Updated return before reassessment notice defeats under-reporting penalty where additional income was disclosed and tax paid.

Updated return filed under Section 139(8A) before issuance of reassessment notice, together with disclosure of additional income and payment of tax, meant the statutory basis for alleging under-reporting under Section 270A was not accepted. As the additional income had already been disclosed and taxed, and the assessment was completed on the returned income, the penalty was held unsustainable and deleted in favour of the assessee.

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Issues: Whether penalty under Section 270A of the Income-tax Act, 1961 was sustainable when the assessee had filed an updated return under Section 139(8A) of the Income-tax Act, 1961, disclosed the additional income before notice under Section 148 of the Income-tax Act, 1961, and paid the taxes.

Analysis: The updated return was filed before the reassessment notice and the additional income stood disclosed and taxed. In these circumstances, the statutory basis for treating the assessee as having under-reported income for the purpose of penalty was not accepted. The record also showed compliance with tax payment on the additional income, and the assessment was completed on the returned income.

Conclusion: The penalty under Section 270A of the Income-tax Act, 1961 was not sustainable and was directed to be deleted in favour of the assessee.

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