Penalty 271(1)(c) for claiming higher Housing Loan Interest deduction u/s 24(b) deleted.

Penalty 271(1)(c) for claiming higher Housing Loan Interest deduction u/s 24(b) deleted. The AO did not detect mistake but noticed it from the reply of the assessee – ITAT Judgment

ABCAUS Case Law Citation:
ABCAUS 1124 (2017) (02) ITAT

Assessment Year : 2008-09
Date/Month of Pronouncement: February, 2017

Important Case Laws Cited/relied upon:
Mak Data P. Ltd. vs. CIT, 358 ITR 593(SC)
Lanxess India (P) Ltd. 60 taxmann.com 352 (Madras)
Cement Marketing Co. of India Ltd. vs. Asstt. CST (1980) 124 ITR 15 (SC)
Motilal Padampati Sugar Mills Co. Ltd. vs. State of U.P (1979), 118 ITR 326 (SC)
Hindustan Steel Ltd. vs. State of Orissa (1972)83 ITR 26 (SC)
CIT vs. R.K. Golecha 173 ITR 423 (Raj.)
Dilip N Shroff vs. JCIT (2007) 291 ITR 519 (SC)
CIT vs. Reliance Petroproducts pvtltd (2010) 322 ITR 158 (SC)
Price Waterhouse Coopers (P) Ltd. vs. CIT (2012) 348 ITR 306 (SC)
CIT vs. Hiralal Doshi (ITA No. 2331/2013 dated 9-02-2016 (Bom)

Brief Facts of the Case:
During the course of the assessment proceedings, the Assessing Officer (AO) noticed that the assessee had claimed housing loan interest u/s 24(b) of Rs. 2,39,832/- in the head of ‘Income from House Property’’. The assessee was asked to produce the details of the loan and property.

As per the Section 24(b) of the Income tax Act assessee is only entitle interest on housing loan of Rs. 1,50,000/- on self occupied property. The assessee accepted the mistake and filed revised return of income and paid the tax on difference amount. But revised return was not treated as regular return because it was not filed on due time. Therefore, Rs. 89,832/- was added to the total income of the assessee and credits of the taxes are allowed to the assessee.

AO initiated the penalty proceedings u/s 271(1)(c) treating that the assessee had concealed his income and had filed inaccurate particulars of income.

There was no response by the assessee to the notice u/s 274 and consequently, a penalty of Rs. 27,759/- being the tax on concealed income or tax sought to be evaded was imposed by the AO.

The assessee filed appeal before CIT(A) against the order imposing the penalty and contended that the assessee filed the revised return by paying the balance tax and brought to the notice of the AO during the assessment proceedings. It was submitted that the AO had not pointed out this mistake but it was detected by the assessee. Thus it was submitted that since revised computation had been submitted and the income had been voluntarily returned by the assessee no penalty was leviable.

However the CIT did not moved by the submission of the assessee and was of the view that the claim that the revised computation was filed suo moto was not correct as the same had been filed only after a specific query was raised by the Assessing Officer on the issue. Also, the ignorance of law pleaded by the assessee was rejected in view of the assistance by trained professionals.

CIT(A) highlighted that but for the case being taken up for scrutiny and the specific query and investigation by Assessing Officer, this amount would have escaped assessment.

In view of the above, CIT(A) dismissed the appeal and confirm the penalty holding that the disclosure made by the assessee was not voluntary and also no reasonable cause could be demonstrated

Observations made by the Tribunal:
The Tribunal noted the following:

1. That the assessee had submitted that the AO had not pointed out this mistake but it was detected by him.

2. That the AO in the assessment order had mentioned as under:

“on perusal of the reply of the assessee, it is found that the assessee has wrongly claimed interest on housing loan u/s 24(b) of Rs. 2,39,832/- on self occupied property.”

Thus the Tribunal was of the opinion that it appeared that the AO had not detected the mistake but it was noticed by the AO only after perusing the reply of the assessee.

3. That the assessee had filed the revised return of income by paying the balance due tax on the amount excessive claimed.

4. That this was the first year of the assessee claiming such deduction u/s 24(b) of the Act.

Held:
CIT(A) is not justified in confirming the penalty u/s 271(1)(c) and the same was directed to be deleted.

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