Applicability of Penalty under section 271(1)(c) for discrepancy in Form 26AS and Form No. 16

Taking into account the amount mentioned in Form 26AS it could not be said that the assessee had concealed amount or furnished inaccurate particulars of income. However, penalty was restricted to the tax sought to be evaded on the amount of commission income not disclosed by assessee.

Assessee assailed the penalty under section 271(1)(c) imposed by AO on account of discrepancy between Form 26AS and Form 16 and concealment of commission income. Assessee contended that notice of penalty did not strike off inappropriate portion.

 it is held that Taking into account the amount mentioned in Form 26AS it could not be said that the assessee had concealed amount or furnished inaccurate particulars of income. With regard to commission income, assessee had not disclosed the same in his return of income and also not offered any explanation. Therefore, penalty was restricted to the tax sought to be evaded on the amount of commission.

Decision: Partly in assessee’s favour.

IN THE ITAT, HYDERABAD BENCH

P. MADHAVI DEVI, J.M. & S. RIFAUR RAHMAN, A.M.

Chalapati Katiki v. ITO

ITA No. 1865/Hyd/2017

9 January, 2019

Assessee by: S. Rama Rao

Revenue by: R. Mohan Kumar, DR

S. Rifaur Rahman, A.M.

This appeal filed by the assessee against the order of Commissioner (Appeals)-1, Hyderabad dated 21-7-2017 for the assessment year 2011-12. In this appeal, assessee raised the following grounds of appeal :–

“1. The order of the learned Commissioner (Appeals) is erroneous both on facts and in law.

2. The initiation of proceedings under section 271(1)(c) of the Income Tax Act is not valid as the assessing officer did not strike off the inappropriate portion of the notice. The assessing officer ought to have struck off the inappropriate portion and indicated to the appellant the applicable portion in the notice.

3. The learned Commissioner (Appeals) erred in confirming the action of the assessing officer in holding that the appellant concealed the particulars of income or furnished inaccurate particulars of his income and further erred in confirming levy of penalty under section 271(1)(c) of the Act of Rs. 2,67,840.

4. Without prejudice, the learned Commissioner (Appeals) ought to have held that the amount of minimum penalty is not worked out correctly by the assessing officer as the same would work out to Rs. 1,09,092.”

2. At the outset, as regards the delay of 4 days in filing the appeal before the Tribunal, Learned Counsel for the Assessee brought our attention to the affidavit filed by the assessee as well as the petition for condonation of delay and submitted that though the appeal papers were prepared and appeal fee was also paid within the prescribed time limit for filing the appeal, the appeals papers were not singed by the assessee as he was out of station during the period 10-11-2017 to 13-11-2017 and therefore, there was a delay of 4 days in filing the appeal before the Tribunal. On perusal of the assessee’s affidavit and the reasons explained in the petition for condonation of delay as well as considering the smallness of the delay, we are of the opinion that there is a reasonable cause for not filing the appeal before the Tribunal within the stipulated time and therefore, we condone the delay and proceed to adjudicate the appeal on merits.

3. Brief facts of the case are that the assessee, an individual, filed his return of income declaring total income of Rs. 8,29,376.

During scrutiny proceedings, assessing officer noticed that in the return of income assessee declared salary income of Rs. 9,98,414 and claimed TDS of Rs. 1,05,899. During the assessment proceedings under section 143(3) of the Act, assessing officer noticed that as per 26AS, the assessee has received Rs. 14,97,590 which includes commission from SBI Life amounting to Rs. 3,56,508. Since there is no response from the assessee in respect of the discrepancy between Form 26AS and Form 16, assessing officer completed the assessment under section 144 of the Act bringing the entire receipts as per 26AS and initiated penalty proceedings under section 271(1)(c) of the Act and levied penalty of Rs. 2,67,840.

4. Aggrieved, assessee preferred an appeal before the Commissioner (Appeals), who upheld the assessing officer’s decision vide para 5.3 of his order and dismissed the appeal. Aggrieved, assessee filed the present appeal before us.

5. Before us, learned Counsel for the Assessee briefly narrated the facts of the case and bringing our attention to the paper book filed before us, he read out the relevant paras from the written submissions made at page 6 of the paper book. For the sake of ready reference, the relevant paras are reproduced as under :–

“It is humbly submitted that Form No. 26AS shows as receipt of Rs. 14,97,556. The salary is mentioned to be Rs. 11,81,079 and the tax deducted at source is mentioned at Rs. 1,80,118. However, while issuing the certificate in Form No.16, State Bank of Hyderabad mentioned the net income to be Rs. 8,29,376 which is admitted by the assessee in the return of income filed. It can be seen that in so far as salary in concerned, there is a difference between Form No.26AS and Form 16. Both are provided by the SBH, Hyderabad. As the assessee admitted income as per Form 16, it cannot be said that such difference represents concealment.

Further, in so far as commission is concerned, it is submitted that the appellant spent the entire amount towards expenditure and therefore, no income was admitted from the said receipt. Therefore, there is no concealment of income and no penalty is levyable.

Further, the tax payable on the amount of Rs. 3,56,508 would work out to Rs. 1,09,092……..”

6. On the other hand, learned Departmental Representative relied upon the orders of the lower Authorities.

7. Considered the rival submissions and perused the material on record. On perusal paper book filed before us, we are of the opinion that with regard to salary, there is a difference between amounts as per Form No. 16 and Form No. 26AS, since both are provided by the SBH, Hyderabad and the assessee has filed his return of income in accordance with Form No. 16 issued by the employer of the assessee, by taking into account the amount mentioned in Form 26AS it cannot be said that the assessee has concealed amount or furnished inaccurate particulars of income. With regard to commission income of Rs. 3,56,508, the assessee has not disclosed the same in his return of income and also not offered any explanation. In our considered view, assessing officer can initiate penalty only for the amount of commission which was not disclosed, can fall within the ambit of ‘concealment of income’. Therefore, we direct the assessing officer to restrict the penalty to the tax sought to be evaded on the amount of commission i.e., Rs. 3,56,508. Therefore, grounds raised by the assessee are partly allowed.

8. In the result, appeal filed by the assessee is partly allowed.