SAMBHAV TIRTH CO OP HSG SOCIETY LTD,MUMBAI vs. ITO WD 16(2)(1), MUMBAI

Brief facts of the case are that the appellant/assessee filed its return of income for the A.Y. 2002-03 declaring the total income of Rs. 5,63,885/-. The assessment order u/s 143(3) read with section 147 of the Act was completed by the Ld. A.O on 31/12/2008, inter alia making addition of Rs. 16,50,000/- received as compensation from M/s Deesha Lease Pvt. Ltd. In the first appeal aforesaid addition was confirmed by the Ld. CIT(A), however, an amount of Rs.10,00,000/- was deleted by the ITAT in second appeal. Accordingly, the AO imposed penalty u/s 271(1)(c) of the Act on the remaining amount of Rs. 6,50,000/-. The assessee challenged the penalty order before the Ld. CIT(A). The Ld. CIT(A) after hearing the assessee confirmed the penalty imposed by the AO. Aggrieved, the assessee is in appeal before the Tribunal raising the following ground of appeal:-

Before us the Ld. Authorised Representative (AR) submitted that the assessee, a co-operative Housing Society, filed its return of income for the A.Y. 2002-03 on 14/10/2002 and the assessment u/s 143(3) of the Act was completed determining the total income at Rs. 19,26,106/-. Later on the case was reopened and assessment order u/s 143(3) read with section 147 of the Act was passed making various additions amounting to Rs. 28,16,750/-. In appeal the Ld. CIT(A) partly allowed the appeal of the assessee. In second appeal the ITAT vide its order dated 22/07/2011 deleted the amount Rs. 10,00,000/- out of the addition of Rs. 16,50,000/- confirmed the CIT(A) on account of payment received from M/s Deesha Lease Pvt. Ltd.

The Ld. A.R. further submitted that since the amount in question had been shown in the annual accounts of the assessee, though claimed as exempt under mutuality concept, the Ld. CIT(A) has wrongly confirmed the penalty levied by the AO. Moreover, in response to notice u/s 148 of the Act, the return of income was filed by the administrator appointed by the Registrar of Society. Therefore, the assessee has neither concealed any income nor furnished any incorrect particulars thereof. Relying on the judgment of the Hon’ble Supreme Court in CIT vs. Reliance Petroproducts (322 ITR 158), the Ld. A.R. submitted that mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Hence, the impugned order is liable to be set aside.

On the other hand the Ld. Departmental Representative (DR) relying on the concurrent finding of the authorities below submitted that since the assessee has furnished the wrong particulars of income, the Ld. CIT(A) has rightly confirmed the penalty order passed by the AO.

We have heard the rival submissions and also perused the material placed on record. The only issue to be adjudicated in this case is whether making of claim in question by the assessee, which was not acceptable to the tax authorities amounts to furnishing of incorrect particulars of income within the meaning of section 271(1)(c) of the Act? We find that the A.O has levied penalty of Rs.1,97,470/- treating the amount of Rs. 6,50,000/- as income of the assessee from other sources, rejecting the contention of the assessee that since the amount was received from M/s Deesha Lease Pvt. Ltd., a nominal member of the society, therefore the amount is exempt under mutuality concept. The assessee did not challenge the assessment order. So, the AO only changed the head of income and added the amount in question to the income of the assessee. Now the question arises whether this attempt of the assessee amounts to furnishing incorrect particulars so as to impose penalty u/271(1)(c) of the Act? In Reliance Petroproducts P. Ltd.(supra), the Hon’ble Supreme Court has held that a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars of income regarding the income of the assessee. Hence, in our considered opinion, the case of the assessee is squarely covered by the aforesaid judgment of the Hon’ble Supreme Court.

We therefore, respectfully following the ratio laid down by the Hon’ble Supreme Court in aforesaid case hold that it is not fit a fit case where penalty u/s 271(1)(c) of the Act can be imposed. In our considered opinion the impugned order is not in accordance with the law laid down by the Hon’ble Supreme Court. We, therefore, set aside the impugned order passed by the Ld. CIT(A) and allow the sole ground of appeal of the assessee.