No ITR Filed On Rs 30 Lakh Salary: Why Delhi ITAT Deleted Rs 3.74 Lakh Penalty

Filing an income tax return is a key compliance requirement for taxpayers who fall within the applicable provisions of the Income Tax Act. Penalties can also apply in cases of under-reporting of income, depending on the circumstances.

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has deleted a Rs 3.74 lakh penalty imposed on Pravesh Aggarwal, who had not filed his income tax return for assessment year 2019-20 despite earning more than Rs 30 lakh in salary income.

Why was the penalty imposed?

Aggarwal had changed jobs during the financial year 2018-19. According to his submissions before the tribunal, he could not obtain Form 16 from both employers before the due date for filing the return. He also believed that since TDS had been deducted by his employers and was reflected in Form 26AS, his tax obligations had been met. The Income Tax Department later reopened his assessment after obtaining information about his income.

According to the ITAT order, Aggarwal subsequently filed his return declaring a total income of Rs 30,22,900. The Assessing Officer issued notices under Sections 143(2) and 142(1) and sought further details. After examining the information, the officer accepted the declared income without making any additions or variations.

Despite this, the Assessing Officer initiated penalty proceedings under Section 270A for under-reporting of income. The entire Rs 30,22,900 declared in the return filed in response to the Section 148 notice was treated as under-reported income because Aggarwal had not filed the original return under Section 139(1).

The penalty imposed was Rs 3,74,072, representing 50 per cent of the tax payable on the amount treated as under-reported income. Aggarwal challenged the penalty before the Commissioner of Income Tax (Appeals), but his appeal was dismissed. He then approached the ITAT.

What did the ITAT say

During the hearing, the Revenue argued that if the Section 148 notice had not been issued, the income could have escaped taxation, and Aggarwal may not have filed a return reporting his salary and interest income. The tribunal examined whether the circumstances amounted to under-reporting under Section 270A. It observed, “whatever income reported/declared by the Assessee has been accepted by the Department, therefore, it is not the case of reporting a smaller amount than their actual income.”

The ITAT also considered that the salary income and TDS were already available to the department through Form 26AS. The tribunal noted, “the income was duly reflecting in Form No. 26AS on the portal of the Department, which was within the knowledge of the Income Tax Department, therefore, there is no question as regards to any under reporting of income.”

The tribunal further noted that the income assessed under the reassessment proceedings was not higher than the amount declared by Aggarwal. It therefore held that the circumstances did not amount to misrepresentation or under-reporting of income and deleted the penalty imposed under Section 270A. The appeal filed by Aggarwal was allowed, bringing an end to the penalty imposed over the return-filing lapse.