2017 (2) TMI 498 - AT - Income Tax

Penalty u/s 271(1)(c) - claim of entire interest as deduction u/s 24 under the head income from house property - AR of the assessee submitted that the AO has not pointed out this mistake but it was detected by him - Held that - The assessee filed the revised return by paying the balance tax and brought to the notice of the AO during assessment proceedings by letter dated 21-10-2010. It is also noted that the AO in the assessment order mentioned that on perusal of the reply of the assessee, it is found that the assessee has wrongly claimed interest on housing loan u/s 24(b) of ₹ 2,39,832/- on self occupied property. It thus appears that the AO has not detected the mistake but it is noticed by the AO only after perusing the reply of the ld. AR of the assessee. It is further noticed that the assessee had filed the revised return of income by paying the balance due tax on the amount excessive claimed against the restriction of deduction to the extent of ₹ 1.50 lacs under head income from house property. It is also noticed that this is the first year of the assessee claiming such deduction u/s 24(b) of the Act. CIT(A) is not justified in confirming the penalty u/s 271(1)(c) which is directed to be deleted. - Decided in favour of assessee

Summary

Issues:
Appeal against penalty u/s 271(1)(c) of the I.T. Act, 1961.

Analysis:
The appeal was filed against the penalty imposed by the Assessing Officer for claiming excess interest on housing loan. The Authorized Representative advised the appellant to rectify the mistake and file a revised return during the assessment proceedings. The Assessing Officer noted that no submissions were made before him in the penalty proceedings, leading to the imposition of a penalty of &8377; 27,759. The appellant claimed that the revised computation was filed voluntarily, but it was found that it was submitted only after a specific query was raised by the Assessing Officer. The appellant also pleaded ignorance of the law, which was rejected, citing that ignorance of the law cannot be an excuse. The Tribunal referred to the case law and held that the disclosure made by the assessee was not voluntary, and no reasonable cause was demonstrated, confirming the penalty under section 271(1)(c).

During the appeal, the Authorized Representative of the assessee prayed for the deletion of the penalty. The Departmental Representative relied on the lower authorities' orders. The Tribunal considered the contentions of both parties and reviewed the assessment order, where the disallowance of interest on housing loan was made by the Assessing Officer. The penalty was imposed for furnishing inaccurate particulars of income by claiming excess interest on the housing loan. The penalty was confirmed by the ld. CIT(A) despite the arguments presented by the Authorized Representative of the assessee, citing various case laws. The Tribunal concluded that the ld. CIT(A) was not justified in confirming the penalty and directed its deletion, allowing the appeal of the assessee.

In conclusion, the Tribunal allowed the appeal of the assessee, overturning the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The Tribunal found that the appellant had rectified the mistake by filing a revised return and paying the due taxes, and the penalty was not justified based on the circumstances of the case and the case laws cited by the Authorized Representative of the assessee.