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Facts
The assessee did not file the original return of income for A.Y. 2017-18. Information about property transactions led to a notice under Section 147, and a return was filed declaring income. Subsequently, a penalty under Section 270A was imposed for under-reporting of income.
Held
The Tribunal held that the assessee's explanation for not filing the original return was bona fide, as self-assessment tax was paid before the notice under Section 148. The penalty under Section 270A was not leviable under Section 270A(6)(a) of the Act.
Key Issues
Whether the penalty under Section 270A is sustainable when the assessee offers a bona fide explanation for not filing the original return and pays self-assessment tax.
Sections Cited
147, 148, 270A, 143(3), 144B, 270A(2)(b), 270A(6), 270A(6)(a)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH, AHMEDABAD
Before: MS. SUCHITRA KAMBLE & SHRI NARENDRA PRASAD SINHA
O R D E R PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:
This appeal is filed by the assessee against the order of National Faceless Appeal Centre (in short ‘the CIT(A)’) dated 06.01.2025 for the Assessment Year (A.Y.) 2017-18 in respect of penalty under section 270A of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The brief facts of the case are that no return of income was filed by the assessee for A.Y. 2017-18. On the basis of information that the assessee had purchased as well as sold certain immovable properties, the case was reopened under section 147 of the Act. In response to notice under section 148 of the Act dated 25.03.2021, the assessee had filed return of income on 17.04.2021 declaring income of Rs.51,67,240/-. The (Assessment Year: 2017-18) Ashokbhai Khodabhai Patel vs. ITO Page 2 of 5 Assessing Officer found that the assessee had duly disclosed the capital gain arising on sale of property and, therefore, the returned income was accepted vide assessment order under section 147/144B of the Act dated 24.03.2022. Since the assessee did not file his original return of income, penalty proceeding under section 270A of the Act was initiated for under- reporting of income. Thereafter, a separate penalty order under section 270A dated 23.09.2022 was passed, imposing penalty of Rs.5,06,475/- at the rate of 50% of the amount of tax payable.
Aggrieved with the penalty order of the Assessing Officer, the assessee had filed an appeal before the First Appellate Authority which was decided vide the impugned order and the appeal of the assessee was dismissed.
The assessee is now in second appeal before us. The following grounds have been taken in this appeal;
1. In law, on the facts and in the circumstances of the case, the impugned penalty order passed by the Ld. AO and confirmed by Hon’ble CIT(A) is against natural justice, bad in law and deserves to be cancelled.
2. On the facts and in the circumstances of the case, the Hon’ble CIT(A) is not justified in confirming the penalty order of Rs.5,06,475/- u/s.270A of the Income Tax Act, 1961 on the basis of presumptions, conjectures and surmises. The learned AO may be directed to delete such addition. 3. the appellant craves to leave to add, alter, amend or withdraw any ground/s of appeal on or before hearing of the appeal.”
Shri Anil Brahmakshatriya, Ld. AR of the assessee submitted that the assessee is an agriculturist and illiterate person having no knowledge of Income Tax liability. He was under the impression that no tax was payable in respect of sale of property and, therefore, no original return of income was filed. However, when he discussed the matter with his (Assessment Year: 2017-18) Ashokbhai Khodabhai Patel vs. ITO Page 3 of 5 consultant, he was informed about the tax liability and had accordingly paid self-assessment tax on 23.07.2019. However, he was unable to file the return of income as the due date for filing of return had already expired and the System did not allow him to file any return. The Ld. AR submitted that the assessee had duly filed the return in response to notice under section 148 of the Act which was accepted by the Department. He further submitted that the assessee had explained the reason for non-filing of return and that his explanation for under-reporting of income was bona- fide. According to the ld. AR, considering the fact that the return of income was accepted, there was no under-reporting of income within the meaning of section 270A(6) of the Act and, therefore, no penalty was called for in this case.
Per contra, Shri B.P. Srivastava, Ld. Sr. DR supported the orders of the lower authorities.
We have carefully considered the rival submissions. The provision of section 270A(2)(b) of the Act stipulates that a person shall be considered to have under-reported his income where no return of income is furnished or where the return is furnished for the first time under section 148 of the Act. In the present case, the assessee had filed his return of income for the first time under section 148 of the Act. Therefore, the provisions of section 270A(2)(b) of the Act was squarely applicable to the case of the assessee. At the same time, the provisions of section 270A(6) of the Act provides as under :-
(6) The under-reported income, for the purposes of this section, shall not include the following, namely:— (a) the amount of income in respect of which the assessee offers an explanation and the Assessing Officer or 95[the Joint Commissioner (Appeals) or] the Commissioner (Appeals) or the Commissioner or the Principal
Commissioner, as the case may be, is satisfied that the explanation is bona fide and the assessee has disclosed all the material facts to substantiate the explanation offered;
As per section section 270A(6)(a), where the assessee offers an explanation for non-filing of return and if the explanation of the assessee is found to be bona fide, then it will not be considered as under-reporting of income. In the present case, the assessee had explained that he had already paid self-assessment tax on 23.07.2019, which was much before the date of issue of notice under section 148 of the Act on 25.03.2021. The assessee was prevented from filing the return after payment of self- assessment tax, for the reason that the return filing window did not allow him to file the return. From the copy of return filed by the assessee in response to section 148 of the Act notice, it is found that the assessee had paid self-assessment tax of Rs.10,41,140/- on 23.07.2019; the credit of which was also allowed in the computation sheet of the order u/s 147 of the Act dated 24.03.2022. Thus, the assessee had disclosed the income to the Department by paying the self-assessment tax on 23.07.2019. Considering these facts, the explanation of the assessee for not furnishing the original return is found to be bona fide. It is also found that the self-assessment tax paid by the assessee was higher than the amount of Rs.10,12,950/- on which 50% penalty under section 270A was imposed. Considering the explanation and the conduct of the assessee, the case is found to be covered in the exception provided under section 270A(6)(a) of the Act. Under the circumstance, no penalty under section 270A of the Act was called for in this case. Accordingly, penalty imposed by the Assessing Officer is deleted and the grounds taken by the assessee are allowed.
Order pronounced in the open Court on this 14th May, 2025.