2017 (4) TMI 972 - HC - Income Tax

Levying of penalty under Section 13 of the Interest-Tax Act, 1974 - interest on securities and interest on head office investment account - whether the assessee has concealed the particulars of interest nor furnished inaccurate particulars of interest ? - Held that - There was no occasion for the respondent Bank to show interest on securities and interest on head office investment account, because same was made chargeable pursuant to Board s instructions No. 1923 dated 14.3.1995 and that too for the period October, 1991 to 31.3.1992 and as such there is no concealment, if any, on the part of assessee. Learned counsel representing the appellant was unable to dispute that interest on securities and interest on head office investment account was made chargeable pursuant to Board s instructions No. 1923 dated 14.3.1995 and as such, this Court sees no occasion for assessee Bank to declare same in its profit and loss account, wherein it had declared interest of ₹ 39.98 Crores, on approved securities for the period 1.10.1991 to 31.3.1992. Otherwise also, penalty order dated 28.5.2010 passed under Section 13 of the Interest-Tax Act, 1974, nowhere suggests that appellant was able to prove on record that assessee concealed particulars of interest or furnished inaccurate particulars of interest, rather, careful examination of material available on record clearly suggests that assessee had furnished complete particulars of its income in the profit and loss account and as such, there is no illegality or infirmity in the order passed by learned Tribunal below, whereby it has held that there is no merit in holding assessee liable to pay penalty under Section 13 of the Interest-Tax Act, 1974. Thus, this Court sees no illegality or infirmity in the order passed by learned Tribunal below, whereby it has deleted penalty on the ground that interest became chargeable to tax only after Board s instructions No. 1923 dated 14.3.1995, because, admittedly, interest on securities and interest on head office investment account was made chargeable pursuant to Board s instructions, which could certainly be not made applicable to the assessment made for the period October, 1991 to 31.3.1992.- Decide against the appellant/ revenue.

Issues Involved
1. Failure to file return of chargeable interest within the stipulated period.
2. Imposition of penalty under Section 13 of the Interest-Tax Act, 1974.
3. Applicability of Section 271(1)(c) of the Income-Tax Act, 1961 to the Interest-Tax Act, 1974.
4. Determination of whether the assessee concealed particulars of interest or furnished inaccurate particulars.

Detailed Analysis

1. Failure to File Return of Chargeable Interest
The assessee, H.P. State Co-operative Bank Ltd., failed to furnish its return of chargeable interest for the relevant year within the stipulated period as prescribed under Section 7 of the Interest-Tax Act, 1974. The return was eventually filed on 19.2.1996 in response to a notice issued under Section 10 of the Interest-Tax Act, 1974.

2. Imposition of Penalty Under Section 13 of the Interest-Tax Act, 1974
The Assessing Officer initially imposed a penalty of ?1,49,67,486 under Section 13 of the Interest-Tax Act, 1974, which was later reduced to ?49,89,162 by the Commissioner Income Tax (Appeals). The Tribunal, however, set aside the penalty, noting that the provisions of the Interest-Tax Act, 1974, do not correspond to Explanation 3 of Section 271(1)(c) of the Income-Tax Act, 1961.

3. Applicability of Section 271(1)(c) of the Income-Tax Act, 1961
The Tribunal held that there is no provision under the Interest-Tax Act, 1974, corresponding to Explanation 3 to Section 271(1)(c) of the Income-Tax Act, 1961. This Court agreed, noting that Section 271(1)(c) could not be invoked for imposing penalties under the Interest-Tax Act, 1974. The Court emphasized that Section 13 of the Interest-Tax Act, 1974, provides for penalty only if the assessee has concealed particulars of chargeable interest or furnished inaccurate particulars.

4. Determination of Concealment or Furnishing Inaccurate Particulars
The Court examined whether the assessee had concealed particulars of interest or furnished inaccurate particulars. It was noted that the assessee had declared total interest in its profit and loss account and had paid advance tax. The interest on securities and head office investment account became chargeable only pursuant to Board’s Instructions No. 1923 dated 14.3.1995, for the period from October 1991 to 31.3.1992. The Tribunal found no evidence of concealment or furnishing of inaccurate particulars by the assessee.

Conclusion
The Court upheld the Tribunal's decision, confirming that the penalty under Section 13 of the Interest-Tax Act, 1974, was not applicable as the assessee had not concealed particulars of interest or furnished inaccurate particulars. The appeal was dismissed, and the substantial questions of law were answered in favor of the respondent.

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