2016 (11) TMI 380 - AT - Income Tax

Levy of penalty u/s. 271 (l)(c) - failure to offer rental income - Held that - Assessee has given bonafide explanations for non-inclusion of rental income in her return of income as the said rental income was stated to belong to the son of the assessee, Mr Vivek Kohli and we find the explanation offered by the assessee as bonafide and quite reasonable keeping in view factual matrix as culled out from records placed before us. Thus as per the assessee , the sum of ₹ 2,76,250/- is chargeable to tax as income in the hands of Mr. Vivek Kohli and not in the hands of the assessee keeping in view that he is also coowner of the property. Thus, in the instant case , the penalty u/s 271(1)(c) of the Act levied by the AO and to the extent it is confirmed by the ld. CIT(A) is not sustainable in view of bonafide explanation given by the assessee in accordance with provisions of Section 271(1)(c) of the Act as the instant case is covered by explanation 1 to Section 271(1)(c) of the Act as the assessee has come out with a bonafide explanation to explain the reasons for non-inclusion of rental income in her return of income filed with the Revenue - Decided in favour of assessee

Summary

Issues Involved:
- Penalty under section 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars of income.

Detailed Analysis:

Issue 1: Penalty under section 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars of income.

The appeal was against the penalty order passed by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act, 1961. The appellant contended that there was no concealment of income or inaccurate particulars furnished, attributing the difference of opinion as the reason for the penalty imposition. The appellant argued that all facts were disclosed at every stage, and the penalty was unjustified. Additionally, the appellant raised concerns regarding the AO imposing the maximum penalty instead of the minimum mentioned. The AO had imposed a penalty of ?1,97,184 for the failure to declare rental income of ?2,76,250 in the return. The CIT(A) upheld a penalty of ?65,728 for furnishing inaccurate particulars of income. The appellant challenged this decision before the Tribunal.

Issue 2: Justification for non-inclusion of rental income in the return.

The appellant, engaged in designing and supervision business, had rental income from a property. The AO observed a mismatch between the rental income declared and the actual amount received. The appellant claimed that a portion of the income belonged to her son, who had invested in the property. Despite explanations and documents submitted, the AO made an addition to the income during the assessment. The CIT(A) upheld this addition. The Tribunal dismissed the appeal related to the quantum proceedings. The penalty was imposed due to the failure to prove that the son had declared his share of income. The appellant argued that the son, being a co-owner, was entitled to a portion of the rental income, and the non-inclusion was justified. The Tribunal found the explanation provided by the appellant to be bona fide and reasonable, ordering the deletion of the penalty under section 271(1)(c) as the income belonged to the co-owner son and not the appellant.

In conclusion, the Tribunal allowed the appeal, ruling in favor of the appellant and ordering the deletion of the penalty imposed under section 271(1)(c) for furnishing inaccurate particulars of income.