CENTRAL BANK OF INDIA EMPLOYEES CO - OP SOCIETY LTD,KOLKATA vs. D.C.I.T CIR - 33,KOLKATA., KOLKATA

In this appeal the Assessee has challenged the order of the CIT(A) whereby the CIT(A) confirmed the order of the AO imposing penalty on the Assessee u/s.271(1)(c ) of the Income Tax Act, 1961 (Act).

The facts and circumstances under which penalty u/s.271(1)( c) of the Act was imposed on the Assessee by the AO are as follows: The Assessee is a Co-operative Society having income, amongst others, from House Properties. In the previous year relevant to AY 2008-09, the Assessee was in receipt of rental income by letting out its property to Central Bank of India (CBI), New Market Branch. The monthly rent payable by CBI was Rs.1,44,900/-. In the course of assessment proceedings, the AO noticed that a sum of Rs.25,05,277 was declared under the head “Income from House Property”. The AO was of the view that the rent for the month of March, 2008 of Rs.1,44,900/- had not been included in the income declared under the head Income from House Property. The Assessee in reply Bank of India Employees Co-op.Society Ltd. A.Y.2008-09 1 to the query of the AO in this regard admitted that a sum of Rs.1,44,900/- be added to the income declared in the return of income. The AO also noticed that the Assessee had claimed a deduction of Rs.18,891/- which was service charges paid for collection of monthly rent, as a deduction under the head Ïncome from House Property”. The AO was of the view that under Sec.24 deduction on account of collection charges is not an allowable deduction while computing income under the head income from house property. Accordingly the said deduction was disallowed by the AO.

In respect of the aforesaid additions made to the total income in the assessment proceedings, the AO initiated penalty proceedings u/s.271(1)( c) of the Act and by an order dated 30.5.2011 imposed penalty on the Assessee.

Before CIT(A), the Assessee pointed out that the monthly rent for March, 2008 of Rs.1,44,900/- was in fact already included in the sum of Rs.25,05,277 declared as income under the head Income from House Property. The Assessee pointed out that it was a bonafide mistake committed by the Assessee in accepting that the rent for March, 2008 was not declared and offering the same to be brought to tax. The Assessee pointed out that it was a case of double taxation of same income and added to that penalty u/s.271(1)( c) of the Act is also being imposed for an item of income which has already been offered to tax. With regard to disallowance of service charges for collection of rent, the Assessee pointed out that the said claim was genuine but was not allowed because of the provisions of Sec.24 of the Act. That cannot lead to any inference that the Assessee either concealed particulars of income or furnished inaccurate particulars of income.

The CIT(A) without dealing with the above contention of the Assessee confirmed the order of the AO by merely observing that the Assessee did not challenge the order of the AO in the quantum proceedings.

Aggrieved by the order of the CIT(A) the Assessee is in appeal before the Tribunal. We have heard the rival submissions. We are of the view that this is not a fit case for Bank of India Employees Co-op.Society Ltd. A.Y.2008-09 2 imposing penalty u/s.271(1)( c) of the Act. It is clear from the rent statement of the Assessee in respect of the property leased to CBI that a total sum of Rs.18,80,077 was received from CBI including the rent of Rs.1,44,900/- for the month of March, 2008. The income declared by the Assessee under the head income from house property in the return of income was Rs.25,05,277/- which includes Rs.18,80,077/- received from CBI inclusive of rent of Rs.1,44,900 for the month of March, 2008. Thus the very addition made in the assessment proceedings was erroneous and therefore imposition of penalty on such addition cannot be sustained. The addition has been made purely on the basis of incorrect admission by the Assessee. The same is accordingly directed to be cancelled.

With regard to imposition of penalty on disallowance of service charges for collection of rent, we are of the view that the expenditure in question was in fact incurred by the Assessee and this fact has not been disputed by the AO. It is only because of the provisions of Sec.24 that this expenditure cannot be allowed as deduction while computing income under the head income from house property. The fact that the Assessee made a claim in the return of income which is true but which is not legally admissible cannot be the basis to impose penalty for concealment of income or for furnishing inaccurate particulars of income. We therefore hold imposition of penalty in respect of this addition was also not correct and the order imposing penalty on this addition is also hereby cancelled.