Case Law Details
Apex Detonators Pvt. Ltd Vs DCIT (ITAT Nagpur)
Summary : The ITAT Nagpur upheld the penalty levied under Section 270A of the Income Tax Act for under-reporting of income where the assessee company failed to file its return of income for AY 2019-20 and also ignored notices issued under Section 148. The addition pertained to interest income of ₹8,62,624 earned on fixed deposits, which came to the Department’s notice through Form 26AS. The assessee argued that tax had already been deducted at source and the omission to file the return was unintentional, arising from the company’s dormant status and management changes. However, the Tribunal held that filing a return is a statutory obligation and that the explanation offered lacked bona fides, particularly as it was raised belatedly. Since the income was assessed only on the basis of third-party information and would otherwise have escaped taxation, the case constituted under-reporting under Section 270A, justifying the penalty.
Core Issue. The principal issue before the Tribunal was whether penalty levied under Section 270A of the Income-tax Act, 1961 for under-reporting of income could be sustained where the assessee-company had failed to file its return of income and the income ultimately assessed consisted solely of interest income already reflected in Form 26AS and subjected to tax deduction at source (TDS). The assessee contended that since the income was fully available with the Department through TDS records, there was neither concealment nor misreporting warranting penalty.
Facts of the Case. The assessee, Apex Detonators Pvt. Ltd., did not file its return of income for Assessment Year 2019-20. Subsequently, even after issuance of notice under Section 148, it failed to furnish a return of income or participate in the reassessment proceedings. During the course of assessment, the Department noticed from available information that interest income of ₹8,62,624 had been credited to the assessee’s account with Saraswat Co-operative Bank Ltd. Since the assessee remained non-compliant throughout the proceedings, the Assessing Officer completed the assessment under Sections 147, 144 and 144B and brought the aforesaid interest income to tax. Thereafter, considering the case to be one of under-reporting of income, the Assessing Officer initiated and levied penalty under Section 270A amounting to ₹1,34,568.
The assessee challenged the penalty before the Commissioner of Income Tax (Appeals). It was argued that the only income earned during the year was interest on fixed deposits amounting to ₹8,62,624; that the same was duly reflected in Form 26AS; and that tax had already been deducted at source. According to the assessee, there was no attempt to suppress income and therefore levy of penalty was unjustified. The CIT(A), however, rejected the explanation and upheld the penalty.
Before the Tribunal, the assessee further explained that the management of the company had changed years earlier, business operations had ceased, assets had been sold, employees had been relieved, and the old promoters were merely reinvesting fixed deposit receipts. Because of a misconception that no return was required where only reinvested FDR income existed, the return was not filed.
CIT(A)’s Findings. The Commissioner (Appeals) observed that the assessee had neither filed its return of income nor offered any satisfactory explanation for the under-reported income. The appellate authority also noted that the assessee had remained non-responsive even during the penalty proceedings. Although the assessee argued that tax had already been deducted on the interest income and the income was visible in Form 26AS, the CIT(A) held that such facts did not explain the failure to report the income through a valid return of income. Consequently, the penalty imposed by the Assessing Officer under Section 270A was confirmed.
ITAT Findings. The Tribunal affirmed the penalty and dismissed the assessee’s appeal. It held that filing a return of income is a statutory obligation and that the assessee had admittedly failed not only to file its original return but also to comply with the notice issued under Section 148. The Tribunal emphasized that the interest income was brought to tax solely because information was available with the Department. Had such third-party information not been available, the income would have escaped assessment.
The Bench rejected the assessee’s explanation regarding change of management, closure of business operations and misconception about filing requirements. According to the Tribunal, these explanations were raised belatedly and could not be regarded as a bona fide explanation within the meaning of Section 270A(6)(a). The Tribunal observed that Section 270A(3)(i)(b) specifically contemplates situations where no return of income has been furnished and prescribes the mechanism for determining under-reported income in such cases. Since the assessee failed to comply with statutory notices and did not file any return, invocation of Section 270A was held to be fully justified.
The Tribunal further held that this was a clear case of under-reporting of income and found no infirmity in the orders of the lower authorities warranting interference. Accordingly, the penalty under Section 270A was sustained.
Cases Relied Upon-By the Assessee
Parulben Vijaykumar Patel v. ITO [2024] 163 taxmann.com 191 (ITAT Ahmedabad)
The assessee relied upon this decision to argue that where income is already reflected in departmental records and tax has been deducted at source, penalty under Section 270A should not be levied.
Tribunal’s Treatment of the Precedent
The Tribunal distinguished the Ahmedabad Bench decision on facts. It noted that in Parulben Vijaykumar Patel, the transaction involved sale of a capital asset where tax had been deducted under Section 194-IA by the purchaser. In contrast, the present case involved a company that had failed to file any return of income and had remained non-compliant throughout the proceedings. Therefore, the Tribunal held that the precedent did not assist the assessee and was not applicable to the facts of the present case.
Ratio Decidendi. Where an assessee fails to file a return of income, ignores notices issued under the Act, and income is brought to tax only through information independently available to the Department, the case falls within the ambit of under-reporting of income under Section 270A. The mere fact that the income was reflected in Form 26AS and subjected to TDS does not, by itself, constitute a bona fide explanation sufficient to avoid penalty, particularly where there is complete non-compliance with statutory filing obligations.
FULL TEXT OF THE ORDER OF ITAT NAGPUR
This appeal filed by the assessee is directed against the order of National Faceless Appeal Centre, Delhi, (for short, “CIT(A)”), dated 26/12/2025 passed under section 250 of the Income Tax Act, 1961 (for short, “Act”) which is emanating from the penalty order dated 30.05.2024 passed u/s. 270A of the Act, for the Assessment Year (AY) 2019-20.
2. The only effective ground raised by the assessee in this appeal is that Ld. CIT(A) erred in confirming the penalty without considering the fact that TDS was already deducted and interest thereon has already been paid.
3. Briefly stated, the facts of the case are that the assessee did not file its return of income for AY 2019-20. The assessee also failed to file a return of income in response to the notice issued under section 148 of the Act. Based on the information available with the Department, it was noticed that interest income of Rs. 8,62,624/- had been credited/paid during the year under consideration in the bank account maintained with The Saraswat Cooperative Bank Ltd. Since the assessee remained nonresponsive throughout the assessment proceedings, the Ld. AO completed the assessment under section 147 r.w.s. 144 r.w.s. 144B of the Act vide order dated 05.01.2024 by bringing to tax the aforesaid amount of Rs. 8,62,624/-. Holding the same to be a case of under-reporting of income, the Ld. AO initiated penalty proceedings under section 270A of the Act and subsequently levied a penalty of Rs. 1,34,568/-.
4. Aggrieved by the penalty order, the assessee carried the matter in appeal before the Ld. CIT(A). The Ld. CIT(A) observed that the assessee had failed to furnish any satisfactory explanation for the under-reporting of income.
It was further noted that the assessee remained nonresponsive during the penalty proceedings as well. Before the Ld. CIT(A), the assessee contended that the only source of income during the financial year 2018-19 was interest income from fixed deposits amounting to Rs. 8,62,624/-, which was duly reflected in Form No. 26AS and on which tax had already been deducted at source. However, the said explanation did not find favour with the Ld. CIT(A), who held that the assessee had failed to explain the reasons for the under-reporting of income. Accordingly, the Ld. CIT(A) upheld the action of the Ld. AO in levying penalty under section 270A amounting to Rs. 1,34,568/-and confirmed the same.
5. Aggrieved with the order of Ld. CIT(A), assessee is in appeal before this Tribunal. Learned counsel for the assessee submitted that penalty levied under section 270A of the Act is not justified on the facts of the case. It was contended that the addition was made solely on the basis of information available with the Department regarding interest income reflected in Form No. 26AS. The assessee submitted that the interest income of Rs. 8,62,624/- was duly subjected to tax deduction at source and was fully disclosed in the information available with the Department. It was further argued that the assessee had neither concealed any particulars of income nor furnished any inaccurate particulars thereof. The omission to file the return of income was neither deliberate nor with any intention to evade taxes. Therefore, the case does not fall within the ambit of misreporting of income. It was accordingly prayed that the penalty levied under section 270A of the Act be deleted. Learned counsel in support her contention, relied on the decision of Cooridnate Bench of Ahmedabad Tribunal in Parulben Vijaykumar Patel vs. ITO [2024] 163 taxmann.com 191
6. Per contra, Learned Departmental Representative strongly supported the orders of the lower authorities. It was submitted that assessee neither filed the return of income for the relevant assessment year nor responded to the notice issued under section 148 of the Act. The assessee also failed to participate in the assessment as well as penalty proceedings. He further contended that the income was brought to tax only on the basis of third-party information available with the Department. Had the information not been available, the income would have escaped assessment. Therefore, the Assessing Officer was justified in treating the case as one of under-reporting of income and levying penalty under section 270A of the Act. The order of the Ld. CIT(A) in confirming the penalty be upheld.
7. We have heard rival submissions and perused the material available on record. It is an undisputed fact that assessee did not file the return of income for the year under consideration, though such filing is onerous responsibility. The assessee also failed to furnish a return of income in response to the notice issued under section 148 of the Act. Further, the assessee remained noncompliant during the assessment proceedings as well as in the penalty proceedings. The record reveals that the income of Rs. 8,62,624/- representing interest income was brought to tax only on the basis of information available with the Department. Had such information not been available, the said income would have escaped assessment. Assessee in its written submissions has given an explanation arising out the fact that in 2001-02 management was transferred and in 2003-04 new management abruptly abandoned the company. The business was shut down and all factory assets were sold off in FY 2007-08, hence, there was no regular activity of the company. The entire accounts and other staff was relieved. Thereafter, the old promoters had tried to revive the company by merely reinvesting the FDRs amounts. Thus, there was misconception that as the only FDRs reinvested, no return was to be filed.
8. We are of the considered view that the assertions cannot be considered sufficient for the purpose of clause (a) to section 270A(6) of the Act as the same have not been asserted at any stage earlier. Merely raising such plea at this stage, cannot be considered to be a bonafide plea. We find that the Ld. AO has levied penalty under section 270A of the Act after recording a finding that the assessee had under-reported income. Section 2 70A(3)(i)(b) specifically mentions that in case no return of income has been furnished, how the penalty has to be calculated by assuming i.e. unreported income. That being the case, as assessee has not responded to any of the statutory notices, the aforesaid provisions of section 270A have been rightly invoked. We do not find any infirmity in the orders of the lower authorities warranting our interference. As regards the reliance placed by the assessee on the decision of the Coordinate Bench of the Ahmedabad Tribunal in the case of Parulben Vijaykumar Patel vs. ITO [2024] 163 taxmann.com 191, we find that the facts of the said case are distinguishable from the facts of the present case. In that case, the transaction was sale of capital asset and tax was deducted at source by the purchaser u/s. 194IA of the Act, however, here there is a case of a company. Therefore, the said decision does not assist the case of the assessee as it is a blatant case of underreporting the income. In view of the foregoing discussion, we uphold the order of the Ld. CIT(A) confirming the penalty levied under section 270A of the Act. Accordingly, the grounds raised by the assessee are dismissed.
9. In the result, appeal filed by the assessee stands dismissed.
Order pronounced in open Court on 15.06.2026
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