SUHAS SUDHAKAR JOSHI,PUNE vs. DCIT, CENTRAL CIRCLE - 6(4), MUMBAI, MUMBAI

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ITA 7983/MUM/2025Status: DisposedITAT Mumbai18 May 2026AY 2022-2318 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty under Section 272A(1)(d) was unsustainable as the assessee had sought adjournments and subsequently complied. The penalty under Section 270A was also deleted, finding the assessee's explanation for the computational error to be bona fide and covered by exceptions in Section 270A(6).

What were the facts?

The assessee was penalized under Section 272A(1)(d) for alleged non-compliance with notices under Section 142(1). Separately, a penalty under Section 270A was levied for under-reporting income from house property due to a computational error.

What were the issues?

Whether non-compliance with Section 142(1) notices warrants penalty, and whether a bona fide computational error in reporting house property income constitutes under-reporting for penalty purposes.

Which sections of the Income-tax Act were involved?

Section 142(1),Section 272A(1)(d),Section 270A,Section 270A(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘G’ BENCH

Before: SHRI AMIT SHUKLA & SHRI GIRISH AGRAWAL

For Appellant: Shri Ravi Ganatra
For Respondent: Shri Pradipsinh Saktavat
Hearing: 25/02/2026Pronounced: 18/05/2026

आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal in ITA No.7983/Mum/2025 has been preferred by the assessee against the impugned order dated 10/09/2025 passed by the learned CIT(A)-54, Mumbai, arising out of penalty proceedings initiated under section 272A(1)(d) of the Income Tax Act, 1961 for the assessment year 2022-23. The sole grievance raised by the assessee is against the confirmation of penalty of Rs.20,000/- levied by

2 ITA No.7983 & 7984/Mum/2025 Suhas Sudhakar Joshi the Assessing Officer for alleged non-compliance of notices issued under section 142(1) dated 14/10/2023 and 18/11/2023.

2.

The brief facts, shorn of unnecessary details but retaining the essential substratum necessary for adjudication of the issue involved before us, are that during the course of assessment proceedings the Assessing Officer had issued notices under section 142(1) calling for certain details and information from the assessee. According to the Assessing Officer, there was non-compliance on the part of the assessee with regard to the aforesaid notices and consequently penalty proceedings under section 272A(1)(d) were initiated and penalty of Rs.20,000/- came to be levied for two alleged defaults. The learned CIT(A) too confirmed the levy of penalty primarily on the reasoning that the assessee had failed to establish any reasonable cause for such non-compliance despite opportunities having been granted during the appellate proceedings also.

3.

Before us, the learned counsel for the assessee vehemently submitted that both the authorities below have proceeded on an entirely erroneous assumption of facts inasmuch as there was no deliberate or wilful defiance of the statutory notices issued by the Assessing Officer. He submitted that on both the occasions, the assessee had duly responded and had

3 ITA No.7983 & 7984/Mum/2025 Suhas Sudhakar Joshi sought adjournment through applications uploaded on the ITBA portal within time and copies of such adjournment applications have been placed in the paper book at pages 91 to 94. It was further submitted that subsequently all the details and information called for by the Assessing Officer were duly furnished vide letters dated 01/11/2023 and 08/11/2023 and thereafter the assessee had continuously participated in the assessment proceedings and had complied with all subsequent notices. Thus, according to him, merely because adjournments were sought on the dates fixed in the notices issued under section 142(1), the same by itself could not lead to the conclusion that there was total non- compliance warranting invocation of penal provisions under section 272A(1)(d). He further drew our attention to the replies and documentary evidences placed in the paper book from pages 91 to 99 and pages 104 to 105 to demonstrate that not only the notices were acknowledged, but substantial compliance was also made by the assessee before the Assessing Officer during the course of assessment proceedings.

4.

After carefully considering the rival submissions and perusing the material placed on record, we find considerable force in the submissions advanced on behalf of the assessee. The entire edifice of penalty proceedings under section 272A(1)(d) rests upon the allegation that there was complete

4 ITA No.7983 & 7984/Mum/2025 Suhas Sudhakar Joshi non-compliance of statutory notices issued under section 142(1). However, from the records placed before us, it is discernible that the assessee had not remained completely non-responsive or defiant to the statutory proceedings. On the contrary, the assessee had sought adjournments through the prescribed mode on the ITBA portal and thereafter had furnished the requisite details and explanations as called for by the Assessing Officer. Once the assessee had entered appearance in the proceedings, sought adjournments for reasonable cause and subsequently furnished the information and details called for, then such conduct cannot be equated with contumacious or wilful disregard of statutory notices so as to justify levy of penalty under section 272A(1)(d). It is a settled proposition of law that penalty provisions, being quasi- criminal in nature, cannot be invoked merely on technical or venial defaults unless there is conscious and deliberate defiance of law. In the present case, the conduct of the assessee, viewed holistically, clearly demonstrates participation and compliance in the assessment proceedings and therefore the very foundation on which the penalty has been levied stands vitiated by incorrect appreciation of facts. Accordingly, considering the entirety of facts and circumstances of the case and the documentary evidences placed before us evidencing compliance on the ITBA portal as well as subsequent furnishing of details before the Assessing Officer, we are of the considered opinion that the levy of

5 ITA No.7983 & 7984/Mum/2025 Suhas Sudhakar Joshi penalty of Rs.20,000/- under section 272A(1)(d) is unsustainable and liable to be deleted. We order accordingly.

ITA No.7984/Mum/2025

5.

The aforesaid appeal has been filed by the assessee against the impugned order passed by the learned Commissioner of Income Tax (Appeals)/NFAC for the assessment year 2022-23, arising out of penalty proceedings initiated under section 270A of the Income Tax Act, 1961, whereby penalty of Rs.32,971/- has been levied on account of alleged under- reporting of income pertaining to income assessable under the head “Income from House Property”.

6.

Briefly stated, the facts borne out from the records are that the assessee is an individual and had filed his return of income under section 139(1) declaring total income of Rs.81,42,690/-. During the year under consideration, the assessee had derived income from salary, income from house property and income from other sources. The case of the assessee was selected for scrutiny assessment and notices under sections 143(2) and 142(1) along with detailed questionnaires were issued from time to time. In compliance thereto, the assessee had furnished requisite details and explanations before the Assessing Officer. During the course of assessment proceedings, the Assessing Officer examined

6 ITA No.7983 & 7984/Mum/2025 Suhas Sudhakar Joshi the Leave and License Agreement pertaining to Flat No. C- 402, 4th Floor, Amaltas Cooperative Housing Society Ltd., Andheri (West), Mumbai, which had been let out to the tenants for a period of 33 months commencing from 01.04.2020 and ending on 31.12.2022. On the basis of the rental arrangement contained in the said agreement, the Assessing Officer observed that the assessee’s one-third share in the gross annual rental value worked out to Rs.4,01,293/- and accordingly taxable income from house property in the hands of the assessee ought to have been computed at Rs.2,80,905/- as against income from house property of Rs.93,247/- disclosed by the assessee in the return of income. Consequently, addition of Rs.1,86,521/- came to be made in the assessment completed under section 143(3) and penalty proceedings under section 270A were initiated separately for alleged under-reporting of income.

7.

Before the Assessing Officer, the explanation of the assessee was that the assessee along with two other individuals was jointly holding the aforesaid property and therefore was entitled only to one-third share in the rental income derived therefrom. It was submitted that the total rental income from the said property during the relevant previous year amounted to Rs.11,99,097/- and accordingly the assessee’s rightful share therein was only Rs.3,99,669/-. It was further explained that in the earlier years, as a matter

7 ITA No.7983 & 7984/Mum/2025 Suhas Sudhakar Joshi of practical arrangement between the co-owners, the tenant used to credit the entire rental receipts in the bank account of the assessee and thereafter the assessee would remit the respective shares to the other co-owners. The accountant of the assessee, who had been consistently handling the return filings over the years, was fully aware of this arrangement and accordingly had been accounting only for the assessee’s one- third share while preparing the return of income.

8.

However, during the year under consideration, the assessee had directly received only his one-third share of rental income amounting to Rs.3,99,669/- in his own bank account. According to the assessee, while preparing the computation of income, the accountant inadvertently treated the said amount itself as the total gross rental receipt and thereafter further divided the same into three parts on the assumption that it represented the aggregate rent of all co-owners. Consequently, instead of considering the gross annual value at Rs.11,99,097/- and thereafter computing one-third share thereof, the accountant restricted the gross annual value itself to one-third of Rs.3,99,669/- and thus declared income from house property at Rs.93,247/- after claiming statutory deduction under section 24. The assessee consistently maintained that the entire discrepancy had occurred only due to a bona fide computational and arithmetical mistake committed inadvertently by the accountant and there was

8 ITA No.7983 & 7984/Mum/2025 Suhas Sudhakar Joshi neither any concealment of income nor furnishing of inaccurate particulars.

9.

It was further brought on record that during the course of assessment proceedings itself, the assessee had candidly admitted and accepted the aforesaid computational error vide submissions filed before the Assessing Officer on 07.03.2024 and 17.04.2024. It was specifically pointed out that the assessee had suo motu accepted the mistake during the course of assessment proceedings and had cooperated fully in determination of the correct taxable income. The assessment order itself records that the addition was being made because the assessee had admitted the mistake relating to income from house property. Based on these facts, it was contended by the assessee that there was no deliberate concealment or intentional furnishing of inaccurate particulars but merely a bona fide and inadvertent computational error arising due to misunderstanding on the part of the accountant. It was also emphasized that all primary facts relating to ownership of property, rental receipts, leave and license agreement and bank account details had already been fully disclosed before the Assessing Officer and nothing whatsoever had been withheld from the Department.

10.

The assessee had further relied upon the provisions of section 270A(6)(a) and submitted that under-reported income

9 ITA No.7983 & 7984/Mum/2025 Suhas Sudhakar Joshi would not include such amount in respect of which the assessee offers a bona fide explanation and discloses all material facts necessary to substantiate the explanation offered. It was submitted that the explanation furnished by the assessee was fully supported by the surrounding facts and circumstances and therefore no penalty could have been levied under section 270A. Reliance was also placed upon the decision of the Hon’ble Jurisdictional High Court in the case of CIT vs. Somany Evergreen Knits Ltd. for the proposition that where a claim or discrepancy arises due to bona fide and inadvertent mistake and the assessee itself admits and rectifies the same, penalty is not leviable.

11.

The Assessing Officer, however, was not convinced with the explanation furnished by the assessee. According to the Assessing Officer, despite opportunity granted during penalty proceedings, the assessee had failed to furnish any satisfactory explanation justifying how the income was not under-reported. The Assessing Officer observed that the assessee was merely attempting to shift the blame upon the accountant by terming the discrepancy as a computational error. It was further observed that section 270A provides for levy of penalty in cases involving under-reporting of income and once there exists difference between assessed income and returned income, the assessee falls within the ambit of section 270A(2). The Assessing Officer further referred to the

10 ITA No.7983 & 7984/Mum/2025 Suhas Sudhakar Joshi decision of the Hon’ble Supreme Court in the case of Union of India vs. Dharmendra Textile Processors for the proposition that mens rea is not an essential ingredient for levy of civil penalty and also observed that section 273B does not provide immunity from penalty under section 270A on account of reasonable cause. The Assessing Officer further held that since the assessee had not challenged the assessment order, it amounted to acceptance of the addition made in assessment proceedings. According to the Assessing Officer, the explanation furnished by the assessee was merely an afterthought and an attempt to justify suppression of income. On this reasoning, penalty at the rate of 50% of tax payable on under-reported income amounting to Rs.32,971/- came to be levied under section 270A of the Act.

12.

Before the learned CIT(A), the assessee reiterated the submissions advanced before the Assessing Officer and assailed the levy of penalty both on factual as well as legal grounds. It was submitted that the entire addition had arisen only because of voluntary disclosure and admission made by the assessee during the course of assessment proceedings and therefore there was no justification for invoking penal provisions. The assessee emphasized that all primary facts relating to ownership of property, rental arrangements, rental receipts and co-ownership details were fully disclosed before the Department and therefore there was neither concealment

11 ITA No.7983 & 7984/Mum/2025 Suhas Sudhakar Joshi of income nor furnishing of inaccurate particulars. It was further contended that the error in question was purely clerical and computational in nature and immediately upon being noticed during assessment proceedings, the assessee had accepted the same in a transparent and bona fide manner without any attempt to dispute the correct taxable income.

13.

However, the learned CIT(A) confirmed the levy of penalty by observing that the assessee had received rental income in his bank account and had failed to disclose the correct rental receipts in the return of income. According to the learned CIT(A), the assessee was attempting to shift the responsibility upon the accountant whereas the ultimate responsibility of filing correct return and paying taxes rested upon the assessee alone. The learned CIT(A) further observed that the assessee had enjoyed the rental receipts credited in his bank account and therefore the explanation attributing the discrepancy to the accountant was merely an afterthought to escape penal consequences. The learned CIT(A) also held that the judicial precedents relied upon by the assessee were distinguishable on facts and accordingly upheld the levy of penalty under section 270A.

14.

We have heard the rival submissions, perused the findings of the lower authorities and carefully considered the

12 ITA No.7983 & 7984/Mum/2025 Suhas Sudhakar Joshi material placed on record. The short controversy involved before us is, whether on the peculiar facts of the present case, levy of penalty under section 270A of the Act for alleged under-reporting of income can at all be sustained when the addition itself had arisen on account of a bona fide computational mistake which was candidly admitted and explained by the assessee during the course of assessment proceedings itself. From the entire conspectus of facts borne out from the records, it is an undisputed position that the assessee was only one of the three co-owners of the property in question and was entitled merely to one-third share in the rental income derived therefrom. It is also not in dispute that the assessee had duly disclosed the Leave and License Agreement, details of the jointly owned property, rental arrangement, bank account particulars and all primary facts before the Assessing Officer during the course of assessment proceedings. Thus, there was neither any suppression of primary facts nor any attempt to withhold the material particulars relating to the rental income from the Department.

15.

The entire addition has arisen only because while computing the taxable income under the head “Income from House Property”, the accountant of the assessee inadvertently treated the amount of Rs.3,99,669/-, being the assessee’s one-third share of rent already received by him, as the total gross rental receipt and thereafter erroneously divided the

13 ITA No.7983 & 7984/Mum/2025 Suhas Sudhakar Joshi same once again into three parts while preparing the computation of income. This arithmetical and computational mistake resulted into declaration of lesser income from house property at Rs.93,247/- instead of the correct taxable figure. However, immediately when the discrepancy was noticed during assessment proceedings, the assessee, vide submissions filed before the Assessing Officer, fairly admitted the mistake and accepted the correct computation of income without any demur or contest. What is of utmost relevance here is that the addition was not unearthed as a consequence of any independent detection of concealed income by the Assessing Officer after investigation exposing falsity of particulars furnished by the assessee. Rather, the assessment order itself records that the assessee had admitted the mistake relating to the computation of rental income during the assessment proceedings. This conduct of the assessee, in our considered opinion, completely demolishes the very foundation upon which the penalty proceedings have been sought to be sustained.

16.

A person intending to deliberately suppress income or furnish inaccurate particulars would ordinarily not voluntarily admit the computational error during the course of assessment proceedings itself after having already furnished all supporting agreements and documents before the Department. The conduct of the assessee throughout

14 ITA No.7983 & 7984/Mum/2025 Suhas Sudhakar Joshi reflects transparency and cooperation rather than concealment or contumacious conduct. The explanation furnished by the assessee has remained consistent at every stage and nothing has been brought on record by the Revenue to demonstrate that the explanation was false, fabricated or bereft of bona fides. The learned Assessing Officer as well as the learned CIT(A) have proceeded on the premise that once there exists a difference between returned income and assessed income, levy of penalty under section 270A follows automatically. Such an approach, in our opinion, is contrary to the very scheme and spirit of section 270A itself. Though section 270A provides for levy of penalty in cases of under- reporting or misreporting of income, sub-section (6) thereof specifically carves out exceptions where the explanation offered by the assessee is bona fide and all material facts have been disclosed. The legislative intent is very clear that every addition or disallowance made during assessment cannot ipso facto result into levy of penalty.

17.

In the present case, the explanation of the assessee cannot be brushed aside merely by observing that the assessee cannot shift the blame upon the accountant. It is trite law that while the assessee may remain ultimately responsible for filing the return of income, at the same time, genuine and inadvertent mistakes committed during preparation of computation by professionals or accountants,

15 ITA No.7983 & 7984/Mum/2025 Suhas Sudhakar Joshi when duly explained and supported by surrounding circumstances, cannot automatically be elevated to the level of concealment or misreporting warranting penal consequences. The Revenue has not brought any material whatsoever to establish that the assessee had derived any benefit through clandestine suppression of rental receipts or had attempted to camouflage the true nature of income. On the contrary, all the rental arrangements, ownership details and rental receipts were fully available before the Assessing Officer from the very inception of the scrutiny proceedings. Once the foundational facts themselves were transparently disclosed, merely because an erroneous computation was made while working out taxable income from house property, the same by itself cannot be construed as a deliberate act of under-reporting of income.

18.

We further find considerable force in the contention of the assessee that the case squarely falls within the protective ambit of section 270A(6)(a). The assessee had furnished an explanation which, looking to the entirety of facts and circumstances, appears to be bona fide and plausible. Not only this, all material facts necessary to substantiate such explanation had also been disclosed before the Assessing Officer. Therefore, once the statutory conditions contemplated under section 270A(6) stand satisfied, the amount in question could not have been treated as under-reported income for the

16 ITA No.7983 & 7984/Mum/2025 Suhas Sudhakar Joshi purpose of levy of penalty. The observations of the learned CIT(A) that the explanation furnished by the assessee was merely an afterthought or concocted story are wholly unsupported by any cogent material on record. In fact, the chronology of events itself demonstrates that the assessee had accepted the error during the assessment proceedings itself and the taxes arising therefrom also stood paid. This conduct is wholly inconsistent with any allegation of intentional concealment or deliberate furnishing of inaccurate particulars.

19.

We also find that the reliance placed by the assessee upon the decision of the Hon’ble Jurisdictional High Court in the case of Somany Evergreen Knits Ltd. supports the case of the assessee on the broad proposition that where the claim or discrepancy arises out of bona fide and inadvertent mistake and the assessee itself admits and rectifies the same, levy of penalty is not justified. The ratio flowing from various judicial precedents consistently recognizes that penal provisions, being quasi-criminal in nature, cannot be invoked merely because an addition has been sustained in assessment proceedings. The distinction between a deliberate attempt to evade taxes and a bona fide computational mistake has always been recognized by Courts while adjudicating penalty matters. In the present case, nothing has been brought on record to suggest any malafide intention, conscious

17 ITA No.7983 & 7984/Mum/2025 Suhas Sudhakar Joshi suppression or deliberate falsification of particulars by the assessee.

20.

Thus, considering the entire facts and circumstances of the case in totality, the nature of error committed, the voluntary disclosure and admission made by the assessee during assessment proceedings, complete disclosure of all primary facts, payment of taxes on the corrected income and the bona fide explanation furnished by the assessee, we are of the considered opinion that this is not a fit case for levy of penalty under section 270A of the Act. The authorities below, in our view, have proceeded merely on the basis of the addition sustained in assessment without properly appreciating the surrounding facts and the statutory protection available under section 270A(6). Accordingly, the penalty levied under section 270A amounting to Rs.32,971/- is directed to be deleted and the grounds raised by the assessee are allowed.

21.

In the result, appeals of the assessee are allowed.

Order pronounced on 18th May, 2026.

Sd/- Sd/- (GIRISH AGRAWAL) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 18/05/2026 KARUNA, sr.ps

18 ITA No.7983 & 7984/Mum/2025 Suhas Sudhakar Joshi Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, //True Copy//

(Asstt. Registrar) ITAT, Mumbai

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