2020 (2) TMI 1306 - AT - Income Tax

Levying penalty u/s 271(1)(c) - receipt of interest on income tax refund u/s 244A - Timing of receipt of interest income and taxability of such interest in the year under consideration - HELD THAT - We are of the considered view that once the fact with regard to taxability of interest income in AY 2013-14 was not disputed by the Ld. AO then he is erred in levying penalty u/s 271(1)(c) of the Act 1961 for not offering interest income to tax for the year under consideration more particularly when the assessee has explained the reasons for not accounting and considering interest income to tax for the year under consideration. When the assessee has offered to tax interest income in subsequent financial year there is no reason for the Ld. AO to levy penalty on the same income for the year under consideration for not offering to tax said income because the timing difference in offering income to taxes cannot be considered as concealment of particulars of income or furnishing inaccurate particulars of income. AO as well as the Ld.CIT(A) were erred in levying penalty u/s 271(1)(c) in respect of additions towards interest on income tax refund. Hence we direct the Ld. AO to delete penalty levied u/s 271(1)(c) - Decided in favour of assessee.

Summary

Issues:
1. Confirmation of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Double addition of interest in different assessment years.

Issue 1 - Confirmation of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals)-42 confirming the penalty of ?3,03,756 imposed by the Assessing Officer under Section 271(1)(c) of the Income Tax Act, 1961 for the Assessment Year 2012-13. The Assessing Officer determined the total income by making additions towards interest received on income tax refund under Section 244A. The penalty was levied as the Assessing Officer believed that the assessee had deliberately concealed particulars of income by not disclosing the interest received on income tax refund. The assessee argued that there was no concealment or filing of inaccurate particulars of income as the interest was credited to the Income Tax Account by mistake and later rectified in the subsequent assessment year. The assessee contended that there was no deliberate attempt to evade tax, and the penalty should be deleted. The tribunal held that as the interest income was offered to tax in the subsequent financial year, there was no concealment of income or furnishing of inaccurate particulars of income. The tribunal directed the Assessing Officer to delete the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961.

Issue 2 - Double Addition of Interest in Different Assessment Years:
The assessee also raised the issue of double addition of interest in different assessment years, arguing that the interest amount was added in the Assessment Year 2012-13 and then offered as income in the subsequent Assessment Year 2013-14, resulting in double taxation. The tribunal noted that the interest income was indeed offered to tax in the subsequent financial year and that the timing difference in offering income to taxes cannot be considered as concealment of particulars of income or furnishing inaccurate particulars of income. The tribunal found that there was no justification for levying a penalty for the same income in the year under consideration. Therefore, the tribunal allowed the appeal filed by the assessee, directing the deletion of the penalty.

In conclusion, the Appellate Tribunal ITAT Mumbai ruled in favor of the assessee, directing the deletion of the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961, as there was no concealment of income or furnishing of inaccurate particulars of income. The tribunal also addressed the issue of double addition of interest in different assessment years, clarifying that the timing difference in offering income to taxes cannot justify a penalty for the same income in the year under consideration.