Penalty for non-compliance and under-reporting fails where compliance is substantial and the income error is bona fide

Penalty under section 272A(1)(d) is not sustainable where the assessee seeks adjournments, later furnishes the information called for under section 142(1), and the conduct shows substantial compliance rather than wilful defiance. Penalty under section 270A is also not leviable where under-reporting arises from a bona fide computational error in house property income, the assessee has disclosed the relevant co-ownership, licence, rental and bank details, and the mistake is admitted and corrected during assessment. The governing principle is that penalty provisions do not apply to technical or venial lapses, or to transparent and bona fide errors made without concealment or contumacious conduct.

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Issues: (i) Whether penalty under section 272A(1)(d) of the Income-tax Act, 1961 was sustainable for alleged non-compliance of notices under section 142(1) of the Income-tax Act, 1961. (ii) Whether penalty under section 270A of the Income-tax Act, 1961 was leviable for alleged under-reporting of income arising from a bona fide computational error in income from house property.

Issue (i): Whether penalty under section 272A(1)(d) of the Income-tax Act, 1961 was sustainable for alleged non-compliance of notices under section 142(1) of the Income-tax Act, 1961.

Analysis: The record showed that the assessee had sought adjournments through the ITBA portal and thereafter furnished the details and explanations called for by the Assessing Officer. The conduct was not one of complete non-response or wilful defiance. Penalty provisions of this nature require contumacious default and cannot be invoked for mere technical or venial lapse where compliance is ultimately made.

Conclusion: The penalty under section 272A(1)(d) was not sustainable and was deleted in favour of the assessee.

Issue (ii): Whether penalty under section 270A of the Income-tax Act, 1961 was leviable for alleged under-reporting of income arising from a bona fide computational error in income from house property.

Analysis: The assessee had disclosed the co-ownership arrangement, leave and licence agreement, rental receipts and bank details, and the discrepancy arose from an inadvertent computational mistake by the accountant while preparing the house property computation. The assessee admitted the error during assessment proceedings and accepted the corrected computation. In these circumstances, the case fell within the statutory protection against treating the amount as under-reported income where the explanation is bona fide and all material facts are disclosed.

Conclusion: The penalty under section 270A was not leviable and was deleted in favour of the assessee.

Final Conclusion: Both penalty additions were set aside because the first arose from compliance conduct that did not amount to wilful non-compliance, and the second arose from a bona fide and transparently disclosed computational error rather than concealment or misreporting.

Ratio Decidendi: A penalty for non-compliance or under-reporting cannot be sustained where the assessee has substantially complied, disclosed all material facts, and the discrepancy is shown to be a bona fide and admitted computational error without contumacious conduct or deliberate suppression.

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