2020 (8) TMI 258 - AT - Income Tax

Penalty u/s 271(1)(c) - non-deduction of TDS - HELD THAT - Once, there is non-deduction of TDS on any expenditure disallowance is made but genuineness is not in doubt, penalty u/s 271(1)(c) of the Act cannot be attracted and hence, on this issue, we delete the penalty and allow the appeal of the assessee. See VENUS ENGINEERS 2011 (8) TMI 1163 - GUJARAT HIGH COURT and SHRI VISHAL MADHUSUDANBHAI CHOKSHI 2014 (1) TMI 910 - ITAT AHMEDABAD Undisclosed rent received - HELD THAT - We noted from the records and it is clear that there is a rent accrued to the assessee to the extent of ₹ 1,49,500/-, which is in dispute, but not disclosed by assessee in the return of income. Even before CIT(A), no evidence was produced in regard to this rent. Now, before us also no argument or no fact is brought on record and hence, the assessee is unable to explain its case that it is a bonafide mistake. In the absence of the same, we confirm the penalty of this amount of rent receipt not disclosed to the extent of ₹ 1,49,500/-. Appeal of the assessee is partly allowed.

Issues:
1. Penalty levied under section 271(1)(c) for disallowance of rent payment without TDS deduction under section 40(a)(ia).
2. Penalty imposed for undisclosed rent received.

Issue 1: Penalty under section 271(1)(c) for disallowance of rent payment without TDS deduction:

The appeal pertains to the confirmation of penalty under section 271(1)(c) by the CIT(A) on disallowance of rent payment made by the assessee without deducting TDS under section 40(a)(ia) of the Act amounting to ?61,72,064. The assessee contended that there was no concealment of income or particulars under section 271(1)(c) and provided a genuine explanation for the non-deduction of TDS. The ITAT, after considering the facts, noted that the payment of TDS along with interest was made within the due dates and was allowable as per the proviso to the section. Referring to the precedent set by ITAT Ahmedabad Bench in a similar case, the ITAT held that non-deduction of TDS, leading to disallowance, does not attract penalty under section 271(1)(c) if there is no inaccurate particulars in the return of income. Additionally, the judgment of the Hon'ble Gujarat High Court in a related case supported the view that a bonafide mistake without concealment or inaccurate particulars does not warrant a penalty. Consequently, the ITAT deleted the penalty levied on the disallowance under section 40(a)(ia) and allowed the appeal of the assessee.

Issue 2: Penalty for undisclosed rent received:

The AO levied a penalty on the rent received of ?4,34,123 not declared by the assessee. The CIT(A) in the quantum proceedings deleted a portion of the rent receipts but confirmed ?1,49,600. The assessee argued that only the penalty to the extent of ?1,49,500 could be imposed. The ITAT observed that the rent accrued to the assessee to the extent of ?1,49,500 was not disclosed in the return of income and no evidence was produced before the CIT(A or the ITAT regarding this rent. The assessee failed to provide any explanation or evidence to support the claim that it was a bonafide mistake. Consequently, the ITAT confirmed the penalty of ?1,49,500 for the undisclosed rent receipts. Therefore, the appeal of the assessee was partly allowed, and the penalty for the undisclosed rent received was upheld.

In conclusion, the ITAT Mumbai, comprising Sri Mahavir Singh, JM, and Sri M Balaganesh, AM, delivered a detailed judgment addressing the issues of penalty under section 271(1)(c) for disallowance of rent payment without TDS deduction and penalty for undisclosed rent received. The judgment highlighted the importance of genuine explanations, precedents, and legal provisions in determining the imposition of penalties in income tax cases.

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