AMROSE VIMALARAJ,CUDDALORE vs. ITO, WARD-4,, CUDDALORE

The assessee is an individual and filed the original return of income for AY 2016-17 on 17.06.2016 declaring total income from salary amounting to Rs. 11,58,207/-. Subsequently the assessee revised his return of income on 09.02.2018 declaring income from salary amounting to Rs. 9,84,475/-. In the revised return of income, the assessee has revised the loss from house property from Rs. 1,63,796/- to Rs. 3,90,790/- and Chapter-VIA deduction was revised from Rs. 1,50,000/- to Rs. 3,23,840/-. Accordingly, the assessee in revised return of income claimed a refund of Rs. 96,690/-. Considering the revised return of income, the A.O had a reason to belief that the assessee's income chargeable to tax as escaped assessment and accordingly reopened the assessment by issue of notice u/s. 148 of the Act dated 31.03.2021. The assessee in response to a notice u/s. 148 of the Act filed the return of income on 08.04.2021 declaring a salary income of Rs.11,58,207/- whereby the deduction under chapter-VIA was revised to Rs.1,50,000/- and the loss from house property was revised to Rs.1,63,796/- as was offered in the original return of income. The A.O completed the assessment u/s.147 of the Act assessing the income of the assessee at Rs.11,58,207/- thereby denying the deductions claimed by the assessee as per Form-16. Aggrieved, the assessee filed further appeal before the CIT(A). There is a delay of 1266 days in filing the appeal before the CIT(A) and the CIT(A) dismissed the appeal in limine stating that there is no reasonable cause. The A.O subsequently initiated penalty proceedings u/s. 271(1)(c) of the Act stating that the assessee has claimed deduction under Chapter-VIA and loss from house property without proper documentary evidences. On further appeal, the CIT(A) confirmed penalty levied by the A.O. The assessee is in appeal before the Tribunal against the order of the CIT(A).

The Ld. Authorized Representative (AR) of the assessee submitted that the assessee in the revised return of income has inadvertently claimed excess amount of deduction under Chapter-VIA and loss from house property. The Ld. AR further submitted that the assessee has realised his mistake and accordingly in the revised return of income in response to notice u/s. 148 of the Act has corrected the mistake. The ld AR also submitted that even before the initiation of reassessment proceedings the assessee has paid tax towards the refund incorrectly claimed. The Ld. AR contended that the assessee was under bonafide belief that since the correct income has been declared on which taxes has also been paid no further action is pending from his end. However, only when the demand notice for the penalty was received the assessee came to know that the A.O has passed the order u/s. 147 of the Act, wherein he has denied the deductions as per Form-16. The ld. AR submitted that the assessee is a salaried person and does not have much knowledge about the income tax proceedings and that the assessee due to his bonafide belief was not aware of reassessment being completed with a demand. The Ld. AR therefore submitted that the delay in filing the appeal before the CIT(A) is genuine and without any malafide intention. The Ld. AR also submitted that on merits the assessee is having a good case and therefore due to the technicality of delay in filing the appeal, the assessee cannot be denied justice.

The Ld. Departmental Representative (DR), on the other hand, relied on the orders of the lower authorities.

We have heard the parties, and perused the material available on record. The assessee in the revised return of income claimed more deduction

From the above it is clear that when substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right for injustice being done because of non deliberate delay. In the case on our hand, we have already held that the impugned claims of the assessee are supported by Form 16 where the employer for the purpose of tax deduction u/s.192 of the Act ought to have considered the submissions of the assessee in this regard. Further, the assessee having realized the error in the amounts claimed in the revised return, has suo-motu paid the tax on amount excess claimed well before the reopening of assessment by the AO i.e. on 25.02.2019 (page 47 of paper book). Though, the documents in support of the impugned claims based on which the employer has deducted tax at source needs factual examination, we are of the considered view that we have to prefer substantial justice rather than technicality in deciding the issue. As observed by Apex

The next question may arise whether 1266 days was excessive or inordinate. There is no question of any excessive or inordinate when the reason stated by the assessee was a reasonable cause for not filing the appeal. We have to see the cause for the delay and when there was a reasonable cause, the period of delay may not be relevant factor. The Hon'ble Madras High Court in the case of CIT v. K.S.P. Shanmugavel Nadai and Ors. (153 ITR 596) considered the delay of condonation and held that there was sufficient and reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. Further the Hon'ble Madras High Court in the case of Sreenivas Charitable Trust ([2006]280 ITR 357(Mad)) held that no hard and fast rule can be laid down in the matter of condonation of delay and the Court should adopt a pragmatic approach and the Court should exercise their discretion on the facts of each case keeping in mind that in construing the expression “sufficient cause” the principle of advancing substantial justice is of prime importance and the expression “sufficient cause” should receive a liberal construction. Therefore, in our view in order to advance substantial justice which is of prime importance, the expression “sufficient cause” should receive a liberal construction as per the above judicial precedence. In the present case, the submission of the assessee that he was under the bonafide belief that no further action is required since the correct income is declared in response to notice u/s.148 after paying the

Having held so, as already stated the evidences submitted by the assessee to his employer for the purpose of tax deduction from salary needs factual verification and therefore we are remitting the impugned issues to AO. The AO is directed to call for necessary details in support of the claim, and allow in accordance with law. The assessee is directed file the necessary details before the AO and cooperate with assessment proceedings without seeking unnecessary adjournments. It is ordered accordingly.

Now coming to the issue of levy of penalty u/s.271(1)(c), we notice that the main reason for levy of penalty by the lower authorities is that but for the initiation of reassessment proceedings, the assessee would not have declared the correct income. In this regard we notice that the reassessment proceedings are initiated in assessee's case on 31.03.2021 by issue of notice u/s.148. However we also notice that the assessee has paid tax on the excess deduction claimed along with interest on 25.02.2019 i.e. well before the initiation of reassessment proceedings. Since it is an established fact that the assessee has suo-motu has paid the tax on excess deduction claimed, the

Considering the overall facts and circumstances peculiar to assessee's case and the ratio laid down in the above case, we are of the view that the levy of penalty u/s.271(1)(c) towards concealment of income is not warranted. Accordingly we direct the AO to delete the same.

In result the appeal in ITA No.1068/Chny/2026 is allowed for statistical purposes and the appeal in ITA No.1069/Chny/2026 is allowed.