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2018 (7) TMI 1482 - AT - Income TaxPenalty levied under sec. 271(1)(c) - addition being other interest income and as FDR interest - Held that - We note that the penalty imposed under section 271 (1) (c ) of the Act, in respect of other interest income of ₹ 56, 81, 911/-, which has been deleted by the ld CIT(A), as the said amount was duly disclosed in the financial statement by the assessee. There was a claim by the assessee that said interest income of ₹ 56, 81, 911/- was eligible for deduction under section 80IB of the Act, and the assessee had disclosed the fact of earning said interest in the financial statements. We note that the assessee has disclosed the particulars of his income in the financial statements and has made full disclosure, in respect of other interest income of ₹ 56, 81, 911/- hence, there is neither concealment of income nor furnishing inaccurate particulars of income . We note that mere making of this claim cannot lead to penalty automatically. Therefore, ld. CIT(A) has rightly deleted the penalty U/s 271 (1) (c) We note that the assessee, vide letter dated 19/03/2014, had explained to AO that the interest income of ₹ 37, 71, 024/- reflected in 26AS statement, was received from M/s. Bau Developer P. Ltd, and had been offered for taxation by the assessee, in the Assessment Year 2012-13. We note that the date of booking of the transaction in respect of M/s. Bau Developer P. Ltd is on 01. 08. 2011 (vide pb 11), which falls in assessment year 2012-13, therefore, the assessee has offered interest income of ₹ 37, 71, 024/-for taxation in the Assessment Year 2012-13. Since the assessee has offered the said income for taxation in the A. Y. 2012-13, hence there is no concealment We note that since the penalty notice issued to the assessee dated 20. 04. 2013 did not spell out as to which default the assessee has committed for which penalty u/s. 271(1)(c) of the Act has been initiated, therefore, respectfully following the Hon ble Karnataka High Court s order in Manjunatha Cotton & Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT we cancel the penalty imposed by the AO which has been erroneously confirmed by the ld. CIT(A), partly. Therefore, the appeal of the Revenue is dismissed and cross objections raised by the assessee are allowed.
Issues Involved:
1. Condonation of delay in filing Cross Objections. 2. Deletion of penalty under Section 271(1)(c) of the Income Tax Act for interest income. 3. Validity of penalty notice under Section 274 read with Section 271(1)(c) of the Act. Issue-wise Detailed Analysis: 1. Condonation of Delay in Filing Cross Objections: The assessee's Cross Objection was delayed by 5 days. The Tribunal heard the parties on this preliminary issue and, considering the reasons provided in the petition, condoned the delay and admitted the Cross Objections for hearing. 2. Deletion of Penalty under Section 271(1)(c) of the Income Tax Act for Interest Income: The Revenue's primary grievance was the deletion of the penalty levied under Section 271(1)(c) of the Act concerning interest income of ?56,81,911. The assessee's main grievance was the upholding of the penalty on the interest income of ?37,71,024. During assessment, the Assessing Officer (AO) found that the assessee had received interest income of ?50,28,374 and interest on FDRs of ?6,53,537, totaling ?56,81,911. However, the AO noted that the assessee did not offer ?37,71,024 received from M/s. Bau Developer P. Ltd. for taxation in the relevant year and added it as undisclosed income, initiating penalty proceedings for concealment and/or filing inaccurate particulars of income. The CIT(A) deleted the penalty for ?56,81,911, noting that the assessee had disclosed the interest income in the financial statements and claimed it as eligible for deduction under Section 80IB. The CIT(A) relied on the decision in Roborant Investments Pvt. Ltd., holding that mere making of a claim that does not stand scrutiny cannot automatically lead to a penalty. 3. Validity of Penalty Notice under Section 274 read with Section 271(1)(c) of the Act: The assessee argued that the AO did not record any satisfaction while imposing the penalty, and the notice was defective as it did not specify whether the penalty was for "concealment of income" or "furnishing inaccurate particulars of income." This non-application of mind was supported by the judgment in CIT vs. Samson Perinchery, which held that the AO must be clear about the specific charge. The Tribunal noted that the penalty notice did not specify the default committed by the assessee, making it defective. The Tribunal cited the Karnataka High Court's decisions in Manjunatha Cotton & Ginning Factory and SSA’s Emerald Meadows, which held that such vagueness in the notice invalidates the penalty. Conclusion: The Tribunal concluded that the assessee had disclosed the interest income in the financial statements and offered the ?37,71,024 for taxation in the appropriate year (AY 2012-13). Thus, there was no concealment or furnishing of inaccurate particulars. The penalty notice was defective as it did not specify the default, leading to the cancellation of the penalty. The appeal of the Revenue was dismissed, and the Cross Objections filed by the assessee were allowed.
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