Pre-notice repayment of excess refund with interest defeats concealment and underreporting penalties under the Income-tax Act

Penalty under section 271(1)(c) and section 270A was held unsustainable where the assessee repaid the excess refund with interest before issue of the section 148 notice and furnished a revised computation showing the correct income. On those facts, the Tribunal found no deliberate concealment or culpable underreporting, and treated the pre-notice repayment and surrounding conduct as negativing the basis for penalty. Applying its coordinate bench decisions on similar facts, the Tribunal deleted the penalty orders and allowed the assessee's appeals.

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Issues: Whether penalty under section 271(1)(c) and section 270A of the Income-tax Act, 1961 was leviable when the assessee had deposited back the excess refund with interest before issue of notice under section 148 and the return disclosed the correct income in substance.

Analysis: The assessee was a salaried employee whose original return, prepared through a tax consultant, contained excess claims under the head income from house property and Chapter VI-A, resulting in a refund. Before the reassessment notice under section 148 was issued, the assessee repaid the entire excess refund along with interest to the Government Treasury and also furnished revised computation showing the correct income. The Tribunal followed its earlier coordinate bench decisions on similar facts and held that the pre-notice repayment and the surrounding circumstances negatived the basis for penalty. The penalty under section 271(1)(c) was found unsustainable on the same factual matrix, and the penalty under section 270A was also held not leviable.

Conclusion: The penalty orders were liable to be deleted and the assessee succeeded.

Final Conclusion: The impugned penalties for both assessment years were set aside, and the appeals were allowed.

Ratio Decidendi: Where excess refund is voluntarily repaid with interest before reassessment notice and the assessee's conduct does not show deliberate concealment or culpable underreporting, penalty for concealment or underreporting cannot be sustained.

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