PERUMAL VIRUDHACHALAM,VEGANOOR vs. ITO, PREMBALUR, CHENNAI

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ITA 3358/CHNY/2025Status: DisposedITAT Chennai27 April 2026AY 2020-215 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the penalty under section 270A was premature as the AO had accepted the disclosed income as bona fide and the additions were nominal or set aside for verification. The penalty issue was remitted back to the AO.

What were the facts?

The assessee, who did not file an income tax return, disclosed income after the assessment was reopened. The Assessing Officer (AO) made additions for undisclosed interest income and disallowed a deduction due to lack of evidence, also initiating penalty proceedings. The CIT(A) set aside the quantum additions back to the AO for verification.

What were the issues?

Whether penalty under section 270A is leviable when the primary additions are nominal or set aside for further verification. The validity of penalty proceedings initiated for under-reporting of income.

Which sections of the Income-tax Act were involved?

Section 270A,Section 147,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & MS. PADMAVATHY.S

Hearing: 09.04.2026Pronounced: 27.04.2026

आदेश / O R D E R

PER PADMAVATHY.S, A.M: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short "CIT(A)") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") dated 29.09.2025 for Assessment Year (AY) 2020-21.

2.

The assessee is an individual and did not file the return of income. The A.O noticed that the assessee has entered into substantial financial transactions during the year under consideration. Since the assessee did not

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file return of income, the assessment was reopened. The assessee submitted before the AO that he retired from Tamil Nadu Electricity Board (TNEB) during the year under consideration and has received various retirement benefits such as leave encashment, Gratuity etc., which are exempt under the Act and the credits in the bank pertain to the said receipts. The assessee also submitted that he is receiving pension from TNEB on which tax is deducted at source and that he did not file the return of income due to ill health and Covid pandemic. The assessee during the course of hearing filed a computation statement admitting income to the tune of Rs.11,36,606/- which included Income from Salaries and Income from Other Sources. The A.O while completing the assessment accepted the income returned by the assessee and also has recorded a finding that the submissions regarding the receipt of retirement benefits that are exempt under the Act have been duly verified and found to be in order. The AO however held that the assessee has not disclosed interest income from Savings Bank (SB) to the tune of Rs.1,560/- and that the assessee has not submitted proper proof for claim of deduction under chapter VIA for Rs.1,50,000/- Accordingly the AO made addition towards the same to assess the income at Rs.13,16,260/-. Subsequently, the A.O initiated penalty proceedings u/s. 270A of the Act for under reporting of income and levied a penalty of Rs.1,07,840/-. Aggrieved, the assessee filed further appeal before the CIT(A) and the CIT(A) set aside the appeal back to A.O by considering the additions made by the AO and directed the AO to verify the documentary evidences and allow the claim of the assessee. It is relevant to mention here that the CIT(A) has not given any finding with regard to the penalty levied by the AO. The assessee is in appeal before the Tribunal against the order of the CIT(A).

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3.

We have heard the parties, and perused the material available on record. The assessee submitted that the CIT(A) while considering the appeal filed against the penalty order has considered the issue arising in the quantum appeal and remitted the issue back to the AO with a direction to consider on merits. The assessee therefore submitted that though no specific findings are given by the CIT(A) with regard to penalty, based on the decision with regard to quantum, the penalty cannot be sustained. On perusal of the AO's order u/s.147 we notice that the AO has accepted the income returned by the assessee in the return in response to notice u/s.148. We further notice that the AO has made only a nominal addition of Rs.1,560 towards SB a/c interest as not disclosed and the claim under chapter VIA is denied due to lack of documentary evidence. The AO has initiated the penalty proceeding for under reporting stating that the assessee would not have disclosed the entire income but for the initiation of reassessment proceedings. In this regard our attention is drawn to the provisions of clause (a) to subsection (6) of section 270A which provides that the under-reported income, for the purposes section 270A shall not include the amount of income in respect of which the assessee offers an explanation and the AO is satisfied that the explanation is bona fide and the assessee has disclosed all the material facts to substantiate the explanation offered. In the present case from the findings of AO in the order u/s.147 we notice that the AO has accepted the income returned by the assessee towards salary and interest and while doing so the AO has stated that the details filed by the assessee in this regard have been verified and found to be in order. Further it is noticed that the AO has not disputed the claim of the assessee that the original return was not filed due to his health condition and the Covid pandemic situation. Accordingly there is merit in the submission that the AO to the extent of income returned has been accepted to be bonafide of the

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assessee and therefore to this extent cannot be treated as income under reported. Further the addition already made is for an nominal amount of Rs.1,560/- and disallowance of deduction claimed under chapter VIA is done for want of evidence which is now set aside by the CIT(A with a direction to AO to verify the documentary evidence with regard to the SB Interest and Deduction claimed under Chapter VIA and allow the same in accordance with law. Considering the overall facts and circumstances we are of the view that the levy of penalty u/s.270A as of now is premature. Accordingly we remit the issue of levy of penalty u/s.270A to the extent of addition made towards SB interest and deduction claimed under chapter VIA back to the AO to be decided based on the decision in the quantum appeal as well as the observations made (supra), in accordance with law. Needless to say that the assessee be given a reasonable opportunity of being heard. It is ordered accordingly.

4.

Before parting we want to record that our observation with regard to the issue of penalty u/s.270A herein above, is purely based on the facts unique to assessee's case and cannot be used as precedence in any other case.

5.

In result the appeal of the assessee is allowed for statistical purposes. Order pronounced on 27th day of April, 2026 at Chennai.

Sd/- Sd/- (एबी टी. वक�) (पदमावती यस) (ABY. T. Varkey) (Padmavathy.S) लेखा लेखा सद�य लेखा लेखा सद�य सद�य /Accountant Member सद�य �याियक �याियक सद�य �याियक �याियक सद�य सद�य / Judicial Member सद�य चे�नई/Chennai, �दनांक/Dated: 27th April, 2026. EDN, Sr. P.S

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आदेश क� �ितिल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकर आयु�/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF

EJTADA Digitally signed by EJTADA DURGA DURGA NARESH Date: 2026.05.06 NARESH 10:35:44 +05'30'

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