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2012 (9) TMI 612 - AT - Income TaxPenalty u/s 271(1)(c) - bogus claim of exemption of interest income on FDRs u/s. 80IB - Revenue contended interest on FDRs to be income from other sources - Held that - Appellant has demonstrated that interest on FDRs and interest received from customers had nexus with business inasmuch as such a claim made by the assessee in the immediately preceding assessment year 2001-02 where miscellaneous income including interest was disclosed at Rs.22,30,180 as his business income, the AO himself allowed deduction u/s 80IB on such claim made by him. It is in this backdrop the assessee can be said to have acted bona-fidely while claiming deduction on similar interest as his income derived from industrial undertaking thereby claiming deduction u/s 80IB in the same manner as was done in the immediately preceding year. In any event, at the time when the assessee returned income and made claim, there were two views possible on the issue under consideration and as such the assessee cannot be said to have made a false or mala-fide claim in the return of income filed by him. Assessee having demonstrated that he made a bona-fide claim. Merely because it is held that claim is not sustainable in law that by itself will also not amount to furnishing of inaccurate particulars regarding income of the assessee and as such it would not attract penalty u/s 271(1)(c) - Decided in favor of assessee
Issues:
1. Whether the assessee concealed income under explanation (1B) of section 271(1)(C) of the IT Act, 1961. 2. Whether the assessee's claim for deduction under section 80IB of the Act on interest income from FDRs was justified. 3. Whether penalty under section 271(1)(c) of the Act was rightly imposed on the assessee. 4. Whether the decision of the ld. CIT(A) to cancel the penalty was justified. Analysis: Issue 1: The Assessing Officer held that the assessee's income from interest on Fixed Deposit Receipts (FDRs) should be considered as income from other sources, not as income from industrial undertaking. The AO disallowed a portion of the deduction claimed by the assessee under section 80IB of the Act. The AO imposed a penalty under section 271(1)(c) of the Act, contending that the assessee had concealed income. The assessee argued that the interest income had a direct nexus with the business, as the FDRs were used for business purposes. The ld. CIT(A) found no intention to defraud the Revenue and relied on the judgment in CIT v. Reliance Petroproducts Pvt. Ltd. to cancel the penalty. Issue 2: The Revenue contended that the assessee made a wrong claim, citing the judgment in CIT v. Zoom Communication (P.) Ltd. The Revenue argued that if a claim is not only incorrect but also mala-fide, Explanation 1 to section 271(1)(c) of the Act applies. The Revenue asserted that the ld. CIT(A) erred in canceling the penalty without sufficient reason. The assessee maintained that the claim was bona fide, supported by previous assessments where similar claims were accepted. The Tribunal found that the assessee acted bona fide in making the claim, as there were two possible views on the issue. Issue 3: The Tribunal compared the present case with CIT v. Zoom Communication (P.) Ltd. and distinguished it based on the assessee's demonstration of a bona-fide claim. The Tribunal emphasized that the assessing authority did not find the explanation false or mala-fide. The Tribunal concluded that the claim, though unsustainable in law, did not amount to furnishing inaccurate particulars, thus not warranting a penalty under section 271(1)(c) of the Act. Issue 4: The Tribunal upheld the ld. CIT(A)'s decision to cancel the penalty, stating that the assessee substantiated the explanation and acted bona fide. The Tribunal found no reason to interfere with the decision, dismissing the Revenue's appeal. Overall, the Tribunal found in favor of the assessee, emphasizing the bona fide nature of the claim and the absence of mala-fide intent or inaccurate particulars, leading to the cancellation of the penalty imposed under section 271(1)(c) of the Act.
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