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Facts
The assessee, an Association of Persons (AOP), filed its returns declaring itself as an 'Individual'. The CPC processed the returns, identified the assessee as AOP, levied tax at the AOP rate, and raised a demand. The AO initiated penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars.
Held
The Tribunal held that penalty under Section 271(1)(c) can only be invoked if there is concealment or furnishing of inaccurate particulars. Since the income declared was accepted by the CPC and the increased liability arose solely due to a change in tax rate based on the assessee's status, the penalty provisions could not be invoked.
Key Issues
Whether penalty under Section 271(1)(c) is leviable when the increased tax liability arises from a change in the assessee's status (from 'Individual' to 'AOP') rather than concealment or furnishing of inaccurate particulars of income.
Sections Cited
271(1)(c)
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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI B.R. BASKARAN
O R D E R PER B.R. BASKARAN, A.M :
Both the appeals filed by the assessee relate to the Assessment Years (AYs.) 2013-14 & 2015-16 and they are directed against the order passed by the Ld. Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [‘Ld.CIT(A)’], wherein he has confirmed the penalty levied by the AO u/s. 271(1)(c) of the Income Tax Act, 1961 (‘the Act’) in these two years.
The assessee is an Association of Persons (AOP). However, it filed its return of income of both the years under consideration declaring its status as “Individual’. The CPC, Bengaluru, while processing the return of income of both the years under consideration, treated the assessee as & 6272/Mum/2024 AOP and accordingly levied tax at maximum marginal rate. Accordingly, a tax demand was raised in both the years in view of change in the rate of tax. It is pertinent to note that the CPC did not modify the total income returned by the assessee. The assessee also accepted the intimation so issued by the CPC in both the years.
Since there was increase in the tax liability, the AO initiated penalty proceedings u/s.271(1)(c) of the Actin both the years and levied penalty equivalent to the enhanced tax liability. The same was confirmed by the Ld.CIT(A) in both the years and hence, the assessee has filed these appeals before us.
The contention of the Ld.AR is that the total income declared by the assessee did not undergo any change and increase tax liability has arisen on account of change in the status of the assessee from ‘individual’ to ‘AOP’. Accordingly, the Ld.AR submitted that there is no concealment of particulars of income or furnishing of inaccurate particulars of income within the meaning of sec.271(1)(c) of the Act. Accordingly, he submitted that the AO was not right in levying penalty u/s.271(1)(c) of the Act.
The Ld.DR, on the contrary, submitted that the assessee has furnished inaccurate particulars by wrongly declaring itself as an ‘individual’.
Having regard to the rival submissions, we are of the view that there is merit in the submissions made by the assessee. The question of levying of penalty u/s.271(1)(c) of the Act shall arise only if there is either concealment of particulars of income or furnishing of inaccurate particulars of income. In the instant case, the income declared by the assessee has been accepted by the CPC. Due to change in the tax rates applicable to individual and AOP, additional tax liability has arisen, for & 6272/Mum/2024 which the provisions of sec.271(1)(c), in our view, cannot be invoked. Accordingly, we set aside the order passed by the Ld.CIT(A) in both the years under consideration and direct the AO to delete the penalty levied u/s.271(1)(c) of the Act in both the years.
In the result, both the appeals filed by the assessee are allowed.