Concealment penalty for not offering LFC/LTC to tax under bonafide belief that it was exempt deleted

Concealment penalty for not offering LFC/LTC reimbursement to tax under bonafide belief that it was exempt as the employer did not deduct tax at source, deleted

ABCAUS Case Law Citation:
ABCAUS 2637 (2018) (11) ITAT

The appeal was preferred by the assessee against the order of the Commissioner of Income Tax [Appeals] in confirming the penalty levied u/s 271(1)(c) of the Income-tax Act, 1961 (the Act).

The assessment of the assessee was reopened u/s 147 / 148 because the Assessing Officer (AO) found that the assessee has not included the amount of Leave Fare Concession ( LFC ) / Leave Travel Concession ( LTC ) received from its employers in its income and the same was claimed to be exempt u/s 10(5) of the Act.

The reassessment was completed after making the addition of LFC/LTC received from the employer. Penalty proceedings were separately initiated.

During the course of penalty proceedings, the assessee contended that since his employer bank did not deduct tax at source on the LFC/LTC payment, the assessee was under bonafide belief that the same was exempt.

The contention of the assessee did not find favour with the Assessing Officer who proceeded by levying penalty u/s 271(1)(c) of the Act. The assessee carried the matter before the CIT(A), but without any success.

The Tribunal observed that there was no dispute that the employer Bank did not deduct tax at source on reimbursement of LFC/LTC and it cannot be ruled out that the assessee was under bonafide belief that the same is exempt from tax. Otherwise, the employer would have deducted tax at source.

The Tribunal opined that it could not be stated that the assessee had concealed its particulars of income or has furnished inaccurate particulars of income.

Considering the circumstances under which the assessee formed bonafide belief, the Tribunal opined that this was not a fit case for levy of penalty u/s 271(1)(c) of the Act.

Accordingly, the Assessing Officer was directed to delete the penalty levied.

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