Bona Fide Claim Under Newly Introduced Section 71(3A) Saves Assessee from Penalty Under Section 270A

Uday Garudachar Bindiganavale Vs ITO (ITAT Bangalore)

Bona Fide Claim Under Newly Introduced Section 71(3A) Saves Assessee from Penalty Under Section 270A

The Bangalore ITAT deleted a penalty of ₹5.67 lakh levied under section 270A for under-reporting of income, holding that the assessee had furnished a bona fide explanation and had disclosed all material facts relating to the computation of income. The Tribunal observed that a genuine mistake arising from lack of awareness of a newly introduced provision cannot automatically attract penalty.

The assessee had claimed set-off of the entire loss from house property against other income. During scrutiny, the Assessing Officer restricted the loss to ₹2 lakh in accordance with the newly inserted section 71(3A) applicable from AY 2018-19 and consequently levied penalty under section 270A for under-reporting of income. The assessee explained that the incorrect claim arose because he was unaware of the newly introduced restriction and had relied on professional advice while filing the return.

The Tribunal noted that section 71(3A) itself was introduced for AY 2018-19, the very year under consideration. It further found that the assessee had disclosed every component of the computation of income from house property and had not suppressed any material fact. The addition was also partly based on estimation of annual letting value by the Assessing Officer using data from real-estate websites.

Referring to section 270A(6)(a), the Tribunal held that where the assessee offers a bona fide explanation and discloses all material facts necessary to substantiate the claim, the resulting addition falls outside the scope of under-reported income for penalty purposes. Since there was no allegation of misreporting of income and the explanation was found to be genuine, the penalty could not be sustained.

Accordingly, the Tribunal directed deletion of the entire penalty of ₹5.67 lakh levied under section 270A, holding that the case involved a bona fide error relating to a newly inserted provision rather than any deliberate attempt to evade tax.

FULL TEXT OF THE ORDER OF ITAT BANGALORE

1. ITA No. 1314/Bangalore/2025 is filed by Mr.Uday Garudachar Bindiganavale (the Assessee/Appellant) against the Appellate Order passed by the Ld. Commissioner of Income Tax (Appeals), Bangalore (the Ld. CIT(A)) wherein he has confirmed the penalty of Rs. 5,67,149/- levied by the National Faceless Assessment Centre Delhi vide order dated 05.08.2020.