2017 (4) TMI 444 - AT - Income Tax

Penalty under section 271(1)(c) - whether AO has not specified charges which is to be levied against the assessee? - addition of interest u/s.24(b) - Held that - In the assessment order while recording satisfaction for initiation of penalty, the ld.AO has recorded a categorical satisfaction that the assessee has furnished inaccurate particulars of income. The letter dated 4.2.2013 has not been placed on record by the ld.counsel for the assessee. This show cause notice has been replied by the assessee and a perusal of the reply would indicate that the assessee was duly confronted with specific charges of furnishing inaccurate particulars. Therefore, on the strength of the judgment referred to by the ld.counsel, the assessee cannot draw any benefit on facts. The charge was specific and from the reply of assessee it is not discernable that there was confusion in his mind while preparing his defense. We have confronted the assessee to explain what has operated in the minds of the assessee when he filed the return. What led the assessee to include the total interest expenditure as allowable expenditure. Neither it has been alleged that on advice of tax consultant, it was claimed as allowable expenditure, nor is the case of the assessee that without verification of the facts, he has signed the return under a bona fide mistake, which was prepared by the clerk in the tax consultant office. Under these circumstances, the ld.counsel for the assessee cannot draw benefit of the proposition laid down in the decision referred before us. Therefore, we are of the view that the ld.Revenue authorities have appreciated the facts in right perspective and we do not see any reason to interfere in the finding of the ld.CIT(A). - Decided against assessee

Summary

Issues Involved:
1. Imposition of penalty under section 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars of income.
2. Bona fide mistake as a defense against penalty.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c):
The sole grievance of the assessee was the confirmation of a penalty amounting to ?5,28,066/- imposed by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act. The AO found that the assessee, who is an individual and director of Laxmi Diamond Pvt. Ltd., had claimed an interest expenditure of ?18,77,520/- under section 24(b) for self-occupied property, which exceeds the allowable limit of ?1.50 lakhs. The AO disallowed the excess amount of ?17,27,520/- and added it to the total income. Additionally, the AO added an interest component of ?32,700/- from an Income Tax refund which the assessee failed to include in his income. The AO initiated penalty proceedings for furnishing inaccurate particulars of income and imposed a penalty equivalent to the tax sought to be evaded.

2. Bona Fide Mistake as a Defense:
The assessee raised two main contentions. First, the assessee argued that there was no clarity on whether the penalty was for furnishing inaccurate particulars or for concealment of income. The assessee relied on several judicial decisions to support this contention. Second, the assessee claimed that the error was an inadvertent mistake made under a bona fide belief that the entire interest was allowable. The assessee cited various judgments, including the Supreme Court's decision in Price Waterhouse Coopers P. Ltd., to argue that the mistake was bona fide and should not attract a penalty.

Tribunal's Analysis and Conclusion:
The Tribunal examined section 271(1)(c) and the deeming provisions regarding the concealment of income. It noted that for penalty imposition, the AO or CIT(A) must be satisfied that the assessee concealed income or furnished inaccurate particulars. The Tribunal observed that the AO had recorded a categorical satisfaction that the assessee furnished inaccurate particulars of income in the assessment order. The Tribunal rejected the assessee's argument about the lack of clarity on charges, noting that the assessee was duly confronted with specific charges and had replied accordingly.

Regarding the bona fide mistake defense, the Tribunal distinguished the present case from the Price Waterhouse Coopers P. Ltd. case. It pointed out that in the latter case, the Supreme Court considered the explanation of the assessee and found that the mistake was due to a human error in the computation process. In contrast, the Tribunal found no such explanation or evidence of a bona fide mistake in the present case. The assessee did not provide any specific reason or evidence to explain the inclusion of the entire interest expenditure as allowable.

The Tribunal concluded that the Revenue authorities had correctly appreciated the facts and upheld the penalty imposed by the AO. The appeal of the assessee was dismissed.

Final Order:
The appeal of the assessee was dismissed, and the penalty of ?5,28,066/- under section 271(1)(c) was confirmed. The order was pronounced on 5th April 2017 at Ahmedabad.