Bona Fide Non-Filing of Return Due to TDS Coverage Does Not Attract Section 270A Penalty: ITAT Hyderabad

Case Overview

Case Name: Kavita Mamidi Vs ACIT (ITAT Hyderabad)
Appeal Number: ITA 72/HYD/2026
Date of Order: 22/07/2026
Assessment Year: 2018-19
Forum: Income Tax Appellate Tribunal, Hyderabad

Background and Factual Matrix

The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) delivered a significant ruling in favour of the assessee in ITA 72/HYD/2026, directing deletion of penalty imposed under Section 270A of the Income-tax Act, 1961 for Assessment Year 2018-19.

The case originated when the Revenue's Insight Portal flagged that the assessee had not filed her return of income for A.Y. 2018-19, despite being engaged in substantial financial transactions. These included receipt of salary from M/s. Verizon Data Services India Private Limited — on which tax had been deducted at source under Section 192 of the Income-tax Act, 1961 — as well as interest income from multiple companies subject to TDS under Section 194A of the Act.

Acting on this information, the Assessing Officer issued a notice under Section 148 of the Act on 04.04.2022, reopening the assessment. In response to this notice, the assessee filed her return of income declaring total income of Rs.37,58,300/-.

Assessment Proceedings and Addition Made

The case was taken up for scrutiny. After examining the return filed and other material on record, the Assessing Officer completed the assessment under Section 147 read with Section 144B of the Act vide order dated 26.03.2024, determining total income at Rs.38,03,034/-. The marginal upward revision from the declared income was on account of an addition of Rs.44,734/- towards interest received on a savings bank account, brought to tax under the head "Income from Other Sources".

Simultaneously, penalty proceedings were initiated under Section 270A of the Act on the ground that the non-filing of the original return constituted under-reporting of income arising in consequence of misreporting.

The Assessee's Explanation Before the Assessing Officer

During penalty proceedings, a Show Cause Notice was issued calling upon the assessee to explain why penalty under Section 270A should not be levied. The assessee put forth the following explanation:

  • She is a salaried employee in the private sector whose salary income is fully subject to TDS.
  • Her interest income on deposits is also subject to TDS under Section 194A of the Act.
  • During the relevant period, she was employed outside India and was operating under a bona fide belief that her employer was filing her return of income on her behalf, as had purportedly been done in earlier assessment years.
  • For reasons attributable to the employer, the return was not filed for A.Y. 2018-19, but she remained unaware of this omission.
  • Upon receipt of the notice under Section 148, she promptly filed a return disclosing true and correct particulars of all income, on which taxes had already been remitted through TDS.