ITAT quashes Penalty Order as Non-Filing of Income Tax Return and Concealing Particulars Cannot be Levied u/s 271(1)(c) [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) recently quashed the penalty order as the non-filing of income return and concealing particulars cannot be levied under Section 271(1)(c) of Income Tax Act 1961.

The assessee Pushpa Jadhav had not filed any return of income for the Assessment Year 2011-12 under Section 139 of the Income Tax Act, 1961. On realizing the mistake, the assessee in March 2017 deposited the tax due for Assessment Year 2011-12 along with interest thereon.

Thereafter, the assessee filed a letter dated 29.03.2017 before the Assessing Officer (AO) enclosing a copy of the challan towards payment of tax and computation of income for the assessment years 2011-12. The said disclosure was made by the assessee voluntarily.

One year thereafter, the Assessing Officer issued notice under Section 148 of the Income Tax Act on 31.03.2018. In response to the said notice, the assessee filed a return of income declaring total income of Rs.8,35,790/-.

The Assessing Officer accepted the income returned by the assessee. During the period relevant to the assessment year under appeal, the assessee had received rental income of Rs.6,68,267/- from M/s. Bharti Infratel Ltd. The same was reflected in Form 26AS.

Tanmay Phadke appearing on behalf of the assessee submitted that the Assessing Officer erred in holding that the assessee received rental income of Rs.13,36,534/- from M/s. Bharti Infratel Ltd. However, no addition whatsoever was made by the Assessing Officer in respect of difference in rental income and the Assessing Officer initiated penalty proceedings under Section  271(1)(c) of the Income Tax Act and vide order dated 13.06.2019 levied penalty of Rs.92,418/- that is maximum penalty of 300% in respect of difference in rental income.

Against the penalty order, the assessee filed an appeal before the CIT (A). The CIT (A) confirmed the penalty. Hence, the present appeal was preferred by the assessee.

Counsel for the assessee further added that once the return of income had been accepted by the Assessing Officer without any addition, there was no question of levy of penalty. He also pointed out that the actual rental income received by the assessee had been duly reflected in the return of income/computation of income. The rental income declared by the assessee matches with the rental income reflected in 26AS.

And he argued that the TDS has duly been deducted on the rental income and paid to the government exchequer by the deductor. Thus, no penalty under Section 271(1) (c) of the Income Tax Act was leviable on account of rental income.

Counsel for the Revenue V. S. Mahajan submitted that the assessee had failed to

disclose full rental income in the return. As per the information available with the department, the assessee has received rental income of Rs.13,36,534/- whereas,the assessee had disclosed rental income of Rs.6,68,267/- only. It was a clear case of concealment of income.

The Bench consisting of a Judicial Member Vikas Awasthy and an Accountant Member Amarjit Singh observed that the penalty provisions under Section 271(1)(c) of the Income Tax  Act had been invoked for non-filing of return of income.

Penalty for non-filing of return of income cannot be levied under Section 271(1)(c) of the Income Tax Act. The Assessing Officer vide order dated 13.06.2019, levied penalty under Section 271(1)(c) for concealing particulars of income.

Whereas, while recording satisfaction, no such reason was mentioned by the Assessing Officer  for initiating a penalty. Thus, recording of satisfaction for initiating penalty under Section 271(1)(c) of the Income Tax Act was not in accordance with the provisions of the Income Tax Act.

Therefore, the penalty proceedings under Section 271(1)(c) of the Income Tax Act were quashed and appeal of the assessee was  allowed.

To Read the full text of the Order CLICK HERE

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