Bank interest not reported in ITR? ITAT ruling explains when taxpayers can escape income tax penalties

**ITAT Deletes Penalty For Omitted Interest**

The Income Tax Appellate Tribunal (ITAT), Delhi, has deleted a ₹3.08 lakh penalty levied on a salaried taxpayer who failed to disclose ₹4.49 lakh in bank interest in his original return. The ruling, delivered on 14 October 2026 in ITA No. 6864/DEL/2026, was pronounced by Vice President Mahavir Singh and Accountant Member S. Rifaur Rahman in Sidharth Gupta v. Income Tax Officer, Ward 29(1).

**Facts Of The Case**

The taxpayer filed his original return for assessment year 2020-21 on 16 October 2020, declaring total income of ₹81.35 lakh, including salary and bank interest. The department later reopened the assessment under Section 147 of the Income-tax Act, 1961, relying on information from its Insight portal covering bank interest and a motor vehicle purchase. After a notice under Section 148 dated 31 March 2024, the taxpayer filed a return on 24 April 2024 declaring ₹85.84 lakh, including the previously omitted interest of ₹4.49 lakh. The assessing officer completed the reassessment at the declared income without further addition, but then imposed a penalty of ₹3.08 lakh under Section 270A, computed at 200% of the tax on the additional interest.

**Why The Penalty Failed**

The tribunal gave two reasons for deleting the penalty. First, the penalty notice did not identify the specific clause of Section 270A(9) allegedly violated. It merely alleged under-reporting in consequence of misreporting. The tribunal noted that Section 270A distinguishes between under-reporting, which attracts a 50% penalty, and misreporting, which attracts 200%, and held that a general reference without identifying the applicable clause was insufficient. It relied on the Delhi High Court's judgment in Schneider Electric South East Asia (HQ) Pte Ltd. v. ACIT on the need to clearly specify the charge.

Second, the tribunal accepted the omission as bona fide. The taxpayer said the return was filed during the Covid-19 pandemic and the interest was n…