2015 (12) TMI 1545 - AT - Income Tax

Penalty u/s.271(1)(c) - change in head of income - assessee as a housing cooperative society has shown the receipt from mobile company, in income and expenditure account and surplus of this account has not been considered/offered as income on the principal of mutuality - CIT(A) has treated the receipts from allowing the terrace to be used or installing telecommunications network as business income - Held that - No conscious act on the part of the assessee for concealing the particulars of income. In our opinion, there is no justification to support the penalty order passed by the A.O u/s 271(1)(c) of the Act levying penalty upon the assessee. See Jolly Highrise Co-op HSG Society Ltd. 2010 (7) TMI 1082 - ITAT MUMBAI - Decided in favour of assessee

Summary

Issues:
Appeal against imposition of penalty u/s.271(1)(c) of the I.T. Act for assessment year 2005-06 on the grounds of treating receipts as business income instead of income from property.

Analysis:
The appeal was filed by the assessee challenging the order of CIT(A)-Mumbai regarding the imposition of penalty u/s.271(1)(c) of the I.T. Act for the assessment year 2005-06. The assessee, a housing cooperative society, had shown receipts from a mobile company in the income and expenditure account. The surplus from this account was not considered as income on the principle of mutuality. The AO and CIT(A) treated the receipts from allowing the terrace to be used or installing telecommunications network as business income. The assessee contended that the receipt should be treated as income from property, but this argument was rejected by the lower authorities, leading to the imposition of the penalty by the AO, which was upheld by the CIT(A).

The assessee's representative referred to a previous order of the Tribunal in the case of Jolly Highrise Co-op HSG Society Ltd., where a penalty for a similar change in the head of income was deleted by the Tribunal. The Tribunal in that case observed that the assessee had not withheld any particulars of income and had made various claims regarding the nature of income, which were eventually negated by the AO. The Tribunal concluded that there was no conscious act of concealing income particulars by the assessee, leading to the cancellation of the penalty order.

Given the similarity of facts and circumstances between the instant case and the case considered by the Tribunal previously, the ITAT Mumbai directed the AO to delete the penalty imposed on the assessee. Consequently, the appeal of the assessee was allowed, and the penalty was set aside. The order was pronounced in the open court on December 16, 2015.