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September 20, 2022

No penalty under Section 271(1)(c) for income offered for taxation by filing a revised return

by CA Shivam Jaiswal in Income Tax, Legal Court Judgement

No penalty under Section 271(1)(c) for income offered for taxation by filing a revised return

Facts and Issues of the Case

The brief facts of the case is that the assessee is a Co- operative Society engaged in the business of supply of fertilizers, seeds, pesticides etc. to its members. The assessee society earns rental income and Dividend income from other Co-Op. Society.During the course of assessment proceedings, The A.O. noticed that the assessee has earned rental income of Rs. 1,52,250/- and claimed deduction u/s. 80P(2)(d) of the Act on rental income which is not eligible for. Hence a show cause notice issued to disallow the claim of u/s. 80P(2)(d) of the Act on rental income. The assessee claimed statutory deduction u/s. 24 of the Act and accepted the addition of Rs. 1,06,575/- as the rental income. The A.O. initiated penalty proceedings u/s. 271(1)(c) for furnishing inaccurate particulars of income.

A show cause notice dated 08.02.2018 which was duly served upon the assessee asking for assessee’s explanation on levy of penalty. None appeared on behalf of the assessee and therefore the ld. A.O. levied a minimum penalty of Rs. 32,932 u/s. 271(1)(c) of the Act. None appeared on behalf of the assessee but written submission was filed on behalf of the assessee. Penalty cannot be levied in respect of deduction claimed but rejected by the Assessing Officer, relying upon Hon’ble Supreme Court judgment in the case of Reliance Petro Products reported in 322 ITR 158. Therefore the penalty is liable to be deleted.Per contra, the ld. D.R. appearing for the Revenue supported the orders of the Lower Authorities.

Observation by the Court

The court have given a thoughtful consideration and perused the materials available on record. It is seen from the Penalty order that the assessee has filed a rectification petition u/s. 154 on 11.09.2017 stating the rental income has already been offered by revising the return on 29.03.2017. The Assessing Officer also held that the bonafideness of the assessee remain unproved as it has filed Revised Return after 8 months of receipt of notice u/s. 143(2) of the Act i.e. the assessee offered the rental income only after the statutory proceedings were initiated by the department.

In the above circumstances, the levy of penalty u/s. 271(1)(c) for filing inaccurate particulars of income does not arise when the assessee filed a Revised Return offering to tax the rental income. In court considered view, the penalty levied u/s. 271(1)(c) is hereby deleted.

Conclusion

The appeal filed by the assessee is allowed by the court.

Lajai-Seva-Sahakari-Mandli-Vs-ITO-ITAT-Rajkot

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