The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the penalty on disallowance under Section 24a of the Income Tax Act, 1961 cannot be imposed merely on the ground of wrong treatment made to the head of the Income.
The bench observed that the assessee giving a wrong statement last year does not mean that as a matter of consistency or any other principle this year also assessee/Assessing officer is supposed to give a wrong treatment to the same. Selection of the head is not an option but a mandate of law to be compulsorily followed by all the concerned.
The assessee is a company that filed its return of income under Section 139 of the Income Tax Act declaring a total income of Rs. 16,10,320/-. Subsequently, a search action under Section 132 of the Income Tax Act was carried out on D’ Décor Group including the assessee company.
Notice under Sections 142(1) and 143(2) of the Income Tax Act were issued and additions of Rs. 11, 88,000/- under the head Income from House Property being disallowance made under Section 24(a) of the Income Tax Act and Rs. 9, 32,326/- under the head Income under the head Business or Profession, being written off of Fixed Assets were made to the total income declared by the assessee.
Simultaneously, penalty proceedings under Section 271(1)(c) of the Income Tax Act were also initiated, and as the assessee has not challenged the assessment order on merits and quantum, a minimum penalty at 100% of the amount of tax sought to be evaded was levied. The Commissioner of Income Tax (Appeal) [CIT(A)], confirmed the order passed by the Assessing Officer.
The Two-member bench comprising of Kuldip Singh (Judicial member) and Gagan Goyal (Accountant member) observed that the cause of addition under the head Income from House Property was the different treatment given by the assessee in this year vis-àvis previous year.
In the previous year assessee had shown the same under the head Business or Profession, but in this year shown under the head Income from House Property, which is actually correct as per the established legal position for income from house property. Rather Assessing Officer changed the same to income under the head Business or Profession and the assessee also agreed and this difference resulted in addition.
Based on the observation, the bench doesn’t find any merit in the case of the department by levying the penalty on this disallowance of Rs. 11,88,000/- being disallowance made under Section 24(a) of the Income Tax Act. The disallowance made under the head Income from House Property, it was held that there are no inaccurate particulars furnished by the assessee, although disallowance was not challenged by the assessee on merits and quantum. Hence, the penalty for this disallowance is not sustainable. Thus, the appeal of the assessee was allowed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
