2022 (12) TMI 630 - AT - Income Tax

Penalty u/s 271(1)(c) - interest income earned during the year on fixed deposits and savings bank accounts were not offered to tax in the return of income filed for the assessment year under dispute - HELD THAT - While explaining the reason for not offering the interest income to tax in the return of income, the assessee had explained before the departmental authorities that the TDS figure and the corresponding income relating to second, third and fourth quarter of the relevant financial year were made available on the 26AS site only in September, 2017 by ICICI Bank. The aforesaid explanation of the assessee appears to be believable in view of the certificate issued by the concerned bank on 28th April, 2018. Therefore,there was reasonable cause in terms with section 274 of the Act in not offering the interest income to tax in the return of income. Departmental authorities have failed to consider the explanation of the assessee in proper perspective. In any case of the matter, the assessee has offered the entire interest income to tax whether in the return of income or in course of assessment proceeding. That being the factual position emerging on record, the assessee should not be visited with penalty under section 271(1)(c) of the Act. Accordingly, we delete the penalty imposed. Assessee appeal is allowed.

Summary

Issues:
Challenge to penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for assessment year 2015-16.

Analysis:

1. Background and Assessment Proceedings:
The appeal was filed challenging the penalty imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2015-16. The assessee, a resident individual, had initially declared an income of Rs. 5,87,730/- but later revised the computation to include interest income from fixed deposits and savings bank accounts. The Assessing Officer found disparities in the income declared and the actual interest earned, leading to the initiation of penalty proceedings.

2. Initial Assessment and Penalty Imposition:
The Assessing Officer initiated penalty proceedings under section 271(1)(c) alleging inaccurate particulars of income due to the undisclosed interest income. The assessee explained that the TDS information was not available earlier, leading to the omission in the original return. Despite the revised computation and explanation, the penalty of Rs. 1,66,504/- was imposed.

3. Appellate Tribunal's Analysis:
The Appellate Tribunal reviewed the case and noted that the assessee had indeed offered the entire interest income during the assessment proceedings, even if it was not initially included in the return. The Tribunal found merit in the explanation provided by the assessee regarding the delayed availability of TDS information on the 26AS site, supported by a certificate from the bank. This delay was considered a reasonable cause for the initial omission.

4. Decision and Ruling:
Based on the factual findings and the explanation provided by the assessee, the Appellate Tribunal concluded that there was a reasonable cause for the delay in offering the interest income to tax. Therefore, the penalty imposed under section 271(1)(c) was deemed unwarranted, and the Tribunal set aside the order of the Commissioner (Appeals) upholding the penalty.

5. Final Verdict:
Consequently, the appeal was allowed, and the penalty imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2015-16 was deleted. The decision was pronounced in the open court on 27th October 2022, in favor of the assessee.