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Income Tax Appellate Tribunal, BENCH “SMC” MUMBAI
Before: SHRI B.R.BASKARAN
स्थधमी रेखध सं./जीआइआय सं./PAN/GIR No. :AACPP8986C अऩीरधथी ओय से / Appellant by Shri B K Vatsaraj प्रत्मथी की ओय से/Rspondent by Shri Ajay सुनवधई की तधयीख / Date of Hearing : 14. 07.2016 घोषणध की तधयीख /Date of Pronouncement : 14.07.2016 आदेश / O R D E R PER B.R.BASKARAN, AM :
Both the assessee’s appeals are directed against the order dated 25.2.2015 passed by the ld.CIT(A)-51, Mumbai and they relate to the assessment years 2006-07 and 2007-08.
The assessee is aggrieved by the decisions of ld.CIT(A) in confirming the penalty levied under section 271 (1)(c) of the Income Tax Act, 1961 (the Act) for both the assessment years under consideration.
2 and 3072/Mum/2015 3. The facts relating to the case as narrated by the ld. CIT(A) for AY 2006-07 are extracted below: “3. The facts of the case are that there was an action under section 132 of the Income Tax Act, 1961 on 16.12.2010 in the case of M/s Patel Engineering Ltd group of cases. As a result of the search on the Patel group, notice u/s 153C of the Income Tax Act was issued on the appellant. In compliance to the said notice, the appellant filed a letter dated 11.7.2012 requesting to treat the return of income originally filed on 10.4.2012 declaring income of Rs.36,57,741/- as filed in response to the notice under s.153C dated 10.7.2012. The appellant had declared the same total income in the original return of income filed under s. 139(1) on 31.07.2006. The said return had been acted upon and it was assessed under s.143(3) on 22.12.2008 at Rs.36,57,741/-. While completing the assessment for the impugned year the AO noticed that though the assessee was the owner of two residential properties, one at Mumbai and the other at Karjat, no income had been offered under the head "Income from House Property" even though in the assessee's own case for the very same year the AO had computed income under the head "Income from House property" and which had been sustained by the CIT(A).** The facts and the circumstances being identical, the AO has treated the property at Karjat as deemed let-out property and has brought to tax a sum of Rs. 81,221/- as income from House Property which is the sum brought to tax under the said head as per the directions of the CIT(A) for the same year in the earlier round of proceedings. The AO initiated penalty proceedings under s. 271 (1)( c) of the Income Tax Act for filing inaccurate particulars leading to concealment of income. (** In assessment order, the AO is making reference to AY 2008-09 and not to the year under consideration) 4. After having heard the assessee in the matter the AO has held that since the assessee failed to disclose the House property income in the original return, the revised return as well as the return filed in response to notice under s. 153C, there is concealment as regards House property income as regards the second residential property. The AO has therefore imposed penalty being minimum penalty in a sum of Rs. 27,340/-“
Before Ld CIT(A), the assessee submitted that the addition has been made on estimated basis due to legal fiction and the assessee has not actually received rental income. It was further submitted that the house property was exempt under Wealth tax Act and hence the assessee was under bonafide impression that the same was not taxable under Income tax Act also. The ld. CIT(A) did not agree with the contention of the assessee and accordingly confirmed the penalty with the following observations : “6. I have very carefully considered the facts of the case and the submissions as made by the appellant. It was during the course of search assessment that the AO noticed that the appellant had not declared income under the head "Income from House property" even though in the assessment order under s. 143(3) for the same year (sic. as stated earlier) the AO had made addition under the head Income from House Property amounting to Rs.86,286/-. Though the appellant had taken up the matter in appeal before the CIT(A), the CIT(A), as per his order dated 22.3.2012 had sustained the findings of the AO in this regard, but had given part relief by directing the AO to take the annual letting value of the property at Rs. 10,000/- per month as against 1% of the total investment in property as taken by the AO. Thus, the fact remains that the stand of the AO that deemed income has to be brought to tax under the head "Income from House Property" had been upheld by the CIT(A) and the order of the CIT(A) had become final. There was no further appeal. Later, subsequent to the search, in response to notice under s.153C when the appellant filed the return of income, the said return did not disclose any income under the head income from House Property. These being the facts, the contention raised that since the house properties were disclosed in the Balance Sheet and that the income is a notional income and therefore the penal provisions cannot be invoked is devoid of merits. So also, the order of the Income Tax Appellate Tribunal on which reliance is placed 4 and 3072/Mum/2015 by the appellant is clearly distinguishable on facts. Therefore, I see no reason to interfere with the finding of the AO that this is a fit case for imposition of penalty under s.271(1)(c) of the Income Tax Act for filing inaccurate of particulars leading to concealment of income. The penalty imposed in a sum of Rs. 27,340/- under s. 271(1)(c) is hereby confirmed.”
At the time of hearing, the ld. AR submitted that omission on the part 5. of the assessee to include notional income on the deemed to be let out property would not amount to furnishing of inaccurate particulars of income, since the availability of two house properties have been duly disclosed by the assessee in the Balance Sheet. The ld. AR further submitted that Pune Bench of the Tribunal in the case of Kamalakar Manohar Haval V/s ITO in to 1173/PN/2010 (AYs-2000-01 to 2004-05) dated 30.12.2011 considered and identical issue and deleted the penalty, since the assessee had disclosed the availability of the house properties in the balance sheet and the addition on account of rental income from those house properties has been made on notional basis by estimating the income. The ld.AR placed reliance on the decision of the Tribunal dated 31.1.2013 rendered by the Co- ordinate Bench of the Mumbai Tribunal in the case of Kadar Khan V/s ACIT in ITA No.494/Mum/2012 (AY-2002-03), wherein also identical view was taken.
On the contrary, the Ld D.R placed strong reliance on the orders passed by Ld CIT(A).
5 and 3072/Mum/2015 7. I have heard rival contentions and perused the record. It is an undiputed fact that the assessee has disclosed the details of availability of two house properties and both the house properties are used for self occupation. Due to the legal fiction placed in the Act, the second house is treated as “Deemed to be let out” and the rental income thereon is assessed on notional basis. I notice that identical addition has been made by the AO in AY 2008-09 and the same has also been confirmed by Ld CIT(A). It appears that the assessee did not contest the decision of the first appellate authority there after. The date of passing of order of Ld CIT(A) in AY 2008-09 is not available on record. If the order has been received after the filing of return u/s 153C of the Act, then there is strong case for the assessee for bonafide belief.
In any case, the Pune bench as well as Mumbai bench of Tribunal, in the above cited cases, have held that the addition made on account of legal fiction, that too on estimated basis will not lead to levying of penalty u/s 271(1)(c) of the Act, when the assessee has duly disclosed the availability of more than one house in the Balance Sheet. Accordingly, by following the above said decisions, I set aside the orders passed by Ld CIT(A) in both the years and direct the AO to delete the penalty.