MANISH DHIRAJLAL POPAT,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX 35(2), MUMBAI

Grounds of appeal

Brief facts of the case are that the assessee is an individual and had filed return of income on 29-07-2011 declaring total income of Rs.3,73,34,020/-. The assessee has declared income from salary of Rs.3,47,44,381/- and income from other sources of Rs.33,70,641/-. The assessment was completed u/s. 143(3) on 16-01-2014, after making the following additions/ disallowances :-

In response to the letter dated 18-02-2016 issued by the AO as to why penalty should not be levied in respect of the above additions, the Authorised Representative filed letter on 25-02-2016 stating that everything was available on record and the assessee neither filed inaccurate particulars nor concealed any information and requested the AO to drop the penalty proceedings.

However, the AO did not find the contentions of the assessee to be acceptable. With regard to the additions made in respect of house property income and clubbing of income earned by the spouse, the AO observed that the CIT(A) confirmed the additions made on these two issues except for giving relief of Rs.19,991/- with regard to income from house property. With regard to the addition made in respect of interest receipts in the savings bank a/c which was not admitted in the return of income, the submission of the assessee was not accepted by the AO on the ground that the assessee had offered the income only after a query was raised in this regard during the assessment proceedings by the AO. The AO observed that had the query not been raised during the course of scrutiny assessment proceedings, the interest income to the extent of addition made would have escaped assessment.

Accordingly, the Assessing Officer levied a penalty of Rs.3,45,286/- being 100% , of the tax sought to be evaded in respect of all the three additions made in the assessment order, subject to the marginal relief allowed by the CIT(A) with regard to one of the additions.

Against the above order assessee is in appeal before us.

We have heard both the counsel and perused the records. Learned Counsel of the assessee submitted that as regards the issue of income from house property and clubbing of income is concerned, the matter has been remanded to the Assessing Officer by the ITAT in quantum appeal. Hence, learned Counsel of the assessee submitted that penalty levied should also be 4 Manish Dhirajlal Popat deleted. As regards third item of addition on account of interest in savings bank, he pleaded that it was voluntary offer and there is no concealment or furnishing of inaccurate particulars.

Per contra, learned Departmental Representative relied upon the order of learned CIT(A).

Upon careful consideration, we find considerable cogency in the submission of learned Counsel of the assessee that for the issues remitted by the ITAT to the Assessing Officer in quantum appeal, levy of penalty is not sustainable. Accordingly, as regard the issue of levy of penalty in this regard, we remit the issue to the file of the Assessing Officer. The Assessing Officer shall consider the same afresh after passing the order in quantum issue upon ITAT remand.

As regards, levy of penalty on interest on savings bank is concerned, we find that the assessee’s case that the same was voluntarily offered has considerable cogency. The assessee’s conduct cannot be said to be contumacious to warrant levy of penalty. Hon'ble Apex Court in the case of Hindustan Steel Vs. State of Orissa Vs. (83 ITR 26) had held that authority may not levy penalty if conduct of the assessee is not found to be contumacious.

In the result, the appeal filed by the assessee is partly allowed as above. Order has been pronounced in the Court on 28.3.2019.