2015 (4) TMI 1093 - AT - Income Tax

Penalty under Section 271(1)(e) - disallowance of claim made by the assessee under the head interest paid - Held that - Any addition made by the AO should not lead to automatic levy of concealment penalty. Making a disallowance is different from levying penalty u/s.271(1)(c) of the Act. Fact of the case are that she had paid interest amounting to Rs. 32.40 lacs that she was under the bonafide belief that the same was an allowable expenditure that she had filed one of the plausible explanation before the AO during penalty proceedings. Considering the background and the tax effect involved we are of the opinion that it was not a fit case of levy/confirming the penalty. See Mahavir Irrigation Pvt.Ltd. 2011 (8) TMI 21 - DELHI HIGH COURT - Decided in favour of assessee.

Summary

Issues:
1. Penalty under Section 271(1)(c) of IT Act, 1961.
2. Delay in filing the appeal before the Tribunal.
3. Disallowance of interest paid and penalty levied under Section 271(1)(c) of the Act.

Issue 1: Penalty under Section 271(1)(c) of IT Act, 1961:
The appellant challenged the penalty imposed under Section 271(1)(c) of the IT Act, amounting to Rs. 49,558, by the Assessing Officer (AO) for filing inaccurate particulars of income. The appellant contended that she had not concealed any income and had relied on expert advice regarding the deductibility of interest paid against property income. The AO found discrepancies in the interest claimed and disallowed a portion of it, leading to the penalty imposition. The First Appellate Authority (FAA) upheld the AO's decision. However, the Tribunal, considering the appellant's genuine belief and explanation, reversed the FAA's order, citing that disallowance of a claim should not automatically result in a penalty under Section 271(1)(c) of the Act. The Tribunal referred to relevant case laws and decided in favor of the appellant, allowing the appeal and setting aside the penalty.

Issue 2: Delay in filing the appeal before the Tribunal:
The appellant sought condonation of a 14-day delay in filing the appeal before the Tribunal, attributing it to a misunderstanding of the appeal filing timeline. The Tribunal, after reviewing the facts and circumstances, including an affidavit from the appellant, deemed it fit to condone the delay, considering the appellant's explanation and lack of intentional delay.

Issue 3: Disallowance of interest paid and penalty imposition:
The AO disallowed a portion of the interest claimed by the appellant, leading to the penalty imposition under Section 271(1)(c) of the Act. The appellant argued that the disallowance should not automatically result in a penalty and cited cases supporting this argument. The Tribunal, after considering the appellant's genuine belief, the tax effect, and relevant case laws, reversed the FAA's decision, ruling in favor of the appellant and allowing the appeal. The Tribunal emphasized that making a disallowance does not necessarily warrant a penalty under Section 271(1)(c) of the Act.

In conclusion, the Tribunal allowed the appeal, setting aside the penalty imposed under Section 271(1)(c) of the IT Act, 1961, based on the appellant's genuine belief and explanation regarding the interest paid against property income, and considering that a disallowance does not automatically lead to a penalty.