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2020 (8) TMI 306 - AT - Income TaxPenalty u/s 271(1)(c) - non-disclosure of interest income - HELD THAT - Regarding the non-disclosure of interest income by the assessee in the income tax return, we note that the assessee has declared taxable income in the income tax return amounting to ₹ 41,99,530/- whereas interest income stands at ₹ 34,912/- which is less than 1% of the income declared by the assessee. Thus, we are of the view that the assessee failed to disclose such interest income in the income tax return without any dishonest intent. Thus in such circumstances, we are of the view that there cannot be any penalty for the addition made to the total income on account of such interest income. See KANBAY SOFTWARE INDIA (P) LIMITED. 2009 (4) TMI 499 - ITAT PUNE-A Disallowance of the expenses for accounting charges and other expenses respectively against the interest income received from the partnership firm - Deduction claimed by the assessee has been held as false. Thus at the most, the claim made by the assessee can be wrong/inaccurate claims which cannot be treated as concealment/inaccurate particular of income. In holding so we find support and guide from the judgment in case of Reliance Petro Products Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT held a mere making of the claim, which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. We disagree with the finding of the authorities below. Accordingly we set aside the finding of the learned CIT (A) with the direction to the AO to delete the penalty imposed by him. Hence the ground of appeal of the assessee is allowed.
Issues Involved:
1. Confirmation of penalty under section 271(1)(c) of the Income Tax Act, 1961. 2. Non-disclosure of interest income. 3. Disallowance of expenses claimed against interest income. Detailed Analysis: 1. Confirmation of Penalty under Section 271(1)(c) The primary issue is whether the penalty of ?18,390/- imposed under section 271(1)(c) of the Income Tax Act, 1961, for A.Y. 2013-14, was justified. The assessee appealed against the CIT(A)'s order confirming this penalty. 2. Non-Disclosure of Interest Income The assessee, a partner in M/s Apex Logistics, filed a return declaring an income of ?41,99,530/-. During scrutiny, it was found that the assessee did not disclose interest income of ?34,912/- from FDR and savings bank accounts. The AO initiated penalty proceedings for concealment and furnishing inaccurate particulars of income. The assessee claimed this omission was inadvertent and lacked dishonest intent. The CIT(A) upheld the penalty, stating the non-disclosure was detected only due to scrutiny and would have otherwise gone undetected. 3. Disallowance of Expenses Claimed Against Interest Income The assessee claimed expenses of ?24,612/- (including ?612 for bank charges) against interest income from the partnership firm. The AO disallowed these expenses, stating they were not eligible for deduction. The CIT(A) confirmed the penalty, rejecting the assessee's argument that the expenses were legitimate, and ruled that the claim was not legally correct. Tribunal's Findings: Non-Disclosure of Interest Income The Tribunal noted that the interest income of ?34,912/- was less than 1% of the total declared income of ?41,99,530/-. It concluded that the omission was without dishonest intent, referencing the ITAT Pune Bench's decision in Kanbay Software India Pvt. Ltd. (122 TTJ 721), which emphasized the importance of considering human probabilities and bona fide explanations. Thus, the Tribunal held that no penalty should be imposed for this non-disclosure. Disallowance of Expenses Regarding the disallowed expenses of ?24,612/-, the Tribunal observed that the claim was not found to be false, merely inaccurate or wrong. Citing the Supreme Court's decision in Reliance Petro Products Pvt. Ltd. (322 ITR 158), it held that a mere unsustainable claim does not amount to furnishing inaccurate particulars of income. Therefore, the penalty for this disallowance was also deemed unjustified. Conclusion: The Tribunal set aside the CIT(A)'s order and directed the AO to delete the penalty of ?18,390/-. The appeal of the assessee was allowed. Additional Note: The Tribunal acknowledged the delay in pronouncing the order due to the COVID-19 lockdown, referencing the Hon’ble Mumbai Tribunal's decision in JSW Limited Vs Deputy Commissioner of Income Tax, which allowed for extensions beyond the usual 90-day period under exceptional circumstances. Order Pronounced: 02-06-2020 Result: The appeal of the assessee is allowed.
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