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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAJESH KUMAR
Revenue by : Shri Pradeep Kumar Sing Assessee by : Shri Dharmesh Shah Date of Hearing – 03.05.2016 Date of Order – 11.05.2016
O R D E R PER SAKTIJIT DEY, J.M.
Instant appeal of the assessee is directed against the order dated 22nd May 2014, passed by the learned Commissioner (Appeals)–28, Mumbai, confirming penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 (for short "the Act") for the assessment year 2010–11.
Brief facts are, the assessee is an individual deriving income from salary. For the assessment year under consideration, assessee filed his
2 Shri Dinesh K. Tiwari return of income on 31st July 2010, declaring total income of ` 2,26,80,792. In the course of assessment proceedings, the Assessing Officer while verifying the data obtained from Form no.26AS, noticed that the assessee had earned salary amounting to ` 2,66,74,588 for the financial year 2009–10 from three employers i.e., J.P, Morgan India Pvt. Ltd., M/s. Standard Chartered Bank and a foreign company A.E.D. It was noticed by the Assessing Officer that in the computation of income for the year under consideration, the assessee has not offered the salary income received from Standard Chartered Bank amounting to ` 52,61,256. When this fact was pointed out to the assessee by the Assessing Officer, assessee accepted the omission and offered the salary income of ` 52,61,256. Accordingly, the Assessing Officer completed the assessment by adding back the amount of ` 52,61,256 to the income returned by the assessee. On the basis of addition made, however, the Assessing Officer initiated proceedings for imposition of penalty alleging furnishing of inaccurate particulars of income and concealment of income.
In response to the show cause notice issued under section 274 r/w section 271(1)(c), it was submitted by the assessee that the amount of ` 52,61,256 represents arrears salary received from Standard Chartered Bank with whom the assessee was employed earlier. It was submitted by the assessee that due to non–receipt of 3 Shri Dinesh K. Tiwari Form no.16 from Standard Chartered Bank, he could not declare salary income of ` 52,61,256, nor claimed credit of TDS of ` 16,84,378, on the said salary income. He submitted, when this fact was brought to his notice in the course of assessment proceedings, he offered the income to tax and claimed credit of TDS on the said salary income. The assessee also submitted, though, in the return of income the assessee had claimed refund of ` 2,10,061, but after adding back the arrear of salary of ` 52,61,256 and crediting TDS on such salary amounting to ` 16,84,378, the Assessing Officer himself has granted enhanced refund of ` 2,68,710, as against ` 2,10,061, claimed by the assessee. It was submitted by the assessee that the TDS on the arrear salary pertaining to Standard Chartered Bank was @ 32.01%, hence, there is no loss to the revenue as the tax on the undisclosed salary income has already been paid / recovered. The Assessing Officer, however, did not find merit in the submissions of the assessee. He was of the view that by not offering income from salary amounting to ` 52,61,256, assessee has furnished inaccurate particulars of income and concealed the income. Hence, is liable for imposition of penalty under section 271(1)(c) of the Act. Accordingly, he passed an order imposing penalty of ` 16,25,728. Being aggrieved of the penalty order so passed, the assessee preferred appeal before the learned Commissioner (Appeals) who also confirmed imposition of penalty.
4 Shri Dinesh K. Tiwari 4. Learned Authorised Representative reiterating the stand taken before the Departmental Authorities submitted, as Form no.16 in respect of arrear salary was not received from Standard Chartered Bank, the assessee could not include the amount received as part of salary while finalizing its return of income. However, it was submitted, tax was deducted at source on such amount by the employer at the maximum marginal rate and the assessee in the return of income has not claimed credit of the TDS. The learned Authorised Representative submitted, after inclusion of arrear salary to the income declared and giving effect to the tax deducted at source on such salary, the refund payable to the assessee was enhanced to ` 2,68,710 and assessee got excess refund of ` 58,649 over and above refund claimed in the return of income. Thus, it was submitted by the assessee, non–inclusion of the arrear of salary in the return of income being an unintentional and bonafide mistake and there being no loss to the revenue penalty under section 271(1)(c) should not have been imposed. For such proposition, learned Authorised Representative relied upon a number of decisions including the decision of the Hon'ble Supreme Court in PricewaterhouseCoopers Pvt. Ltd. v/s CIT & Anr., [2012] 348 ITR 306 (SC).
Learned Departmental Representative relied upon the order of the Assessing Officer and the learned Commissioner (Appeals).
5 Shri Dinesh K. Tiwari
We have considered the submissions of the parties and perused the material available on record. Though, there is no dispute to the fact that in the return of income and computation made by the assessee, he has not included the arrear of salary of ` 52,61,256, received from Standard Chartered Bank but at the same time, it is equally true that the assessee has not claimed TDS of ` 16,84,378, on such arrear salary. Therefore, the explanation of the assessee that non–inclusion of the arrear of salary received from Standard Chartered Bank is due to non–receipt of Form no.16 appears to be a bonafide explanation, hence, acceptable. Moreover, as can be seen while in the return of income on the income declared has claimed refund of ` 2,10,061. However, after inclusion of the amount of ` 52,61,256 and credit given to TDS of ` 16,84,378 on such amount, the refund payable to the assessee as per the assessment order increased to ` 2,68,710. Therefore, it is clearly evident that there was no loss to the revenue because of non–inclusion of the amount of ` 52,61,256 in the computation of income filed along with return of income. On the contrary, after inclusion of the said amount, the assessee has been a gainer as the refund claimed originally by him was enhanced by further sum of ` 58,649. Further, on reading of provisions of section 271(1)(c) clause (iii), it is clear that the penalty imposable should be quantified on the basis of tax sought to be evaded by reason of 6 Shri Dinesh K. Tiwari concealment. In the present case, the question of evasion of tax by the assessee does not arise as the previous employer has deducted tax at source on the arrear of salary at the maximum rate and the assessee has not claimed credit of such TDS in the return of income. Therefore, when there is no evasion of tax by the assessee, there cannot be any penalty under section 271(1)(c). In view of the aforesaid, we delete the penalty imposed under section 271(1)(c).
In the result, assessee’s appeal is allowed. Order pronounced in the open Court on 11.05.2016