ITAT Holds COVID-19 Disruption and Bona Fide Explanation Justify Non-Filing of ITR:

The assessee is an individual and non-resident who had not filed his income tax return for Assessment Year 2020-21 and was consequently treated as a non-filer. Based on information flagged under the risk-management strategy, the AO suspected that income chargeable to tax had escaped assessment.

Accordingly, a notice under Section 148A(b) of the Income Tax Act was issued on 27 February 2024. As no response was received, an order under Section 148A(d) was passed on 19 March 2024, followed by a notice under Section 148 dated 20 March 2024. In response, the assessee filed his return on 16 April 2024, declaring total income of Rs. 1,72,04,860. The assessment under Section 147 was subsequently completed by accepting the returned income without making any additions. However, since the income had been disclosed only in the return filed in response to the notice under Section 148, the AO initiated penalty proceedings under Section 270A.

The AO eventually levied a penalty of Rs. 29,74,189, being 50% of the tax payable on the alleged under-reported income of Rs. 1,72,04,860, vide order dated 30 September 2025. The assessee challenged the penalty before the CIT(A) which confirmed the penalty. 

The Tribunal examined the provisions of Section 270A of the Income Tax Act and observed that Section 270A(2)(b) treats income as under-reported where no return has been furnished under Section 139, but the income is subsequently disclosed in response to a notice under Section 148. However, the Tribunal also highlighted Section 270A(6)(a), which specifically excludes income from the definition of under-reported income where the assessee offers a bona fide explanation and discloses all material facts supporting such explanation.

Considering the facts and circumstances, the Tribunal held that the explanation furnished by the assessee was bona fide and established sufficient cause for not filing the return within the prescribed time. It accordingly held that the income disclosed in the return filed in response to the notice under Section 148 was liable to be excluded from under-reported income under Section 270A(6)(a) of the Act. Accordingly, the appeal filed by the assessee was allowed.