ITAT deletes penalty under section 271(1)(c) after assessee corrects rental income through revised return

The ITAT Mumbai dismissed the assessee's appeal regarding rental income assessment. The assessee, a Singapore resident owning 50% of a Singapore property with his wife, erroneously declared 100% rental income in AY 2014-15 but corrected it to 50% in the revised return for the year under consideration. Since lower authorities accepted the revised return without additional demands, the tribunal found no grievance. However, the penalty under section 271(1)(c) was deleted as the assessee filed a revised return correcting errors without willful concealment, and the AO accepted the revised income declaration.

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Issues Involved:
1. Addition of income under the head "Income from Other Sources" and "House Property".
2. Levy of penalty under section 271(1)(c) for furnishing inaccurate particulars of income.

Detailed Analysis:

1. Addition of Income Under "Income from Other Sources" and "House Property":
The assessee, an individual residing in Singapore but considered a resident and ordinarily resident in India for the relevant assessment year, filed a return of income in India declaring Rs. 12,05,86,110/-. This included 50% of the rental income from a property in Singapore jointly owned with his wife. During scrutiny, the AO noted that the assessee had not declared Rs. 6,21,652/- under "Income from Other Sources" and the full rental income of Rs. 23,71,076/- from the Singapore property. Consequently, the assessee filed a revised return including these amounts, resulting in a total income of Rs. 12,28,70,870/-. The AO accepted this revised return and initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income.

The CIT(A) dismissed the appeal due to a delay of 186 days in filing and upheld the AO's order on merits. The Tribunal noted that the assessee himself had offered the additional income in the revised return during the assessment proceedings and thus could not claim to be aggrieved by the lower authorities' orders. The Tribunal dismissed the grounds raised by the assessee as not tenable.

2. Levy of Penalty Under Section 271(1)(c):
The AO levied a penalty of Rs. 9,24,760/- under section 271(1)(c), stating the assessee furnished inaccurate particulars leading to concealment of income. The assessee argued that the original return was filed based on the available information and that the revised return was filed once accurate details were obtained. The CIT(A) upheld the penalty, reasoning that the assessee was aware of the income from Form 26AS and failed to declare it in the original return. The CIT(A) also noted that the revised return was filed only after the case was selected for scrutiny, indicating an intent to conceal income.

The Tribunal, however, found the CIT(A)'s reasoning factually incorrect regarding the rental income, as Form 26AS only contained details of interest income. The Tribunal acknowledged that the assessee had filed the revised return to correct errors, including an overstatement of salary income. It was noted that the assessee had offered 100% of the rental income from the Singapore property despite claiming joint ownership. The Tribunal concluded that there was no willful intention to conceal income, as the revised return was filed to rectify errors. The Tribunal cited the Supreme Court's observation in Hindustan Steel Ltd. v. State of Orissa, emphasizing that penalty should not be imposed for technical or venial breaches or bona fide errors.

Conclusion:
The Tribunal dismissed the appeal regarding the addition of income (ITA.No. 2706/Mum/2024) but allowed the appeal concerning the penalty (ITA.No. 2707/Mum/2024), directing the AO to delete the penalty levied under section 271(1)(c).

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