RAMACHANDRAN VAITHILINGAM DURAI,MATHANGADU vs. DCIT, INTL. TAXN., MADURAI

The assessee is an individual and a Non-Resident. The assessee did not file the return of income for the AY 2019-20. The A.O received information that there was an investment in time deposits amounting to Rs. 2,65,00,282/- by the assessee and that the assessee has received interest of Rs. 13,48,339/-. Since the assessee did not file the return of income, the A.O reopened the assessment by issue of notice u/s. 148 of the Act. The assessee in response filed the return admitting the interest income and paid taxes due on the same. The assessee also participated in the assessment proceedings and substantiated the details explaining the source for the time deposits. The A.O accepted the submissions of the assessee and completed the assessment u/s. 147 of the Act without making any additions. Subsequently, the A.O initiated penalty proceedings u/.s 270A for under reporting of income. The assessee in response submitted that he is seeking immunity u/s. 270AA of the Act and in that regard was trying to upload Form-68. The assessee further submitted that due to technical glitch, the Form-68 could not be uploaded. The assessee after initiation of the penalty proceedings submitted Form-68 and prayed for dropping of the penalty proceedings. The AO did not accept the submissions of the assessee and proceeded to levy penalty of Rs.1,12,841/- u/s. 270A of the Act. Aggrieved, the assessee filed further appeal before the CIT(A). Before the CIT(A) also the assessee contended that Form-68 could not be uploaded due to technical glitches. On merits, the assessee submitted that he being a Non-Resident was under the bonafide belief that since TDS is made on the interest no further action is required from his end. The assessee therefore submitted that once the A.O issued notice u/s. 148 of the Act, the assessee immediately responded filing the return of income and has fully paid the tax thereon. The CIT(A) rejected the submissions of the assessee and confirmed the penalty. The assessee is in appeal before the Tribunal against the order of the CIT(A).

The Ld. Authorized Representative (AR) of the assessee reiterated the submissions made before the lower authorities. The Ld. Departmental Representative (DR), on the other hand, submitted that filing Form-68 by the assessee is an afterthought and he has filed the said form only after the initiation of penalty proceedings it cannot be accepted as bonafide.

We have considered the rival submissions and perused the material available on record. It is an admitted position that the A.O. has accepted the income declared by the assessee in the return filed in response to the notice issued under section 148 without making any further variation. It is also not in dispute that the assessee had discharged the tax and interest payable pursuant to the reassessment order within the prescribed time and had not preferred any appeal against the said order. The assessee submitted that he was under the bona fide belief that, since tax had already been deducted and the tax liability stood discharged, no further action was required on his part and hence he did not file the required Form seeking immunity against penalty. The assessee's submission has merits in our view, since the AO has completed the assessment accepting the income returned by the assessee. The denial of immunity is founded solely on the ground that Form No. 68 was not filed within the time prescribed under section 270AA(2). In our view, the omission to file the prescribed form, in the peculiar facts of the case, constitutes only a technical or procedural lapse. When the substantive requirements for availing immunity, namely payment of the tax and interest and acceptance of the assessment without preferring an appeal, stand duly satisfied, a mere procedural non-compliance ought not to defeat the substantive benefit contemplated under the statute. The material on record does not indicate any deliberate or contumacious conduct on the part of the assessee warranting denial of such benefit merely on account of the delay in filing the prescribed form.

Even otherwise in the present case 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 we notice that as per 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 interest and while doing so the AO has stated that the details filed by the assessee with regard to the source etc., have been verified and found to be in order. Accordingly there is merit in the submission that the AO to the extent of income returned has been accepted to be bonafide of the assessee and therefore to this extent cannot be treated as income under reported. Considering the totality of the facts, particularly that the reassessed income has been accepted by the A.O. as returned, the tax liability has been duly discharged, and the omission to file Form No. 68 arose on account of a bona fide belief and constitutes only a procedural lapse, we are of the view that the penalty levied under section 270A is not sustainable. Accordingly, the same is directed to be deleted.

In result, the appeal of the assessee is allowed.