Case Law Details
Pushpa Jadhav Vs ITO (ITAT Mumbai)
ITAT Mumbai held that recording of satisfaction for initiating penalty u/s 271(1)(c) of the Act is not in accordance with the provisions of the Act, accordingly, penalty u/s 271(1)(c) not sustained.
Facts- The assessee had not filed any return of income for the AY 2011-12 u/s 139 of the Income Tax Act, 1961. On realising the mistake, the assessee in March 2017 deposited the tax due for AY 2011-12 along with interest thereon. Thereafter, the assessee filed a letter dated 29.03.2017 before AO enclosing copy of the challan towards payment of tax and computation of income for A.Y. 2011-12. The said disclosure was made by the assessee voluntarily.
One year thereafter, the AO issued notice u/s 148 of the Act on 31.03.2018. In response to the said notice, the assessee filed return of income declaring total income of Rs.8,35,790/-. AO accepted the income returned by the assessee. In the assessment order passed u/s 143(3) r.w.s. 147 of the Act, the AO 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 AO in respect of difference in rental income.
AO initiated penalty proceedings u/s 271(1)(c) of the 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 dated 13.06.2019 passed u/s 271(1)(c) of the Act, the assessee filed appeal before the CIT(A). The CIT(A) without appreciating the facts on record confirmed the penalty. Hence, the present appeal.
Conclusion- It is not emanating from recorded satisfaction whether the penalty u/s 271(1)(c) of the Act is levied for concealment of income or furnished inaccurate particulars of income. Except for the above said two reasons, the provisions of 271(1)(c) for levy of penalty cannot be invoked. In fact, after reading of satisfaction recorded by AO, it appears that penalty provisions u/s 271(1)(c) of the Act have been invoked for non-filing of return of income. Penalty for non-filing of return of income cannot be levied u/s 271(1)(c) of the Act. The AO vide order dated 13.06.2019, levied penalty u/s 271(1)(c) for concealing particulars of income. Whereas, while recording satisfaction, no such reason was mentioned by the AO for initiating penalty. Thus, recording of satisfaction for initiating penalty u/s 271(1)(c) of the Act is not in accordance with the provisions of the Act.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the assessee is directed against the order of Commissioner of Income Tax Appeals, National Faceless Appeal Centre, Delhi (hereinafter referred to as “the CIT(A)”) dated 12.01.2023, for the assessment year 2011-12.
2. Shri Tanmay Phadke appearing on behalf of the assessee submitted that the assessee had not filed any return of income for the AY 2011-12 u/s 139 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). On realising the mistake, the assessee in March 2017 deposited the tax due for AY 2011-12 along with interest thereon. Thereafter, the assessee filed a letter dated 29.03.2017 before the Assessing Officer (AO) enclosing 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 AO issued notice u/s 148 of the Act on 31.03.2018. In response to the said notice, the assessee filed return of income declaring total income of Rs.8,35,790/-. The AO 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 (at page 9 of the Paper Book). In the assessment order dated 08.11.2018 passed u/s 143(3) r.w.s. 147 of the Act, the AO 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 AO in respect of difference in rental income. The AO initiated penalty proceedings u/s 271(1)(c) of the 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 dated 13.06.2019 passed u/s 271(1)(c) of the Act, the assessee filed appeal before the CIT(A). The CIT(A) without appreciating the facts on record confirmed the penalty. Hence, the present appeal. The Ld. Authorised Representative (AR) submits that once the returned income has been accepted by the AO without any addition, there is no question of levy of penalty. The actual rental income received by the assessee has 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.
The TDS has duly been deducted on the rental in income and paid to the government exchequer by the deductor. Thus, no penalty u/s 271(1)(c) of the Act is leviable on account of rental income. The Ld. AR in support of his submissions placed reliance on the following decisions:
1. CIT vs. Ashutosh Bhatt 138 taxmann.com 536 (Bombay);
2. Armoury International vs. ACIT in ITA No.3299, 3300 & 3301/MUM/2017 decided on 01.01.2019; and
3. The W. B. State Co-opt. Marketing Federation Ltd. vs. DCIT in ITA No.85/KOL/2013, for AY 2008-09 decided on 10.06.2015.
3. Per contra, Shri V. S. Mahajan representing the Department vehemently defended the impugned order and prayed for dismissing appeal of the assessee. The Ld. Departmental Representative (DR) submits that the assessee has 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 has disclosed rental income of Rs.6,68,267/- only. It is a clear case of concealment of income.
4. We have heard the submissions made by rival sides and have examined the orders of authorities below. A perusal of documents on record viz: Acknowledgement of return of income and computation of income and the assessment order shows that the assessee has declared total income of Rs.8,35,790/-. The income returned by the assessee has been accepted by the AO. No addition on any account whatsoever has been made in the assessment order. Once, the AO has accepted the income returned without any addition/disallowance, there is no question of levy of penalty u/s 271(1)(c) of the Act.
5. We find that the AO while passing the assessment order initially observed that the assessee has received rental income of Rs.13,36,534/- from Bharti Infratel Ltd. The assessee furnished copy of Form 26AS to counter the claim of AO. As per Form 26AS, the rental income of assessee from Bharti Infratel Ltd. is Rs.6,68,267/-and on the said rental income TDS has been deducted under the provisions of the Act. The AO after verifying the relevant documents made no addition. Thus, it is evident from the assessment order that, the AO after verifying the documents placed on record was of the opinion that no addition is required to be made and accepted the returned income. Yet, the AO initiated penalty proceedings u/s 271(1)(c) of the Act. In the absence of any addition/disallowance resulting in enhancement of taxable income, no penalty u/s 271(1)(c) of the Act is leviable.
6. De hors, the fact that no addition was made in assessment order, hence, no penalty proceedings u/s 271(1)(c) of the Act was leviable, we have also examined the manner of recording satisfaction and levy of penalty. The AO recorded satisfaction for initiating penalty u/s 271(1)(c) of the Act by observing as under:
“Initiate penalty u/s 271(1)(c) as the assessee has not filed Return of income in spite of having taxable income and also initiate 271F of the I. T. Act as the assessee has failed to file Return of Income u/s 139(1) of the Act.”
A perusal of the above satisfaction recorded by the AO for initiating penalty u/s 271(1)(c) of the Act clearly indicates no application of mind by the AO. It is not emanating from recorded satisfaction whether the penalty u/s 271(1)(c) of the Act is levied for concealment of income or furnished inaccurate particulars of income. Except for the above said two reasons, the provisions of 271(1)(c) for levy of penalty cannot be invoked. In fact, after reading of satisfaction recorded by AO, it appears that penalty provisions u/s 271(1)(c) of the Act have been invoked for non-filing of return of income. Penalty for
non-filing of return of income cannot be levied u/s 271(1)(c) of the Act. The AO vide order dated 13.06.2019, levied penalty u/s 271(1)(c) for concealing particulars of income. Whereas, while recording satisfaction, no such reason was mentioned by the AO for initiating penalty. Thus, recording of satisfaction for initiating penalty u/s 271(1)(c) of the Act is not in accordance with the provisions of the Act.
7. Ergo, for the reasons recorded above, the penalty proceedings u/s 271(1)(c) of the Act are liable to be quashed. Consequently, the impugned order is quashed and appeal of the assessee is allowed.
Order pronounced in the open court on Monday the 15th day of May 2023.
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