2021 (1) TMI 528 - AT - Income Tax

Penalty u/s 271(1)(c) - eligible for deduction u/s 80P(2) (d) of the Act on the interest income earned from the deposit with the Co-operative Societies - due to bonafide mistake the interest income from other commercial banks was also taken for deduction u/s 80P(2) (d) - similarly deduction u/s 80(P) was claimed in respect of the amount earned from sale of cement hardware CFL and school fee etc. under bonafide belief that the assessee was eligible for claiming the deduction the same being business income of the assessee - HELD THAT - Assessee in this case has put a bonafide claim under a mistaken belief that the assessee was entitled to claim deduction on the aforesaid income - there was not effort by the assessee to conceal any income or to furnish any inaccurate particulars of income - assessee has also relied in this respect on the decision of the Tribunal in the case of ACIT Vs Punjab State Fed of Coop House Building Society Ltd. 2012 (12) TMI 1208 - ITAT CHANDIGARH wherein in somewhat similar circumstances Tribunal noticed in the case of other Cooperative Society that there seemed no intention to evade any tax rather the deduction was claimed in a mistaken belief by the Co-operative Society. Not a fit case for levy of penalty u/s 271(1) (c) - Decided in favour of assessee.

Summary

Issues:
1. Confirmation of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Eligibility of deduction under section 80P of the Act.
3. Bonafide claim under mistaken belief.
4. Consideration for levy of penalty.

Analysis:
1. The appeal was filed against the order of the Commissioner of Income Tax (Appeals) confirming the penalty imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2010-2011.

2. The assessee, a Cooperative Agriculture Multipurpose Society, claimed deduction under section 80P of the Act for interest income earned from Cooperative Banks and other commercial banks. The Assessing Officer disallowed the deduction for interest income from other commercial banks but allowed a deduction for related expenditure, limiting the disallowance to 65% of the interest income. The penalty was imposed for this disallowance, along with another disallowance related to business income claimed under section 80(P) of the Act.

3. The counsel for the assessee argued that the claims were made under a bonafide mistake, believing the deductions were eligible. The assessee did not intend to conceal income and provided all relevant facts. The Tribunal cited a previous case where a similar mistaken belief was held not to be an attempt to evade tax, leading to the decision that no penalty should be levied under section 271(1)(c) of the Act.

4. After considering the submissions and records, it was concluded that the assessee's claims were made in good faith under a mistaken belief, without any intent to conceal income. Relying on precedent and finding no effort to evade tax, the penalty under section 271(1)(c) of the Act was deemed unjustified, and the penalty was ordered to be deleted. Consequently, the appeal was allowed, and the penalty was set aside.

Conclusion:
The Appellate Tribunal held that the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 was unwarranted as the assessee's claims were made in good faith under a mistaken belief, without any intention to conceal income. The penalty was deleted, and the appeal of the assessee was allowed.