2022 (6) TMI 333 - AT - Income Tax

Penalty u/s 271(1)(c) - concealment of income or furnishing inaccurate particulars of income - HELD THAT - As assessee has paid the tax on the addition sustained by CIT(A) in the subsequent year. Therefore, in our considered opinion, the case of the assessee is not a fit case to impose penalty u/ 271(1)(c) of the Act. Therefore, we inclined to delete the penalty imposed by A.O which has been confirmed by the CIT(A). Accordingly, we set aside the penalty order passed by A.O and also the order of CIT(A) by allowing the grounds of appeal.

Summary

Issues:
- Appeal against penalty imposed under section 271(1)(c) of the Income Tax Act
- Assessment year 2012-13
- Disallowance under section 14A and Rule 8D
- Addition of interest income due to discrepancy between 26AS and books of account
- Challenge before CIT(A) regarding disallowance under section 14A
- Explanation provided by the assessee regarding interest income
- Imposition of penalty by Deputy Commissioner of Income Tax
- Appeal before CIT(A) against penalty
- Grounds of appeal challenging the penalty
- Arguments presented by the assessee's counsel
- Auditor's certificate confirming interest income disclosure
- Decision to delete the penalty imposed by A.O and confirmed by CIT(A)

Analysis:

The appeal in this case pertains to the penalty imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2012-13. The assessment order included disallowance under section 14A read with Rule 8D and an additional amount due to a variance between the interest income in 26AS and the books of account. The assessee challenged the disallowance under section 14A before the CIT(A), where it was deleted. Subsequently, penalty proceedings were initiated, and the assessee provided explanations citing various legal precedents to support their position.

The Deputy Commissioner of Income Tax imposed a penalty of 100% based on the explanation provided by the assessee, which was deemed unsatisfactory. The assessee then appealed the penalty order before the CIT(A), who upheld the penalty imposed by the Assessing Officer. The grounds of appeal filed by the assessee challenged the penalty on various points, including the lack of concealment or inaccurate particulars of income, the establishment of bona fides, and the legality of the notice initiating the penalty.

During the proceedings, the assessee's counsel vehemently argued that there was no concealment of income, especially concerning the interest income discrepancy, as the tax had been paid in the subsequent year. The counsel presented an auditor's certificate confirming the disclosure of interest income, which further supported the assessee's position. Ultimately, the Tribunal decided to delete the penalty imposed by the Assessing Officer and confirmed by the CIT(A), based on the complete disclosure of facts by the assessee and the payment of tax on the disputed income in the following year.

In conclusion, the Tribunal allowed the appeal filed by the assessee, emphasizing the importance of full disclosure and the absence of concealment or inaccurate particulars of income in the imposition of penalties under section 271(1)(c) of the Income Tax Act.