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2021 (9) TMI 964 - AT - Income TaxPenalty levied u/s 271(1)(c) - non disclosure of the interest income - bonafied belief - Addition made on account of interest income earned on FDRs made out of funds received by the assessee for two projects - HELD THAT - We find, are identical, with that of A.Y 2007-08 to 2011-12 2015 (1) TMI 1464 - ITAT CHANDIGARH penalty having been levied on identical income of interest earned on FDR s made from the same specific purpose funds, i.e RGCTP and JNNRUM, And relates to A.Y 2012-13, which is prior to the settlement of the dispute on 14-03-2013. The decision rendered by the ITAT in the preceding years therefore, deleting the penalty levied by holding that the agreement to levy no penalty would apply, that the non disclosure of the interest income was under a bonafide belief that it was non taxable, would squarely apply in the present case also. The argument of the Ld.DR that the settlement of the dispute was year specific merits no consideration as we find that the ITAT had categorically held in its order passed for A.Y 2010-11 2011-12 that the settlement was issue specific and not year specific and applied to all interest incomes not returned upto the date of settlement. We see no reason to interfere in the order of the Ld.CIT(A) and the appeal filed by the Revenue is, therefore, dismissed.
Issues Involved:
1. Deletion of penalty levied under Section 271(1)(c) of the Income Tax Act, 1961. 2. Whether the non-disclosure of interest income was under a bona fide belief. 3. Applicability of the agreement between the assessee and the department regarding no penalty. 4. Whether the agreement was year-specific or issue-specific. 5. Relevance of previous judgments and settlements on the current assessment year. Issue-wise Detailed Analysis: 1. Deletion of Penalty Levied under Section 271(1)(c) of the Income Tax Act, 1961: The Revenue appealed against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], which deleted the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was initially imposed due to the non-disclosure of interest income earned on FDRs from project funds related to RGCTP and JNNURM. The CIT(A) deleted the penalty, considering the explanation provided by the assessee and the fact that identical penalties in preceding years had been deleted by the ITAT. 2. Whether the Non-disclosure of Interest Income was under a Bona Fide Belief: The assessee argued that the non-disclosure of the interest income was based on a bona fide belief that the funds did not belong to it but were held as a nodal agent for government projects. This belief was later settled amicably with the department, where it was agreed to treat the interest as the assessee's income, and no penalty would be levied for non-disclosure. The CIT(A) accepted this explanation, noting that the belief was genuine and based on the specific nature of the funds. 3. Applicability of the Agreement between the Assessee and the Department Regarding No Penalty: The CIT(A) and ITAT considered the agreement reached between the assessee and the department, which was recorded in the 'Record of Discussions' and later upheld by the Supreme Court. This agreement stated that no penalty would be levied on the assessee for the non-disclosure of interest income. The ITAT had previously deleted penalties for assessment years 2007-08, 2008-09, and 2009-10 based on this agreement. 4. Whether the Agreement was Year-specific or Issue-specific: The Revenue contended that the agreement was specific to the assessment year 2007-08. However, the ITAT held that the agreement was issue-specific and applied to all years affected by the issue until the dispute was resolved in 2013. This interpretation was supported by the fact that the ITAT had deleted penalties for subsequent years (2010-11 and 2011-12) on the same grounds. 5. Relevance of Previous Judgments and Settlements on the Current Assessment Year: The ITAT referenced its previous decisions and the Supreme Court's order, which indicated that the agreement for no penalty was not limited to a specific year but related to the issue of the assessee's role as a nodal agency. The ITAT concluded that the non-disclosure of interest income was under a bona fide belief and that the agreement for no penalty applied to the assessment year 2012-13 as well. Conclusion: The ITAT upheld the CIT(A)'s order, finding no infirmity in the deletion of the penalty. The ITAT emphasized that the agreement between the assessee and the department, supported by the Supreme Court, was issue-specific and applied to all relevant years. The appeal by the Revenue was dismissed, affirming that the non-disclosure of interest income was under a bona fide belief and that no penalty should be levied.
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