SH. PRINCE SHARMA,CHANDIGARH vs. ACIT, C-5(1), CHANDIGARH

आदेश/Order PER ANNAPURNA GUPTA, AM: The present appeal has been filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-2, Chandigarh (in short CIT(A) dated 29.11.2017 passed u/s 250 (6) of the Income Tax Act, 1961 (in short referred to as ‘Act’), confirming the levy of penalty u/s 271(1)(c) of the Act.

1) Addition on account of notional rent u/s 23(1) of the Act = Rs.1,93,200/-

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2) Addition on account of un- disclosed interest = Rs.23,168/- 3. Taking us through the assessment order passed in the

present case u/s 143(3) of the Act, the Ld. counsel for

assessee pointed out that the addition made on account of

notional rent was on account of the fact that the assessee

had shown himself to be the owner of four properties, out of

which one was shown as self occupied and one was shown as

house under construction. The other two, the assessee had

claimed as being occupied by his mother as her residence

and the other was being used by his staff for residence. It

was pointed out from the assessment order that this

explanation of the assessee was disbelieved since the

assessee had stated before the A.O. that in the impugned

financial year the assessee was residing alongwith his

mother and wife. The A.O., therefore, treated only one house

as self occupied and computed the annual value of the other

two houses, as per section 23(1) of the Act, at Rs.1,93,200/-

and added the same to the income of the assessee. Vis-à-vis

the interest income earned, the Ld. counsel for assessee

pointed out that during assessment proceedings the A.O.

found from his own internal system that the assessee had

not acknowledged the interest income earned from HDFC

bank amounting to Rs.23,168/-,on which TDS had also been

deducted. The addition of the same was made to the income

of the assessee. It was contended that penalty proceedings

were also initiated on the aforesaid additions. Thereafter it

was pointed out that during penalty proceedings the

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assessee contended that non inclusion of the said incomes

was an inadvertent mistake and bonafide as the assessee

himself had provided the information, but the A.O. rejected

the explanation of the assessee and levied penalty for

concealing the said incomes, amounting to Rs.20,505/-.The

same, it was pointed out, was confirmed by the CIT(A).

contested the penalty levied on the said two counts.

Ld.Counsel for the assessee contended that the rental

income added to the income of the assessee was notional

interest only and admittedly no rental income had actually

been earned by the assessee. It was contended that all

particulars relating to the properties owned by the assessee

had been disclosed and the addition being only of notional

income earned, no penalty was leviable on the same.

Reliance was placed on the decision of the I.T.A.T. Pune

Bench in the case of Kamalakar Manohar Haval Vs. ITO in

ITA No Nos.1170 to 1173/Pune/2010 dated 30.12.2011 and

it was pointed out that the I.T.A.T. in the said decision had

deleted levy of penalty on rent, stating that all particulars

having been disclosed by the assessee relating to the

properties owned by it and no rent actually having been

earned and the addition being merely of notional rent, no

penalty u/s 271(1)(c) of the Act was leviable. Copy of the

order was placed before us. Further the Ld. counsel for

assessee contended that even otherwise it had claimed one of

the houses to be occupied by his mother and other by his

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staff and that this explanation of the assessee was rejected

for want of evidence but was not found to be false by the

authorities below and, therefore, also no penalty was

leviable. It was further contended that the assessee had

returned an income of Rs.1.26 crores to tax, having paid tax

of an amount of Rs.36 lacs on the same and had surrendered

the said income on account of notional rent and interest

income when it came to his knowledge that the same income

had not been returned to tax and, therefore, bonafide of the

assessee in the back drop of this fact cannot be doubted and

no penalty was leviable on the same.

the lower authorities stating that the assessee had failed to

give plausible explanation for not returning rental income

and interest income and, therefore, penalty had been rightly

levied on the same.

orders of authorities below and also gone through the case

laws referred to us. We are in agreement with the contention

of the Ld. counsel for assessee that it is not a fit case for

levy of penalty u/s 271(1)© ,on account of

concealing/furnishing inaccurate particulars of income.

Admittedly the assessee had disclosed all particulars of

properties owned by it. Also it is not that the assessee was

found to have concealed rent actually earned from the said

properties. On the contrary the addition has been made of

notional rent as per the provisions of section 23(1) of the

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Act. In such circumstances, we hold, the assessee cannot be

charged with having concealed any particulars of income so

as to attract levy of penalty u/s 271(1)(c) of the Act. The

reliance placed by the Ld.Counsel for the assessee on the

decision of the Pune Bench of the ITAT in the case of

Kamalakar Manohar Haval (supra) is apt wherein the ITAT

deleted identical penalty levied holding that the addition

made on account of rent was only an estimate and a notional

income only and the assessee having disclosed all

particulars relating to the properties owned by him and

having not actually earned any income therefore ,he cannot

be held to have concealed any particulars of income so as to

attract levy of penalty u/s 271(1)© of the Act. Moreover,

admittedly the assessee had returned income of Rs.1.26

crores and had paid tax & interest amounting to Rs.36 lacs

on the same. In the backdrop of these facts, we agree with

the Ld.Counsel for the assessee, that the non disclosure of

notional rent and bank interest amounting in all to a meagre

sum of Rs.66,368/-(Rs.43,200/-+Rs.23,168/-),was an

inadvertent mistake and by no count the bonafides of the

assessee could be doubted, more particularly when the

assessee surrendered the same on being confronted during

assessment proceedings.

not be charged with having concealed/furnished any

inaccurate particulars of income relating to notional rent

and bank interest ,and therefore no penalty u/s 271(1)© was

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leviable. The penalty so levied of Rs.20,505/- is directed to be deleted.

Order pronounced in the Open Court.

Sd/- Sd/- संजय गग� अ�नपणा� ग�ता (ANNAPURNA GUPTA) (SANJAY GARG ) �याय�क सद�य/ Judicial Member लेखा सद�य/ Accountant Member �दनांक /Dated:26th November, 2018 *रती*

आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to :

आदेशानसार / By order, सहायक पंजीकार/ Assistant Registrar