Inadvertent omission in an incomplete return did not justify penalty for under-reporting where income was otherwise duly disclosed.

Penalty for under-reporting of income under section 270A was held unsustainable where the assessee had originally disclosed the interest income correctly and the omission arose only when an incomplete return was uploaded while replying to a defect notice. The note records that the income had been consistently offered in earlier and subsequent years, the defect notice itself was based on non-furnishing of an audit report even though section 44AB was not applicable, and the assessee promptly tried to rectify the error. In the absence of material showing deliberate suppression, the omission was treated as a technological or inadvertent mistake, and the penalty order was set aside.

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Issues: Whether penalty under section 270A of the Income-tax Act, 1961 for under-reporting of income was leviable where the assessee had originally declared the income correctly but an incomplete return was uploaded while responding to a defect notice.

Analysis: The original return reflected the interest income correctly and the same income had been consistently offered in earlier and subsequent years. The defect notice was issued on the premise of non-furnishing of a tax audit report, though the provisions of section 44AB were not applicable on the facts. While replying to the notice under section 139(9), the assessee inadvertently uploaded an incomplete return in which the interest amount did not get reflected in the relevant schedule, even though the income was otherwise disclosed in the return papers. The sequence of events, including the prompt attempt to rectify the mistake and the absence of any material showing deliberate suppression, showed that the omission was attributable to a technological or inadvertent error rather than conscious under-reporting.

Conclusion: Penalty under section 270A was not sustainable, and the penalty order was set aside in favour of the assessee.

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