₹30 lakh salary, no ITR, ₹3.74 lakh penalty: Why ITAT quashed it

The tribunal examined the definition of under-reporting under Section 270A(2). That sub-section says under-reporting occurs when a person discloses a smaller amount than actual income. In Aggarwal's case, the income he reported in his belated return was accepted by the tax department. The department did not dispute the figure or add any extra income. The tribunal ruled there was no under-reporting.

"Whatever income was reported by Aggarwal has been accepted by the tax department. Hence, it is not the case of reporting smaller amount than their actual income," the ITAT said.

The tribunal noted that TDS had been deducted by both employers and reflected correctly in Form 26AS. The taxpayer had a genuine difficulty obtaining documents from his previous employer. A heavy penalty was not warranted for a salaried employee who had no intention to conceal income and whose tax obligation was already met through TDS, the tribunal held.

The ruling reinforces the principle that the penalty under Section 270A is triggered by under-reporting, not by the mere late filing of a return. The department's argument that late filing itself constitutes under-reporting did not hold in this instance.

The ITAT allowed all grounds of appeal and directed the tax department to delete the penalty. The decision is final subject to any appeal by the department.