THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI

ITA No.1852/Mum/2014          Assessment year : 2007-2008
Dinesh Khanna (Appellant) vs. Dy. Commissioner of Income Tax  (Respondent)
Date of Order : 16-10-2015

ORDER

Per B R Baskaran, AM:

The assessee has filed this appeal challenging the order dated 28.02.2014 passed by the ld.CIT(A)-32, Mumbai partially confirming the penalty levied under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2007-08.

2. The facts relating to the case are stated in brief. The Revenue carried search and seizure operation in the residential and business premises of Khanna Group of cases and its directors on 22.2.2007. The assessee herein is the main person of the Group. During the course of search and seizure operation various incriminating documents showing foreign banks account of the assessee maintained in UK and Germany were found. It was noticed that the income from these bank accounts were not disclosed in the return of income filed by the assessee u/s 139(1) of the Income Tax Act, 1961 in any of the years. During the course of search, it was also noticed that the assessee was occupying a furnished accommodation belonging to M/s Ninesh Hospitality Services Pvt Ltd (NHSPL), in which the assessee was a director. However, the above said company has not charged the perquisite value of the rent free furnished accommodation provided to the assessee and the assessee also did not declare any perquisite value of the flat as his rent.

3. The assessee filed his return of income for the year under consideration declaring a total income of Rs.24.53 lakhs without disclosing the income from bank accounts as well as perquisite value of rent free accommodation. Since the search was during the financial year relevant to the assessment year under consideration, the assessment was completed by the AO u/s 143(3) of the Act. During the course of assessment proceedings, the AO noticed that the assessee has not declared income from bank accounts and perquisite value of rent free accommodation. However, before the completion of assessment proceedings, the assessee filed revised return of income on 29.12.2008 i.e. just two days before the completion of assessment proceedings, declaring the total income of Rs.30.39 lakhs by declaring the income from bank accounts as well as the perquisite value of rent free accommodation. The AO completed the assessment at a total income of Rs.36.39 lakhs. Thereafter, the AO passed penalty order levying penalty on the following additions:

(a) Income from foreign banks Rs.2,41,402/-;
(b) Perquisite from rent free furnished accommodation Rs.3,94,068/-
(c) Cash on hand Rs.4,50,000/-.

4. The assessee challenged the penalty order by filing appeal before Ld CIT(A). In the appellate proceedings, the ld. CIT(A) deleted the penalty levied on the addition of Rs.4,50,000/- relating to cash found and confirmed the penalty levied on the remaining two additions. Aggrieved, the assessee has filed this appeal before us.

5. We heard the parties and perused the record. The ld. Counsel appearing for the assessee submitted that the AO had also levied penalty on identical additions made in the assessment years 2001-02 to 2006-07 in the assessments completed under section 153A of the Act and Co-ordinate Bench of the Tribunal, vide its order dated 29.07.2015 passed in ITA No.4200 to 4205/Mum/2010, has deleted the penalty accepting the contentions of the assessee that the above said income was not offered in the original return of income under genuine belief that they need not to be offered to tax. Explaining further, the ld. AR submitted that the assessee was under bonafide belief that income accruing on the foreign bank account shall be taxable in India only when they are brought into India. The assessee was not receiving any salary from NHSPL and hence the assessee was under bonafide belief that the perquisite value of rent free accommodation is required to be computed only if salary was received. The ld. AR further submitted that the assessee, upon being questioned by the AO, has furnished all the materials relating to the above said two additions and also filed revised return of income offering them to tax. He further submitted that the revised return of income was filed within the time prescribed u/s 139(5) of the Act. He further submitted that the explanations of the assessee with regard to the above said two additions have not been found fault with and the assessee has also furnished all the materials available with him in this regard. Accordingly, he prayed for deletion of impugned penalty.

6. On the contrary, the ld. DR placed strong reliance on the order passed by the AO as well as ld. CIT(A).

7. We have heard the rival contentions and perused the record. Admittedly, the assessee did not offer the income received from foreign bank account and the perquisites value of rent free accommodation in the original return of income. However, in the revised return of income, which was filed within time prescribed under section 139(5) of the Act, the assessee had duly offered both the incomes. However, it so happened that the revised return of income could be filed just two-days prior to the completion of the assessment. It is a fact that the information relating to the two types of income came to the notice of the department during the course of search. It is also a fact that the assessee did not include the said incomes in the original return of income filed after the search.

8. However, it is a well settled proposition that the addition made in the assessment proceedings will not automatically give rise to penalty. In the penalty proceedings, the assessing officer is required to examine the matter afresh and for that purpose, the discussions made and decision taken in the assessment proceedings can be taken as a guide. In the penalty proceedings, the assessee submitted that he was under bonafide belief that the income from foreign bank account is required to be offered only when it is brought into India. Similarly, since the assessee was not receiving any salary from the above said company, it was explained that he was under bonafide belief that the perquisite value of rent free accommodation is not taxable. However, during the course of assessment proceedings, the assessee has filed revised return of income disclosing both the incomes and also furnished all the materials relating to the above said two additions. We notice that the explanations furnished by the assessee were not found to be fault or found to be malafide one.

9. Further, we notice that the penalties levied on identical type of additions in the assessment years 2001-02 to 2006-07 have since been deleted by the co-ordinate Bench of Tribunal in assessee’s own case (referred supra). Under these set of facts, we are of the view that the Explanation (1) to section 271 (1)(c) shall be applicable to the facts of the present case and accordingly, the penalty levied on the above said two additions is liable to be deleted. Accordingly, we set aside the order of ld.CIT(A) and direct the AO to delete the penalty levied on the above said two additions.

10. In the result, the appeal filed by the assessee is allowed.

Pronounced accordingly on 16th Oct, 2015.

Sd                                Sd
(AMARJIT SINGH)       ( B.R. BASKARAN)
JUDICIAL MEMBER    ACCOUNTANT MEMBER