2016 (7) TMI 751 - HC - Income Tax

Penalty imposed u/s. 13 of the Interest Tax Act 1974 - Held that - The ingredients/ basis for imposition of penalty are different and distinct from the ingredients in a taxing provision. Section 13 of the Interest Act provides that penalty is imposable only if the Assessing Officer is satisfied that the person has either filed inaccurate particulars or concealed the chargeable interest. In the present facts, the respondent-assessee has made a complete disclosure of the interest recovered from the borrowers including the interest amount of ₹ 91.21 Crores which was sought to be excluded.Thus in the present facts, two authorities viz CIT(A) and the Tribunal have on the basis of the disclosure made in the interest tax return have found, no concealment or filing of inaccurate particulars on the part of the respondent-asseseee. In fact, the Assessing Officer has itself accepted that all particulars had been disclosed as is evident from the order dated 2nd March, 2006 passed on reassessment proceedingss, for quantum. The claim made by the Respondent-assessee is a bona fide claim after having made a full disclosure by filing accurate particulars. Thus, no concealment. Therefore, no penalty under Section 13 of the Interest Act, can be imposed. - Decided in favour of assessee

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal under Interest Act and Income Tax Act for Assessment Year 2000-01; Justification for deleting penalty imposed by Assessing Officer under Section 13 of Interest Tax Act 1974; Claim of deduction of interest by respondent-assessee; Reassessment proceedings disallowing deduction of interest tax; Appeal to CIT(A) confirming Assessing Officer's order; Initiation of penalty proceedings by Assessing Officer; Bona fide claim based on Madras High Court decision; Deletion of penalty by CIT(A) and Tribunal; Imposition of penalty independent of quantum proceedings; Disclosure of interest recovered from borrowers; Interpretation of Section 2(7) of Interest Act; No concealment or inaccurate particulars filed; Bona fide claim with full disclosure; No imposition of penalty under Section 13 of Interest Act.

Analysis:
The High Court of Bombay heard an appeal challenging the order of the Income Tax Appellate Tribunal for Assessment Year 2000-01 under the Interest Act and the Income Tax Act. The main issue was the deletion of a penalty imposed by the Assessing Officer under Section 13 of the Interest Tax Act 1974. The respondent-assessee had filed interest tax returns showing chargeable interest at ?4472 Crores, deducting ?91.21 Crores from taxable interest based on the ground that it did not fall under the definition of interest in Section 2(7) of the Interest Act. The Assessing Officer initially accepted this deduction but later disallowed it in reassessment proceedings, leading to a penalty imposition.

During the penalty proceedings, the respondent-assessee argued that the deduction was made in good faith based on a decision of the Madras High Court and that there was complete disclosure with no inaccurate particulars filed. Despite this, the Assessing Officer imposed a penalty of ?2 Crores. However, the CIT(A) and the Tribunal later deleted the penalty, emphasizing the full disclosure made by the respondent-assessee and the bona fide nature of the claim regarding the deduction of ?91.21 Crores.

The High Court highlighted that penalty proceedings are independent of quantum proceedings and that the imposition of a penalty requires a different set of conditions, such as the filing of inaccurate particulars or concealment of chargeable interest. In this case, both the CIT(A) and the Tribunal found no concealment or inaccurate filing by the respondent-assessee, as all details were disclosed, and the Assessing Officer had accepted the particulars in the reassessment proceedings.

Ultimately, the High Court concluded that the claim made by the respondent-assessee was bona fide, with full disclosure and accurate particulars filed, leading to no concealment. Therefore, no penalty under Section 13 of the Interest Act should be imposed. The Court dismissed the appeal, stating that no substantial question of law arose from the case.