Apex Detonators Pvt. Ltd. Vs ACIT (ITAT, Nagpur Bench)
Form 26AS May Expose the Income, But It Does Not File the Return: ITAT Restores Penalty u/s 270A Over Incorrect Tax Computation & Lack of Opportunity
Facts of the Case
The assessee, Apex Detonators Pvt. Ltd., was a private limited company which did not furnish its regular return of income for AY 2019-20.
Information available in Form 26AS revealed that the assessee had received interest income of ₹8,62,624 from The Saraswat Co-operative Bank Ltd. Tax of ₹86,263 had also been deducted at source from the interest payment.
Since no return had been filed despite the reported financial transaction, the AO reopened the assessment by issuing notice u/s 148. During the reassessment proceedings, the assessee failed to make proper compliance or furnish the necessary explanation.
In the absence of any response, the AO treated the entire interest receipt of ₹8,62,624 as the assessee’s total income. The AO also initiated penalty proceedings u/s 270A for under-reporting of income.
The assessee once again failed to respond to the notices issued during the penalty proceedings. The AO consequently levied penalty at 50% of the tax payable on the under-reported income. The tax on the under-reported income was computed at ₹2,69,137, resulting in a penalty of ₹1,34,568 u/s 270A.
Proceedings Before the CIT(A)
The assessee challenged the penalty before the CIT(A)/NFAC. However, it did not furnish submissions even during the first appellate proceedings.
Due to the continued absence of compliance, the CIT(A) confirmed the penalty & dismissed the appeal.
The assessee thereafter approached the ITAT, contending that the penalty had been wrongly sustained without properly examining either the nature of the default or the computation of tax upon which the penalty was based.
Assessee’s Contentions
The assessee submitted that the interest from fixed deposits was the only income of the company during the relevant year. The entire interest income had already been captured in Form 26AS & tax had been deducted at source by the bank.
It was argued that, since the income was transparently reflected in the Department’s own information system, the assessee should not be visited with a penalty for under-reporting.
The assessee also questioned the calculation of penalty. According to it, the AO had adopted an incorrect figure of tax payable because the available TDS credit of ₹86,263 had not been reduced while determining the amount on which the penalty was calculated.
The assessee further raised a specific grievance that it had not been granted an adequate opportunity to file its written submissions.
Revenue’s Stand
The Departmental Representative supported the order of the CIT(A). The Revenue relied upon the assessee’s repeated failure to file its return, participate in the assessment, respond to the penalty notice or make submissions before the CIT(A).
According to the Revenue, the penalty imposed on the under-reported income did not call for interference.
Form 26AS Is Not a Substitute for Filing the Return
The Tribunal did not accept the assessee’s broad contention that disclosure of the interest income in Form 26AS should itself be regarded as sufficient reporting of income.
It observed that, with the introduction of Form 26AS & the widening scope of TDS provisions, several financial transactions are now automatically captured & reflected on the Income Tax portal. This enables the Revenue to identify cases where returns have not been filed or reported transactions have been omitted from the returns.
However, the presence of information in Form 26AS does not relieve an assessee from the statutory obligation to file its return.
The Tribunal emphasised that the assessee was a private limited company, which was required to file its income-tax return every year. The fact that its only income was interest from fixed deposits did not dispense with that obligation.
It also noted that the applicable rate of tax on the company’s income was higher than the rate at which tax had been deducted. Therefore, the availability of TDS did not necessarily mean that the entire tax liability had already been discharged.
Why the Matter Was Restored
Although the Tribunal rejected the argument that Form 26AS disclosure was equivalent to filing a return, it noticed two factors requiring fresh consideration.
First, the assessee had raised a specific ground that it had not received a proper opportunity to furnish written submissions.
Secondly, the assessee had pointed out an apparent mistake in the computation of the penalty, particularly concerning the treatment of the TDS credit while calculating the tax payable.
Since the assessee had not participated before the lower authorities, these matters had not received proper factual & legal examination.
The Tribunal, therefore, considered it appropriate to restore the entire issue relating to penalty u/s 270A to the Jurisdictional AO for de novo adjudication in accordance with law.
ITAT’s Decision
The AO was directed to grant the assessee a fair opportunity of hearing & decide the penalty afresh after considering its submissions.
The assessee was simultaneously directed to cooperate with the proceedings & not seek unnecessary adjournments except for a reasonable cause.
Accordingly, the appeal was allowed for statistical purposes. The penalty was neither finally deleted nor confirmed; its validity & computation were left open for fresh adjudication.
Authors’ Comments
The ruling sends a balanced message. Income appearing in Form 26AS cannot replace the statutory return, particularly for a company having a mandatory filing obligation. Third-party reporting may establish transparency of the transaction, but it does not by itself amount to compliance by the recipient.
At the same time, penalty u/s 270A cannot be sustained through a mechanical computation. The precise meaning of “tax payable on under-reported income”, the available TDS credit, opportunity of hearing & the assessee’s explanation must be examined carefully.
On remand, the assessee must establish not merely that the interest appeared in Form 26AS, but why the non-filing occurred & why its case does not warrant penalty under the statutory framework of section 270A.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, NAGPUR BENCH
This appeal by the assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi (for short, “CIT(A)”) dated 26.12.2025 passed u/sec. 250 of the Income Tax Act, 1961 (for short, “Act”) which is arising out of penalty order dated 30.05.2024 passed u/sec. 270A of the Act for the Assessment Year (A.Y.) 2019-20.
2. Sole grievance of the assessee is that Ld.CIT(A) erred in confirming the penalty at Rs. 1,34,568/- levied by the Ld. AO u/sec. 270A of the Act.
3. I have heard the rival submissions and perused the material placed before me. The assessee is a private limited company and did not furnish its regular return of income. Based on the information appearing in Form No.26AS, Ld.Assessing Officer (AO) issued valid notice u/sec. 148 of the Act for carrying out re-assessment proceedings. During the course of assessment proceedings, assessee did not make proper compliance. Ld.AO noticed from Form No.26AS that assessee has received interest from The Sarswat Co-op. Bank Ltd. at Rs.8,62,624/- and deducted tax at source of Rs.86,263/-. In absence of reply from assessee, Ld.AO calculated the total income at Rs. 8,62,624/- and also initiated penalty proceedings u/sec. 270A of the Act on the under reporting income. Subsequently, notice issued for carrying out penalty proceedings, but assessee again did not respond and the Ld. AO levied penalty u/sec. 270A of the Act @50% of the tax payable at Rs. 2,69,137/- on the under-reported income at Rs. 8,62,624/-. Against the said penalty levied u/sec. 270A, assessee preferred appeal before the Ld.CIT(A), but again did not made any submissions, resulting into dismissal of appeal. Now assessee is in appeal before this Tribunal.
4. In the course of hearing, learned counsel for the assessee submitted that assessee should not have been visited by the alleged penalty because the interest income is the only income of the assessee-company, which has already been reflected in Form No.26AS and the tax at source has also been deducted. He also referred to calculation of penalty stating that Ld. AO has adopted the wrong figure of tax payable because TDS has not been deducted from the tax payable.
5. On the other hand, Ld.DR supported the order of Ld.CIT(A).
6. I note that assessee has not made compliance before the Ld. AO during the course of assessment proceedings as well as first appellate proceedings. The present appeal is against the levy of penalty u/sec. 270A of the Act. Learned counsel for the assessee is claiming that assessee’s only source of income is interest from FDR and that the assessee is not carrying out regular business activity. I note that with introduction of Form No.26AS and widening of the scope of TDS provisions, various financial transactions are now captured and reflected on the Income Tax Portal and it is easy to take note of such transactions and in case return of income is not filed or such reported transactions are not appearing in the returns, it becomes easy for the Revenue authorities to take action against the concerned assessee. Though, the assessee is claiming that the information contained in Form No.26AS should be treated sufficient for reporting of income. I do not find any merit in such contention because assessee is a private limited company and is required to file the income tax return on year to year basis and that the income is chargeable to higher rate of tax as compared to the rate of TDS.
7. However, considering the fact that assessee has not participated in the proceedings before the lower authorities and also has raised a specific ground No.4 that assessee has not been granted opportunity for filing written submissions and also taking into consideration the apparent mistake in calculation of penalty shown by the learned counsel for the assessee, I deem it appropriate to restore the alleged issue of penalty u/sec. 270A of the Act to the Ld. Jurisdictional Assessing Officer (JAO) for denovo adjudication and decide it afresh in accordance with law. Needless to mention that Ld.JAO shall grant fair opportunity of hearing to the assessee assessment and the assessee shall not take unnecessary adjournments unless other required for reasonable cause. Grounds of appeal raised by the assessee are allowed for statistical purposes.
8. In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced on 02nd September, 2026 under Rule 34(5) of the Income Tax (Appellate Tribunal) Rules, 1963
