In a significant ruling, the Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) deleted the penalty under Section 271(1)(c) of the Income Tax Act,1961, after the taxpayer rectified the excess salary income declaration by filing a revised return, concluding that there was no willful intent to conceal income by the assessee and that all necessary corrections were made through the revised return.
The Assessee, Rohit Chatterji, an individual residing in Singapore, filed his return of income in India for the assessment year, declaring a total income of Rs. 12, 05, 86,110. This declaration included 50% of rental income from a house property co-owned with his wife, Ms. Alpana Chatterji, in Singapore. His residential status for the year under consideration was classified as a resident and ordinarily resident.
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The Income Tax Department selected the case for scrutiny, serving statutory notices under Section 143(2) on August 22, 2016, and under Section 142(1) on October 11, 2017. During the assessment, the Assessing Officer ( AO ) raised queries regarding the non-declaration of Rs. 6, 21,652 under “Income from Other Sources” and 100% of rental income from the Singapore property, amounting to Rs. 23, 71,076. In response, the assessee filed a revised return on March 30, 2017, including these incomes. The AO subsequently completed the assessment, accepting the income as declared in the revised return.
Upon verification of Income Tax Statement ( ITS ) details, the AO observed that the assessee had not declared Rs. 6,21,662 under “Income from Other Sources” and Rs. 23,71,076 under “House Property.” Consequently, the AO initiated penalty proceedings under Section 271(1)(c) for the alleged concealment of income.
The appeal was brought before the Commissioner of Income Tax ( Appeals ) ( CIT (A) ), who confirmed the penalty. The CIT (A) noted that the original return did not include significant amounts of income, and that the revised return was filed only after the scrutiny notice was issued.
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Mr. Ajit Jain, representing assessee, contended that the original return was based on the best available information. The difference in assessment years between India and Singapore delayed the availability of correct income details, which led to the revised return being filed during the assessment proceedings.
Conversely, Mr. Nayanjyoti Nath, representing the revenue, argued that the assessee would not have disclosed the additional income if not for the scrutiny.
The tribunal reviewed the case, noting that the assessee had declared his total income in the original return, and later revised it to include additional income after receiving clarification on the previously undisclosed rental and interest income. The tribunal highlighted that there was no evidence of intentional concealment, as the original return was filed with the best available information. Additionally, the tribunal found that Form 26AS only contained details of the interest income, not the rental income, as the property was situated outside India. The tribunal noted that assessee had also corrected errors in the salary income on the revised return.
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Ultimately, the two-member tribunal, consisting of Rahul Choudhary and M.S. Pathmavathy, determined that the penalty under Section 271(1) (c) was unjustified. The tribunal directed the AO to delete the penalty levied, concluding that there was no willful intent to conceal income by the assessee, and that all necessary corrections were made through the revised return.
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