Santosh Kumar Chamoli Vs Assessing Officer (ITAT Dehradun)
ITAT Dehradun remands 200% penalty under section 270A where bona fide TDS-based explanation was not examined — statutory exclusion under section 270A(6) must be considered before treating income as under-reported.
Summary: The ITAT Dehradun considered whether a 200% penalty under section 270A could be sustained without examining the assessee’s bona fide explanation for not filing the return where the entire salary income had suffered TDS. The assessee had changed employment during the relevant year and believed that, since tax had already been deducted at source, no return was required. After receiving notice from the AO dated 31.03.2023, the assessee engaged a tax professional, complied with the proceedings and discharged the tax dues. The AO imposed penalty of Rs. 13,31,252 at 200%, while the CIT(A) confirmed it. Before the ITAT, the assessee relied on section 270A(6), contending that the statutory exclusion for an amount supported by a bona fide explanation and disclosure of material facts had not been examined. The Tribunal also found that the AO had not assigned a specific reason for imposing penalty beyond the minimum rate of 100%. It therefore set aside the NFAC/CIT(A) order and directed fresh consideration of the assessee’s case under section 270A(6), followed by a reasoned and speaking order. The appeal was partly allowed for statistical purposes.
Core Issue / Main Ground
Whether penalty under section 270A at 200% for alleged under-reporting/misreporting of salary income can be sustained without examining the assessee’s bona fide explanation that he did not file the return because the entire salary income was subjected to TDS, and without considering the statutory exclusion of such income from “under-reported income” under section 270A(6)(a).
Facts
During the relevant year, the assessee changed his employment and received salary income from different employers. According to the assessee, tax had been deducted at source from the entire salary income. On that basis, he was under a genuine belief that since the tax liability had already been discharged through TDS, he was not required to file a return of income.
Subsequently, the Assessing Officer issued notice dated 31.03.2023. On receipt of the notice, the assessee engaged a tax professional, complied with the proceedings and discharged the tax dues. Penalty proceedings under section 270A were thereafter initiated alleging under-reporting/misreporting of income.
The AO levied penalty of Rs. 13,31,252 at 200% of the alleged under-reported income. The CIT(A)/NFAC confirmed the penalty, leading the assessee to approach the ITAT.
AO’s Finding
The Assessing Officer treated the income as under-reported/misreported and imposed penalty under section 270A at 200%, i.e. at the maximum rate.
However, as noted by the Tribunal, the AO did not assign any specific or cogent reason for imposing penalty at 200% rather than the statutory minimum of 100%.
CIT(A) / NFAC Finding
The CIT(A) confirmed the penalty. It was observed, inter alia, that since the assessee had not challenged the quantum order, the alleged misreporting stood established.
However, the appellate authority did not examine the assessee’s explanation from the perspective of section 270A(6), particularly whether the explanation was bona fide and whether the amount could consequently be excluded from the computation of under-reported income.
Assessee’s Argument before ITAT
The assessee submitted that there was a genuine and bona fide explanation for the non-filing of the return. Since the entire salary income had suffered TDS, the assessee genuinely believed that there was no further requirement to file the return.
It was further argued that section 270A(6)(a) specifically excludes from “under-reported income” an amount in respect of which the assessee offers an explanation and the prescribed authority is satisfied that:
1. the explanation is bona fide; and
2. the assessee has disclosed all material factsnecessary to substantiate the explanation.
The assessee also challenged the levy of penalty at 200%, contending that no specific reason had been given for imposing penalty beyond the minimum rate.
ITAT Finding and Observation
The ITAT found the approach of the Revenue authorities deficient.
The Tribunal observed that the AO had been “unduly harsh” in levying penalty at 200% without assigning any specific reason for imposing the penalty beyond the minimum rate of 100%.
More importantly, the Tribunal found that the CIT(A) had not considered the assessee’s case under section 270A(6).
The Tribunal observed that an assessee should not be unduly punished for lack of knowledge of taxation laws, particularly where there could be a reasonable basis for the belief that once TDS had been deducted on the entire income, there was no further requirement to file a return.
At the same time, the ITAT expressly clarified that it was not condoning the lapse of the assessee. Its finding was that where the statute itself provides an exclusion from under-reported income, the Revenue authorities are required to examine whether the facts satisfy the statutory conditions.
The Tribunal therefore emphasised that the existence of a penal provision does not end the inquiry. The statutory exclusions contained in section 270A(6) must also be considered before determining the quantum of under-reported income and consequential penalty.
Outcome The ITAT set aside the impugned NFAC/CIT(A) order and restored the matter for fresh consideration.
The CIT(A) was directed to examine the assessee’s case specifically with reference to section 270A(6) and thereafter pass a reasoned and speaking order.
Accordingly, the appeal was partly allowed for statistical purposes.
Section 270A(6) — Important Principle
The Tribunal specifically referred to section 270A(6)(a), under which under-reported income does not include an amount in respect of which the assessee offers an explanation and the AO/CIT(A) or other prescribed authority is satisfied that the explanation is bona fide and all material facts have been disclosed by the assessee to substantiate the explanation.
Thus, the Tribunal recognised that bona fide explanation is a statutory consideration and not merely a plea for equitable or discretionary relief.
FULL TEXT OF THE ORDER OF ITAT DEHRADUN
1. This appeal arises from order dated 27.02.2026, u/s. 250 of the Income Tax Act, 1961 (hereafter as “the Act”), by NFAC.
1.1 In this case, it is seen from the records that for the year under consideration the assessee had changed jobs during this year. Thereafter, the assessee was under the belief that since the entire salary income was subjected to TDS and thus, he was not required to file any return of income. Thereafter, on receipt of notice from the AO (dated 31.03.2023), the assessee engaged a tax professional and duly complied with the terms of notice, with all tax dues fulfilled. Subsequently, penalty proceedings u/s. 270A of the Act were initiated for under reporting/misreporting of income.
1.2 The said penalty was levied at Rs. 13,31,252/- @ 200% of under reported income, which was confirmed by the Ld. CIT(A) also.
1.3 The aggrieved assessee has approached the ITAT with grounds of appeal challenging this action on several grounds, including the ground of unawareness of law and undue harshness in the levy of penalty @ 200%.
2. Before us the Ld. AR argued with the help of a paper book and stated that the assessee was under a genuineness impression that he was not required to file the return of income since the entire quantum of taxes due had been recovered through TDS. The Ld. AR also drew our attention to the fact that the penalty had been unduly levied at @200% without specifying the reason for enhancing it from the minimum of 100%. It was the submission that the Ld. CIT(A) has clearly mentioned on page 20 at para 6.7 that since the assessee has not challenged the quantum order and thus, the fact of misreporting of income was duly established. The Ld. AR argued that Section 270A(6) of the Act provides for a discretion to the Ld. AO for considering whether there was a plausible explanation for the default being considered u/s. 270A of the Act. The Ld. AR stated that the assessee’s case would fall within the basic premise of Section 270A(6) of the Act and therefore he deserves relief, also because the pleadings of the assessee, about the reasons for default had not been considered by the Ld. CIT(A).
2.1 The Ld. DR took us through the order of Ld. AO and CIT(A) and stated that ignorance of law could not be treated as a genuine excuse for not filing a return of income.
3. We have carefully considered the rival submissions and have gone through the records before us. We find that while the Ld. AO has been unduly harsh in levying the penalty at @200% without assigning any specific reason for levying the said penalty beyond the minimum of 100% prescribed. We also find that the Ld. CIT(A) has not considered the case of the assessee for the purposes of Section 270A(6) of the Act. It is appreciated that an assessee should not be unduly punished for any lack of knowledge of taxation laws especially when there can be a reason to believe that once the TDS has been made on the entire quantum of income then there was no need to file any return of income. We hasten to add that we are not condoning the lapse but merely observing that once the penal provisions themselves provide an escape clause then the Revenue authorities and the tax counsels are duty bound to test the facts on the basis of such provisions, in this case being 270A(6) of the Act. For the sake of reference, the said provision is extracted as under: –
“(6) The under-reported income for the purposes of this section, shall not include the following, namely: –
(a) the amount of income in respect of which the assessee offers an explanation and the Assessing Officer or [the Joint Commissioner (Appeals) or] the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, is satisfied that the explanation is bona fide and the assessee has disclosed all the material facts to substantiate the explanation offered;
(b) the amount of under-reported income determined on the basis of an estimate, if the accounts are correct and complete to the satisfaction of the Assessing Officer or [the Joint Commissioner (Appeals) or] the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, but the method employed is such that the income cannot properly be deduced therefrom;
(c) the amount of under-reported income determined on the basis of an estimate, if the assessee has, on his own, estimated a lower amount of addition or disallowance on the same issue, has included such amount in the computation of his income and has disclosed all the facts material to the addition or disallowance;
(d) the amount of under-reported income represented by any addition made in conformity with the arm’s length price determined by the Transfer Pricing Officer, where the assessee had maintained information and documents as prescribed under section 92D, declared the international transaction under Chapter X, and, disclosed all the material facts relating to the transaction; and
(e) the amount of undisclosed income referred to in section 271AAB.”
We set aside the impugned order and direct that the Ld. CIT(A) must examine the assessee’s case on the basis of the provisions of Section 270A(6) of the Act and thereafter pass a reasoned and speaking order.
4. In the result, the appeal is partly allowed for statistical purposes.
Order pronounced in the open court on 21.08.2026
