2017 (6) TMI 780 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - addition of interest on compensation received as exempt u/s 10(37) not offered to tax - Held that - As at the time of filing of return of income since the interest received by it pertained to section 28 of the Land Acquisition Act, as claimed by the assessee all along and not disputed by the Revenue, he was of the belief that the interest was a capital receipt to be treated as compensation. Though section 145A(b) and Section 56(viii) do categorically state that interest on enhanced compensation is to be taxed on receipt but the said sections do not clarify that interest for the purposes of the said sections includes interest under section 28 of the Land Acquisition Act alongwith interest under section 34 of the Land Acquisition Act. The assessee therefore, we hold, had under a bonafide belief treated the interest on enhanced compensation as being in the nature of compensation, and thus exempt u/s 10(37) of the Act. The assessee having disclosed all particulars of his income pertaining to interest on enhanced compensation and having claimed the same as exempt under a bonafide belief, we hold that the assessee s case is squarely covered by case of Reliance Petroproducts (P.)ltd. 2010 (3) TMI 80 - SUPREME COURT which states that merely making an incorrect claim in law would not tantamount to furnishing of inaccurate particulars of income when admittedly information given in the return is not found to be incorrect or inaccurate. Further it cannot be said that the claim of the assessee was false and therefore the decision in the case of Zoom Communication (2010 (5) TMI 34 - DELHI HIGH COURT ) would not apply in the present case. - Decided in favour of assessee.

Summary

Issues Involved:
1. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Taxability of interest on enhanced compensation.
3. Bona fide belief regarding exemption under section 10(37) of the Income Tax Act, 1961.
4. Consistency in penalty decisions across similar cases.

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):
The primary issue in this case is the imposition of penalty under section 271(1)(c) for concealing particulars of income and furnishing inaccurate particulars of income. The assessee had claimed exemption on the interest received on enhanced compensation under section 10(37) in the Income Tax Return (ITR). The Assessing Officer (AO) imposed a penalty of ?15,45,849/- after adding 50% of the interest on enhanced compensation to the taxable income, arguing that the assessee was aware of its taxability but only disclosed it after being questioned.

2. Taxability of Interest on Enhanced Compensation:
The AO and the Commissioner of Income Tax (Appeals) [CIT(A)] held that the interest on enhanced compensation was taxable under sections 145A(b) and 56(viii) of the Income Tax Act, 1961. The AO noted that the assessee paid Advance Tax on the interest, indicating awareness of its taxability. The CIT(A) upheld the penalty, referencing judicial pronouncements and amendments that clarified the taxability of such interest, including the Supreme Court decision in CIT Vs. Ghanshyam (HUF) and the Punjab & Haryana High Court decision in CIT Vs. Bir Singh (HUF).

3. Bona Fide Belief Regarding Exemption under Section 10(37):
The assessee argued that the interest was claimed as exempt under a bona fide belief, supported by the Supreme Court decision in CIT Vs. Ghanshyam (HUF), which categorized interest under section 28 of the Land Acquisition Act as part of compensation. The Tribunal acknowledged that the assessee disclosed all particulars of the income and claimed the exemption based on this belief. It was noted that the sections 145A(b) and 56(viii) did not explicitly clarify that interest under section 28 was included, thus supporting the assessee's bona fide belief.

4. Consistency in Penalty Decisions Across Similar Cases:
The assessee contended that in a similar case involving his mother, the AO had dropped the penalty. The Revenue countered that each case should be decided based on its facts and law. The Tribunal found that the circumstances leading to the disclosure of income in both cases were similar, reinforcing the assessee's argument for consistency.

Judgment:
The Tribunal concluded that the assessee had disclosed all particulars of the income and claimed the exemption under a bona fide belief, which was supported by the Supreme Court's decision in Ghanshyam (HUF). The Tribunal held that merely making an incorrect claim in law does not amount to furnishing inaccurate particulars of income when the information provided is not incorrect or inaccurate. Consequently, the penalty under section 271(1)(c) was deleted, and the appeal was allowed.