2016 (9) TMI 14 - AT - Income Tax

Penalty u/s 271(1)(c) - salary that was omitted to be declared in the return of income - Held that - As observed that the tax has been deducted by the previous employers of the assessee to the extent of ₹ 7,88,334/-. On perusal of the return of income filed by the assessee, it is observed that the assessee has not claimed the TDS so deducted by previous employers and has only claimed the TDS in respect of employer from whom he drew his last salary during the end of the financial year relevant to Assessment Year under consideration. In such a situation, the possibility of bona fide mistake cannot be overruled. Ld. Assessing Officer has also not made any case against the assessee in respect of TDS not being deducted against the salary drawn during the year under consideration being insufficient. It is also observed that the assessee had fully cooperated during the assessment proceedings and had submitted sufficient details to establish the bona fide mistake that was committed inadvertently. However, the Assessing Officer did not agree to the explanation of the assessee and he initiated penalty proceedings u/s 271(1)(c) of the Act for filing inaccurate particulars of income. In our considered opinion, the assessee cannot be made liable for penalty as there is a bona fide mistake of omission in not showing the salary received from the previous employers. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasicriminal proceedings and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. From the ROI filed by the assessee, it has been demonstrated that the assessee has failed to claim the TDS deducted by the earlier employers. The conduct of the assessee supports the explanation tendered and therefore, a deliberate omission to include the salary received from previous employer cannot be established.Accordingly, we delete the penalty levied by the Assessing Officer in respect of omission to disclose the salary received from the previous employers on which TDS had already been deducted by them. Interest on housing loan - Held that - From the Paper Book filed before us, the assessee has referred page 22 which is the certificate of interest issued by HDFC bank. It has been submitted that the housing loan is in the joint name of his wife as the house property was purchased in the joint name. However Ld. A.R. submitted that the interest was paid by the assessee from his account; therefore the assessee has claimed deduction of total amount in his return of income. Ld. A.R. submitted that the assessee was under the bona fide belief that as he was paying the interest, the deduction should also be claimed by him alone. We find that explanation given by the assessee has not been accepted by the Ld. A.O. for which a penalty cannot believed u/s 271(1)(c) of the Act. Reliance has been placed on the decision of Hon ble Supreme Court in the case of Reliance Petro Products Ltd. 2010 (3) TMI 80 - SUPREME COURT which hold that mere disallowance of any claim will not automatically lead to levy of penalty u/s 271(1)(c) of the Act. Further, there is no material that has been brought on record by the Ld. A.O. to prove that the assessee has consciously concealed any particulars pertaining to his income or has supplied inaccurate particulars deliberately. We are therefore, inclined to delete the penalty levied by the A.O. in respect of interest on housing loan. In respect of interest earned by the assessee on saving bank account, the disallowance that has been made by the Assessing Officer is to the extent of ₹ 12,863/-. Ld. A.R. has submitted that the assessee has been filing his return without any professional assistance and was not aware about the interests so earned on saving bank is taxable in the hands of the assessee. Therefore, explanation advanced by the assessee cannot be accepted as such interest on saving bank accounts is credited to the assessee s bank account during every financial year. It cannot be a case where assessee has been consistently filing his returns personally was ignorant that interest so earned from saving bank being taxable. The explanation tendered by the assessee is not acceptable for the simple reason that the assessee has been filing his return every year and interest on saving bank account accrues to assessee in every assessment year. We, therefore, upheld the penalty levied by the Ld. A.O. on such interest on saving bank account. Credit card expenses - Held that - As observed from the assessment order that the assessee had made expenses of ₹ 3,12,137/- as seen from the AIR information, through credit card. On calling for the details by Ld. A.O., assessee submitted the bank account and was not able to submit the credit card statement for verification of such expenses. Ld. A.O. has verified the expense amounting to ₹ 1,50,843/- which appears in the bank statement. As the remaining expense have been ₹ 1,61,294/- for the expenses made through credit card which was not verifiable, the same was added to the income of the assessee. It has been observed that the addition had been made for want of evidence / explanation. As the assessee has not submitted proper explanation in support of expenses made through credit card. We do not find any infirmity in levying penalty on such amount. In view of above, we confirm the penalty levied by the Assessing Officer for submitting wrong explanation in respect of credit card expenses. Decided partly in favour of assessee.

Issues Involved:

1. Interpretation and application of Section 271(1)(c) regarding penalty for concealment of income.
2. Non-disclosure of salary income and its implications.
3. Bona fide belief and its impact on penalty for non-disclosure.
4. Voluntary acceptance of income and payment of demand.
5. Treatment of credit card expenses as income.
6. Penalty on disallowance of housing loan interest and credit card expenses.
7. Consideration of tax already deducted and deposited for penalty calculation.
8. Inclusion of tax already deducted in the tax sought to be evaded.
9. Penalty on routine additions.
10. Excessiveness of the penalty levied.

Detailed Analysis:

1. Interpretation and Application of Section 271(1)(c):
The appellant argued that the penalty order was bad in law and that Section 271(1)(c) was wrongly applied. The Tribunal analyzed the applicability of this section, emphasizing that penalty under this section is a quasi-criminal proceeding and should not be imposed unless there is a deliberate act of defiance or dishonest conduct.

2. Non-disclosure of Salary Income:
The appellant failed to disclose salary income from two other institutions amounting to ?30,47,245/- against which TDS of ?7,88,334/- was deducted. The Tribunal noted that the appellant did not claim the TDS deducted by previous employers, indicating a bona fide mistake. The Tribunal held that the omission was not deliberate and deleted the penalty related to the non-disclosure of salary income.

3. Bona Fide Belief and Non-disclosure:
The appellant contended that the non-disclosure of salary income was due to a bona fide belief that TDS had already been deducted and no further disclosure was required. The Tribunal accepted this explanation, citing the Supreme Court's decision in Price Waterhouse Coopers vs. CIT, which acknowledged that even professionals can commit bona fide inadvertent errors.

4. Voluntary Acceptance of Income and Payment of Demand:
The appellant voluntarily accepted the income during the assessment proceedings and paid the demand without further appeal. The Tribunal considered this conduct as supportive of the appellant's bona fide mistake and not indicative of an intention to conceal income.

5. Treatment of Credit Card Expenses as Income:
The Assessing Officer added ?1,61,294/- as income due to unverifiable credit card expenses. The Tribunal upheld the penalty on this amount, noting that the appellant failed to provide proper evidence or explanation for these expenses.

6. Penalty on Disallowance of Housing Loan Interest and Credit Card Expenses:
The Assessing Officer disallowed 50% of the housing loan interest claimed by the appellant, amounting to ?31,756/-. The Tribunal found that the appellant's explanation for claiming the full amount was based on a bona fide belief and deleted the penalty. However, the penalty on credit card expenses was upheld due to the lack of proper explanation.

7. Consideration of Tax Already Deducted and Deposited for Penalty Calculation:
The appellant argued that the penalty should not consider the portion of tax already deducted and deposited. The Tribunal acknowledged that the appellant did not claim the TDS deducted by previous employers, supporting the bona fide mistake explanation.

8. Inclusion of Tax Already Deducted in the Tax Sought to be Evaded:
The Tribunal noted that the tax already deducted by previous employers should not be included in the tax sought to be evaded, as the omission was not deliberate.

9. Penalty on Routine Additions:
The appellant argued that penalties should not be levied on routine additions made in an illegal manner. The Tribunal differentiated between debatable claims and patently wrong claims, upholding penalties only where the appellant failed to provide valid explanations.

10. Excessiveness of the Penalty Levied:
The appellant contended that the penalty levied was highly excessive. The Tribunal partially agreed, deleting penalties related to the non-disclosure of salary income and housing loan interest but upholding penalties on credit card expenses and interest on the saving bank account.

Conclusion:
The Tribunal partly allowed the appeal, deleting penalties related to the non-disclosure of salary income and housing loan interest while upholding penalties on credit card expenses and interest on the saving bank account. The decision emphasized the importance of bona fide mistakes and the necessity of providing valid explanations for claimed deductions.

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