2018 (4) TMI 627 - AT - Income Tax

Penalty u/s 271(1)(c) - legal heirs liability to pay tax on the amount received from NSS - Held that - Revenue has not disputed the fact that this amount was offered by the assessee out of his own will. It is also not in dispute that at the time of investment, the assessee was minor. After considering the totality of the facts that the issue of taxability of the income being debatable, we are therefore of the considered view that the authorities below were not justified imposing the penalty. Accordingly, we direct the AO to delete the said amount penalty. - Decided in favour of assessee.

Summary

Issues Involved:
Appeal against penalty imposed under section 271(1)(c) of the Income Tax Act for assessment year 2008-09.

Detailed Analysis:

1. Grounds of Appeal:
The assessee raised multiple grounds of appeal against the penalty imposed, including challenging the order as based on wrong interpretations of law, lack of reasons for rejecting submissions, and inconsistency with judicial pronouncements.

2. Assessment and Penalty Imposition:
The assessment under Section 143(3) revealed discrepancies in the declaration of income from a National Saving Scheme withdrawal. The Assessing Officer computed the amount as income and levied a penalty of ?1,88,640 under section 271(1)(c) of the Act. The CIT(A) upheld the penalty, leading to the appeal before the ITAT.

3. Assessee's Arguments:
The assessee contended that the amount was not taxable as it represented the father's investment in the scheme, not hers. The assessee had disclosed the interest income and TDS in the return. The assessee argued that the withdrawal should not be taxable as she did not claim deductions under section 80CCA.

4. Judicial Interpretation and Precedents:
The assessee highlighted legal provisions and circulars to support the argument that withdrawals from the National Saving Scheme should not be taxed if deductions were not claimed. The assessee emphasized that the penalty was unjustified due to a clerical error and inadvertent mistake, not an attempt to conceal income.

5. Tribunal's Decision:
The ITAT considered the debatable nature of the taxability issue, the fact that the assessee was a minor at the time of investment, and the voluntary disclosure of the amount. The tribunal concluded that the penalty was unwarranted and directed the AO to delete the penalty amount.

6. Conclusion:
The ITAT allowed the appeal, emphasizing that the penalty imposition was not justified based on the facts and legal arguments presented by the assessee. The tribunal's decision was based on the lack of intent to conceal income and the genuine nature of the mistake, leading to the deletion of the penalty amount.

This detailed analysis encapsulates the key issues, arguments, legal interpretations, and the final decision of the ITAT in the appeal against the penalty imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2008-09.