RAMADUTTA DEVAGIRI,AUSTRALIA vs. DCIT, INTL TAXATION CIRCLE 1(1), BANGALORE, BANGALORE

The Assessee has raised the following grounds of appeal:

The order passed by the learned Commissioner of Income -Tax(Appeals)- 12 Bangalore, under section 250 of the Act is so far as it is against the Appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant’s case.

The appellant denies himself liable to a penalty of Rs. 29,74,189/- levied by the learned assessing officer under section 270A of the Act, under the facts and circumstances of the case.

The learned CIT(A) has erred in upholding the order u/s 270A of the Act, without considering the written submissions filed, on the facts and circumstances of the case.

The authorities below failed to appreciate that the return filed in response to notice u/s 148 and the assessment was completed without any additions and accepting the returned income and consequently the charge of underreporting is unfounded, as the income was fully disclosed and supported by documentary evidence, on the facts and circumstances of the case.

The authorities below failed to appreciate the provisions of Section 270A (6) of the Income-tax Act which provides that the under-reported income shall not include any amount, where the explanations are bona fide and the assessee has disclosed all the material facts to substantiate the explanation offered.

The appellant craves leave to add, alter, delete or substitute any of the grounds urged above.

In view of the above and other grounds that may be urged at the time of the hearing of the appeal, the appellant prays that the appeal may be allowed and appropriate relief be granted in the interest of justice and equity.

The assessee is an individual and a non-resident who did not file a return of income for Assessment Year 2020–21 and was therefore treated as a non-filer. Information flagged under the risk-management strategy indicated that he had entered into multiple transactions suggesting that income chargeable to tax had escaped assessment. Accordingly, a notice under section 148A(b) of the Act was issued on 27 February 2024, but no response was received. An order under section 148A(d) was thereafter passed on 19 March 2024, followed by a notice under section 148 on 20 March 2024. On 16 April 2024, the assessee filed a return declaring total income of ₹1,72,04,860. A notice under section 143(2) was issued on 11 June 2024, and the assessment under section 147 was completed by accepting the returned income. Since the income was disclosed only in the return filed in response to the notice under section 148, proceedings under section 270A were initiated by notice dated 25 March 2025. The assessee submitted that there was no deliberate attempt to evade tax and that the delay arose from circumstances beyond his control. The Assessing Officer, however, noted that no original return had been filed and that the income was reported only after issuance of the notice under section 148. Despite further opportunities, no additional response was received. The Assessing Officer therefore held that the assessee had under-reported income for Assessment Year 2020–21 and, by order dated 30 September 2025, levied a penalty of Rs. 29,74,189, being 50% of the tax of ₹59,48,788 payable on the under-reported income of ₹1,72,04,860. 04. The assessee challenged the penalty order before the learned CIT(A), contending that the Assessing Officer had passed it without considering his written submissions. The learned CIT(A), however, observed that the assessee had produced no evidence before the appellate authority to establish that any submission or document had been filed during the penalty proceedings. She further noted that the assessee had failed to comply with the several opportunities afforded to him and therefore confirmed the penalty and dismissed the appeal. 05. Aggrieved by the order of the learned CIT(A), the assessee preferred the present appeal. The learned authorised representative, Shri Ravishankar S. V., Advocate, filed a 66-page paper book consisting primarily of correspondence between the assessee and the Assessing Officer. He specifically referred to the written submissions dated 20 January 2026 filed before the learned CIT(A), placed at pages 51–57 of the paper book, and to the assessee’s letter dated 29 September 2025 filed before the Assessing Officer in response to the show-cause notice under section 270A of the Act, placed at pages 48–50. 06. On the merits, the learned authorised representative submitted that the assessee, an Australian citizen, was employed in India for a brief period during Financial Year 2019–20. In March 2020, the onset of the COVID- 19 pandemic and urgent family obligations compelled him to leave India abruptly, preventing him from accessing the financial and tax records required to file his return within the prescribed time. The delay was therefore unintentional and did not involve any concealment or under- reporting of income. The assessee’s income for the year consisted substantially of salary, on which tax had already been deducted at source and deposited by the employer; consequently, most of the tax due had been received by the Government and there was no loss of revenue to the exchequer. The delay arose solely from exceptional circumstances and not from any willful attempt to evade tax. He further submitted that, of the bank interest of ₹37,839, ₹10,000 was deductible under section 80TTA of the Income-tax Act, leaving taxable interest of only ₹27,839, which was less than 0.5% of the assessee’s total income. The assessee had also earned short-term capital gains and incurred short-term capital losses during the year. After credit for tax deducted at source, his remaining tax liability was stated to be less than ₹10,000; nevertheless, he paid ₹10,465 together with applicable interest, demonstrating full compliance upon becoming aware of the liability. It was therefore contended that the failure to file the return was attributable to circumstances beyond the assessee’s control and not to any mala fide intention, and that the penalty levied by the learned Assessing Officer should accordingly be deleted. 07. The learned authorized representative then relied on section 270A(6)(a) of the Income-tax Act, which excludes an amount from under-reported income where the assessee’s explanation is bona fide and all material facts supporting it have been disclosed. He submitted that the assessee had offered a bona fide explanation and disclosed all available material facts. Accordingly, even though the return was filed in response to the reopening of the assessment, the income should be excluded from under-reported income and the penalty under section 270A should be deleted. 08. The learned Departmental Representative strongly supported the orders of the lower authorities. He submitted that the assessee had not filed the return within the time prescribed under section 139(1) of the Income-tax Act and had furnished it only in response to the notice issued upon reopening. The income was therefore under-reported, and the penalty under section 270A was correctly levied, particularly as the assessee failed to respond before the lower authorities. 09. We have carefully considered the rival submissions and perused the orders of the lower authorities. Section 270A(1) of the Income-tax Act provides that, during proceedings under the Act, the Assessing Officer may direct a person who has under-reported income to pay a penalty in addition to the tax payable on such income. Section 270A(2)(b) treats a person as having under-reported income where no return is filed under section 139 but income is subsequently disclosed in response to a notice under section 148. However, section 270A(6)(a) excludes from under-reported income an amount in respect of which the assessee offers a bona fide explanation and discloses all material facts supporting it. 10. In the present case, the assessee explained that he is an Australian citizen who was employed in India briefly during Financial Year 2019– 20 and had to leave India abruptly in March 2020 because of the COVID-19 pandemic and urgent family obligations. He was therefore unable to file his return under section 139(1). His salary income was fully subject to tax deducted at source, which his employer deposited with the Government of India. In the return filed in response to the notice under section 148, the only difference related to bank interest of ₹37,839, of which only ₹27,839 was taxable. This amount was minimal. The assessee furnished this explanation to the Assessing Officer on 29 September 2025, yet the penalty order dated 30 September 2025 recorded that no reply had been submitted. The learned CIT(A) also failed to consider the assessee’s claim that the assessee had filed the explanation before the Assessing Officer. The explanation furnished before us is bona fide and establishes sufficient cause for not filing the return under section 139(1). It covers the salary income, while the remaining income is insignificant. We therefore hold that the income disclosed in the return filed in response to the notice under section 148 is excluded from under-reported income under section 270A(6)(a). 11. Section 270A(1) uses the word “may” and thereby confers discretion on the Assessing Officer to levy a penalty for under-reporting of income. Accordingly, the penalty is not mandatory in every case of under- reporting and must depend on the surrounding circumstances. In the present case, the Assessing Officer ought to have exercised that discretion in favour of the assessee, an Australian citizen who was prevented from filing his return due to the onset of the COVID-19 pandemic, who had to return to his home country. We accordingly find no justification for the penalty under section 270A, both because its levy is discretionary and because the assessee’s bona fide explanation falls within section 270A(6)(a)of the Act . 12. Accordingly, we reverse the orders of the lower authorities and direct the Assessing Officer to delete the penalty of ₹29,74,189 levied under section 270A of the Act for under-reporting of income. 13. The assessee’s appeal is allowed. Order pronounced in the open court on 23rd October, 2026.