SANTHOSH ABRAHAM,CHENNAI vs. ITO, WARD-1,, KANCHEEPURAM

Aggrieved by the order of the AO imposing penalty u/s.270A of the Act, assessee filed appeal before the FAA. Before the FAA, assessee reiterated the contention that since there was no difference between the returned income and the assessment income, no penalty is leviable. The FAA rejected the contentions of the assessee since assessee has not complied with the statutory duty of filing the return of income within the prescribed time limit. Further, the FAA noted that assessee had substantial transaction in the share market. The relevant finding of the FAA reads as follows:- “4.3 ……………………….. On careful consideration it is seen that the appellant did not file the ROI despite having substantial taxable income. It is not the case that the appellant was not aware of the obligation to file the ROI, the appellant has been having substantial transactions of more than Rs.13 4 -: SA No.137/Chny/2025 crore in the share market. Considering these facts the general explanation adduced by the appellant Is not found acceptable. The appellant’s case is duly covered by the provisions of section 270A of the Act. Therefore, I do not find any infirmity in the action of AO and the penalty of Rs.2,57,631/- is confirmed.”

Aggrieved by the order of the FAA confirming the penalty imposed, assessee has filed the present appeal before the Tribunal. The grounds raised read as follows:- a. The Learned Commissioner of Income-Tax (Appeals), Income Tax Department failed to consider the fact that the income assessed by the assessee is identical to the returned income, and thus there was no evasion of tax.

The Ld.AR submitted that assessee on his own has been regularly filing return of income on time from assessment year 2007-08 to assessment year 2025-26. It is submitted that for the relevant assessment year namely, 2020-21, assessee and his family members had suffered covid during the Covid-19 pandemic and was not in a position to file the return within the prescribed time. It was 6 -: SA No.137/Chny/2025 stated that, subsequently assessee made efforts to file the return, however the system did not accept the return which was sought to be filed. It was submitted that out of the aggregate income tax liability of Rs.5,26,174/-, a sum of Rs.5,12,810/- was paid by way of TDS and balance sum of Rs.10,912/- was on account of penalty for not filing the return of income and interest u/s.234A of the Act. Therefore, it was contended that more than 99% of tax has been paid by way of TDS and assessee had no intention to conceal his income. It was stated that this fact is also clearly borne out from the assessment order dated 15.01.2025 at page 4, wherein it has been clearly stated that assessee’s claim was corroborated with the available record and the return of income has been accepted. Therefore, it was contended that the explanation of the assessee is bonafide u/s.270A(6)(a) of the Act. The Ld.AR further submitted that on identical facts, Ahmedabad Bench of the Tribunal in the case of Suresh Rao vs. ITO in order dated 24.01.2025 had deleted the penalty imposed u/s.270A of the Act.

The Ld.DR on the other hand submitted that assessee had gross turnover exceeding Rs.13 crores in dealing with Future and Options (F&O). Moreover, for the relevant assessment year, the total declared income of the assessee was Rs.22,76,480/- in 7 -: SA No.137/Chny/2025 response to the notice issued u/s.148 of the Act, which is above the basis exemption limit. Therefore, it was contended that assessee having failed to file the return of income, there was escapement of assessment, which warrants imposition of penalty u/s.270A of the Act. It was stated that penalty u/s.270A of the Act for under- reporting of income is computed u/s.270A(3)(b)(i) of the Act, being the difference between the assessment income and the exemption limit with the tax payable thereon u/s.270A(10)(b) of the Act. Therefore, the order of FAA which has confirmed the AO’s order imposing penalty u/s.270A of the Act requires no interference and the appeal of the assessee may be dismissed.

We have heard rival submissions and perused the material on record. Admittedly, assessee has been regularly filing his return of income from assessment years 2007-08 to assessment year 2025-26, copies of acknowledgment for having filed the return of income is placed are record. For the relevant assessment year namely 2020-21, assessee has not filed his return of income. Assessee had stated that he was not been able to file the return of income on account of he and his family members suffering from Covid during the covid-19 pandemic. It was stated that thereafter

The assessee had traded in stock market and has gross turnover exceeding Rs.13 crores. However, it is clear from the written submissions of the Ld.DR that trading in shares had resulted in loss of Rs.1,97,056/- (para 1 of the Ld.DR submissions). Pursuant to the notice issued u/s.148 of the Act, return of income was filed by assessee declaring total income of Rs.22,76,480/- (income from salary). The return of income was accepted by the AO and assessment was accordingly completed u/s147 r.w.s.144B of the Act vide order dated 15.01.2025. In the assessment order, the AO had accepted the genuineness of the assessee claim based on the evidences and the explanation provided. The relevant portion of the assessment order reads as follows:- “The submissions made by the assessee were duly verified and examined against the return of income filed, along with the details and particulars provided during the assessment proceedings and other relevant records. The genuineness of the assessee’s claims was corroborated with available records, and based on the evidence, the explanations provided by the assessee were found satisfactory.”

As regards the salary income so disclosed in the return of income filed pursuant to notice issued u/s.148 of the Act, it is to be mentioned that there has been TDS on the said salary payments 9 -: SA No.137/Chny/2025 almost covering 99% of total tax demand. The balance tax of sum of Rs.13,400/- is on account of penalty in not filing return of income and interest payment u/s.234A of the Act. Section 270A(6)(a) of the Act states that for the purpose of this section under-reporting of income shall not include amount of income in respect of which assessee offers an explanation which is bonafide and assessee has disclosed all material facts to substantiate the explanation offered. Penalty in this case has been imposed u/s.270A of the Act for under-reporting of income for the reason that if notice not being issued u/s.148 of the Act, income would have escaped assessment. We fail to understand when total tax liability has been covered by TDS payment, how income could have escaped assessment. When tax liability is covered by TDS, there is no manafide intention on the part of the assessee to conceal any particulars of income or under- reporting his income. Therefore, the explanation of the assessee that he was prevented from filing the return of income for the relevant assessment year due to suffering Covid-19 is a bonafide explanation and covered u/s.270A(6)(a) of the Act. Accordingly, on the facts of the instant case, we are of the view that penalty u/s.270A of the Act is not to be imposed and we, delete the same. It is ordered accordingly.