2018 (8) TMI 125 - AT - Income Tax

Penalty u/s 271(1)(c) - undisclosed interest income on FDR - Held that - No doubt, the assessee in the returns filed in response to the notice u/s 148 for both the years did not offer the interest income on FDR to tax and claimed the same as exempt. At the same time, it is to be kept in mind that all particulars were very much available in the records based on which the Assessing Officer had reopened the assessment and also made the addition subsequently in the reopening assessment. We find merit in the argument of the ld. counsel for the assessee that the claim of exemption made by the assessee can at best be a wrong claim but it cannot be called a false claim. The Courts have invariably held in various decisions that while the penalty proceedings u/s 271(1)(c) are attracted for making a false claim, however, such penalty is not leviable merely because the assessee has made a wrong claim - merely because the assessee has claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue that by itself would not, in our opinion, attract the penalty u/s 271(1)(c). - Decided in favour of assessee

Summary

Issues:
1. Condonation of delay in filing appeals.
2. Penalty under section 271(1)(c) for assessment years 2007-08 and 2008-09.
3. Justifiability of penalty for concealment of income.

Analysis:
1. Condonation of Delay: The assessee filed appeals against orders confirming penalties for assessment years 2007-08 and 2008-09. A delay of 54 days was present, attributed to the Convenor Finance's preoccupation with travel arrangements to the USA. The delay was condoned after hearing both sides.

2. Penalty Imposition: The original assessment for 2007-08 was completed on Nil income for a mutual benefit club. Subsequently, interest income was added based on a High Court decision. The Assessing Officer imposed a penalty under section 271(1)(c), which was confirmed by the CIT(A). The assessee argued against the penalty, citing debatable issues and reliance on legal precedents. The Tribunal considered the timing of law changes and the nature of the claim, ultimately canceling the penalties for both years.

3. Justifiability of Penalty: The Tribunal noted that the law favored the assessee at the time of filing returns, and the claim, though incorrect, was not false. Citing the Supreme Court's decision in Reliance Petroproducts Pvt. Ltd., the Tribunal emphasized that a wrong claim does not equate to concealment. The Tribunal also highlighted the CIT(A)'s cancellation of penalties in other assessment years, aligning with legal principles. Consequently, the penalties for both assessment years were canceled, emphasizing that all details were available in the assessment records, and it was not a fit case for penalty imposition.

In conclusion, the Tribunal allowed both appeals, canceling the penalties imposed under section 271(1)(c) for assessment years 2007-08 and 2008-09, based on the timing of legal changes, the nature of the claim, and the absence of concealment.