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Facts
The assessee, a private family trust, filed its return declaring income of Rs. 99,62,600/-. Due to a technical error while responding to a defect notice, an incomplete revised return showing nil income and claiming a refund was uploaded. The assessee had consistently declared this income in earlier years and paid tax.
Held
The Tribunal held that there was no intentional under-reporting of income, as the mistake of uploading an incomplete return was inadvertent and due to a technological error. The assessee took steps to rectify the mistake as soon as it was noticed.
Key Issues
Whether the penalty under Section 270A for under-reporting of income is leviable when the same was due to an inadvertent uploading error and not a deliberate act.
Sections Cited
270A, 250, 139(9), 44AB, 143(1), 143(2)
AI-generated summary — verify with the full judgment below
Before: MS. KAVITHA RAJAGOPAL & SMT. RENU JAUHRI
Assessee by : Shri Nitesh Joshi Revenue by : Shri Hemanshu Joshi Date of Hearing 28.01.2025 Date of Pronouncement 11.02.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 24.10.2024 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2018-19.
The assessee has raised the following grounds of appeal:
1. The learned CIT(A) has erred in confirming the penalty levied of Rs. 15,86,925/- u/s. 270A of the Act without considering the inadvertent mistake by the Assessee.
A.Y. 2018-19 Hiranand Family Trust 2. The learned CIT(A) ought to have considered that the facts of the instant case does not fall under any of the clauses of sub-section (2) of section 270A of the Act.
3. The learned CIT(A) has erred in confirming that the Appellant has underreported its income and accordingly liable to pay penalty u/s. 270A of the Act.
4. The learned CIT(A) has erred in not considering the particulars of Interest Income in the Schedule of Profit and Loss of the Return of Income filed by the Assessee.
5. The learned CIT(A) failed to consider that it was a bonafide, technical and inadvertent error.
6. The learned CIT(A) has erred in not granting any hearing before dismissing the appeal of the Appellant, moreso when the Appellant has requested for the same.
The Grounds of Appeal
stated herein below are without prejudice to each other and the Appellant carves leave to alter, amend and/or add any other ground of appeal.” (i) Brief facts of the case are that the assessee is a private family trust incorporated vide trust deed dated 23.08.2006. The appellant is a non- discretionary trust with the beneficiaries having specific determinate shares. For AY 2018-19, the assessee filed the original return declaring a total income of Rs. 99,62,600/- from the interest and share of profit received from six partnership firms. While the share of profit from the partnership firms is treated as exempt income, the assessee has been paying tax on interest income every year since AY 2007-08. (ii) The assessee received a defect notice dated 22.02.2019 u/s 139(9) of the Act from the CPC regarding non furnishing of tax audit report u/s 44AB of the Act. The assessee submitted a reply stating that the tax audit provisions are not applicable to it as income is derived only as share from the partnership firms which is exempt. However, in the process of responding to the notice u/s 139(9), the assessee uploaded a revised A.Y. 2018
19. Hiranand Family Trust return on the website. In this return, the income was shown at nil and the refund of Rs. 34,03,030/- was claimed. The revised return got processed on 02.10.2019 and the case was also selected for scrutiny on the ground that the assessee had wrongly shown nil income. During the assessment proceedings, the assessee explained that in the process of responding to the defect notice, an incomplete return inadvertently got uploaded on the website. However, Ld. AO did not accept the assessee’s clarification and proceeded to pass the assessment order wherein penalty proceedings u/s 270A of the Act for under-reporting of income were initiated. (iii) During the penalty proceedings, the assessee reiterated its contention that there was no malafide intent in claiming the refund in the revised return as it got uploaded inadvertently. However, the explanation was not accepted by the Ld. AO and penalty of Rs. 15,86,952/- was imposed. (iv) Aggrieved with the penalty order dated 02.03.2022, the assessee filed an appeal before Ld. CIT(A). Vide order dated 24.10.2024, Ld. CIT(A) dismissed the assessee’s appeal holding that the assessee did not file any revised return rectifying the mistake of claiming refund by showing nil income, and therefore, the penalty was rightly imposed by the Ld. AO for purposely under-reporting the income.
A.Y. 2018-19 Hiranand Family Trust Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before the Tribunal.
We have heard the rival submissions and perused the material placed before us. We find that the assessee had correctly declared the income of Rs. 99,62,600/- in its original return. However, the CPC wrongly issued the defect notice asking the assessee to furnish the tax audit report when the provisions of section 44AB were not applicable. In the process of replying to the notice u/s 139(9), the assessee inadvertently submitted a revised return in which the interest amount of Rs. 99,62,600/- did not get posted in the ‘Schedule of Income from other sources’ even though the information about interest income was included and shown in the Schedule of Profit and Loss account in the ITR. It is, further, seen that the assessee has consistently been declaring this income in earlier years as well as in subsequent years and has also paid tax thereon every year. Even in the original return for the year under consideration, the assessee had correctly shown the income of Rs. 99,62,600/- on account of interest received. In view of the above factual matrix, it is clear that there was no intentional under-reporting of income on part of the assessee.
This revised return was processed u/s 143(1) on 02.10.2019 but before that, a notice u/s 143(2) was received by the assessee on 22.09.2019. As soon as the mistake was noticed, the assessee applied for rectification and also filed a grievance with E-nivaran on 14.01.2019. In response to the grievance, the CPC A.Y. 2018-19 Hiranand Family Trust informed the assessee that rectification rights are transferred to the jurisdictional assessing officer. The assessee thereafter contacted the AO and was informed that rectification would be taken up alongwith the scrutiny assessment which was underway.
From the above sequence of events, it is clear that there was no intention on the part of the assessee to under-report its income. The inadvertent mistake of uploading incomplete return happened due to technological error. As soon as it came to the assessee’s notice, he initiated steps to rectify the mistake. We, therefore, hold that is not a fit case for levy of penalty u/s 270A for under reporting of income, and therefore, the penalty order dated 02.03.2022 is set aside.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 11.02..2025.