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Facts
The assessee, a retired salaried person, initially filed an income tax return that was processed. The case was later reopened under Section 147 of the Income Tax Act due to observed discrepancies in gross income. The assessee declared additional income and claimed a deduction under Section 80DD, which was not substantiated with documentary evidence. Consequently, penalty proceedings were initiated under Section 271(1)(c) of the Income Tax Act.
Held
The Tribunal held that merely making an incorrect claim that is not substantiated does not automatically attract penalty under Section 271(1)(c) of the Income Tax Act, especially when the assessee is facing hardship. The lower authorities proceeded with the penalty levy without considering Section 273 of the Act.
Key Issues
Whether penalty under Section 271(1)(c) is leviable for claiming deduction under Section 80DD without substantiation, and whether the lower authorities correctly applied the law in levying the penalty.
Sections Cited
143(1), 147, 80DD, 143(3), 271(1)(c), 273
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES, ‘’SMC” JAIPUR
Before: Hon’ble SHRI SANDEEP GOSAINvk;dj vihy la-@ITA No. 1061/JP/2024
ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 19-07-2024, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2016-17 raising therein following grounds of appeal. ‘1 The AO denied lawful deduction u/s 80DD even after Submission of (1) Doctor's certificate for this handicapped son and (ii) self declared Affidavit-the Two essentialities to allow that deduction.
Shri Shardul Singh vs ITO, Ward-1, Jhunjhunu 2 That AO made addition in declared income against the provision of Law and pressurized the Assessee to revise retum giving notices u/s 147/148 having made pressure 3. That the learned Assessing officer get deposited the standing unlawful demand of Rs. 42900/-having made pressure and before passing the order u/s 271 (1) (c) 4 The AO imposed penalty u/s 271 (1)(c) without any ESTABLISHING Submission of A. Inaccurate facts/Statements B. without Establishing CONCEALMENT OF INCOME as all mentioned by him was fetched by Submission of the Assessee and without doing any Act to take correct decision to impose penalty u/s 271 (1)(c) 5. The AO not considered the Submitted Decisions of relavant courts furnished by the Assessee in his favour.’’ 2.1 The brief facts of the case are that assessee being a retired salaried Person filed return of income, declaring salary, income of Rs. 4,30,29/- which was processed under section 143(1) of the income tax Act. However, the AO observed that the gross income of the assessee was Rs.11,41,896/- as per Form number 16, thereafter the case was reopened under section 147 of the Income Tax Act and in response thereof, the assessee filed return of income on 24th May 19, declaring income of Rs. 8,94,700/-. Thus, in this way, additional income was declared of Rs.4,64,410/-. The assessee claimed deduction under section 80DD of the Act amounting to Rs. 1,25,000/- but could not substantiate with documentary evidence. The assessment was completed under section 143 (3) read with section 147 and penalty proceedings were initiated under section 271(1)© of the Income Tax Act for furnishing Inaccurate particulars and thereafter penalty amounting to Rs. 2,53,160/- being 200% was imposed on account of tax sought to be evaded.
Shri Shardul Singh vs ITO, Ward-1, Jhunjhunu 2.2 Aggrieved by the order of imposition of penalty, the assessee preferred appeal, however, the ld. CIT (A) after considering the case of the assessee, dismissed the appeal of the assessee. 2.3 Further aggrieved by the order of dismissal of appeal by ld.CIT(A), the assessee preferred the present appeal before me on the grounds mentioned here and above. 2.4 All the grounds raised by the assessee are interrelated and interconnected, and relates to challenging the order of imposition of penalty. Therefore, I have decided to dispose off these grounds through the present consolidated order. 2.5 The ld. AR appearing on behalf of the assessee, reiterated the same arguments as were raised by him before the lower authorities and submitted that the imposition of penalty under the given circumstances is unwarranted 2.6 On the contrary, the ld. DR appearing on behalf of the department relied upon the orders passed by the revenue authorities, and further submitted that since the assessee had wrongly claimed deduction under section 80DD of the Act and thus concealed the income therefore, penalty in the present case was rightly imposed. It was further argued that assessee has not disclosed his interest income in the income tax return filed by him and thus he requested for the dismissal of the Appeal.
Shri Shardul Singh vs ITO, Ward-1, Jhunjhunu 2.7 I have heard the counsel for both the parties and have also perused the material placed on record, judgements cited before me, and also the orders passed by the revenue authorities. From the records, I noticed that as far as the quantum additions are concerned, admittedly, the assessee has not filed any appeal and has already paid taxes due thereon apart from this it was also submitted before me that the assessee is retired individual from M/s. Hindustan Copper Limited, Jhunjhunu and the son of the assessee being disabled person having disability of more than 80% was not allowed deduction under section 80DD of the Income Tax Act, even after submissions of required documents in the shape of medical certificate, having disability of more than 80% and affidavit of the assessee regarding his disability. After having gone through the factual position contained in the present case, I am of the view that assessee is already facing great hardship and in my view, raising a claim, which could not be substantiated does not attract penalty under section 271(1)© of the Income Tax Act. On this preposition, I rely upon the decision of Hon’ble Supreme Court in the case of CIT vs versus Reliance Petro-products Private Limited (2010) 322 ITR 158, wherein it was categorically held by Hon’ble Supreme Court that merely making an incorrect claim which is not substantiated does not attract penalty under section 271(1)© of the income tax Act. I further noticed that assessee earned interest income of Rs.36,701/- during the year under consideration but the same was not offered for taxation. However, I noticed that Shri Shardul Singh vs ITO, Ward-1, Jhunjhunu during the assessment proceedings, the additional income was brought for taxation. Be that as it may, after considering the entire fact, circumstances of the present case, I noticed that both the lower authorities have proceeded as the levy of penalty under section 271(1)( c) is automatic without considering section 273 of the Income Tax Act, therefore, now being satisfied by the explanation offered by the assessee and after considering the position of law as applicable, I hold that respective orders imposing and confirming the penalty are set aside and the penalty order is quashed and the assesses appeal is allowed. 3.0 In the result, the appeal of the assessee is allowed and the penalty levied is hereby dropped with no orders to cost. Order pronounced in the open court on 30/09/2024.