2020 (10) TMI 1253 - AT - Income Tax

Penalty u/s 271(1)(c) - omission on the part of the assessee for not taking into account of the interest accumulated on the FDs maintained with various banks - HELD THAT - When individuals / HUF maintain Fixed Deposits in piecemeal with various banks the interest earned on the fixed deposits might be lost sight off as the interest gets automatically accumulated with the deposits. The need to evaluate those Fixed Deposits will arise only when funds are required for a specific purpose. In the case of the assessee-HUF it appears that the assessee took stock of the Fixed Deposits when they were in the process of purchasing the house property and the interest earned by those Fixed Deposit was inadvertently omitted to be taken into account. It is only an unintended omission on the part of the assessee. It is pertinent to mention that the decisions relied on by the ld. DR are not applicable to the facts and circumstances of these cases before us. Therefore in the interest of justice we hereby set aside the orders of the Ld. CIT (A) and further direct the Ld. AO to delete the penalty imposed as per section 271(1)(c) - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act for Assessment Year 2005-06.

Analysis:
The appeal was filed against the order of the Ld. CIT (A) upholding the penalty imposed by the Ld. AO under section 271(1)(c) of the Act. The case involved a Search & Seizure operation revealing transactions related to a house property purchase where the assessee omitted to declare interest income from Fixed Deposits. The Ld. AO levied a penalty on the assessee for concealing income, which was upheld by the Ld. CIT (A).

The Tribunal found no merit in the penalty imposed on the assessee. It noted that the omission of interest income was inadvertent and not a deliberate attempt to evade taxes. The Tribunal referred to a Supreme Court decision stating that failure to include income does not necessarily indicate concealment. The Tribunal emphasized that the interest on Fixed Deposits might be overlooked, especially when funds are not immediately required. It concluded that the omission was unintentional, and the decisions cited by the Revenue were not applicable to the case.

Based on the peculiar facts and circumstances, the Tribunal applied the Supreme Court's decision and overturned the orders of the lower authorities. The Tribunal directed the Ld. AO to delete the penalty imposed under section 271(1)(c) for the relevant Assessment Years, considering it as an unintended omission on the part of the assessee. The appeal of the assessee was allowed, and the penalty was set aside in the interest of justice.

In conclusion, the Tribunal ruled in favor of the assessee, highlighting that the inadvertent omission of interest income from Fixed Deposits did not amount to concealment of income. The decision emphasized the need to consider the specific circumstances of the case and the unintentional nature of the omission in determining the applicability of penalties under the Income Tax Act.