2016 (3) TMI 16 - AT - Income Tax

Penalty imposed U/s 271(1)(c) - assessee has made wrong claim of deduction U/s 10B on the interest income which is not an eligible income - Held that - The assessee had furnished details of interest in return and in audit report, therefore, no particulars of income have been concealed. The matter is debatable on the deduction U/s 10B is allowable on interest income or not, as such, the assessee had claimed that these receipts are directly linked with the export business. However, the explanation of the assessee was not found bonafide to the Assessing Officer but the fact is that all particulars of income has been disclosed and assessee s explanation is bonafide on facts and circumstances of the case. The issue is also debatable issue, no penalty U/s 271(1)(c) of the Act can be imposed. Hon ble Delhi High Court in the case of CIT Vs. Nalwa Sons Investments Ltd. (2010 (8) TMI 40 - DELHI HIGH COURT ) has held that any addition in regular assessment and thereafter the case is assessed U/s 115JB and finally tax paid by the assessee on the basis of Section 115JB of the Act. The concealment on account of any regular assessment, does not lead to evade the tax at all. Therefore, penalty U/s 271(1)(c) is not justified. In this year also, the assessee has disclosed all the particulars of income in return alongwith audit report. The matter is whether interest income has direct nexus with the export business or not. Therefore, we uphold the order of the ld CIT(A) in both the assessment years. - Decided in favour of assessee

Summary

Issues:
- Whether penalty imposed under Section 271(1)(c) of the IT Act for wrong claim of deduction under Section 10B on interest income is justified.

Analysis:
1. The appeals were filed against orders dated 18/07/2013 and 25/08/2014 by the CIT(A)-I, Jaipur for A.Ys. 2007-08 and 2008-09. The common ground was the deletion of penalty under Section 271(1)(c) for wrong deduction under Section 10B on interest income.
2. The Assessing Officer disallowed the deduction under Section 10B on interest income, leading to penalty imposition. The CIT(A) upheld the disallowance, but the penalty was deleted as it was deemed unjustified. The CIT(A) highlighted that mere disallowance of a claim does not imply concealment of income.
3. The Revenue appealed, arguing that interest income lacked a direct nexus with the export business, justifying the penalty. The Assessee contended that all income particulars were disclosed, and the claim was debatable. Case laws were cited to support the Assessee's position.
4. The Tribunal upheld the CIT(A)'s decision, emphasizing that the Assessee's explanation was bonafide, and all income details were disclosed. The Tribunal noted that the issue was debatable, preventing penalty imposition. The Tribunal also cited the Delhi High Court's ruling that concealment in regular assessment does not warrant penalty under Section 271(1)(c).

In conclusion, the Tribunal dismissed the Revenue's appeals, affirming the CIT(A)'s decision to delete the penalty under Section 271(1)(c) for the wrong claim of deduction under Section 10B on interest income.