Penalty u/s 270A unsustainable as non-declaration cannot be equated as underreporting of income

Kavita Jasjit Singh Vs CIT (ITAT Mumbai)

ITAT Mumbai held that penalty under section 270A of the Income Tax Act unsustainable as non-declaration of interest on income tax refund was bona fide and cannot be said to be underreporting of income.

Facts- The assessee is an individual and for the year under consideration filed the return of income on 30/10/2017, declaring a total income of Rs.1,88,68,990. The return filed by the assessee was selected for scrutiny and vide order dated 27/11/2019, passed u/s. 143(3) of the Act the scrutiny assessment was concluded assessing the total income of the assessee at Rs.1,98,41,907.

As the assessee had received interest on income tax refund amounting to Rs.9,72,915, which was not considered at the time of filing the return of income, notice u/s. 274 read with section 270A of the Act was issued to the assessee asking the assessee to show cause as to why penalty under section 270A of the Act be not levied.

AO vide penalty order passed u/s. 270A of the Act did not agree with the submissions of the assessee and held that there is a difference between the income returned by the assessee and the income assessed vide assessment order passed u/s. 143(3) of the Act and thus satisfies the basic requirement for initiation of penalty u/s. 270A of the Act. The AO further held that the assessee chose to disclose the interest income not offered in the return of income only after the case was selected for scrutiny. Accordingly, the AO held that the assessee had under-reported her income and accordingly levied a penalty of Rs.1,75,824, under section 270A of the Act.

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