ITAT deleted addition as it was erroneous, and quashed penalty

1. The Assessee was a Co-operative Society having income, amongst others, from House Properties. In the previous year relevant to AY 2008-09, the Assessee was in receipt of rental income by letting out its property to Central Bank of India (CBI), New Market Branch. The monthly rent payable by CBI was Rs.1,44,900/-. In the course of assessment proceedings, the AO noticed that a sum of Rs.25,05,277 was declared under the head "Income from House Property". The AO was of the view that the rent for the month of March, 2008 of Rs.1,44,900/- had not been included in the income declared under the head Income from House Property. The Assessee in reply to the query of the AO in this regard admitted that a sum of Rs.1,44,900/- be added to the income declared in the return of income. The AO also noticed that the Assessee had claimed a deduction of Rs.18,891/- which was service charges paid for collection of monthly rent, as a deduction under the head Ïncome from House Property". The AO was of the view that under Sec.24 (of Income Tax Act, 1961) deduction on account of collection charges is not an allowable deduction while computing income under the head income from house property. Accordingly the said deduction was disallowed by the AO. In respect of the aforesaid additions made to the total income in the assessment proceedings, the AO initiated penalty proceedings u/s.271(1) (of Income Tax Act, 1961)( c) of the Act and by an order dated 30.5.2011 imposed penalty on the Assessee.

2. CIT(A) confirmed the order of the AO by merely observing that the Assessee did not challenge the order of the AO in the quantum proceedings.

3. On appeal, the ITART held as under:

"It is clear from the rent statement of the Assessee in respect of the property leased to CBI that a total sum of Rs.18,80,077 was received from CBI including the rent of Rs.1,44,900/- for the month of March, 2008. The income declared by the Assessee under the head income from house property in the return of income was Rs.25,05,277/- which includes Rs.18,80,077/- received from CBI inclusive of rent of Rs.1,44,900 for the month of March, 2008. Thus the very addition made in the assessment proceedings was erroneous and therefore imposition of penalty on such addition cannot be sustained. The addition has been made purely on the basis of incorrect admission by the Assessee. The same is accordingly directed to be cancelled.

4. With regard to imposition of penalty on disallowance of service charges for collection of rent, we are of the view that the expenditure in question was in fact incurred by the Assessee and this fact has not been disputed by the AO. It is only because of the provisions of Sec.24 (of Income Tax Act, 1961) that this expenditure cannot be allowed as deduction while computing income under the head income from house property. The fact that the Assessee made a claim in the return of income which is true but which is not legally admissible cannot be the basis to impose penalty for concealment of income or for furnishing inaccurate particulars of income. We therefore hold imposition of penalty in respect of this addition was also not correct and the order imposing penalty on this addition is also hereby cancelled.

5. In the result appeal by the Assessee is allowed.”

Case Reference - Central Bank of India Employees Co-operative Society Ltd, Kolkata -versus- D.C.I.T., Circle-33, Kolkata.

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH 'A' KOLKATA

[Before Hon'ble Shri N.V.Vasudevan, JM & Shri Waseem Ahmed, AM ]

ITA No.865/Kol/2013

(Assessment Year : 2008-09)