2016 (4) TMI 988 - AT - Income Tax

Penalty u/ s 271(1)(c) - error incurred in the filing of Tax Returns - Held that - The conduct of the assessee was not mala-fide and contemptuous and the assessee had come forward by offering a bona-fide explanation about the error committed by the online tax return filing portal Taxspanner and hence in our considered view, the assessee is not liable for penalty u/s 271(1)(c) of the Act as the case is covered by the exceptions as contained in the explanation 1(B) to Section 271(1)(c) of the Act. Even with respect to the discount as commission income received by the assessee, the assessee has purchased a flat from broker M/s Buniyad Retail Pvt. Ltd. and received discount as commission income of ₹ 85,270/- from M/s Buniyad Retail Pvt. Ltd. and the assessee submitted that the said discount as commission income received from broker M/s. Buniyad Retail Pvt. Ltd is capital receipt and the same was reduced by the assessee from the cost of the flat purchased through broker M/s. Buniyad Retail Pvt. Ltd in Kensington Park at Jaypee Greens Sector-133. The view adopted by the assessee is a plausible bona-fide view although the same did not found favour with the Revenue and the assessee chose not to file appeal against the said additions but that does not mean that every claim which is not sustained by the revenue will make the tax-payer liable to penalty u/s. 271(1)(c) of the Act. The claim of the assessee was plausible and bona-fide and we hold that no penalty can be imposed u/s 271(1)(c) of the Act on this count. With respect to the amount of ₹ 16,803/-, it was stated that inadvertently the assessee failed to declare the interest received on savings bank account amounting to ₹ 16,803/- and the omission was neither intentional nor willful.The amount involved is also trivial. Thus there is no deliberate attempt on the part of the assessee and it is not a fit case to impose penalty u/s 271(1)(c) of the Act on the assessee as the conduct of the assessee if seen in context of preceding and succeeding years as set-out above does not warrant imposition of the penalty u/s 271(1)(c) - Decided in favour of assessee.

Issues Involved:
1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Alleged concealment of income and furnishing inaccurate particulars of income.
3. Bona fide explanation and negligence by the online tax return filing portal.
4. Treatment of commission income as capital receipt.
5. Non-declaration of interest income from savings bank account.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The assessee appealed against the penalty order dated 20-02-2014 passed by the AO under Section 271(1)(c) for the assessment year 2011-12. The AO levied a penalty of 300% of the tax sought to be evaded, amounting to ?13,04,178/-. The CIT(A) reduced this penalty to 100% of the tax sought to be evaded, considering the circumstances.

2. Alleged Concealment of Income and Furnishing Inaccurate Particulars of Income:
The AO observed discrepancies in the assessee's return, including under-declaration of salary income, non-declaration of commission income, and interest income from a savings bank account. The AO held that the assessee willfully concealed income, thus attracting the penalty under Section 271(1)(c).

3. Bona fide Explanation and Negligence by the Online Tax Return Filing Portal:
The assessee argued that errors in the tax return were due to negligence by the online tax return filing portal "Taxspanner," which was engaged to file the return. The assessee provided Form No. 16 to "Taxspanner," which allegedly made mistakes in reporting the salary income. The assessee, being pregnant and under work pressure, did not verify the return details before signing and submitting it.

4. Treatment of Commission Income as Capital Receipt:
The AO added ?85,270/- as commission income, which the assessee claimed to be a capital receipt reduced from the cost of a flat purchased through M/s Buniyad Retail Pvt. Ltd. The AO rejected this claim, treating it as commission income, while the assessee maintained that it was a discount on the property purchase.

5. Non-declaration of Interest Income from Savings Bank Account:
The AO added ?16,803/- as interest income from a savings bank account, which the assessee failed to declare. The assessee contended that this omission was neither intentional nor willful, attributing it to oversight.

Tribunal's Findings:

On the Levy of Penalty:
The Tribunal observed that the assessee's conduct was bona fide, and there was no mala fide intention to evade taxes. The errors in the return were attributed to the negligence of "Taxspanner." The Tribunal noted that the assessee promptly deposited the refund amount back to the government upon realizing the mistake.

On Alleged Concealment and Inaccurate Particulars:
The Tribunal found that the assessee had provided a plausible and bona fide explanation for the discrepancies. The Tribunal emphasized that every error does not warrant a penalty under Section 271(1)(c), especially when the assessee's conduct in preceding and succeeding years was consistent and bona fide.

On Commission Income:
The Tribunal accepted the assessee's explanation that the commission income was treated as a capital receipt and reduced from the property cost. This view was considered plausible and bona fide, even though it did not align with the Revenue's stance.

On Interest Income:
The Tribunal acknowledged that the omission of interest income was inadvertent and unintentional, considering the trivial amount involved.

Conclusion:
The Tribunal concluded that the assessee's conduct did not warrant the imposition of a penalty under Section 271(1)(c). The penalty levied by the AO and sustained by the CIT(A) was deleted. The appeal filed by the assessee was allowed.

Order Pronounced:
The appeal filed by the assessee in ITA No. 4887/Mum/2014 for the assessment year 2011-12 was allowed, and the penalty levied under Section 271(1)(c) was deleted. The order was pronounced in the open court on 20th April 2016.

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