2017 (6) TMI 450 - AT - Income Tax

Penalty u/s 271(l)(c) - short disclosure of interest on Income tax refund - Held that - Admittedly there is a mistake committed by the assessee in not adding interest on the refund to his sources of income. There is no disputing the fact that the tax payer duly and diligently must necessarily in its return of income disclose all avenues of his income. The assessee in its defence has consistently maintained that the mistake has occurred as the information in regard to the said interest was not available in the public domain namely 26AS form of the assessee firm downloaded from the system and lack of any other intimation also available to the assessee from the Income Tax Department. These facts are not rebutted by the Revenue as CIT(A) has confirmed the penalty holding that it was the duty of the assessee to check and recheck the avenues of his income. The fact that it was the duty of the tax payer to follow due diligence cannot be over emphasized. Assessee is not a habitual defaulter and as per the assessment order is shown to be trading in wood . There is nothing on record to show that it was an act of concealment nor is there any fact on record that there was a deliberate filing of inaccurate particulars of income. No doubt the assessee is expected to show due diligence and is mandatorily required to disclose all avenues of income before filing of his return. The mistake in the peculiar facts as considered in the decision of Apex Court in the case of Price Waterhouse Coopers (P.) Ltd. (2012 (9) TMI 775 - SUPREME COURT) being a bonafide or inadvertent mistake cannot be the basis for levying or upholding the penalty - Appeal of the assessee is allowed.

Summary

Issues:
1. Correctness of the assessment order upheld by CIT(A)
2. Imposition of penalty u/s 271(l)(c) for short disclosure of interest on Income tax refund
3. Receipt of no intimation u/s 143(1) by the assessee firm
4. Mismatch in refunds received by the assessee firm
5. Passing of order by CIT(A) without considering facts and submissions made by the assessee

Analysis:

Issue 1: Correctness of the assessment order upheld by CIT(A)
The appellant contested the assessment order, claiming that the CIT(A) failed to discharge duties as an appellate authority, leading to a prejudicial order. The appellant argued that the assessment order was bad in law and not in line with the case's facts. The AR highlighted the list of dates and events in the written submissions, emphasizing that the addition leading to the penalty was not challenged by the assessee. The appellant's main defense was the lack of knowledge regarding interest on the income tax refund, as no intimation was received, and Form 26AS showed nil interest. The AR argued that the penalty was unjustly levied and should be quashed.

Issue 2: Imposition of penalty u/s 271(l)(c) for short disclosure of interest on Income tax refund
The Senior DR supported the penalty, stating that the assessee failed to disclose the full interest income on the refund, leading to a justifiable addition. The CIT(A) dismissed the claim that the assessee was unaware of the interest received, citing the statutory duty to report all income accurately. The onus was placed on the assessee to verify and report all income sources correctly, including interest on refunds. The appellant's submission that this was a first-time mistake and not intentional was noted.

Issue 3: Receipt of no intimation u/s 143(1) by the assessee firm
The appellant argued that no intimation under section 143(1) was received, and the only available source for interest on refunds was Form 26AS, which showed nil interest. The appellant maintained that the mistake was inadvertent due to lack of information and should not lead to penalty imposition.

Issue 4: Mismatch in refunds received by the assessee firm
The appellant explained the mismatch in refunds received against the dues for specific assessment years, highlighting discrepancies in the amounts. This mismatch led to confusion regarding the exact interest on refunds, contributing to the inadvertent error in reporting.

Issue 5: Passing of order by CIT(A) without considering facts and submissions made by the assessee
The appellant criticized the CIT(A) for not considering the case's facts and the submissions made by the assessee firm. The AR emphasized the inadvertent nature of the mistake and argued that it did not amount to concealment, citing various legal precedents to support this claim.

In the final judgment, the Tribunal acknowledged the mistake made by the assessee in failing to disclose interest income on the refund. However, considering the inadvertent nature of the error, the Tribunal set aside the penalty, noting that there was no deliberate concealment or filing of inaccurate particulars of income. The judgment highlighted the importance of due diligence by taxpayers but recognized the appellant's explanation as a genuine mistake. Consequently, the penalty order was quashed, and the appeal of the assessee was allowed.