The assessee is an individual engaged in the business of plastic products. He filed a return of income on 15th October 2015 at a total income of Rs.1,22,83,260/-. The assessment under section 143(3) of the Act was passed on 21st December 2018. The learned Assessing Officer noted that the assessee has not shown interest of Rs.2,97,122/- in the income. The assessee submitted that these incomes are credited to the assessee’s account, however as the income belongs to Jolly Containers, where the assessee is a partner. Therefore, the same is chargeable to tax there. The learned Assessing Officer rejected the contention of the assessee stating that the income was credited in the name of the assessee and corresponding TDS also claimed, therefore, he made an addition of Rs.2,97,122/-. On the same, penalty proceedings under section 271(1)(C) of the Act were initiated separately for ‘concealment of income and furnishing inaccurate particulars of income’. AO imposed penalty of Rs.1,10,000/- on the above addition of Rs.2,97,122/-.
The explanation before learned Assessing Officer by the assessee was that assessee started his business initially as proprietor of Jolly Containers, at that time there was a certain investment in fixed deposits and also security deposits with Electricity Board. Interest income is earned on that. At the time of making those deposits, the Permanent Accountant Number of the assessee was given. Subsequently, from 1st April, 2015, the sole proprietorship business of the assessee was converted into a partnership firm and consequently, the fixed deposit and other deposits were appearing in the books of partnership. The interest income received on these deposits was already offered as income in the hands of the partnership for Assessment Year 2016-17. However, as the Permanent Accountant Number of the assessee was available with the bank and Electricity Board, they deducted tax at source by using the Permanent Accountant Number of the assessee instead of the firm. Thus, TDS on this interest appeared in form no. 26AS of the assessee. Being the small amount, inadvertently, the credit of TDS was taken by the individual assessee whereas the interest income was offered in the hands of the partnership firm. The partnership firm also did not claim credit for this TDS. The assessee produced only the account and return of income of the partnership firm. However, the learned Assessing Officer rejected the contention and levied a penalty of Rs.1,10,000/- stating that the assessee has filed ‘inaccurate particulars of income’.
The assessee preferred the appeal before the learned CIT(A), who confirmed the penalty on the merits.
We have carefully considered the rival contentions and perused the order of the lower authorities. In the present case, the levy of penalty under Section 271(1)(c) of the Act is agitated by the assessee stating that notice issued dated 11th June, 2019, under section 274 read with section 271(1)(c) of the Act none of the twin charges were struck off by the learned Assessing Officer. Further, in the assessment order also, the learned Assessing Officer was not sure whether the assessee has furnished inaccurate particulars or has concealed the income. In such circumstances, the penalty levied by the learned Assessing Officer suffers from severe defects. The issue is squarely covered in favour of the assessee by the decision of Hon’ble Supreme Court in case of SSA’S Emerald Meadows (supra). The learned CIT(A) is not correct in upholding the penalty on this ground. The Tribunal held that the explanation is given by the assessee clearly shows that there was neither concealment of income nor furnishing of inaccurate particulars of income and deleted the penalty under section 271(1)(c) of the Act. The appeal filed by the assessee was allowed.
Gautam Hiralal Gandhi vs The DCIT
ITA No. 1485/Mum/2021
Decision in favour of: AssesseeIN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI