ITAT Chennai Deletes Penalty for Under-Reporting Of Income After Finding 99% Tax Covered by TDS

The Chennai Bench of the Income Tax Appellate Tribunal has recently deleted a Rs. 2.57 lakh penalty imposed under Section 270A of the Income Tax Act (penalty for under-reporting of income) on an individual salaried taxpayer.

The tribunal noted that TDS (tax deducted at source) on the assessee's salary had almost covered 99% of the total tax demand and held that, “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.”

The order was passed by a bench comprising Vice President George George K. and Accountant Member Inturi Rama Rao,

The chennai resident had not filed his return for AY 2020–21 under Section 139 (provision requiring filing of return of income).

A notice was issued under Section 148 (reassessment notice for income escaping assessment). He then filed a return declaring salary income of Rs. 22.76 lakh.

The assessment was completed under Section 147 (reassessment of income escaping assessment) read with Section 144B (faceless assessment procedure). The returned income was accepted without any addition.

The revenue imposed a penalty under Section 270A (for under-reporting of income), initiated through Section 274 (procedure for imposing penalty), on the ground that income would have escaped assessment had notice under Section 148 not been issued.

The tribunal further accepted the assessee's explanation that he and his family had been affected by Covid-19 during the pandemic and held that the delay in filing the return constituted a bona fide explanation under Section 270A(6)(a) (exclusion from under-reporting where the explanation is bona fide and material facts are disclosed).

Holding that the case fell within this statutory exception, the tribunal deleted the penalty.