2025 (2) TMI 1421 - AT - Income Tax

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 ... Levy of penalty levied u/s. 271AAC(1) - return was filed in response to a notice issued u/s. 142(1) - HELD THAT:- Admittedly, the return filed by the assessee is a return u/s. 139(4); even assuming that the return was filed u/s. 139(1) we are live to the fact that the provisions of section 139(4) refers to the words “return for any previous year at any time before three months prior to.” This amendment was brought in by the Finance Act 2021 w.e.f. 01.04.2021. Therefore, this amendment would take effect from the AY 2022-23 and the impugned assessment year is 2021-22. We may also refer to the provisions of section 142(1) where also the term section 139 is referred to and specifically 139(1) has also been referred to. Therefore, when the legislature wanted to refer to section 139(1) the legislature used the specific term 139(1) but in the proviso to section 271AAC(1) the legislature in its wisdom has used the term 139. Therefore, the section 139 refers to in the proviso cannot be extended to be read as 139(1). In the present case as the assessee has filed his return of income and complied with the provisions as required in the proviso to section 271AAC(1), we are of the view that the penalty levied is unsustainable and consequently, the same stands deleted. Assessee appeal allowed. 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.