MR. AJIT MAHADEO VAZE,MUMBAI vs. ITO-16(2)(4), MUMBAI

Assessee has raised the following ground of appeal:

1. On the facts and circumstances of the case and in law, the Commissioner of Income Tax – (Appeals) has erred in confirming a concealment penalty levied u/s. 271(1)(c) of the Assessment Year: 2015-16 Income Tax Act, of Rs. 2,76,776/-. The penalty levied may please be cancelled.

Brief facts of the case are that the Appellant, a doctor, filed return of income on 30.09.2015 declaring total income of INR 28,62,260/-. The case of the Appellant was selected for limited scrutiny. During the assessment proceedings, the Appellant was asked to provide reconciliation of receipt as appearing in Form 26AS with the receipts as shown in the Books of Accounts. On reconciliation, it was seen that the Appellant had not offered certain receipts to tax during the relevant Assessment Year but had claimed tax deducted at source in respect of the same. This resulted in excess claim of tax deducted at source of INR 32,689/- which was disallowed by the Assessing Officer (AO). Further, it was also noticed that the Appellant had received INR 7,33,362/- from Birla Life Insurance Company Ltd. on surrender of insurance policy. Credit of tax deducted at source by Birla Life Insurance Company Ltd. in respect of the same was claimed by the Appellant but the corresponding receipt was not offered to tax. In response to query from the AO the Appellant stated that on re- verification of all the documents it was noticed that the surrender value of the insurance policy was liable to tax in case less than 5 premiums were paid. Since the Appellant had paid only 3 premiums, the surrender value was being offered to tax. Accordingly, an addition of INR 7,33,362/- was made by the AO. Still further, it was also noticed that interest income of INR 1,97,817/- (earned on savings bank account, fixed deposits and postal deposits), and rental income of INR 61,409/- were added to the capital account and not included in taxable income. During the assessment proceedings, when this was brought to the notice of the Appellant, and the Appellant again offered the same to tax. The assessment was completed under Section 143(3) of the Act vide order dated 26.12.2017 and, thereafter, in the above circumstances, penalty Assessment Year: 2015-16 proceedings under Section 271(1)(c) of the Act were initiated against the Appellant.

During the penalty proceedings, the Appellant submitted that he was heavily dependent upon the chartered accountant handling his affairs who inadvertently committed bonafide mistakes in filing the return of income. The Appellant had no malafide intentions and committed no deliberate act to exclude any income. The Appellant got to know about the mistakes committed during the assessment proceedings and agreed to remedy the same. The excess claim for tax deducted at source was withdrawn and income inadvertently not included in total income was offered to tax. However, the AO rejected the explanation provided by the Appellant as the AO was of the view that if the case of the Appellant had not been selected for scrutiny, the omissions and discrepancies in the return of income would not have been discovered. Accordingly, AO levied penalty of INR 2,76,776/- under Section 271(1)(c) of the Act.

Being aggrieved, the Appellant preferred appeal before CIT(A), however, the CIT(A) confirmed the levy of penalty holding as under:

Being aggrieved, the Appellant/Assessee has preferred the present appeal. The Authorised Representative of the Assessee appearing before us reiterated the submissions before lower authorities and emphasized on the fact that the Appellant is a doctor and was heavily dependent upon the consultant to file his tax of return. The Appellant had no malafide intentions. The receipts as well as tax deducted at source were reflected in the Form 26AS. The underreporting of income and excess claim of tax deducted at source were on account of inadvertent mistakes committed by the consultant, who has been replaced by the Appellant. Further, the Appellant had suo moto offered the relevant income to tax when it came to his knowledge in the assessment proceedings. The Appellant could not have filed a revised return as the return filed by the Appellant was belated. Per contra, Ld. Departmental Representative submitted that there was deliberate concealment of income as the Appellant had claimed credit of tax deducted at source in respect of receipts but had not offered the same to tax. Similarly, rental income and interest income were credited to the capital account and not offered to tax. He relied upon the orders passed by the lower authorities to contend that this was a fit case for levy of penalty under Section 271(1)(c) of the Act.

In view of the above, we reverse the order of AO and CIT(A) and delete the penalty of INR 2,76,776/- levied under Section 271(1)(c) of the Act.