2017 (7) TMI 807 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - The simple reason that notice u/s 274 cannot be read de-hors the assessment order. From reading of the assessment order if it is evident that under which particular limb of section 271(1)(c) the penalty has been initiated then merely because in the notice u/s 274 the Assessing Officer does not specify the specific limb of section 271(1)(c) it cannot be concluded that the Assessing Officer failed to pinpoint the actual limb in which said penalty was levied. In the assessment order the Assessing Officer had clearly concluded after confirmation of each of the two additions that assessee had furnished inaccurate/ incorrect particulars of his income. Therefore merely because in the penultimate para he observed that assessee has concealed/ furnished inaccurate particulars of income cannot be the basis for holding that the Assessing Officer wrongly and mechanically initiated the penalty. Therefore it cannot be said that the penalty proceedings initiated by the Assessing Officer were bad in law for want of pinpointing the exact limb in which subject penalty was initiated. Claim of deduction of HRA made in the original return - Held that - As far as deduction for HRA was claimed by assessee the same was denied only for the reason that actual payment had not been made by assessee. It is not disputed that the assessee was residing in the house of his mother to whom the rent was payable. Therefore at best it can be said to be a wrong claim in view of Explanation B to section 10(13A) but that does not imply that the assessee furnished any inaccurate particulars of its income. The amount was payable to mother and not to any outsider. This goes to show assessee s bona-fide. Therefore do not find any reason to saddle the assessee with penalty on account of claim of deduction of HRA made in the original return. Non-disclosure of interest on FDR - Held that - As far as assessee s non-disclosure of interest on FDR is concerned the assessee s explanation was as reproduced earlier that the assessee was of the view that he was filing return on cash basis. It is pertinent to mention that the assessee had not claimed the TDS on interest of FDR in its original return of income because he had not included the interest on FDR. This shows assessee s bona-fide inadvertent mistake of not including interest in his income. Had the assessee claimed TDS but not returned the interest income different consequences could follow. Under such circumstances the assessee explanation cannot be said to be bona-fide. In the result the penalty levied is directed to be deleted.

Summary

Issues:
- Condonation of delay in filing appeal
- Denial of HRA claim and addition of interest income
- Validity of penalty under section 271(1)(c)

Condonation of Delay:
The appeal was filed by the assessee against the order passed by the Commissioner of Income Tax (Appeals) relating to the assessment year 2009-10, which was belated by approximately 238 days. The assessee cited the unfortunate demise of their tax advisor and the subsequent lack of professional advice as reasons for the delay. After considering the submissions, the delay was condoned as the assessee was deemed to be prevented by reasonable cause from filing the appeal in time.

Denial of HRA Claim and Addition of Interest Income:
The Assessing Officer observed that the assessee had claimed a deduction on account of House Rent Allowance (HRA) without providing supporting documents to prove the payment of rent. It was found that the rent was not actually paid, leading to the denial of the HRA claim. Additionally, interest income on FDR was not declared in the return of income, resulting in an addition to the income. Penalty proceedings were initiated for furnishing inaccurate/incorrect particulars of income, which was upheld by the CIT(A).

Validity of Penalty under Section 271(1)(c):
The assessee challenged the penalty under section 271(1)(c) on various grounds, including the vague notice issued by the Assessing Officer and the lack of specific mention of the limb under which the penalty was levied. The Tribunal noted that the Assessing Officer had concluded that the assessee furnished inaccurate/incorrect particulars of income, justifying the penalty. However, regarding the denial of the HRA claim, the Tribunal found that it was a wrong claim but did not imply inaccurate particulars of income. The penalty related to non-disclosure of interest on FDR was deleted as the explanation provided showed a bona-fide inadvertent mistake. The appeal was partly allowed, and the penalty was directed to be deleted in the case of non-disclosure of interest income.

This judgment highlights the importance of providing accurate information and supporting documentation while filing tax returns to avoid penalties and disputes with tax authorities.