2016 (7) TMI 403 - HC - Income Tax

Penalty proceedings u/s 13 of the Interest Tax Act, 1974 - filing of in-accurate particulars of interest chargeable to Interest Tax Act - Held that - The levy of penalty by the Assessing Officer was on unjustified grounds and the CIT(A) rightly deleted the penalty which was rightly upheld by the Tribunal. The Assessing Officer did not give any finding that inaccurate particulars were furnished by the assessee. It appears that the assessee was under a bonafide impression that its case was covered by the decision of the Madras High Court. The assessee had made the claim in the return filed and in the original proceedings the claim was rejected whereas in the first appeal the claim was allowed by the CIT(A). The assessee has relied upon expert opinion. It cannot be said that the assessee had filed inaccurate particulars of income or there was any conscious effort on the part of the assessee to furnish inaccurate particulars of chargeable interest. In that view of the matter, we are of the opinion that penalty proceedings u/s 13 of the Interest Tax Act was wrongly initiated. Therefore, the questions are answered against the appellant revenue and in favour of the assessee.

Summary

Issues:
- Justification of deleting penalty under section 13 of Interest Tax Act, 1974 based on the decision of Madras High Court
- Whether inaccurate particulars of interest chargeable to Interest Tax Act amount to concealment of interest chargeable

Analysis:
1. The case involved the appellant challenging the impugned judgment by the Income Tax Appellate Tribunal regarding penalty under section 13 of the Interest Tax Act, 1974. The Tribunal had confirmed the order passed by the CIT(A), leading to the present Tax Appeals.

2. The assessment was initially completed against the assessee, who appealed before the CIT(A), and further before the Tribunal. The Tribunal directed the Assessing Officer to verify facts related to interest collection and accounting entries. The Assessing Officer rejected the claim of the assessee for excluding interest tax from chargeable interest, leading to penalty proceedings under section 13 of the Interest Tax Act, 1974.

3. The revenue contended that the interest tax should not be deducted from the total chargeable interest, citing the lack of provisions allowing such deductions. They argued that penalty proceedings were rightly initiated by the Assessing Officer.

4. On the other hand, the assessee's representative argued that the Tribunal correctly upheld the CIT(A)'s order, emphasizing the provisions of Section 13 of the Interest Tax Act, 1974. They supported the Tribunal's decision with sound reasoning.

5. The High Court, after considering arguments from both sides and reviewing the case records, concluded that the penalty levied by the Assessing Officer was unjustified. They noted that the assessee had a genuine belief based on the Madras High Court decision and had expert opinion supporting their claim. The Court found no evidence of furnishing inaccurate particulars of income by the assessee, leading to the decision in favor of the assessee.

6. Consequently, the High Court upheld the Tribunal's judgment, dismissing the present Tax Appeals. The Court found the penalty proceedings under section 13 of the Interest Tax Act, 1974 to be wrongly initiated, ultimately ruling in favor of the assessee in the case.