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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER
I.T.A. No.343/Asr/2018 Assessment Year: 2012-13
Rajinder Koul (HUF) C/o Bhat Vs. Income Tax Officer, Ward Durani& Associates (Chartered 3(2), Srinagar. Accountants Flat No.207 Ist Floor, Yatri Bhawan II Durga Nag Dalgate, Srinagar, J & K 190001 [PAN:-AAKHR9580E] (Respondent) (Appellant)
Appellant by Sh. Upender Bhat, CA Respondent by Sh.Ghansham Sharma, Sr. DR.
Date of Hearing 12.09.2022 Date of Pronouncement 15.09.2022
ORDER Per:Anikesh Banerjee, JM:
The instant appeal of the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals)-2, Jalandhar, (Camp Officer at Srinagar)
[in brevity the ld. CIT(A)] bearing appeal 239/15-16/CIT(A)/Jammu, date of order
I.T.A. No.343/Asr/2018 2
05.03.2018, the order passed u/s 250 (6) of the Income Tax Act 1961, [in brevity
the Act] for A.Y. 2012-13.The impugned order was originated from the order of
the Income Tax Officer, Ward 3(2), Srinagar, (in brevity the AO) order passed u/s
271(1)(c) of the Income Tax Act date of order 10.08.2015.
The grounds of the appeal are extracted as below: “1. Reg Imposing of Penalty Rs 406623/=: That on the basis of Facts and Circumstances of the case the Worthy CIT(A) erred in not deleting the penalty imposed by the Ld A.O.
That the appellant craves leave to add, alter, amend or delete any of the grounds of Appeal at the time of hearing and all above grounds are without prejudice to each other.”
The brief fact of the case is that the assessee was assessed u/s 143(3) of the
Act on basis of the addition of arrear rent received from the assessment year 2012-
13 from BSNL. The rent was received as per the order of the Hon’ble High Court
of Jammu & Kashmir at Jammu bearing W.P. No.24/2011, date of order
12.01.2011. The arrear rental income to tune of Rs.1894746/- was received during
the assessment year which was not declared in the return of the assessee. The
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addition was made for contravening of section 25B of the Act for receiving the
arrear rent. The notice u/s 271(1)(c) was issued and the penalty @ 100% of tax
sought to be evaded amount of Rs.4,06,623/-. The assessee filed an appeal before
the ld. CIT(A). The ld. CIT(A) upheld the order of the ld. AO.
Being aggrieved, assessee filed an appeal before us by challenging the
penalty amount of Rs.4,06,623/- u/s 271(1)(c) of the Act.
The ld. Counsel for the assessee vehemently argued and filed written submission
on the dated of 28.07.2022 and 27.06.2022 which are kept in record. The ld.
Counsel argued that the arrear rent was declared by the assessee during the filing
of the return in earlier years. The said arrear rent is not an undeclared amount. So,
the said amount was not declared during the assessment year 2012-13 in which
year the amount was received. The ld. AO added back the amount for contravening
section 25B of the act for not taking the arrear rent in the year in which it is
received. The extract of section 25B is as below:-
“[Special provision for arrears of rent received. 25B. Where the assessee— (a) is the owner of any property consisting of any buildings or lands appurtenant thereto which has been let to a tenant; and
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(b) has received any amount, by way of arrears of rent from such property, not charged to income-tax for any previous year, the amount so received, after deducting 84[a sum equal to thirty per cent of such amount], shall be deemed to be the income chargeable under the head "Income from house property" and accordingly charged to income-tax as the income of that previous year in which such rent is received, whether the assessee is the owner of that property in that year or not.]”
5.1 But the assessee had taken yearwiserent in each & every year in the return of
income.The list with copy of ITRs from assessment years 2004-05 to 2012-13 are
enclosed APB.
5.2 The said property of the assessee was damaged by the militant attack. The
BSNL was the tenant and was not paying the rent. After the order of the Hon’ble
High Court of Jammu and Kashmir (J & K) they paid the arrear rent in the A.Y.
2012-13. But all the rent is declared and each anevery years in which the rent was
related. No rent was remained undeclared in end of assessee.
The ld. Sr. DR vehemently argued and relied on the order of the ld. AO
passed u/s 271(1)(c). The ld. Sr. Dr pointed out relevant para 4.4 of the order of
CIT(A) which is extracted as below:-
“4.4 Having considered the material available on record, I find that appellant has failed to declare the income received on account of arrears of rent in the year
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in which it has been received. There is a special provision in the income tax act in the form of section 25 B of the IT Act, which has been inserted by the Finance act 2000, with effect from 01.04.2001, to provide that the arrears of rent received are deemed to be the income of the year in which it is received. Thus, there is no option available to the appellant to distribute the arrears of rent received to the years to which those pertain to. The purpose of distribution of rent to the respective year as has been done by the appellant is to avoid payment of rightful taxes on the income earned. Thus, after considering all these facts, I hold that AO was justified in holding that appellant has furnished inaccurate particulars of income and is therefore liable for imposition of penalty under section 271(1)(c) of the IT Act.”
We heard the rival submissions considered the documents available in the
records. The addition was made on basis of the contravening section 25B of the
Act related to arrear rent received duly assessment year which was not declared in
the return of income for A.Y. 2012-13. The section 25B inserted in Finance Act
I.T.A. No.343/Asr/2018 6
2000 w.e.f. 01.04.2001 is more clarificatory in nature and it only clarified the
position that if any arrears of rent are received in subsequent years, same will be
taxed in the year of receipt- “B.M. Gupta and Sons (HUF) vs. ACIT”, Circle-31 (Del) 299 ITR 410. The arrear rent which was not declared in return of incomein
earlier years & said amount would be taxed in year of receiving the amount. But
the assessee declared the rent in earlier years and paid the tax accordingly. In this
issue the ld. Sr. DR was unable to bring any contrary fact before the ITAT. The
penalty was levied u/s 271(1)(c) of the Act on basis of the income which was
concealed or stated inaccurate particulars of income. But the assessee never
concealed nor stated any inaccurate particulars of income related to rental income.
The arrear rent was not taken during the assessment year 2012-13 because the rent
was already declared in the year in which it was related. The application of section
25B in itself clarificatory in nature. The assessment order is debatable in nature. In
our considered view, there is no deliberate attempt on the part of the assessee and it
is not a fit case to impose penalty u/s 271(1)(c) of the Act on the assessee as the
conduct of the assessee if seen in context of preceding years as set-out above does
not warrant imposition of the penalty u/s 271(1)(c) of the Act. Keeping in view
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peculiar facts and circumstances of the case as set out above as we find that no
attempt has been made by the assessee in the preceding years to conceal the rental
income. The penalty levied by the ld. AO amount of Rs.4,06,623/- is liable to be
quashed.
In the result, the appeal of the assessee bearing I.T.A. No.343/Asr/2018 is
allowed.
Order pronounced in the open court on 15.09.2022
Sd/- Sd/-
(Dr. M. L. Meena) (ANIKESH BANERJEE) Accountant Member Judicial Member
AKV Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T.