Penalty Annulled: ITAT Deletes Fine for Non-Disclosure of Compensation Due to Revised Return Filing Before Notice.

The ITAT Mumbai annulled the penalty imposed under section 271(1)(c) of the Income Tax Act for non-disclosure of compensation received on flat booking cancellation. The ITAT found that the appellant had disclosed the compensation in a revised return before any notice was issued and had paid the taxes. The ITAT concluded that the appellant's conduct was not contumacious, thus deleting the penalty and allowing the appeal.

---

---

Issues:
Levy of penalty for non-disclosure of compensation received on cancellation of flat booking in the original return for A.Y. 2007-08.

Analysis:
The appellant contested the penalty imposed by the Assessing Officer (AO) for not disclosing the compensation received on the cancellation of a flat booking in the original return for A.Y. 2007-08. The appellant argued that a revised return disclosing the alleged undisclosed income was filed physically along with a letter during the assessment for A.Y. 2010-11. The appellant also claimed that the AO had assured not to reopen the assessment if the revised return was filed. Furthermore, the appellant highlighted their dependence on a consultant for tax compliance due to financial constraints and limited education. The AO initiated penalty proceedings under section 271(1)(c) for non-compliance with the notice. The AO observed that the undisclosed income was detected during the assessment for A.Y. 2010-11 and was not voluntarily disclosed by the appellant. Consequently, a penalty of Rs. 2,04,855 was levied, representing 100% of the tax sought to be evaded.

The appellant appealed to the CIT(A), who upheld the AO's decision. However, the ITAT Mumbai, comprising Shri Shamim Yahya (AM) and Shri Ravish Sood (JM), reviewed the case. The ITAT noted that the appellant had disclosed the compensation amount through a revised return before the notice under section 148 was issued. The appellant had also paid the taxes accordingly. The assessment was based on the amounts already declared by the appellant. Considering these facts, the ITAT determined that the appellant did not act contumaciously to warrant the penalty under section 271(1)(c) of the Income Tax Act. Citing the decision in Hindustan Steel Ltd. Vs. State of Orissa 83 ITR 26, the ITAT emphasized that penalty should not be levied if the conduct of the assessee is not contumacious. Therefore, in light of the circumstances and legal precedent, the ITAT set aside the lower authorities' orders and annulled the penalty.

In conclusion, the ITAT allowed the appeal filed by the assessee, thereby deleting the penalty imposed. The judgment was pronounced on 3.5.2019 by the ITAT Mumbai.

---