SAROJBEN URMISHBHAI SHAH,AHMEDABAD vs. THE ITO, WARD-5(3)(2), AHMEDABAD

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE: SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER आयकर अपील सं./I.T.A. No. 312/Ahd/2026 (िनधा�रण वष� / Assessment Year : 2016-17) Sarojben Urmishbhai Shah बनाम/ Income Tax Officer 1st Floor Rasna Flat, Nr. Ward -5(3)(2), Vs. Kesharyaji Char Rasta, Ahmedabad Vasna, Ahmedabad, Gujarat - 380007 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AYFPS6388A (Appellant) .. (Respondent) अपीलाथ� ओर से /Appellant by : Shri Rupesh R. Shah, AR ��यथ� क� ओर से/Respondent by : Shri Girish Parihar, Sr.DR Date of Hearing 23/03/2026 22/05/2026 Date of Pronouncement (आदेश)/ORDER PER ANNAPURNA GUPTA, AM:

The present appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi (hereinafter referred to as “CIT(A)”) dated 12.01.2026 confirming levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2016-17.

ITA No.312/Ahd/2026 [Sarojben Unmishbhai Shah vs. ITO] A.Y. 2016-17 - 2 –

“1. The Ld. CIT(A), NFAC has erred in law and on facts in confirming the penalty of Rs. 55,870/- levied u/s 271(1)(c) of the Income-tax Act, 1961, which is bad in law, unjustified, and liable to be deleted. 2. The Ld. Authorities below failed to appreciate that the assessment for A.Y. 2016-17 was completed u/s 147 r.w.s. 143(3) & 1448 at the very same income as returned by the appellant and no addition or disallowance was made; hence, there was neither concealment of income nor furnishing of inaccurate particulars. 3. The penalty has been levied merely on the ground that the return was filed in response to notice u/s 148, which by itself does not attract the provisions of section 271(1)(c) in absence of any addition to income. 4. The Ld. CIT(A) erred in ignoring the bona fide explanation of the appellant that the non-filing of original return was due to circumstances beyond her control and professional lapse of the earlier tax consultant, and not due to any mala fide intention or deliberate concealment. 5. The penalty order is vitiated as it does not specify clearly whether the penalty is for 'concealment of income or for 'furnishing of inaccurate particulars of income', rendering the initiation and levy of penalty invalid in law. 6. The Ld. CIT(A) has failed to consider settled judicial precedents holding that when returned income is accepted in reassessment proceedings, penalty u/s 271(1)(c) is not leviable. 7. The appellant submits that there was full disclosure of all material facts during reassessment proceedings and due taxes were paid; therefore, the essential ingredients of section 271(1)(c) are not satisfied. 8. The order of the Ld. CIT(A) is arbitrary, mechanical, and based on surmises and conjectures, and deserves to be quashed. 9. The appellant craves leave to add, alter, amend, or withdraw any of the above grounds at the time of hearing.”

ITA No.312/Ahd/2026 [Sarojben Unmishbhai Shah vs. ITO] A.Y. 2016-17 - 3 –

“5. Decision: I have carefully considered the facts of the case, penalty order and the submissions made by the appellant. It is seen that the appellant had taxable income of Rs. 6.45,230/- for the year under consideration and she did not file her return as required u/s. 139 of the Act. The return was filed by the appellant in response to notice u/s. 148 in which she had declared income of Rs. 6,45,230/-. Hence it cannot be said to be a voluntary compliance. If notice u/s. 148 was not issued in the case of the appellant, the income would have escaped assessment and the taxes paid by the appellant in the return filed in response to notice u/s. 148 would not have come to the account of the Government. The appellant had taxable income for the year under consideration. Still the appellant did not file her return of income under section 139 and had not paid tax on the same. The department issued notice u/s. 148 as the appellant's income had escaped assessment and the A.O had information about the same. Failure to furnish return of income inspite of having taxable income and not paying tax on the same falls within the purview of Section 271(1)(c) of the Act. Hence, the AO has correctly levied penalty u/s. 271(1)(c) of the Act. Hence, penalty levied by the AO is confirmed and the appeal of the appellant is dismissed.” 5. We do not find any merit in the order of the Ld.CIT(A) confirming the penalty levied on the assessee merely because the

ITA No.312/Ahd/2026 [Sarojben Unmishbhai Shah vs. ITO] A.Y. 2016-17 - 4 –

assessee had not initially returned income to tax, but, had returned the same only in return filed during re-assessment proceedings. The law in this regard is provided for by Explanation (3) to Section 271(1)(c) of the Act, which states that the assessee will be deemed to have concealed or furnished inaccurate particulars of income when it returns income to tax only in re-assessment proceedings and not originally u/s.139 of the Act, only in the circumstance where the assessee, without any reasonable cause, does not furnish return of income up to the time provided for framing assessment u/s.153 of the act. The provisions of Explanation (3) of Section 271(1)(c) of the Act in this regard read as under:

“Explanation 3.—Where any person fails, without reasonable cause, to furnish within the period specified in sub-section (1) of section 153 a return of his income which he is required to furnish under section 139 in respect of any assessment year commencing on or after the 1st day of April, 1989, and until the expiry of the period aforesaid, no notice has been issued to him under clause (i) of sub-section (1) of section 142 or section 148 and the Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner (Appeals) is satisfied that in respect of such assessment year such person has taxable income, then, such person shall, for the purposes of clause (c) of this sub-section, be deemed to have concealed the particulars of his income in respect of such assessment year, notwithstanding that such person furnishes a return of his income at any time after the expiry of the period aforesaid in pursuance of a notice under section 148.”

ITA No.312/Ahd/2026 [Sarojben Unmishbhai Shah vs. ITO] A.Y. 2016-17 - 5 –

assessment year in which income was assessable. The applicable provision of Section 153 of the Act are as under:

“153. (1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of twenty-one months from the end of the assessment year in which the income was first assessable:

ITA No.312/Ahd/2026 [Sarojben Unmishbhai Shah vs. ITO] A.Y. 2016-17 - 6 –

assessee. Her submissions in this regard are reproduced at para 4 of the CIT(A)’s order as under:

“4. WRITTEN SUBMISSION: The appellant has filed written submission as under: That your appellant is a senior citizen lady and law-abiding citizen not much literate and not much having knowledge of accounts and produce for filing of Income Tax return. Therefore, your appellant takes service for writing books of accounts and filing of Income Tax return from qualified person named "Hitesh Khalas" who was writing books of accounts and after finalizing he was filing my Income Tax return That for the financial year 01-04-2015 to 31-03-2016 corresponding to assessment year 2016-17 my books of accounts were got ready by "Hitesh Khalas" in time However, due to some dispute regarding higher fees your assesse's accountant cum Income Tax consultant "Hitesh Khalilas" has not failed my return of income for the assessment year 2016-17 not handover my books of accounts therefore your appellant was helpless as well as he also mot informed that return of Income is not filed by him. That your appellant received a notice under S. 148 dated 22-04-2023 asking to file Income tax return for the assessment year 2016-17. The your assesse has filed Income tax return on 22.04.2023 declaring a total income of Rs. 6,45,230/- That your appellant s order was passed under S.147 r.w.s 1448 of Income Tax Act dated 19-01-2024 and the declared income vis-à-vis the assessed income was same and duly accepted by the AO of Assessment Unit. AO vide order bearing no, ITBA/AST/S/147/2023-24/1059912761(1) dated 19 -01-2024 passed under section 143(3) r.พ.ร. 147 r.w.s. 144B of the Income Tax Act, 1961 which is attached herewith.”

ITA No.312/Ahd/2026 [Sarojben Unmishbhai Shah vs. ITO] A.Y. 2016-17 - 7 –

of penalty, therefore, confirmed by the Ld. CIT(A) in the facts of the present case, we hold, is against the provisions of law. Both the authorities below have simply considered the fact that the assessee disclosed her income only in the return filed u/s.148 of the Act and did not consider the provisions of law which provided that if there was a reasonable cause for not having returned the income earlier, no penalty u/s.271(1)(c) of the Act was leviable. In the light of the same, we delete the penalty levied of Rs.55,870/- u/s.271(1)(c) of the Act.

This Order pronounced on 22/05/2026

Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 22/05/2026 S. K. SINHA True Copy आदेश क� �ितिल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant ��यथ� / The Respondent. 2. संबंिधत आयकर आयु� / Concerned CIT 3. आयकर आयु�(अपील) / The CIT(A)- 4. �वभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad