Mohan Thakurdas Gurnani Vs ITO (ITAT Mumbai)
Penalty on notional income from house property quashed – ITAT rules levy u/s 271(1)(c) unjustified- Search penalty void – Section 271AAB overrides 271(1)(c)
ITAT ruled that penalties under Section 271(1)(c) cannot be levied on notional income from house property, as it does not amount to concealment or inaccurate particulars. For assessments after July 2012, ITAT observed that penalties should be considered under Section 271AAB rather than 271(1)(c). Penalties levied under the wrong section are void, emphasizing correct statutory application post-search.
Background
A search u/s 132 was conducted in the Gurnani Group on 04.02.2016, after which cases were centralized & notices u/s 153A were issued. Assessee filed returns for the relevant years. During scrutiny, AO noticed that several immovable properties were shown in the balance sheet, but no notional income from those properties was offered.
AO computed annual letting value (ALV) on such properties & added notional income u/s 22, treating the same as income from house property. Subsequently, penalty u/s 271(1)(c) was levied on the ground of concealment/inaccurate particulars, even though the addition was based purely on notional basis.
CIT(A) confirmed the levy, though directed recomputation of penalty after allowing 30% standard deduction u/s 24, in line with an earlier ITAT direction in the case of Priya Gurnani.
