Penalty upheld under Section 271(1)(c) for underreporting house property income after notice under Section 148

The ITAT Mumbai upheld the penalty under section 271(1)(c) against the assessee for furnishing inaccurate particulars of income. The assessee, a non-filer, filed the return only in response to a notice under section 148 and underreported income from house property by Rs. 4,37,187. The concealment was detected by revenue, and the assessee failed to disclose the income voluntarily or fully in the return filed. Given the assessee was otherwise required to file under section 139(1), the penalty was justified. The appellate order imposing the penalty was affirmed, resulting in a decision against the assessee.

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1. ISSUES PRESENTED and CONSIDERED

• Whether the assessee's failure to disclose income of Rs. 4,97,187/- in the return filed under notice issued under Section 148 of the Income-tax Act, 1961, constitutes furnishing inaccurate particulars of income attracting penalty under Section 271(1)(c) of the Act.
• Whether the penalty under Section 271(1)(c) is justified where the assessee is a non-filer who filed return only in response to notice under Section 148 and underreported income.
• Whether the omission to disclose income was a bona fide inadvertent mistake or deliberate concealment.
• Whether the penalty order passed by the assessing officer and upheld by the Commissioner of Income Tax (Appeals) is sustainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Applicability of penalty under Section 271(1)(c) for furnishing inaccurate particulars of income in return filed under notice issued under Section 148

Legal Framework and Precedents: Section 271(1)(c) of the Income-tax Act, 1961, empowers the Assessing Officer to levy penalty where a person has furnished inaccurate particulars of income. Section 148 permits reopening of assessment where income has escaped assessment. Filing of return under notice issued u/s 148 does not exempt the assessee from penalty provisions if inaccurate particulars are furnished.

Court's Interpretation and Reasoning: The Court noted that the assessee, being a non-filer, filed return only after receipt of notice u/s 148. The return declared income of Rs. 6,89,51,300/-, but the Assessing Officer determined income at Rs. 6,94,48,490/- after making additions of Rs. 4,97,187/- on account of income from house property. The omission to disclose this income was held to be furnishing inaccurate particulars of income.

Key Evidence and Findings: The return filed did not include the income of Rs. 4,97,187/-. The income was not reflected in Form 26AS, which was relied upon by the assessee to claim inadvertent mistake. The Assessing Officer detected the concealed income during reassessment proceedings.

Application of Law to Facts: The Court held that the underreported income falls squarely within the ambit of "furnishing inaccurate particulars of income" under Section 271(1)(c). Since the return was filed only in response to notice and the income was concealed, penalty was rightly levied.

Treatment of Competing Arguments: The assessee argued that omission was inadvertent and not deliberate, relying on non-inclusion in Form 26AS. The revenue contended that the assessee was a non-filer and deliberately underreported income. The Court found the latter argument more persuasive given the facts.

Conclusion: The penalty under Section 271(1)(c) is justified for furnishing inaccurate particulars of income in the return filed under Section 148 notice.

Issue 2: Justification of penalty where assessee is a non-filer and files return only in response to notice under Section 148

Legal Framework and Precedents: Section 139(1) mandates filing of return by an assessee whose income exceeds prescribed limits. Non-filing is a default. Filing return only in response to notice under Section 148 is not voluntary compliance. Penalty provisions apply if inaccurate particulars are furnished.

Court's Interpretation and Reasoning: The Court observed that the assessee was a non-filer for the relevant assessment year and filed return only after notice under Section 148. The income level was such that filing return was mandatory under Section 139(1). Failure to do so was an additional default.

Key Evidence and Findings: The assessee's income exceeded the threshold for mandatory filing. The return filed under Section 148 omitted certain income. The concealment was detected by the revenue and the return was not filed voluntarily.

Application of Law to Facts: The Court held that non-filing of return and underreporting of income in return filed under Section 148 notice attracts penalty under Section 271(1)(c). The penalty is not mitigated by the fact that return was filed only after notice.

Treatment of Competing Arguments: The assessee's claim of inadvertent mistake was rejected as the facts showed deliberate concealment and non-compliance. The revenue's submission that penalty is warranted was accepted.

Conclusion: Penalty under Section 271(1)(c) is sustainable against a non-filer who underreports income in return filed only in response to Section 148 notice.

Issue 3: Nature of omission - inadvertent mistake or deliberate concealment

Legal Framework and Precedents: Penalty under Section 271(1)(c) is leviable where there is furnishing of inaccurate particulars of income, which may be due to concealment or misreporting. Bona fide inadvertent mistakes may be considered for waiver of penalty if proved.

Court's Interpretation and Reasoning: The Court considered the assessee's argument that omission was inadvertent and based on non-inclusion of income in Form 26AS. However, the Court found that the assessee was a non-filer and failed to disclose income even in the return filed under Section 148 notice.

Key Evidence and Findings: The assessee's failure to disclose income despite knowledge of income level and mandatory filing requirement indicated deliberate concealment rather than inadvertent mistake.

Application of Law to Facts: The Court held that inadvertent mistake was not established on record. The concealment was deliberate as the assessee did not voluntarily disclose the income and underreported it even after reopening.

Treatment of Competing Arguments: The assessee's contention of inadvertence was rejected due to absence of credible evidence supporting bona fide error. The revenue's contention of deliberate concealment was accepted.

Conclusion: The omission to disclose income was deliberate concealment and not a bona fide inadvertent mistake, justifying penalty.

Issue 4: Sustainability of penalty order passed by Assessing Officer and upheld by Commissioner of Income Tax (Appeals)

Legal Framework and Precedents: Penalty orders must be based on findings of concealment or furnishing inaccurate particulars of income. Appellate authorities have jurisdiction to confirm, reduce, or cancel penalty based on facts and law.

Court's Interpretation and Reasoning: The Court noted that both the Assessing Officer and the Commissioner of Income Tax (Appeals) found the assessee liable for penalty under Section 271(1)(c) based on concealment of income and furnishing inaccurate particulars.

Key Evidence and Findings: The penalty amount was 100% of the tax sought to be evaded, consistent with statutory provisions. The appellate authority upheld the penalty after considering the assessee's submissions.

Application of Law to Facts: The Court found no infirmity in the concurrent findings of the authorities. The penalty was imposed in accordance with law and justified by facts.

Treatment of Competing Arguments: The Court rejected the assessee's appeal against penalty, finding no valid ground to interfere with the orders of lower authorities.

Conclusion: The penalty order passed by the Assessing Officer and upheld by the Commissioner of Income Tax (Appeals) is sustainable and is accordingly upheld.

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