2023 (5) TMI 632 - AT - Income Tax

Penalty u/s. 271(1)(c) - addition on account of interest on the balance standing in the foreign bank account of the Assessee - AO was of the view that the interest income has to be assessed on accrual basis in the relevant assessment years, wherein, the interest income accrued, thus added the interest income on accrual basis in assessment year 1998-99 and assessment years 2004-05 to 2011-12. HELD THAT - While deciding quantum appeals of the Assessee, contesting the addition of interest income on accrual basis, the Tribunal in assessment years 2006-07 to 2009-10 ( 2022 (8) TMI 950 - ITAT DEHRADUN has deleted the additions made by the AO. In fact, Commissioner (Appeals) himself has deleted identical addition while deciding Assessee s appeal for the assessment year 2009-10. As while deciding quantum appeals, the additions on account of interest income have been deleted, concluded that penalty imposed u/s. 271(1)(c) of the Act is unsustainable. Decided in favour of assessee.

Summary

Issues involved: Appeal against penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 for assessment years 2010-11 and 2011-12.

Assessment Proceedings and Penalty Imposition:
The assessee, a resident individual, faced a search and seizure operation under section 132 of the Act, leading to proceedings under section 153A. The Assessing Officer discovered a foreign bank account in HSBC Bank, Switzerland, with a balance of USD 181,426. The assessee disclosed Rs. 90.56 lacs, comprising the principal and accumulated interest till the account's closure in the financial year 2013-14. The Assessing Officer determined that the interest income should have been taxed in the years of accrual, resulting in additions of Rs. 27,09,452/- and Rs. 33,13,904/- for assessment years 2010-11 and 2011-12. Penalties under section 271(1)(c) were imposed and confirmed by the first appellate authority.

Contentions and Tribunal's Decision:
The assessee's representative argued that quantum appeals were pending, and penalties should not have been decided without resolving the quantum issues. Referring to previous Tribunal decisions, it was highlighted that similar additions for other assessment years had been deleted. The Departmental Representative supported the Assessing Officer's and first appellate authority's stance but could not refute the assessee's reliance on prior Tribunal rulings. The Tribunal noted that the interest income additions leading to penalties were previously deleted by the Tribunal for other assessment years. Considering the consistent decisions in favor of the assessee in both quantum and penalty proceedings for identical additions, the Tribunal concluded that the penalties imposed for the present assessment years were unsustainable. Consequently, the penalties under section 271(1)(c) for the assessment years 2010-11 and 2011-12 were deleted.

Conclusion:
The Tribunal allowed the appeals, emphasizing that the penalties imposed under section 271(1)(c) for the assessment years 2010-11 and 2011-12 were to be deleted in line with the consistent favorable decisions for the assessee in similar matters before the Tribunal.