2013 (3) TMI 373 - HC - Income Tax

Penalty u/s 271(1)(c) - interest received on 6% Government of India Capital Index tax free bonds which was accepted by the assessee during the course of assessment proceedings and not offered voluntarily - ITAT cancelled the penalty levy - Held that - Tribunal in the impugned order records a finding of fact that by inadvertent mistake interest @ 6% on the Government of India Capital Index Bonds was shown as tax free bonds as there was no desire on the part of the assessee to hide or conceal the income so as to avoid payment of tax on interest from the bonds & as the decision of the Tribunal is based on finding of fact that there was an inadvertent mistake on the part of the assessee & it is not contended by the Revenue that above finding of fact by the Tribunal is perverse. Thus no reason to entertain the proposed question - in favour of assessee. Penalty u/s.271(1)(c) - addition made treating premium received on redemption of debentures as income from other sources against claim of assessee as capital gain - ITAT cancelled the penalty levy - Held that - As it is not the case of the department that the assessee had concealed any particulars of income or furnished inaccurate particulars of income by stating incorrect facts, thus there is only a change of head of income and in the absence of any facts that the claim of the assessee was not bonafide - Tribunal was correct to delete penalty- in favour of assessee.

Summary

Issues:
1. Justification of ITAT in canceling penalty under Section 271(1)(c) for interest on tax-free bonds.
2. Justification of ITAT in canceling penalty under Section 271(1)(c) for treating premium on debentures as income from other sources.

Analysis:
1. The first issue revolves around the inadvertent categorization of interest on Government of India Capital Index Bonds as tax-free bonds by the respondent assessee. The assessing officer levied a penalty under Section 271(1)(c) of the Income Tax Act, which was upheld by the CIT(A). However, the Tribunal found that there was no intention to hide income and deleted the penalty. The Tribunal's decision was based on the factual finding of inadvertent mistake, which the Revenue did not challenge as perverse. Consequently, the High Court dismissed the appeal, citing no reason to entertain the question.

2. The second issue concerns the treatment of premium on redemption of debentures by the respondent assessee. While the assessing officer considered it as revenue receipt taxable under income from other sources, the respondent treated it as income from capital gains. The penalty under Section 271(1)(c) was imposed and confirmed by the CIT(A), but the Tribunal overturned it. The Tribunal noted that the respondent disclosed the premium amount and there was no concealment of income. As the dispute was regarding the classification of income and not concealment, the penalty was deleted. The High Court found no perversity in the Tribunal's decision and dismissed the appeal, seeing no reason to entertain the question raised.

In conclusion, the High Court upheld the Tribunal's decisions in both issues, leading to the dismissal of the appeal with no order as to costs.