2020 (10) TMI 1081 - AT - Income Tax

Penalty u/s 271(1)(c) - AO held that the assessee had concealed the particulars of income because the interest earned from the fixed deposit was not included as income under the head income from other source in the return of income and levied minimum penalty - HELD THAT - The issue of netting off of the interest or treating the interest income earned by the assessee as taxable under the head income from other source is a debatable issue considering the facts and circumstances of the case of the assessee. assessee has taken one possible view which was rejected by the Ld. Revenue Authorities - assessee had brought out all the facts before the Revenue along with the return of income. Therefore, at the most it can be only treated as a claim of the assessee which may not be sustainable in law. We are of the considered view that the ratio laid down in the case of CIT vs. Reliance Petroproduct (P.) Ltd 2010 (3) TMI 80 - SUPREME COURT will be squarely applicable to the case of the assessee wherein held Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that, by itself, would not attract the penalty under section 271(1)(c) - Decided in favour of assessee.

Summary

Issues:
- Appeal against deletion of penalty under section 271(1)(c) of the Act by the Ld. CIT (A).
- Interpretation of whether interest income earned by the assessee should be taxable under the head "income from other source."
- Application of legal precedents in determining the taxability of interest income.
- Assessment of penalty for concealing particulars of income.

Analysis:

1. Appeal against Penalty Deletion:
The Revenue filed an appeal against the deletion of penalty under section 271(1)(c) of the Act by the Ld. CIT (A). The crux of the issue was the Ld. CIT (A) erred in deleting the penalty levied by the Ld. AO amounting to &8377; 2,07,11,990. The Revenue raised four grounds in the appeal, focusing on the deletion of the penalty.

2. Taxability of Interest Income:
The case involved a private limited Company engaged in setting up a Special Economic Zone, which earned interest income from fixed deposits. The Ld. AO assessed the interest income under "income from other source," as the company had obtained a secured loan for land acquisition and project development. The assessee argued that the interest income was netted off against pre-operative expenses pending allocation, citing various legal decisions to support their position. However, the Ld. AO imposed a penalty for concealing income, leading to the appeal.

3. Legal Precedents and Interpretation:
The Ld. CIT (A) deleted the penalty by citing a previous judgment in a similar case, emphasizing the debatable nature of the issue. The Tribunal noted that the assessee's interpretation of netting off interest income was a possible view, even though rejected by the Revenue Authorities. The Tribunal referred to the decision in CIT vs. Reliance Petroproduct, highlighting that incorrect claims in law do not amount to furnishing inaccurate particulars of income, thus questioning the imposition of penalty.

4. Assessment of Penalty:
The Tribunal upheld the Ld. CIT (A)'s decision to delete the penalty, stating that the issue was debatable, and the assessee had disclosed all relevant facts to the Revenue. The Tribunal applied the legal principles laid down by the Hon'ble Apex Court to conclude that the penalty under section 271(1)(c) could not be imposed as there was no concealment or furnishing of inaccurate particulars of income. The appeal of the Revenue was dismissed, affirming the deletion of the penalty.

In conclusion, the judgment focused on the debatable nature of the issue regarding the taxability of interest income and the imposition of penalty under section 271(1)(c) of the Act. The Tribunal emphasized the importance of disclosing all relevant facts and legal interpretations in determining the applicability of penalties for concealing income.