2022 (9) TMI 838 - AT - Income Tax

Penalty levied u/s. 271(1)(C) - Disallowance of claim of u/s. 80P(2)(d) on rental income - assessee claimed statutory deduction u/s. 24 of the Act and accepted the addition as the rental income - A.O. initiated penalty proceedings for furnishing inaccurate particulars of income. HELD THAT - It is seen from the Penalty order that the assessee has filed a rectification petition u/s. 154 stating the rental income has already been offered by revising the return on 29.03.2017. AO also held that the bonafideness of the assessee remain unproved as it has filed Revised Return after 8 months of receipt of notice u/s. 143(2) of the Act i.e. the assessee offered the rental income only after the statutory proceedings were initiated by the department. The levy of penalty u/s. 271(1)(c) for filing inaccurate particulars of income does not arise when the assessee filed a Revised Return offering to tax the rental income. In our considered view, the penalty levied u/s. 271(1)(c) is hereby deleted. Appeal filed by the Assessee is allowed.

Summary

Issues Involved:
Penalty under section 271(1)(c) of the Income Tax Act, 1961 for furnishing inaccurate particulars of income.

Analysis:

Issue 1: Background and Facts
The appellant, a Cooperative Society, filed an appeal against the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for the Assessment Year 2015-16. The penalty was confirmed by the Commissioner of Income Tax (Appeals)-3, Rajkot, based on the assessee's claim of deduction under section 80P(2)(d) on rental income, which was deemed ineligible.

Issue 2: Penalty Proceedings
The Assessing Officer initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income after the assessee claimed statutory deduction under section 24 and accepted the addition of rental income. A show cause notice was issued, and a minimum penalty was levied as the assessee failed to appear and provide an explanation.

Issue 3: CIT(A) Decision
The CIT(A) dismissed the appeal, stating that the appellant did not provide adequate justification during the penalty proceedings or at the appellate stage for not levying the penalty under section 271(1)(c). The penalty was confirmed at Rs. 70,551, and the grounds of appeal were rejected.

Issue 4: Grounds of Appeal
The appellant raised several grounds in the appeal, arguing against the confirmation of the penalty under section 271(1)(c). The grounds included errors in law and facts, non-consideration of judicial pronouncements, lack of proper verification, inadequate opportunity at the appeal stage, and absence of cogent material justifying the penalty.

Issue 5: Tribunal Decision
The Tribunal considered the rectification petition filed by the assessee, stating that the rental income had already been offered by revising the return before the penalty order. The Tribunal found that the penalty under section 271(1)(c) for filing inaccurate particulars of income was not justified as the assessee had rectified the return and offered the rental income for taxation. Consequently, the penalty was deleted, and the appeal filed by the assessee was allowed.

In conclusion, the Tribunal ruled in favor of the appellant, deleting the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, based on the rectification made by the assessee regarding the rental income.