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Income Tax Appellate Tribunal, DELHI BENCH “SMC”, NEW DELHI
Before: SHRI S.V. MEHROTRA
This is an appeal filed by the assessee against the order dated 30.11.2015 passed by the Commissioner of Income Tax (Appeals)-12, New Delhi, u/s 271(1)(c) of the Income Tax Act, 1961 (in short “the Act”), relating to assessment year 2009-10.
The assessee has filed this appeal which is belated by approximately 238 days. In the condonation petition, duly supported by affidavit, the assessee has stated as under :-
“i. That my professional work related to Income Tax was handled by Late Sh. Devendra Chordia, who unfortunately expired on 24/06/2016. ii. That I had engaged Late Sh. Devendra Chordia to represent before CIT (Appeals)-12, New Delhi in appeal no. 123/15-16/1230/12-13 for A.Y. 2009-10 in respect of matter pertaining to imposition of penalty u/s 271(1)(c) of Income Tax Act. iii. That when hearings were called for Hon'ble CIT (Appeals) - 12, my counsel Sh. Devendra Chordia, who was supposed to attend, got expired, which led to representations by one Sh. Sunil Kumar as stated in the order dated 30.11.2015 issued by CIT (Appeals) - 12. iv. That on the absence of Sh. Devendra Chordia, there was no professional advice available to me for filing appeal before ITAT post subsequent of order of worthy CIT (Appeals) - 12. On the basis of advice just received from Sh. Kapil Goel, Advocate, the appeal before ITAT is preferred. v. That the delay of 238 days for the period ranging from 3.12.2015 (date of receiving of order) to till date is purely an in advertent and unintentional due to the bonafide reasons beyond my controls. vi. That I have no practical and working knowledge of Tax Laws and I was totally dependent on advice of my counsel late Sh. Devendra Chordia, who is unfortunately no more.
After considering the submissions of assessee, I am of the considered opinion that the assessee was prevented by reasonable cause from filing the appeal in time and, therefore, I condone the delay in filing the appeal.
Brief facts of the case are that the return declaring income at Rs.13,37,548/- was filed by assessee. The assessee had declared income from salary, house property and income from other sources. The Assessing Officer noticed that the assessee had claimed deduction on account of House Rent Allowance (HRA) of Rs.8,68,404/- u/s 10(13A) of the Act. The Assessing Officer has observed as under :-
“Assessee was asked to furnish the necessary details regarding the payment of house rent like copy of the rent agreement, copy of the rent receipt and confirmation from the landlord as to receipt of the house rent. The AR of the assessee could not furnish any of the documentary evidence in support of claim of deduction on account of HRA amounting to Rs. 8,68,404/-. On further investigation and enquiry it was found that assessee has not incurred any expenditure on account of HRA. The AR of the assessee Shri M.L. Aggarwal, Chartered Accountant, furnish a revised computation of income along with the letter dated 08.11.2011 wherein he added the amount of Rs. 8,68,404/- to returned income of assessee. As the assessee has deliberately furnished the wrong and incorrect particulars of his income regarding claim of deductions on account of HRA hence penalty proceedings u/s 271 (1)(c) of the I.T. Act, are also initiated on this point.”
Thus, Assessing Officer denied the assessee’s claim because assessee had not actually paid the rent.
5. The Assessing Officer further noticed that assessee had been credited with interest of Rs.75,690/- on FDR but the income was not declared in the return of income. He, therefore, made addition of Rs.75,690/-.
6. The Assessing Officer initiated penalty proceedings for furnishing inaccurate/ incorrect particulars of his income. Ld. CIT(A) dismissed the assessee’s appeal. Being aggrieved, the assessee is in appeal before the Tribunal and has taken following grounds of appeal :-
“Invalid Penalty u/s 271(1)(c) of Rs. 3,20,895/- 1. That on the facts and in the circumstances of the case and in law, ld CIT-A - 12 New Delhi erred in confirming penalty amounting to Rs 3,20,895/- u/s 271(1)(c) without appreciating that Ld AO has miserably failed to pinpoint the exact head/limb in which subject penalty is levied for want of which present penalty becomes invalid; 2. That on the facts and in the circumstances of the case and in law, ld CIT-A - 12 New Delhi erred in confirming penalty amounting to Rs 3,20,895/- u/s 271(1)(c) without appreciating that Ld AO has issued vague and mechanical notice u/s 274 which makes present penalty invalid; 3. That on the facts and in the circumstances of the case and in law, ld CIT-A - 12 New Delhi erred in confirming penalty amounting to Rs 3,20,895/- u/s 271(1)(c) without appreciating that Ld AO has not mentioned exact limb in which penalty is levied in impugned penalty order; 4. That on the facts and in the circumstances of the case and in law, ld CIT-A - 12 New Delhi erred in confirming penalty amounting to Rs 3,20,895/- u/s 271(1)(c) without appreciating the reply dated 15/05/2012 but also valid explanation was tendered before Ld AO that inadvertently said claim was made and was promptly revised voluntarily during assessment by filing of revised computation; 5. That on the facts and in the circumstances of the case and in law, ld CIT-A - 12 New Delhi erred in confirming penalty amounting to Rs 3,20,895/- u/s 271(1)(c) where present case is covered by Apex court verdict in PWC case 348 ITR 206 & Suresh chand Mittal 259 ITR 19 ; PRAYER/Relief Claimed 1. To delete the penalty levied of Rs 3,20,895/-; 2. Any other relief as deemed fit in circumstances of the case.”
Ld. counsel referred to page 33 of appeal set, wherein, notice dated 30.11.2011 u/s 274 r.w.s. 271 is contained and pointed out that the Assessing Officer has not specified as to under which limb of section 271(1)(c), the penalty was levied. Ld. counsel referred to page 28 of appeal set, wherein, show-cause notice dated 02.05.2012 is contained, wherein, also nothing had been mentioned. Further in the penalty order also, in the penultimate para, the Assessing Officer has, inter-alia, observed as under :-
“Looking to the default of the assessee a penalty of Rs.3,20,895/- which is minimum levy-able penalty is being imposed u/s 271(1)(c) of the IT Act for concealing particulars of income and filing inaccurate particulars of income.”
Ld. counsel referred to the decision of ITAT, Delhi Benches in the case of M/s Mindmill Software Limited vs. ITO vide order dated 10.02.2017. He further referred to the decision of Hon’ble Delhi High Court in the case of Pr. Commissioner of Income Tax vs. Shri Neeraj Jindal and Others vide ITA No.463/2016 & Others, order dated 09.02.2017, wherein, the Hon’ble High Court has held as under :-
“Thus, as the law stands, the word “conceal” in Section 271(1)(c), would require the A.O. to prove that specifically there was some conduct on part of the assessee which would show that the assessee consciously intended to hide his income.”
On merits of the addition made, ld. counsel referred to pages 26 and 27 of appeal set, wherein, the assessee’s reply before the Assessing Officer in response to notice u/s 271(1)(c) is contained, wherein, it is, inter-alia, stated as under :-
“3. The assessee while filing his return claimed HRA amounting to Rs.8,68,404/- as per Form No.16 issued by his employer. Exemption part of HRA was calculated on the basis of rent payable to his mother Sushila Sood for using her house D-54, Anand Niketan, New Delhi.
4. In the questionnaire dt. 11.10.2011 issued alongwith notice u/s 142(1) of the Income-tax Act, 1961 it was asked in para no.10, the working & documents in support of all deductions and exemptions claimed and in para no.12 computation of HRA alongwith proofs with respect to rent paid and rent agreement.
While preparing the reply of the questionnaire it came to know that rent to mother was not actually paid by the assessee. The assessee immediately revised his return withdrawing HRA claim Rs.8,68,404/- before detecting the mistake by the assessing officer. The learned Assessing Officer initiated the proceeding u/s 271(1)(c) of the above addition.
While revising the return the assessee was also advised by his tax consultants that interest on FDR Rs.75,690/- has been left to be added in the total income. The assessee was of view that as he is filing return on cash basis, the FDR But at the advise of his tax consultant the assessee also added in his computation interest on FDR and also claimed TDS thereon which were not previously claimed. The learned Assessing Officer also initiated the penalty proceedings u/s 271(1)(c) of the Income-tax on the above interest income.”
Ld. counsel submitted that the assessee suo motu revised its return and offered income on detection of mistake.
Ld. DR referred to the assessment order and pointed out that the penalty had been initiated on account of inaccurate particulars being furnished by assessee. He further referred to the penalty order, wherein, also the Assessing Officer held that the assessee had furnished inaccurate particulars of income for which penalty had been levied.
I have considered the submissions of both the parties and perused the record of the case. As far as ld. counsel’s plea regarding notice u/s 274 being vague is concerned, I am not inclined to accept the same for the simple reason that notice u/s 274 cannot be read de-hors the assessment order. From reading of the assessment order, if it is evident that under which particular limb of section 271(1)(c), the penalty has been initiated then merely because in the notice u/s 274 the Assessing Officer does not specify the specific limb of section 271(1)(c), it cannot be concluded that the Assessing Officer failed to pinpoint the actual limb in which said penalty was levied. In the assessment order, the Assessing Officer had clearly concluded, after confirmation of each of the two additions that assessee had furnished inaccurate/ incorrect particulars of his income.
Therefore, merely because in the penultimate para, he observed that assessee has concealed/ furnished inaccurate particulars of income, cannot be the basis for holding that the Assessing Officer wrongly and mechanically initiated the penalty.
In regard to ld. counsel’s submission with reference to penultimate para of penalty order, reproduced earlier, it is to be noted that at page 3, while concluding the imposition of penalty, the Assessing Officer has observed as under :-
“In view of the above facts & circumstances of the case I hold that assessee has furnished inaccurate particulars of income by claiming wrong deduction of HRA and non disclosure of interest income of FDRs. Hence assessee is liable to be imposed with penalty u/s 271(1)(c) of the Income Tax Act which is computed.”
Therefore, it cannot be said that the penalty proceedings initiated by the Assessing Officer were bad in law for want of pinpointing the exact limb in which subject penalty was initiated.
Now, coming to the merits of the addition, I find that as far as deduction for HRA was claimed by assessee, the same was denied only for the reason that actual payment had not been made by assessee. It is not disputed that the assessee was residing in the house of his mother to whom the rent was payable. Therefore, at best, it can be said to be a wrong claim in view of Explanation B to section 10(13A) but that does not imply that the assessee furnished any inaccurate particulars of its income. The amount was payable to mother and not to any outsider. This goes to show assessee’s bona-fide. I, therefore, do not find any reason to saddle the assessee with penalty on account of claim of deduction of HRA made in the original return, in view of the decision of Hon’ble Supreme Court in the case of CIT vs. Reliance Petroporducts Pvt. Ltd., (2010) 322 ITR 158 (SC), wherein, it has been held as under :-
“.....In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tentamount to furnishing inaccurate particulars.”
As far as assessee’s non-disclosure of interest on FDR is concerned, the assessee’s explanation was, as reproduced earlier, that the assessee was of the view that he was filing return on cash basis. It is pertinent to mention that the assessee had not claimed the TDS on interest of FDR in its original return of income because he had not included the interest on FDR. This shows assessee’s bona-fide inadvertent mistake of not including interest in his income. Had the assessee claimed TDS but not returned the interest income different consequences could follow. Under such circumstances, the assessee explanation cannot be said to be bona-fide. In the result, the penalty levied is directed to be deleted.
In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on this 09th day of March, 2017.