BHARAT MOHANLAL SHAH,MUMBAI vs. ASST. CIT,RANGE- 16(3), MUMBAI

The assessee is aggrieved by the decision of learned CIT(A) in confirming the penalty of ` 3,03,319/- levied by the Assessing Officer u/s. 271(1)(c) of the Act.

Facts relating to levy of penalty are discussed in brief. The assessee filed his original return of income on 29.3.2010, i.e. belatedly u/s. 139(4) of the Act. The Assessing Officer selected the return for scrutiny and accordingly issued notice u/s. 143(2) of the Act on 20.8.2010. Subsequently, the assessee filed revised return of income on 30.3.2011 before the Assessing Officer, wherein the assessee revised upwards the income declared under the head ‘income from house property’ and also the interest income earned on fixed deposits maintained with the banks. The additional income disclosed by the assessee are as given below :

Learned AR submitted that the assessee has been claiming ‘society maintenance charges’ as a deduction while computing income from house property for the past several years and the said claim was supported by the decision rendered by the coordinate bench of the Tribunal in the case of Sharmila Tagore Vs. JCIT (2005) 93 TTJ (Mum) 483. The past years’ returns were accepted u/s 143(1) of the Act. However, the assessee was subsequently advised that the society maintenance charges may not be allowable as a deduction while computing income under the head ‘income from house property’ and accordingly, in order to avoid any controversy, the assessee has revised the income declared under that head by omitting the said claim. Learned counsel submitted that the coordinate bench of the Tribunal, in a recent decision dated 18.5.2016 rendered in the case of Asha Arun Ashar in has held that deduction claimed in respect of society maintenance charges is allowable as deduction against income computed under the head income from house property. Accordingly, the Ld A.R submitted that this issue is a debatable one and hence the levying of penalty on this issue is not justified.

Learned counsel further submitted that the assessee had declared interest on fixed deposits in the original return of income as per his own workings. However, when he received the TDS certificate from the bank subsequently, it came to his notice that the interest income shown in the TDS certificate was higher. Since the income shown in the TDS certificate has to be declared, the assessee has revised the interest income also by declaring the same as per the TDS certificate. Learned AR submitted that the assessee has filed revised computation of income voluntarily and there were valid reasons for not declaring the correct amount of income in the original return of income. He further submitted that the assessee has filed revised return of income even prior to the issue of any notice u/s 142(1) of the Act by the AO. The Learned AR also invited our attention to the penalty notice issued by the Assessing Officer and submitted that the Assessing Officer has not struck of inapplicable limbs in that notice and on that count also the impugned penalty proceeding is liable to the quashed. In this regard he placed reliance on the decision rendered by the Coordinate Bench in the case of Shri Hafeez S. Contractor (ITA No. 6222 & 6223/Mum/2013 dated 2.9.2015).

On the contrary learned Departmental Representative submitted that the assessee has filed his original return of income belatedly and hence revised return of income filed by the assessee cannot be considered to be a valid return u/s. 139(5) of the Act. The assessee was constrained to revise computation, only upon receipt of scrutiny notice u/s. 143(2) of the Act and hence disclosure made by the assessee could not be considered to be voluntary.

We have heard the parties and perused the record. It is seen that the assessee has revised the income declared in the original return of income by filing a revised return of income. As held by the assessing officer, the revised return of income may not be a valid return, since the original return of income was not filed within the statutory period prescribed u/s 139(1) of the Act. However, the fact remains that the assessing officer has acted upon the revised return of income and assessed the income as declared therein. Since he has held that the revised return of income was not a valid one, he has taken the view that the difference between the income declared in the original return of income and revised return of income would attract penalty u/s 271(1)(c) of the Act.

There is also confusion about the limb under which the penalty proceedings were initiated. The provisions of sec. 271(1)(c) provide for levying of penalty for concealment of particular of income or furnishing of inaccurate particulars of income. In the body of assessment order, the AO has stated that the income revised by the assessee gives rise to furnishing of inaccurate particulars of income. However, in the penalty notice the AO did not struck off inapplicable limb. In the penalty order, the AO has stated that there is concealment/furnishing of inaccurate particulars of income. All these facts show that the assessing officer also was not sure as to the limb under which he has initiated penalty proceedings.

Be that as it may, we notice that the assessee has increased the income declared under the head Income from House property by omitting the claim made for Society maintenance charges. It is stated that the assessee has been claiming identical deduction in the earlier years also and the said claim got support from the decisions rendered by the Tribunals. Hence, the question of deduction of Society maintenance charges becomes debatable one and the decision to give up the said deduction cannot be, in our view, considered to be a case of concealment of particulars of income or furnishing of inaccurate particulars of income.

In respect of interest income from fixed deposits, it is not the case of the assessing officer that the assessee has suppressed the fixed deposits itself. In fact, the assessee has declared interest income accrued/received on fixed deposits as per his workings and he was constrained to revise the interest income upwards upon receipt of the TDS certificate, since the interest income shown therein was higher. Hence, in our view, the explanation furnished by the assessee in revising interest income upwards cannot also be found fault with, since the Income-tax provisions mandate matching of TDS amount and the relevant income.

In view of the foregoing, we are of the view that the additional income declared by the assessee was on account of bonafide reasons and the explanations offered in this regard could not be found to be false. Accordingly, we are of the view that the same would not give rise to penalty u/s 271(1)(c) of the Act on either of the limbs.

Accordingly, we set aside the order of Ld CIT(A) and direct the AO to delete the penalty agitated before us.

In the result, the appeal filed by the assessee is allowed.