Penalty response

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

08 September 2014 sir, I was working in two companies during FY10-11. My ITR was wrongly filed to include only one Form 16 details and it was my ovsersight not to have cross checked even though a represnetative filed. However TDS was deducted for the other company salary as well. AO raised a notice asking for clarifications and we found that due to an oversight the second salary was not included in the ITR even though TDS was deducted and reflected in 26AS. However, subsequent to the notice from AO, the differential of 1.5lakhs was paid with interest. Now a penalty has been raised for the entire tax amount from the second company under grounds of concealment. Not sure if concealment is the right reason as TDS has already been paid for. There was no evasion of tax and hence i am perplexed. I agree that it was my mistake to not include the one of the form 16s in the ITR but tax was not evaded. Want some guidance and way forward to appeal and address this.

Querist : Anonymous

Querist : Anonymous (Querist)

10 October 2014 Looks like noone wants to reply to my query.

Querist : Anonymous

Querist : Anonymous (Querist)

10 October 2014 Looks like noone wants to reply to my query.

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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10 August 2024 In your case, the issue revolves around the penalty imposed for the non-inclusion of income in your Income Tax Return (ITR), despite having TDS deducted and reflected in Form 26AS. Here’s a structured approach to address and potentially resolve the penalty issue:

### **1. **Understanding the Penalty Grounds**

**a. **Concealment vs. Mistake:**

- **Concealment of Income:** Penalties under Section 271(1)(c) of the Income Tax Act are generally levied for concealment of income or for providing inaccurate particulars of income. In your situation, since TDS was already deducted and reflected in Form 26AS, and there was no attempt to evade tax, this may not strictly fall under concealment but rather a mistake or oversight.

- **Mistake or Oversight:** Given that the income was not included due to oversight and not due to deliberate concealment, it is essential to argue that the penalty under concealment may be inappropriate.

### **2. **Steps to Respond to the Penalty Notice**

**a. **Prepare a Detailed Response:**

- **Draft a Reply:** Draft a detailed response to the penalty notice explaining the oversight and providing evidence that TDS was deducted and reflected in Form 26AS. Emphasize that there was no intention of evading taxes and that the discrepancy was purely due to an oversight.

- **Include Proof:** Attach copies of the Form 16s, Form 26AS, and proof of payment of the differential tax along with interest. Highlight that you have already paid the additional tax along with interest.

**b. **Cite Relevant Case Laws and Provisions:**

- **Legal Precedents:** You can refer to case laws where penalties were contested successfully on similar grounds. Case laws such as **CIT vs. Dharmendra Textile Processors** and **CIT vs. Reliance Petroproducts Pvt. Ltd.** may be relevant.

- **Section 273A:** Mention Section 273A of the Income Tax Act, which provides for the waiver or reduction of penalty if the taxpayer has cooperated and has paid the due tax and interest.

**c. **Submit a Formal Appeal:**

- **Appeal to the Commissioner of Income Tax (Appeals):** If the response to the penalty notice is not accepted, you can file an appeal with the Commissioner of Income Tax (Appeals) (CIT(A)). The appeal should include a copy of your response to the penalty notice, the proof of payment, and any additional evidence or arguments supporting your case.

### **3. **Points to Highlight in Your Appeal**

**a. **No Intentional Evasion:**

- **Emphasize Good Faith:** Clearly state that there was no intention to evade tax, and the mistake was purely an oversight. The TDS deducted reflects your actual income, and the tax has been paid accordingly.

**b. **Corrective Actions Taken:**

- **Rectification Measures:** Highlight that you took corrective actions as soon as the discrepancy was identified, including paying the differential tax with interest.

**c. **Mitigating Circumstances:**

- **No Previous Defaults:** If this is a first-time error and you have no history of default or evasion, this can be presented as a mitigating factor.

### **4. **Consult a Tax Professional**

**a. **Seek Expert Advice:**

- **Tax Consultant:** Consulting with a tax professional or legal advisor can provide you with detailed guidance tailored to your specific case. They can help in drafting the response and appeal effectively.

**b. **Legal Assistance:**

- **Representation:** If required, legal representation can assist in presenting your case before the tax authorities or during the appeal process.

### **Summary**

1. **Draft a detailed response** to the penalty notice explaining the oversight and providing proof of TDS and payment of differential tax with interest.
2. **Appeal the penalty** if necessary, citing relevant legal precedents and provisions that support your case.
3. **Consult a tax professional** to ensure your response and appeal are well-prepared and to get personalized advice.

By addressing the penalty notice with a well-structured response and demonstrating that there was no intentional evasion of tax, you increase the chances of a favorable outcome.