1979 (5) TMI 65 - AT - Income Tax

Summary

Issues:
- Appeal against the cancellation of penalty under section 271(1)(c) of the IT Act for the assessment years 1970-71, 1971-72, and 1972-73.
- Disallowance of interest claimed as payable but not paid.
- Imposition of penalty for alleged concealment of income.
- Appeal against the cancellation of penalties imposed by the Income Tax Officer (ITO).

Analysis:
The case involved three appeals by the Revenue against the cancellation of penalties under section 271(1)(c) of the IT Act for the assessment years 1970-71, 1971-72, and 1972-73. The appeals were in response to the decision of the Appellate Assistant Commissioner (AAC) canceling the penalties imposed by the ITO. The main issue revolved around whether the assessee had concealed income by not showing interest due on an accrual basis. The ITO reopened the assessments under section 147 and imposed penalties for alleged concealment of income. The Tribunal upheld the inclusion of interest on an accrual basis but deleted the disallowance of interest payable but not paid.

In the case, the ITO contended that the assessee should have accounted for interest on an accrual basis, while the assessee maintained that interest was shown only on a receipt basis. The ITO imposed penalties for each year, alleging concealment of income. However, the AAC found that there was a genuine difference of opinion and canceled the penalties. The Revenue appealed, arguing that there was a clear attempt to conceal income, while the assessee's counsel supported the AAC's decision.

To analyze the case comprehensively, the Tribunal requested particulars of interest actually received in each accounting period. It was revealed that interest had been received and accounted for in some instances but not considered during the assessment. The Tribunal found that the assessee had a bona fide belief that interest should be shown only on a receipt basis, leading to the non-reporting of interest income on a due basis. Despite the Revenue's argument for accrual basis taxation, the Tribunal concluded that the penalties under section 271(1)(c) were not applicable in this case due to the assessee's genuine belief. Therefore, the Tribunal upheld the AAC's decision to cancel the penalties, and the appeals were dismissed.