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2025 (4) TMI 589 - AT - Income TaxLevy of penalty u/s. 271(1)(c) - treatment of income under two different PANs - Assessee claimed loss on account of mutuality which was set off against the rental and interest income - HELD THAT - It is a fact on record that there were two PANs which were allotted to the assessee. The one which is referred as old PAN was allotted with the status of Firm which was surrendered for cancellation by making an application as early as on 24.07.2012. Thereafter assessee had filed its return against the new PAN with the status AOP . Assessee admitted in its explanation furnished in response to notice for levying penalty on account of concealment of particulars of income that it had inadvertently claimed loss on account of mutuality which was set off against the rental and interest income the same was corrected while filing the return in response to the notice u/s. 148. Assessee also included interest relating to time deposit in its return filed in response to the notice u/s. 148. It is also undisputed fact that the assessment u/s. 143(3) r.w.s. 147 was completed by ld. Assessing Officer accepting the returned income there being no addition or disallowance. Penalty proceedings were initiated on the income components which were reported by the assessee in the return filed in response to notice u/s. 148 vis- -vis which were not included in the original return u/s. 139. Thus we find that assessee has duly complied with Explanation 1 to Section 271(1) by offering all the possible explanations substantiating it by documentary evidences to establish that there is no concealment of particulars of income on its part. Having satisfied by the submissions made by the assessee in the course of re-assessment proceedings AO has accepted the income returned by the assessee as such. There is no concealment of particulars of income on the part of the assessee. We accordingly delete the penalty so imposed by ld. Assessing Officer. Ground raised by the assessee is allowed.
ISSUES PRESENTED and CONSIDERED
The core legal question considered in this judgment is whether the penalty imposed under Section 271(1)(c) of the Income-tax Act for alleged concealment of income by the assessee was justified. The issue revolves around the treatment of income under two different PANs and whether the assessee's actions constituted concealment of income or merely an inadvertent error. ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents: The legal framework centers around Section 271(1)(c) of the Income-tax Act, which deals with penalties for concealment of income or furnishing inaccurate particulars. The Tribunal also considered the applicability of Explanation 1 to Section 271(1), which provides that if the assessee offers an explanation and substantiates it with evidence, no penalty shall be imposed if the explanation is bona fide and all material facts are disclosed. Court's interpretation and reasoning: The Tribunal noted that the assessee had two PANs, one of which was incorrectly classified as a 'Firm' and was later surrendered. The income initially reported under the old PAN was subsequently included in the return filed in response to the notice under Section 148. The Tribunal found that the assessee had inadvertently adjusted a loss on account of mutuality against rental and interest income, which was corrected in the revised return. Key evidence and findings: The Tribunal examined the sequence of events, including the assessee's application to cancel the old PAN and the filing of returns under the new PAN. The Tribunal also considered the fact that the assessee included the income from Loop Mobile and interest from a time deposit in the revised return filed in response to the notice under Section 148. Application of law to facts: The Tribunal applied Explanation 1 to Section 271(1) and concluded that the assessee had provided a bona fide explanation for the discrepancies in the returns. The Tribunal found that the assessee had not concealed income or filed inaccurate particulars, as the revised return included all income components that were initially omitted. Treatment of competing arguments: The Revenue argued that the penalty was justified due to the assessee's failure to include certain income components in the original return. However, the Tribunal found that the assessee's actions were not indicative of concealment, as the revised return addressed the omissions, and the Assessing Officer accepted the revised income without any additions or disallowances. Conclusions: The Tribunal concluded that there was no concealment of income by the assessee, as the revised return included all relevant income components, and the explanation provided was bona fide. Consequently, the penalty imposed under Section 271(1)(c) was deleted. SIGNIFICANT HOLDINGS The Tribunal held that the penalty under Section 271(1)(c) was not warranted in this case. The core principle established is that an inadvertent error corrected in a revised return, accompanied by a bona fide explanation and full disclosure of material facts, does not constitute concealment of income. Final determinations on each issue: The Tribunal determined that the assessee had not concealed income and had provided a bona fide explanation for the discrepancies. The penalty imposed by the Assessing Officer was deleted, and the appeal of the assessee was allowed.
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