2020 (9) TMI 608 - AT - Income Tax

Penalty u/s 271(1)(c) - addition made on account of undisclosed interest income - HELD THAT - The interest income related to other client ID of ₹ 2,85,26,008/- earned during the year under consideration was never informed by the bank to the assessee and even Form No.16A for the same was apparently not issued. The assessee came to know about the earning of the said interest income only when the same was realized by it in the immediately succeeding year when the concerned Fixed Deposits in bank got matured. Accordingly, the same was declared by the assessee in that year as its income. As remained undisputed by the AO during the course of assessment proceedings as well as penalty proceedings and by the ld. DR at the time of hearing before us, we are of the view that the mistake of the assessee in understating its interest income from bank to the extent was bona-fide one and it gets further fortified by the fact that credit for the tax deducted at source from the said income by the bank was not claimed by the assessee in the return of income filed for the year under consideration. We, therefore, find ourselves in agreement with the CIT(A) that this is not a fit case where assessee can be said to have concealed particulars of its income or furnished inaccurate particulars of such income as contemplated u/s 271(1)(c) and the penalty imposed by the AO under the said provisions of the Act, in our opinion, was rightly cancelled by the ld. CIT(A). We, therefore, uphold the impugned order of the ld. CIT(A) cancelling the penalty u/s 271(1)(c) - Decided against revenue.

Summary

Issues:
Challenge to penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
The appeal was filed by the Revenue against the cancellation of a penalty of ?88,14,536 imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961. The assessee, a Statutory Corporation owned by the Government of Maharashtra, filed a return of income declaring a loss. During assessment proceedings, it was found that the interest income received by the assessee from Bank of Maharashtra was understated. The Assessing Officer made an addition to the total income of the assessee on account of undisclosed interest income and initiated penalty proceedings. The ld. CIT(A) cancelled the penalty imposed by the Assessing Officer, stating that there was no concealment of income or furnishing of inaccurate particulars by the assessee.

The ld. CIT(A) reasoned that the assessee had declared interest income based on the Form 16A issued by the bank, and the discrepancy in income arose due to the bank's error in creating two client IDs. The income related to the undisclosed client ID was realized by the assessee in the following year and was duly declared. The ld. CIT(A) concluded that the assessee's actions did not amount to concealment or furnishing inaccurate particulars of income. The Tribunal noted that the factual aspects remained undisputed and agreed with the ld. CIT(A) that the mistake in understating income was bona fide. The Tribunal upheld the cancellation of the penalty, emphasizing that the assessee did not conceal income or furnish inaccurate particulars as per section 271(1)(c) of the Act.

The Tribunal observed that the assessee's explanation regarding the undisclosed interest income was consistent and undisputed. The mistake in understating income was attributed to the bank's error in issuing Form 16A for only one client ID. The Tribunal concurred with the view that the assessee did not have knowledge of the undisclosed income during the relevant year and promptly declared it in the subsequent year. The Tribunal found no grounds to establish concealment or furnishing of inaccurate particulars of income by the assessee. Thus, the Tribunal upheld the decision of the ld. CIT(A) to cancel the penalty imposed under section 271(1)(c) of the Act.

In conclusion, the Tribunal dismissed the appeal of the Revenue and upheld the cancellation of the penalty. The decision was based on the finding that the assessee's actions did not amount to concealment or furnishing inaccurate particulars of income, as the discrepancy in income was due to a bona fide mistake and promptly rectified in the subsequent year. The Tribunal found no evidence to support the imposition of the penalty under section 271(1)(c) of the Income Tax Act, 1961.