ITAT Delhi on Section 270A Penalty: No Under-Reporting Where Income Is TDS-Disclosed and Explanation Is Bona Fide

The Delhi Bench of the Income Tax Appellate Tribunal in Pravesh Aggarwal Vs CIT (Appeals) (ITA No.6412/Del/2025, order dated 13/05/2026) examined whether a penalty under Section 270A of the Income Tax Act, 1961 could be sustained where an assessee, a salaried individual, failed to file a return under Section 139(1) but later filed a return in reassessment proceedings under Section 148, which was accepted without modification. The Tribunal ultimately deleted the penalty of Rs. 3,74,072/- levied for Assessment Year 2019-20.

This decision is particularly significant for salaried assessees who rely on TDS and Form 26AS and may omit filing returns due to bona fide misunderstandings about their compliance obligations.

Background of the Case

Basic Facts

• The assessee, an individual, had salary income exceeding Rs. 30,00,000/- during Financial Year 2018-19 (Assessment Year 2019-20).
• No return of income was filed within the due date under Section 139(1) of the Income Tax Act, 1961.
• Based on the information available with the Department, the case was reopened under Section 147.

Reassessment Proceedings

1. An order under Section 148A(d) was passed on 19.04.2023.
2. Pursuant to that, a notice under Section 148 was issued.
3. In response, the assessee filed a return of income on 08.05.2023, declaring total income of Rs. 30,22,900/-.
4. Statutory notices under Section 143(2) and Section 142(1) were issued, and the assessee furnished the requisite details.
5. The Assessing Officer completed reassessment under Section 147 by accepting the returned income as it is, i.e., assessed income = Rs. 30,22,900/-, with no additions, variations or disallowances.

Despite this, the Assessing Officer proceeded to initiate and levy penalty under Section 270A, on the footing that the assessee had under-reported income by not filing a return under Section 139(1).

Penalty Proceedings under Section 270A

Stand of the Assessing Officer

• The Assessing Officer treated the assessee as a non-filer for the relevant year.
• It was held that the assessee had under-reported income to the extent of Rs. 30,22,900/-, being the income declared in the return filed in response to notice under Section 148, because:
  • No original return had been filed under Section 139(1).
• Penalty was calculated at 50% of the tax on the alleged under-reported income, in line with Section 270A(7), resulting in a penalty of Rs. 3,74,072/-.

Assessee’s Explanation before the Assessing Officer

During penalty proceedings, the assessee furnished a detailed reply, explaining:

• During Financial Year 2018-19, the assessee changed employment.
• Due to this job change, the assessee could not obtain Form 16 from both employers before the due date of filing the return under Section 139(1).
• The assessee was under a bona fide belief that, since:
  • TDS had been properly deducted by the employers, and
  • The TDS and related salary details were duly appearing in Form 26AS,
    the tax liability was effectively discharged and no separate action was required.

The Assessing Officer, however, rejected this explanation and proceeded to levy penalty under Section 270A.

Order of the CIT(A) – NFAC

The assessee filed an appeal before the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), New Delhi against the penalty order dated 13.06.2025 passed under Section 270A.

• The assessee argued that:

  • The income declared in the return filed under Section 148 was accepted in full;
  • No concealed income or misreporting was found during the reassessment;
  • Hence, there was no “under-reporting” in terms of Section 270A(2).

• The Ld. CIT(A), however, dismissed the appeal, upholding the Assessing Officer’s view that:

  • In the absence of a return under Section 139(1), the conditions of Section 270A(2)(b) were triggered;
  • Therefore, penalty under Section 270A was justified.

Appeal before ITAT Delhi

The assessee carried the matter to the Delhi Bench of the ITAT against the order dated 15.09.2025 passed by the Ld. CIT(A), NFAC, under Section 250. All grounds in the appeal effectively questioned the legality and propriety of the penalty of Rs. 3,74,072/- under Section 270A.