Penalty u/s 271(1)(c) for filing inaccurate particulars of income does not arise when assessee filed Revised ITR

The present appeal has been filed by the Assessee against the order dated 22.04.2019 passed by the Commissioner of Income Tax (Appeals)-3, Rajkot partly confirming the penalty levied u/s. 271(1)(C) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2015-16.

2. 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.

2.1. 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.

2.2. 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.

3. Aggrieved against the same, the assesse filed an appeal before the Ld. CIT(A). The ld. CIT(A) dismissed the appeal of the assessee as follows:

5.2 Thus the contention raised by the appellant as per his ground of appeal that adequate opportunity of being heard was not given to him by the AO during the course of assessment proceedings and penalty proceedings is not found to be acceptable. Again at appellate stage also the appellant has made any submission on merit.

Considering these facts it is held that the appellant has failed to file any justification either before the AO during the course of penalty proceedings or at appellate stage before me for not levying penalty u/s 271(l)(c) and therefore it is held that the AO has correctly the penalty of Rs. 70,551/- u/s 271(l)(c) of the Act such penalty is hereby confirmed. Thus the grounds of appeal of the appellant are dismissed.

4. Aggrieved against the same, the assessee is in appeal before us raising the numerous grounds:

1. The Ld. CIT(A) has erred in law and facts in confirming penalty U/s. 271(l)(c) of Rs. 32,932/-. The penalty needs deletion.

2. The Ld. CIT(A) has erred in law and facts in confirming penalty U/s. 271(l)(c) of Rs. 32,932/- against the specific decisions of the Hon. Supreme Court and also of the Hon. Gujarat High Court though citen before him. Non acceptance of the same appears disregards towards judicial pronouncement. The penalty needs deletion.

3. The Ld. CIT(A) has erred in law and facts in confirming penalty U/s. 271(l)(c) of Rs. 32,932/- in respect of amount treated as income without proper verification and settled law. The penalty needs deletion

4. Without prejudice, no adequate and reasonable opportunity has been allowed at appeal stage. The penalty needs cancellation.

5. The Ld. CIT(A) has erred in law and facts in confirming penalty U/s. 271(l)(c) of Rs. 32,932/-without properly considering that the Ld. A.O. has erred in not giving adequate time and opportunity although the assessee specifically requested for the same. The penalty needs deletion.

6. The Ld. CIT(A) has erred in not considering that the Ld. A.O. has bringing any cogent material justifying levy of penalty. The penalty needs deletion.

7. The penalty order being bad in law needs cancellation.

8. Without prejudice the penalty order having been passed beyond limitation prescribed needs cancellation.

9. Taking into consideration the legal position, statutory aspects and facts of the case no penalty ought to have been levied. The same deserves cancellation.

4.1. 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.

5. Per contra, the ld. D.R. appearing for the Revenue supported the orders of the Lower Authorities.

6. We 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.

6.1. 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 our considered view, the penalty levied u/s. 271(1)(c) is hereby deleted.