Income Tax Penalty u/s 271F Not Leviable as ITR Filed Within Prescribed Time: ITAT [Read Order]

The assessee, Hari Mohan and Sons, was imposed of a penalty of ₹5,000 under Section 271F of the Income Tax Act, 1961, for Assessment Year (AY) 2013-14. The penalty was originally levied by the AO on the ground that the assessee had allegedly failed to file its income tax return as required under Section 139(1) of the Act.

The CIT(A) had upheld the penalty, treating the assessee as a non-filer and affirming the AO’s view. The assessee, represented by its counsel, argued that the CIT(A) had wrongly assumed non-filing.

The assessee clarified that it had filed its return of income on 21 February 2014, well within the time prescribed under Section 139(5). The declared income included ₹1,91,230 as total income, along with ₹50,000 as agricultural income. The assessee’s income also comprised earnings from a partnership firm, trading business, interest from savings accounts, and profit on the sale of rural agricultural land.

The AO had issued a notice under Section 148 for reassessment and reassessed the income at ₹13,81,230. Penalty proceedings under Section 271F were initiated based on the assertion that the assessee had taxable income and was required to file the return within the original due date.

Your Definitive Guide to India’s Income Tax Laws! Click here

The assessee argued that the imposition of a penalty was arbitrary and unjustified because the return had been filed on time under Section 139(5), and therefore, no mischief of non-filing arose.

Upon hearing both parties, the two-member bench of Sudhir Kumar (Judicial Member) and Naveen Chandra (Accountant Member) carefully examined the record. It noted that the return of income for AY 2013-14 had indeed been filed on 21 February 2014, a fact recorded in the AO’s assessment order under Sections 143(3)/147.

The tribunal found that the CIT(A) erred in holding that the assessee was a non-filer. Since the assessee had complied with the filing requirements within the time allowed under the Act, the tribunal concluded that no penalty under Section 271F could be justified.

The ITAT observed that Section 271F penalises only those who fail to file their return within the stipulated time and is not applicable where the return is filed timely, even if reassessment proceedings are later initiated under Section 148.

Accordingly, the tribunal allowed the grounds of appeal raised by the assessee and deleted the penalty of ₹5,000. The order was pronounced in open court on 12 February 2025.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates