Penalty Under Section 270A Is Valid for Non-Filing Under Section 139(1) Even if Returned Income Is Accepted Post-Notice Under Section 148

ORDER

Om Prakash Kant, Accountant Member. – This appeal by the assessee is directed against order dated 05/12/2025 passed by the Ld. Commissioner of Income-tax (Appeals)- National Faceless Appeal Centre, Delhi [in short the Ld. CIT(A)] for assessment year 2018-19 in relation to penalty under Section 270A of the Income Tax Act, 1961 (in short the Act) levied by the Assessment Unit of the Income Tax Department. The grounds raised by the assessee are reproduced as under;-

2. Briefly stated facts of the case are that the assessee did not file his regular return of income for the year under consideration. In the case of the assessee, specific information was flagged as per risk management strategy formulated by the Central Board of Direct Tax (CBDT) through ITBA software and as per this specific information, the assessee had received salary income of Rs. 65,69,395/- from M/s. Wanbury Ltd., and Rs. 8,04,138/- from Employee Provident Fund(PF) Organization, but failed to file the return of income in spite of such huge transaction. Thereafter, considering the above facts, the case was reopened under Section 147 of the Act after passing order under Section under Section 148A(d) of the Act, followed by notice under Section 148 of the Act on 5^th April of 2022, which was duly served upon the assessee. Subsequently, show cause notice under Section 144 of the Act was issued during which the assessee admitted salary income of rupees 34,11,506/- from M/s. Wanbury Limited and P F withdrawal of Rs. 8,04,138/-.

2.1 The Assessee filed return of income in response to notice under section 148 under which he paid additional 20% tax payable on the income of Rs. 1.70 lacs which was paid along with interest under Section 234A; 234B and 234C of the Act. The AO completed the assessment under section 147 read with section 144, accepting the income declared by the assessee in the return filed in response to notice under section 148.

2.2 The AO also initiated penalty proceeding under section 270A for under reporting of the income. During the course of the penalty proceedings under Section 270A, it was submitted on behalf of the assessee that there was no difference in the tax on assessed income and tax paid by the assessee with interest, therefore, there was no underreporting or concealment on behalf of the assessee, but Ld. AO rejected the contention of the assessee and levied the penalty under Section 270A. On further appeal, the Ld. CIT(A) also upheld the penalty, observing as under: –

“5.5 The appellant has claimed that there was no underreporting of income as no additions have been made in the assessment order and all the taxed were paid before the completion of assessment proceedings. The argument of the appellant does not hold merit. The intent and purposes of penalty provisions contained in Section 270A are very clear. Section 270A(2)(b) states that if the income assessed is greater than the maximum amount not chargeable to tax, where no return of income has been furnished or where return has been furnished for the first time under section 148, then the person shall be considered to have under-reported his income which would automatically attract the penalty under the section. In the instant case, the return of income was filed for the first time in response to notice u/s 148. The income assessed is greater than the basic exemption limit and it is evident that the appellant has underreported his income.

5.6 It is further seen that the income was declared only after initiation of reassessment proceedings, and not voluntarily or suo motu. The appellant failed to file the return of income. Had notice u/s 148 not been issued in the case of the appellant, the income would have escaped assessment. The AO has passed a very detailed order considering the submissions of the appellant. The argument of the appellant that income returned in response to 148 was accepted and the penalty is not leviable is not acceptable. The disclosure of the income was not voluntary but in consequence to of issuance of notice u/s 148. Inspite of having taxable income, the same was not disclosed. Reliance is placed on Mak Data Pvt. Ltd. v. CIT [358 ITR 593 (SC)], where the Hon’ble Supreme Court held that voluntary surrender after detection does not exonerate the assessee from penalty.

5.7 The argument of the appellant that since the TDS was deducted on the salary income and therefore penalty should not be levied u/s 270A does not hold merit in view of the facts of the case and provisions of section 270A. Further, it has been clearly observed by the AO that apart from Salary Income there was an additional PF withdrawal of Rs.8.04 lacs on which TDS was deducted but it was liable for higher rate of tax but the appellant did not file the return of income. Once the underreporting of income is detected, the penal consequences follow. The appellant has not been able to offer proper explanation or valid reason for the underreported income. The Hon’ble Supreme Court in several cases has held that the conduct of the assessee, timing of disclosure, and factual matrix must be seen in totality.

5.8 Reliance is placed on the following case laws as the legal principles from these are applicable for the said issue: –

5.9 In view of the above discussion, facts of the case and case laws, I do not find any reason to interfere with the order of the AO. Hence, I find no infirmity in the order of the AO and in levying penalty of Rs.4,58,888/-u/s 270A. Accordingly, these grounds of appeal are dismissed.”

3. Before us, the learned Authorised Representative (AR) assailed the impugned penalty order and advanced the following submissions:

3.1 In support of the aforesaid contentions, the learned AR placed reliance on the following judicial precedents:

4. We have carefully considered the rival submissions, perused the orders of the authorities below and examined the material available on record. The short controversy before us is whether penalty levied under section 270A of the Act is sustainable where the assessee failed to furnish the return of income under section 139(1), but subsequently filed the return only in response to notice issued under section 148, and the income so declared was accepted without any further addition in the reassessment proceedings.

4.1 The material facts are undisputed. The assessee admittedly did not file the return of income within the time prescribed under the Act despite having received substantial salary income together with taxable withdrawal from the Employees’ Provident Fund. It was only on the basis of information available with the Department through its Risk Management System that reassessment proceedings were initiated under section 147. Thereafter, in response to notice issued under section 148, the assessee furnished the return of income declaring total income of Rs.35,95,150/-, which ultimately came to be accepted by the Assessing Officer without any variation.

4.2 The principal contention advanced on behalf of the assessee is that since no addition was ultimately made over and above the income declared in the return filed in response to section 148, there was no “under-reporting of income” within the meaning of section 270A and, consequently, the levy of penalty is unsustainable. It has also been urged that the entire salary income was subjected to tax deduction at source and reflected in Form No.26AS; therefore, there was neither any concealment nor any intention to evade tax.

4.3 We are unable to persuade ourselves to accept the aforesaid submissions. For ready reference, the relevant provisions regarding penalty for under reporting and misreporting are reproduced below:-

270A. (1) The Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner may, during the course of any proceedings under this Act, direct that any person who has under-reported his income shall be liable to pay a penalty in addition to tax, if any, on the under-reported income.

(2) A person shall be considered to have under-reported his income, if-

(3) The amount of under-reported income shall be,-

……………………………….

(4) Subject to the provisions of sub-section (6), where the source of any receipt, deposit or investment in any assessment year is claimed to be an amount added to income or deducted while computing loss, as the case may be, in the assessment of such person in any year prior to the assessment year in which such receipt, deposit or investment appears (hereinafter referred to as “preceding year”) and no penalty was levied for such preceding year, then, the under-reported income shall include such amount as is sufficient to cover such receipt, deposit or investment.

(5) The amount referred to in sub-section (4) shall be deemed to be amount of income under-reported for the preceding year in the following order-

(6) The under-reported income, for the purposes of this section, shall not include the following, namely:-

…………………………………”

4.4 Section 270A marks a significant departure from the erstwhile penalty provisions contained in section 271(1)(c). The scheme of section 270A is founded upon objectively identifiable statutory events constituting “under-reporting of income” rather than upon the subjective concept of concealment. The legislative intent is evident from sub-section (2), which exhaustively specifies the situations in which a person shall be deemed to have underreported his income. Clause (b) of section 270A(2) expressly provides that where no return of income has been furnished, and the income assessed exceeds the maximum amount not chargeable to tax, the assessee shall be regarded as having under-reported income. Correspondingly, section 270A(3)(i)(b) prescribes the method of quantification of such under-reported income, namely, the difference between the assessed income and the maximum amount not chargeable to tax in cases other than companies, firms or local authorities.

4.5 In the present case, admittedly no return of income was furnished under section 139(1). The income ultimately assessed at Rs.35,95,150/- was far in excess of the basic exemption limit. The statutory consequence envisaged under section 270A(2)(b) therefore automatically follows. The subsequent filing of a return only after issuance of notice under section 148 does not obliterate the initial default contemplated by the statute. Once the factual ingredients prescribed under section 270A are satisfied, the liability to penalty flows from the statutory mandate. The contention that no addition was made in the reassessment order also does not advance the assessee’s case. The absence of variation between the income returned in response to notice under section 148 and the income assessed is not the determinative test under section 270A(2)(b). The statute does not predicate levy of penalty upon an addition made over the returned income in every case. In a case where no return had originally been furnished despite taxable income, the very assessment of taxable income for the first time constitutes the event contemplated by the Legislature for attracting the provisions relating to under-reporting. Acceptance of the income declared after initiation of reassessment proceedings cannot retrospectively cure the statutory default already committed.

4.6 Equally devoid of merit is the plea that the income was already reflected in Form No.26AS and taxes had substantially been deducted at source. Availability of information with the Department or deduction of tax at source does not dispense with the statutory obligation cast upon an assessee to furnish a valid return of income where such obligation exists under the Act. The penal consequence under section 270A is attracted by the statutory conditions specified therein and not by the source through which the Department eventually comes to know of the income. The assessee has also sought to contend that there was no intention to evade tax. However, unlike the earlier provisions relating to concealment, section 270A substantially adopts an objective statutory framework. Once the conditions prescribed under sub-section (2) are fulfilled and the case does not fall within any of the exclusions provided in sub-section (6), the question of examining the assessee’s subjective intention assumes little relevance. We also find that the assessee has failed to demonstrate that his case falls within any of the exceptions carved out under section 270A(6).

4.7 The decisions relied upon by the learned Authorised Representative do not advance the assessee’s case. Those decisions turned upon their own peculiar facts where either the Assessing Officer had not recorded any finding regarding statutory underreporting as contemplated under section 270A, or the factual foundation necessary for invoking section 270A(2)(b) was absent. In the present case, however, the assessee admittedly failed to furnish the return of income despite having taxable income and disclosed the income only after reassessment proceedings were initiated. The factual matrix is, therefore, materially distinguishable, rendering those decisions inapplicable.

4.8 We, therefore, find ourselves in agreement with the conclusion arrived at by the Assessing Officer, as affirmed by the learned CIT(A), that the assessee squarely falls within the ambit of section 270A(2)(b) read with section 270A(3) of the Act and is consequently liable to penalty under section 270A(7). No legal or factual infirmity has been demonstrated warranting interference with the impugned order. Accordingly, the grounds raised by the assessee are dismissed.

5. In the result, appeal of the assessee is dismissed.