2016 (4) TMI 942 - AT - Income Tax

Penalty u/s 271(1)(c) - claim made by the assessee that the interest on the Non-resident Non-repatriable account deposits is exempted from taxation - Held that - The assessee filed the return of income in the status of resident . In the note filed alongwith the return of income, the assessee claims that he was a non-resident upto assessment year 2001-02. The assessee has also indicated in the note filed alongwith the return of income that the investment made in the securities and bank deposits are out of the remittance made from abroad. AO, after examining the claim of the assessee, found that the interest from the maturity of Non-resident Non-repatriable account deposits is not entitled for exemption u/s 10(4) of the Act. Accordingly, the interest on the Non-resident Non-repatriable account deposits was added to the total income. The Assessing Officer has also levied penalty u/s 271(1)(c) of the Act on the ground that the claim made by the assessee that the interest on the Non-resident Non-repatriable account deposits is exempted from taxation. This Tribunal is of the considered opinion that after furnishing all the details for making a claim before the Assessing Officer under the Income-tax Act, 1961, cannot be construed as furnishing inaccurate particulars of income. The details of deposits made by the assessee and the interest accrued on such deposits are very much available before the Assessing Officer. During the course of assessment proceedings, the assessee claimed that interest on such deposit is exempt from taxation. This Tribunal is of the considered opinion that this claim cannot be construed as furnishing of inaccurate particulars of income in view of the judgment of the Apex Court in Reliance Petroproducts Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT ). - Decided in favour of assessee

Summary

Issues:
Assessment of interest income on non-resident deposits, claim of exemption under sections 10(4) and 10(15) of the Income Tax Act, penalty under section 271(1)(c) for furnishing inaccurate particulars of income.

Analysis:

Assessment of Interest Income:
The assessee, a non-resident, had made deposits in a scheduled bank, which were subsequently converted into a Non-resident Non-repatriable account. The Assessing Officer contended that the interest income of a significant amount was taxable for the assessment year 2005-06 due to the assessee's residential status being 'resident'. However, the assessee claimed that the interest income was exempt under sections 10(4)(i) and 10(15) of the Act. The dispute arose regarding the taxability of this interest income based on the accounting system followed by the assessee.

Claim of Exemption under Sections 10(4) and 10(15):
The assessee argued that the interest income from the non-resident deposits was exempt from taxation, citing provisions under sections 10(4) and 10(15) of the Act. The Assessing Officer and the CIT(A) disagreed with this claim, leading to the initiation of penalty proceedings under section 271(1)(c) for allegedly furnishing inaccurate particulars of income. The key contention was whether the claim of exemption constituted furnishing inaccurate particulars, warranting the penalty.

Penalty under Section 271(1)(c):
The Assessing Officer imposed a penalty under section 271(1)(c) due to the assessee persistently claiming exemption for the interest income. The CIT(A) upheld this penalty, considering the claim of exemption as furnishing inaccurate particulars of income. However, the Tribunal, referring to the Apex Court judgment in CIT vs. Reliance Petroproducts Pvt. Ltd, held that providing details and making a claim for exemption does not amount to furnishing inaccurate particulars. The Tribunal set aside the penalty, concluding that the claim for exemption, even if incorrect, did not justify the penalty imposition.

This detailed analysis of the judgment highlights the issues of interest income assessment, exemption claims under relevant sections of the Income Tax Act, and the penalty for furnishing inaccurate particulars, providing a comprehensive understanding of the legal proceedings and the Tribunal's decision.