Levy of penalty under section 271AAC(1) on return filed in response to notice quashed due to proviso interpretation

Interpretation of the proviso to section 271AAC(1) turned on whether the phrase "section 139" encompasses returns under subsection (1) or (4). The tribunal found the Finance Act 2021 amendment altering subsection references takes effect prospectively from AY 2022-23, so it does not alter the scope for AY 2021-22. Because the proviso uses the general term "section 139," it cannot be read as limited to 139(1), and an assessee who filed a return meeting the proviso's conditions cannot be penalised under the impugned provision; the penalty was deleted.

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Issues: Whether the proviso to section 271AAC(1) of the Income-tax Act, 1961 applies to a return filed under section 139(4) (filed after issuance of notice under section 142(1)) for AY 2021-22, thereby precluding levy of penalty under section 271AAC(1).

Analysis: The proviso to section 271AAC(1) refers to "section 139" without specifying sub sections. The statutory text distinguishes where the legislature intended to refer specifically to section 139(1) (as seen elsewhere, e.g., in section 142(1)). The amendment introducing time limits in section 139(4) by the Finance Act, 2021 takes effect from 01.04.2021 and applies from AY 2022-23; it does not alter the meaning of "section 139" in the proviso as applicable to AY 2021-22. The assessee filed a return under section 139 (specifically section 139(4)) and disclosed the income and paid tax under section 115BBE, thereby meeting the conditions set out in the proviso to section 271AAC(1).

Conclusion: The proviso to section 271AAC(1) applies to the return filed by the assessee under section 139(4) for AY 2021-22; consequently, the penalty under section 271AAC(1) is not leviable and is deleted. The appeal is allowed in favour of the assessee.

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