ANILKUMAR SHROFF,MUMBAI vs. ITO 2(2)(3), MUMBAI

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ITA 2015/MUM/2014Status: DisposedITAT Mumbai16 March 2017AY 2008-094 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee could have been under a bona fide belief that the entire income from the firm was exempt, which does not warrant a penalty. The levy of penalty was set aside.

What were the facts?

The assessee claimed exemption for the entire income from a partnership firm, but the AO disallowed a portion, stating only the share of profit was exempt under Section 10(2A). Consequently, a penalty was levied under Section 271(1)(c).

What were the issues?

Whether a penalty under Section 271(1)(c) is leviable when the assessee acted under a bona fide belief regarding the exemption of income from a partnership firm.

Which sections of the Income-tax Act were involved?

Section 10(2A),Section 271(1)(c)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI

Before: SHRI SHAMIM YAHYA & SHRI RAVISH SOOD

For Respondent: Shri. Rajesh Kumar Yadav

Date of Hearing -07.03.2017 Date of Order – 16.03.2017 O R D E R PER: SHAMIM YAHYA This appeal by the assessee is directed against order of Ld. CIT-A dated. 27.12.2013 and pertains to assessment year 2008-09. 2. The grounds of appeal read as under:

1. On the facts of the case and correct construction of Law Ld. CIT-A erred in upholding the order of the assessing officer levying penalty of Rs. 1,81,043/- u/s. 271 (1)(c). The A.O. while passing order u/s. 271 (1)(c), ignored the fact that addition was made on disputed point Anil Kumar Shroff ITA no.2015/Mum./2014 of share of profit exempt in the hand of partner u/s. 10(2A) and the appeal against the said point is pending before Hon’ble ITAT.

2. On the fact of the case and correct construction of law Ld. CIT-A erred in upholding the order of A.O. stating that Appellant has furnished inaccurate particulars of his income, as none of the facts were concealed nor any inaccurate particulars were submitted by the Appellant.

3. The Appellate craves leave to add and/or amend all or any of the above grounds of appeal.

3. In this case assessee is a partner in the partnership for. He has claimed the income from the partnership form as exempt. However, the A.O. noted that assessee has claimed income from the firm exempt in excess of what was permissible u/s. 10 (2) A. The A.O. observed that it was the share of profit that was exempt and not other incomes of the firm. Hence the A.O. made a disallowance of Rs. 5,32,638/-. Upon this addition penalty was also levied amounting to Rs. 1,81,043/-. In the penalty order the A.O. did not bother to bring on record assessee’s submissions. He held that assessee submissions have been considered and were not acceptable. Up on assessee’s appeal Ld. CIT-A confirmed the levy of penalty.

4. Against above order assessee is in appeal before us. We have heard the Ld. DR. None appeared on behalf of the assessee. However, in our considered opinion the issue can be adjudicated upon hearing the Ld. DR and perusing the records.

Anil Kumar Shroff ITA no.2015/Mum./2014 5. We find that in this case addition has been made due to the reason that assessee has claimed exemption for the entire share of income of the partnership form. However, the revenue has found that the act only postulates exemption of the share of profit of the firm. Hence, assessee’s claim of exemption qua the rental income of the firm was denied. In this factual scenario we are of the considered opinion that assessee can be considered to be under a bona fide belief that the entire income from the firm is exempt. Such a belief of the assessee cannot be held to be contumacious warranting levy of penalty u/s. 271 (1) C. For this proposition we place reliance upon the decision of a larger bench of the Hon’ble Apex Court in the case of a Hindustan Steel Ltd. vs. State of Orissa 83 ITR 26 6. In the background of aforesaid discussion and precedent we set aside the order’s of authorities below and delete the levy of penalty.

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