Bona Fide Non-Offering Of Interest On Income Tax Refund While Filing ITR Does Not Amount To Under-Reporting Of Income: ITAT

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the explanation of the assessee for not offering the interest on income tax refund while filing its return of income is bona fide.

The bench of Sandeep Singh Karhail (Judicial Member) and Amarjit Singh (Accountant Member) has observed that bona fide non-declaration of interest on income tax refunds cannot be said to be under-reporting of income by the assessee within the meaning of Section 270A of the Income Tax Act.

The appellant or assessee filed a return, which was selected for scrutiny. The order was passed under Section 143(3), and the scrutiny assessment was concluded, assessing the total income. As the assessee had received interest on an income tax refund amounting to Rs. 9,72,915, which was not considered at the time of filing the return of income, a notice under Section 274 read with Section 270A was issued to the assessee, asking the assessee to show cause as to why the penalty under Section 270A was not levied.

In response, the assessee submitted that during the scrutiny assessment proceedings, she had voluntarily offered the interest of an income tax refund without any show cause notice being issued on the same. Therefore, it cannot be considered an attempt to underreport the income.

The assessee contended that while filing the return of income, she neither had any intimation regarding the refund amount nor had she received any refund by check or ECS in a bank account.

The assessing officer passed a penalty order under Section 270A and did not agree with the submissions of the assessee. The AO held that there is a difference between the income returned by the assessee and the income assessed via the assessment order passed under Section 143(3). Thus, it satisfies the basic requirement for the initiation of a penalty under Section 270A.

The AO 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. The AO noted that the assessee had under-reported her income and accordingly levied a penalty under Section 270A.

The tribunal noted that the department failed to bring any material on record to controvert the submissions of the assessee that, while filing the return of income, she neither received any income tax refund by check or by ECS in a bank account nor was there any intimation regarding the determination of the refund amount.

The tribunal directed the AO to delete the penalty levied under Section 270A of the Income Tax Act.

Counsel For Appellant: Ketan Ved

Counsel For Respondent: P.D. Chougule

Case Title: Kavita Jasjit Singh Versus Commissioner of Income Tax (Appeals)

Case No.: ITA no.1981/Mum./2023

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