Determination of Income in Assessment Order cannot be basis for Filing of ITR u/s 139 (1): ITAT Quashes Penalty u/s 271 F of Income Tax Act [Read Order]

The Income Tax Appellate Tribunal (ITAT) quashes penalty under Section 271F of the Income Tax Act, stating that determination of income in the assessment order cannot serve as the basis for filing Income Tax Return under Section 139(1) of the Income Tax Act, 1961

The fact remains that the impugned penalty under Section 271F of the Income Tax Act was levied for non-filing of the return of income under Section 139(1) of the Act by the assessee; the income for the year under Section was determined under Section 144 r.w.s. 147 of the Income Tax Act vide order dated 31.03.2022. The case of the assessee is this that as the income of the assessee for the year under consideration was below the taxable limit, there was no requirement to file return under Section 139(1) of the Income Tax Act.

On the contrary, the Assessing Officer ( AO ) observed that  the assessee as deposited considerable amount of cash in different banks, the assessee must have income above the taxable limit and therefore bound to file his return of income for the year under consideration under Section 139(1) of the Income Tax Act and also to pay due taxes within time. On this premise, the penalty under Section 271F of the Income Tax Act was levied, which was further confirmed by the First Appellate Authority.

The AO stated that determination of income in the assessment order cannot be said to be the basis for filing of return of income under Section 139(1) of the Income Tax Act. As estimated income for the year under consideration was Rs.2, 00,000/- as per the assessee for A.Ys. 2013-14 & 2014-15 and Rs.2, 50,000/- for A.Ys. 2015-16 & 2016-17, the assessee was of the firm belief that return of income is not required to be filed under Section 139(1) of the Income Tax Act.

The bench observed that the provision of Section 271F of the Income Tax Act, clearly speaks of requirement of furnishing return of income as required under Section 139(1) of the Income Tax Act or by the provisions of that sub-Section. Precisely, the return of income is to filed on the basis of the total income of any person in respect of which he is assessable under the Act during the previous year, exceeded the maximum amount which is not chargeable to tax, and in this particular case as the estimated income of the assessee is only Rs.2,00,000/-   below the taxable limit, the assessee was, therefore, of the firm belief of not being required to file return under Section 139(1) of the Income Tax Act.

Thus, under this fact and circumstance of the matter, the two member bench of the tribunal comprising Wassem Ahemed ( Accountant member) and Madumitha Roy ( Judicial member) concluded that the levy of penalty seems not only harsh but also not sustainable in the eyes of law under Section 271F of the Income Tax Act and hence quashed. Accordingly, the appeal filed by the assessee was allowed. 

To Read the full text of the Order CLICK HERE

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