Penalty under Section 270A cancelled where no revenue loss and TDS covered entire tax liability

ITAT Bangalore allowed the assessee's appeal against penalty under section 270A for underreporting income. The assessee failed to file original return but entire tax liability was already deducted through TDS by employer and deposited with government. ITAT held that since there was no revenue loss and assessee had bona fide belief that no underreporting occurred due to TDS coverage, penalty was not warranted. The explanation was genuine as assessee regularly filed returns in previous years and had no intention to underreport income.

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Issues:
Penalty under section 270A of the Act for underreporting of income.

Analysis:
The appeal was filed against the penalty levied by the AO under section 270A of the Act amounting to Rs. 8,16,895. The assessee, an individual, had not filed the return of income under section 139 of the Act for the relevant year. The AO found that the assessee claimed excessive deduction in Form-16 under section 24 of the Act for Rs. 74,951, resulting in the income being determined at Rs. 58,70,680. The penalty was initiated for underreporting of income, which was confirmed by the CIT(A). The assessee contended that all due taxes on salary income were deducted by the employer, leading to a bona fide belief that there was no underreporting. The AO, however, was not convinced and levied the penalty.

Contentions:
The assessee argued that the tax on salary income was already deducted by the employer, and there was a genuine belief that no underreporting occurred. The AO, supported by the DR, maintained that the penalty was correctly imposed due to the failure to file the return of income.

Judgment:
The Tribunal noted that the income was subject to tax deductions at source by the employer, with almost all tax liabilities paid through TDS. The explanation offered by the assessee for not filing the return was deemed bona fide, as there was no intention to underreport income. The Tribunal referred to a similar case from the Ahmedabad Tribunal to support its decision. It was concluded that the assessee's failure to file the return was due to a genuine belief that no further disclosure was required, given the TDS deductions and accurate reporting in Form No. 26AS. Consequently, the penalty under section 270A was set aside, and the appeal of the assessee was allowed.

Conclusion:
The Tribunal found that the assessee's failure to file the return of income was based on a bona fide belief that no additional disclosure was necessary, given the TDS deductions and accurate reporting. As a result, the penalty under section 270A was deemed unwarranted, and the appeal was allowed, directing the AO to delete the penalty.

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