Dinesh Kumar Vs Deputy Commissioner (ITAT Delhi)
Delhi ITAT: No Penalty Under Section 271(1)(c) Where Reopened Return Was Accepted Without Any Addition
The Delhi ITAT quashed the penalty levied under section 271(1)(c), holding that where the return filed in response to a notice under section 148 is accepted without any addition, levy of penalty merely because the assessee had not filed the original return is unjustified.
The assessee’s appeal had initially been dismissed by the CIT(A) on the erroneous ground that Form No. 35 had not been filed. Before the Tribunal, however, the assessee produced the acknowledgment of Form No. 35 and evidence of its filing. The ITAT also noted that the CIT(A)’s order itself reproduced the grounds of appeal and the assessee’s submissions, clearly demonstrating that the appeal had in fact been filed. The Tribunal held that the dismissal was based on a misconstruction of facts.
On merits, the Tribunal observed that the assessment had been reopened under section 148 because the Department noticed the sale of an immovable property on which TDS had been deducted. In response to the notice, the assessee filed a return declaring total income of ₹6.12 lakh, including long-term capital gains of ₹5.56 lakh, and the Assessing Officer accepted the returned income without making any addition. Nevertheless, penalty proceedings under section 271(1)(c) were initiated solely on the ground that the assessee had failed to file the original return despite having taxable income.
The Tribunal further noted that almost the entire tax liability stood discharged through TDS, leaving only a negligible difference of ₹7 between the tax payable and taxes already paid. In these circumstances, it found no justification for sustaining the penalty.
Considering that the issue was fully covered by the material already on record, the ITAT held that no useful purpose would be served by remanding the matter to the CIT(A). Accordingly, it quashed the penalty under section 271(1)(c) and allowed the assessee’s appeal.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal is preferred by the assessee against the order dated 28.10.2025 of the Ld. Commissioner of Income Tax (A)-43, Delhi (hereinafter referred to as the First Appellate Authority or ‘the ld. FAA’ for short) in DIN & Order No: ITBA/APL/S/250/2025-26/1082044910(1) arising out of the penalty order dated 26.09.2024 u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by Circle, International Tax 2(1)(2), for AY: 2016-17.
2. On hearing both sides we find that the appeal of the assesse has been dismissed on the basis that Form 35 has not been filed by the assesse at all and being defective the appeal was dismissed.
3. However, before us ld. Counsel has placed on record at page No. 37 the screen shot of submission of evidences before ld. CIT(A) and at page No. 41-46 the copy of Form 35 has also been filed bearing acknowledgment number. We find that in the impugned order the grounds of appeal of the assesse have been incorporated which certainly would have been on record of ld. CIT(A) if Form 35 was there. Then, in para 4 submissions of assesse in response to a notice u/s 250 have been reproduced. Thus, it appears that out of some misconstruing of facts, a conclusion was drawn that Form 35 has not been filed leading to dismissal of the appeal as defective.
4. However, what is material in this case is that at page No. 2-4 copy of assessment order dated 11.03.2024 is on record which shows that assessee’s case was reopened by notice u/s 148 in response to which assesse had filed a return of income declaring total income of Rs.6,12,570/- and which was accepted and no addition was made. The penalty proceedings has been initiated on the basis that assesse had not filed original ITR even after having taxable income above basic exemption limit, thus there is a concealment of income and thus, it was found to be fit case for initiation of penalty proceedings u/s 271(1)(c) of the Act. At page 38 of the paper book the copy of impugned order is available.
5. We find that the case was reopened on the basis that there was sale of some immovable property for which TDS was deducted and assesse has reported long termcapital gain of Rs.5,56,098/- and income from other sources of Rs.66,471/-. However, there was no tax liability left after the TDS rather the computation sheet available at page No. 5-7 shows the total taxes of Rs.1,72,251/- stood paid against aggregate tax liability of Rs.1,72,258/- and there was amount payable/refundable of Rs. 7/- only.
6. Though, ld. DR has submitted that Tribunal has been consistently giving relief to assesses, on technical ground, however, in the present facts and circumstances we find that levy of penalty was not justified and ld. CIT(A) has dismissed the appeal of the assesse erroneously by observing there is Form 35. Thus, no purpose would be served by sending the appeal back to ld. CIT(A) when we have sufficiently examined the issue and not inclined to sustain penalty.
7. Thus the appeal is allowed and the penalty is quashed.
Order pronounced in the open court on 05.08.2026
