2020 (11) TMI 640 - AT - Income Tax

Penalty u/s 271(1)(c) - concealment of interest income on income tax refund - HELD THAT - Penalty is not uniform and its imposition depends upon exercising of discretion by the taxing authorities and is imposed as part of the machinery for assessment of tax liability. The word mentioned in the statute may direct that such person shall pay by way of penalty u/s 271 definitely leave certain amount of discretion in imposing penalty which need to be imposed when there is a minor breach of law and when having regard to the facts, end of justice requires that the assessee should not be penalized. Similarly, the word without reasonable cause are also indicative of some kind of discretion in the authority imposing the penalty to find out whether there was a reasonable cause or not. If such authority is satisfied that there was a reasonable cause, it may impose any penalty but inadvertent mistake cannot call for penalty in the absence of any material to show there is gross negligency or want of bona fides on the part of the assessee. In the instant case, we find no such gross negligency on the part of the assessee and thus in our considered opinion the penalty should be justified for an inadvertent mistake committed by the assessee. Hence, penalty order is found to be devoid of any merit and hereby quashed. Appeal filed by the assessee is allowed.

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961 for concealment of interest income.
3. Pronouncement of the order beyond the stipulated 90 days due to the Covid-19 pandemic.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee filed an application for condonation of a 49-day delay in filing the appeal. The reasons cited were the office's location 35 kilometers away from Jamnagar city and the assessee's illness during the relevant period, which prevented coordination with the consultant. The tribunal found these reasons to be "genuine and practical" and thus condoned the delay.

2. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The assessee, a partnership firm, filed its return for AY 2013-14 declaring a total income of ?12,59,657/-. During the assessment, it was found that the assessee had received interest on an income tax refund amounting to ?80,164/-, which was not declared. Consequently, a penalty of ?24,770/- was imposed under section 271(1)(c) for "concealment of income by furnishing inaccurate particulars of income."

The assessee argued that the omission was a bona fide mistake without any deliberate intention to conceal income. The assessee relied on the Supreme Court judgment in Hindustan Steel Ltd. vs. State of Orissa, which emphasized that penalty should not be imposed for inadvertent mistakes.

The tribunal agreed with the assessee, noting that the omission was a bona fide mistake and not a deliberate act of concealment. It emphasized that the imposition of penalty involves discretion and should be exercised judicially. The tribunal found no gross negligence or lack of bona fides on the part of the assessee, thus quashing the penalty order.

3. Pronouncement of the Order Beyond the Stipulated 90 Days Due to the Covid-19 Pandemic:
The tribunal addressed concerns about the delay in pronouncing the order, which was concluded on 26.02.2020 but pronounced on 29.06.2020. Citing the nationwide lockdown and disruptions caused by the Covid-19 pandemic, the tribunal referenced the Co-ordinate Bench's decision in DCIT vs. JSW Ltd. and the Supreme Court's orders extending limitations due to the pandemic.

The tribunal noted that the term "ordinarily" in Rule 34(5) of the Appellate Tribunal Rules, 1963, allows for flexibility in extraordinary circumstances. It concluded that the lockdown period should be excluded from the 90-day limit, thus justifying the delayed pronouncement.

Conclusion:
The appeal filed by the assessee was allowed. The tribunal condoned the delay in filing the appeal, quashed the penalty imposed under section 271(1)(c) for concealment of interest income, and justified the delayed pronouncement of the order due to the Covid-19 pandemic. The order was pronounced in the open court on 29th June, 2020 at Rajkot.

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