2019 (3) TMI 1152 - AT - Income Tax

Condonation the delay - negligence on the part of its staff - 27 days delay - HELD THAT - assessee is prevented by reasonable cause in not getting the appeal filed in time before the Tribunal. Therefore, we condone the delay and proceed to dispose of the appeal on merit. Penalty u/s 271(1)((c) - Exemption of interest income u/S 80P(2) - non disclosure of interest income on deposits not yet matured - HELD THAT - The assessee has bona fide belief and it has disclosed all complete details. It has given an explanation which was not found to be false. With regard to disallowance out of ghee, it was contended that it has shortage of 15 kgs. of ghee on account of pilferage or wastage. It became inedible, and therefore, it claimed the loss. There was a natural consequence in the working of the assessee-society. Similarly, food items might have deteriorated on account of time gap between the purchases and sales etc. There is no mala fide intention at the end of the assessee. As far as exclusion of interest income from exempt under section 80P(2) is concerned, this disallowance has been confirmed by the CIT(A) after taking into consideration decision in the case of SBI Employees Co. op. Credit & Supply Society Ltd.2016 (7) TMI 516 - GUJARAT HIGH COURT This decision has come subsequent to the return filed by the assessee. Therefore, prior to this decision, the position was not clear and remained debatable whether interest income from FDR made with nationalised banks will qualify for exemption under section 80P(2) or not. There are certain decisions also which are in favour of the assessee. Considering all these, we are of the view that assessee does not deserve to be visited with the impugned penalty, which is hereby cancelled and ground of the appeal of the assessee is allowed.

Summary

Issues: Appeal against order of CIT(A) for Asstt. Year 2013-14, Delay in filing appeal, Addition of interest income, Disallowance under section 80P(2), Imposition of penalty under section 271(1)(c).

Analysis:
1. Delay in Filing Appeal:
The appeal filed by the assessee was found to be barred by limitation. The assessee attributed the delay to the negligence of its staff who failed to inform the management about the order of CIT(A). The Tribunal, after considering the submissions, condoned the delay as it found the assessee was prevented by reasonable cause from filing the appeal in time. The delay was attributed to staff negligence, and the appeal was allowed to be adjudicated on merit.

2. Addition of Interest Income:
The AO noted a difference in interest income declared by the assessee from fixed deposits with SBI. The assessee claimed the difference was interest receivable but not received in the relevant year, and therefore, entitled to exemption under section 80P. However, the AO was not convinced and made the addition. The Tribunal, after considering the contentions, found that the assessee had disclosed complete details and had a bona fide belief. The explanation provided was not false, leading to the cancellation of the penalty imposed.

3. Disallowance under Section 80P(2):
The AO disallowed the exemption claimed by the assessee under section 80P(2) for interest income earned from nationalized banks. The disallowance was upheld by the CIT(A) based on a decision of the Gujarat High Court. However, the Tribunal noted that prior to this decision, the position regarding the exemption was debatable. Considering the uncertainty and certain decisions favoring the assessee, the Tribunal held that the assessee did not deserve the penalty imposed.

4. Imposition of Penalty under Section 271(1)(c):
The AO imposed a penalty on the assessee based on deemed concealment of income under section 271(1)(c). The penalty was calculated considering additions made by the AO, totaling taxes of a certain amount. The Tribunal analyzed the provisions of section 271(1)(c) and the deeming fiction regarding concealment of income. It found that the assessee had provided explanations for the discrepancies, and there was no mala fide intention. Consequently, the penalty was cancelled, and the appeal of the assessee was allowed.

In conclusion, the Tribunal allowed the appeal of the assessee, considering the genuine explanations provided for the discrepancies in income and disallowance under section 80P(2). The Tribunal emphasized the importance of bona fide beliefs and complete disclosure of facts in determining the imposition of penalties under the Income Tax Act.