₹30 Lakh Salary, No ITR: Why ₹3.74 Lakh Penalty Was Deleted

 

No ITR Filed Despite ₹30 Lakh Salary: Why Delhi ITAT Deleted ₹3.74 Lakh Penalty

A Delhi Income Tax Appellate Tribunal (ITAT) ruling has provided relief to a salaried taxpayer who did not file an income tax return despite earning more than ₹30 lakh in a financial year. The taxpayer later filed his return after receiving an income-tax notice, declaring income of ₹30.22 lakh.

The Income Tax Department had imposed a penalty of ₹3.74 lakh under Section 270A for alleged under-reporting of income. However, the Delhi ITAT deleted the penalty after finding that the entire income declared by the taxpayer was accepted during reassessment, with no addition or variation made by the Assessing Officer.

The ruling is important for salaried taxpayers because it explains the distinction between failing to file an ITR and under-reporting income. It does not mean that salaried individuals can simply skip their tax returns because TDS has already been deducted.

What Happened in the ₹30 Lakh Salary Case?

The case involved Pravesh Aggarwal for Assessment Year 2019-20. According to the ITAT order, he had salary income exceeding ₹30 lakh but did not file his return under Section 139(1) within the applicable deadline.

The taxpayer said he had changed jobs during the financial year and could not obtain the necessary Form 16 documents from both employers before the filing deadline. He also believed that because his employers had deducted tax at source and the TDS was appearing in Form 26AS, his tax obligations had effectively been taken care of.

The Income Tax Department subsequently reopened the assessment after passing an order under Section 148A(d) on April 19, 2023, followed by a notice under Section 148.

In response, Aggarwal filed his income tax return declaring total income of ₹30,22,900. The Assessing Officer subsequently issued statutory notices and sought supporting information.

Crucially, after examining the case, the Assessing Officer accepted the declared income of ₹30,22,900 without making any addition or variation.

That point eventually became central to the ITAT's decision.

Why Was a ₹3.74 Lakh Penalty Imposed?

Despite accepting the taxpayer's declared income, the Assessing Officer initiated penalty proceedings under Section 270A of the Income Tax Act.

The department treated the entire ₹30,22,900 disclosed in the return filed in response to the Section 148 notice as under-reported income because no original return had been filed under Section 139(1).

The resulting penalty was ₹3,74,072, calculated at 50% of the tax considered payable on the amount treated as under-reported income. The taxpayer challenged the penalty, but the Commissioner of Income Tax (Appeals) upheld it.

He then approached the Delhi ITAT.

Under Section 270A, a penalty for under-reporting is generally 50% of the tax payable on the under-reported income. The law separately provides for a 200% penalty where the under-reporting results from specified forms of misreporting.

Why Did Delhi ITAT Delete the Penalty?

The tribunal focused on what actually constitutes under-reporting of income.

The ITAT noted that the taxpayer had declared ₹30,22,900 in his return and that the reassessment ultimately accepted exactly that income. There was no additional income discovered by the Assessing Officer and no upward adjustment to the returned income.

In other words, the taxpayer did not declare ₹20 lakh and then have the department discover another ₹10 lakh. He declared the full ₹30.22 lakh when filing the return in response to the reassessment notice, and that amount was accepted.

The tribunal therefore concluded that the facts did not establish under-reporting in the manner contemplated by Section 270A.

The ITAT also took into account the taxpayer's explanation that he genuinely believed the TDS deducted by his employers and reflected in Form 26AS meant that his tax obligations had been fulfilled.

The tribunal observed that the salary income was already reflected in Form 26AS and was within the department's information system. It ultimately held that there was no question of under-reporting in the circumstances and deleted the ₹3,74,072 penalty.

Does This Mean TDS Is Enough and ITR Filing Is Optional?

No.

This is perhaps the most important takeaway for salaried taxpayers.

The Income Tax Department itself states that taxpayers still need to disclose income in the ITR even where tax has already been deducted by an employer or bank. TDS is a mechanism for collecting tax at source; an ITR is used to report income, calculate the final tax liability and claim credit for TDS.

Therefore, someone earning a substantial salary should not interpret the Delhi ITAT ruling as permission to skip filing an ITR.

The ruling turned on the specific facts of this case, particularly the fact that the taxpayer eventually disclosed his entire income and the department accepted that income without making any addition.

That distinction matters.

What Section 270A Means for Taxpayers

Section 270A deals with penalties for under-reporting and misreporting income.

The provision covers situations where the income assessed is higher than the income reported or where other statutory conditions for under-reporting are met. For a non-filer or a taxpayer filing for the first time under Section 148, the law has specific rules for determining under-reported income.

The Income Tax Department currently explains the basic penalty structure as:

• 50% of tax payable on under-reported income.

• 200% of tax payable where the under-reporting results from misreporting.

The Aggarwal case is therefore significant because the tribunal did not simply overlook the failure to file an original return. Instead, it examined whether the statutory concept of under-reporting actually applied when the entire income subsequently declared was accepted.

What Salaried Taxpayers Should Learn From the Case

For employees, the case highlights an important difference between tax deduction and tax compliance.

If an employer deducts TDS from salary, that does not automatically complete the employee's ITR-related obligations. The taxpayer still has to report income and claim the appropriate TDS credit. The Income Tax Department explicitly confirms this position.

Form 16 and Form 26AS are particularly useful for checking whether salary and TDS information has been correctly reported. Taxpayers should also reconcile salary income with their bank records and other income sources before filing.

If an ITR deadline is missed, taxpayers may still be able to file a return later, although late filing can involve fees and interest depending on the circumstances.

Why This ITAT Ruling Matters

The ruling offers an important legal distinction: non-filing of an ITR and under-reporting of income are not necessarily the same thing for purposes of Section 270A.

For this taxpayer, the department already had information about his salary through TDS records. When he eventually filed his return, he disclosed ₹30.22 lakh, and the Assessing Officer accepted that figure without making any addition.

That factual combination was critical to the tribunal's decision.

However, taxpayers should not assume that every case involving a late or missing ITR will receive the same treatment. Different facts, additional undisclosed income, inaccurate particulars or other statutory violations can lead to different consequences.

What Taxpayers Should Watch Going Forward

The biggest lesson is simple: do not confuse TDS with filing an ITR.

The Delhi ITAT's decision provides relief in a specific penalty dispute, but it does not remove the underlying importance of timely tax compliance. Salaried individuals should check their Form 16, Form 26AS and other tax information before filing and ensure that all taxable income is properly disclosed.

For taxpayers who have already missed a filing deadline, the appropriate response is generally to examine their filing options and tax position rather than assume that TDS has settled everything.

Conclusion

The Delhi ITAT deleted the ₹3.74 lakh penalty imposed on a taxpayer who had failed to file his original ITR despite salary income of more than ₹30 lakh. The tribunal's key finding was that the taxpayer later disclosed his full income of ₹30,22,900, and the Assessing Officer accepted that income without making any addition.

The ruling is useful because it clarifies how under-reporting under Section 270A can be distinguished from simply failing to file an original return in circumstances where the full income is subsequently disclosed and accepted.

For ordinary salaried taxpayers, however, the message remains clear: TDS deduction does not replace ITR filing.

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This article is for informational and educational purposes only and should not be considered tax or investment advice