2024 (8) TMI 1233 - AT - Income Tax

Penalty levied u/s 270A - the assessee did not file original return of income AO initiated penalty proceedings for underreporting of income - AR before us submitted that all the due tax on the income earned by the assessee under the head salary were already deducted by the employer and, therefore, there was bona-fide belief on the part of the assessee that he has not underreported HELD THAT - Undisputedly the income of the assessee was subject to the tax liabilities on which tax at source was duly deducted by the employer and deposited with the government exchequer on behalf of the assessee which was also reflecting in the record of the department. Accordingly, there was no loss to the revenue as far as the tax liability is concerned. The provisions of clause (a) of sub-section 6 of section 270A provides that there will not be any under reporting of income if the assessee furnish explanation with respect to the income and discloses all the material facts regarding such income and the AO is satisfied that the explanation offered is bona fide. In the present case, the income of the assessee was subject to TDS and almost entire tax liability was already paid by way of TDS and the same was duly reflecting in the record of the department. Hence there was no reason for the assessee to underreport his income by not furnishing return of income. The assessee has been filing return of income for the last many years. Therefore, we find that the explanation furnished by the assessee for failing to file return of income was bona fides as the assessee never intended to underreport the income. Likewise, as far as the addition is concerned, we reiterate that the assessee under the bona fides belief has claimed a higher amount of deduction u/s 24 of the Act. Therefore, no penalty under the provision of section 270A of the Act shall be levied. We can safely hold that the assessee due to bona fide belief failed to file the return of income. Therefore, no penalty shall be levied under section 270A of the Act on account of underreporting of income - Appeal of the assessee is allowed.

Summary

Issues:
Penalty under section 270A of the Act for underreporting of income.

Analysis:
The appeal was filed against the penalty levied by the AO under section 270A of the Act amounting to Rs. 8,16,895. The assessee, an individual, had not filed the return of income under section 139 of the Act for the relevant year. The AO found that the assessee claimed excessive deduction in Form-16 under section 24 of the Act for Rs. 74,951, resulting in the income being determined at Rs. 58,70,680. The penalty was initiated for underreporting of income, which was confirmed by the CIT(A). The assessee contended that all due taxes on salary income were deducted by the employer, leading to a bona fide belief that there was no underreporting. The AO, however, was not convinced and levied the penalty.

Contentions:
The assessee argued that the tax on salary income was already deducted by the employer, and there was a genuine belief that no underreporting occurred. The AO, supported by the DR, maintained that the penalty was correctly imposed due to the failure to file the return of income.

Judgment:
The Tribunal noted that the income was subject to tax deductions at source by the employer, with almost all tax liabilities paid through TDS. The explanation offered by the assessee for not filing the return was deemed bona fide, as there was no intention to underreport income. The Tribunal referred to a similar case from the Ahmedabad Tribunal to support its decision. It was concluded that the assessee's failure to file the return was due to a genuine belief that no further disclosure was required, given the TDS deductions and accurate reporting in Form No. 26AS. Consequently, the penalty under section 270A was set aside, and the appeal of the assessee was allowed.

Conclusion:
The Tribunal found that the assessee's failure to file the return of income was based on a bona fide belief that no additional disclosure was necessary, given the TDS deductions and accurate reporting. As a result, the penalty under section 270A was deemed unwarranted, and the appeal was allowed, directing the AO to delete the penalty.