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Income Tax Appellate Tribunal, ‘’ SMC’’ BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED
आदेश/O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeals)-4, vadodara, dated 23/05/2019 arising in the matter of penalty order passed under s. 271(1)(c) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2013-14.
The solitary issue raised by the assessee is that the learned CIT (A) erred in confirming the penalty levied by the AO for Rs. 56,728/- under the provisions of section 271(1)(c) of the Act.
The assessee in the present case is a society and engaged in the activity of providing credit facilities to its members. The assessee in the year under consideration has claimed deduction under section 80P(2)(a)(i) of the Act for Rs. 1,93,585/- representing the interest income from the nationalized bank which was disallowed by the AO on the reasoning that the impugned income is not arising from the financing activities with the members in the assessment framed under section 143(3) of the Act vide order dated 23rd October 2015.
3.1 As per the AO, the assessee has furnished inaccurate particulars of income by claiming the deduction under section 80P(2)(a)(i) of the Act. Thus the AO initiated the penalty proceedings under section 271(1)(c) read with section 274 of the Act by issuing notice dated 23rd October 2015 and show cause notice dated 16th February 2018.
3.2 The assessee in response to such show cause notice among other things contended that in the penalty proceedings, the onus lies upon the revenue to establish the fact that the assessee has furnished inaccurate particular of income, but the revenue has not done so. Therefore the assessee cannot be charged for furnishing inaccurate particulars of income.
3.3 However, the AO disregarded the contention of the assessee by observing that the explanation 1 to section 271(1) the Act is a deeming provisions which cast duty on the assessee to offer an explanation to the effect that it has not furnished inaccurate particulars of income. But the assessee has not furnished any explanation. Thus the AO levied the penalty of ₹ 56,728/- being 100% of the amount of tax sought to be evaded by the assessee under the provisions of section 271(1)(c) of the Act on account of inaccurate particulars of income furnished by the assessee.
3.4 Aggrieved assessee preferred an appeal to the learned CIT (A) who confirmed the order of the AO by observing that the claim of the assessee for the deduction under section 80P(2)(a)(i) of the Act with respect to the interest income from the nationalized bank was not eligible for deduction as held by the Hon’ble Gujarat High Court. Therefore, the wrong claim made by the assessee tantamount to furnishing inaccurate particulars of income.
Aggrieved by the order of the learned CIT (A), the assessee is in appeal before us.
4.1 The assessee has filed submission along with the memo of appeal that the deduction claimed under section 80P(2)(a)(i) of the Act cannot be treated as furnishing inaccurate particulars of income. At the most, the claim made by the assessee can be a wrong claim which is not equivalent to furnishing inaccurate particulars of income.
4.2 The assessee also contended that the AO has not made any specific charge while initiating the penalty proceedings under section 271(1)(c) of the Act by way of issuing notice under section 274 of the Act whether the assessee has concealed the income or furnished the inaccurate particulars of income. Accordingly, the penalty proceedings should be dropped.
On the other hand, the learned DR before us vehemently supported the order of the authorities below.
We have heard the learned DR and perused the materials available on record. The issue in the present case revolves whether the assessee has furnished inaccurate particulars of income with respect to the interest income from the nationalized bank by claiming the deduction under section 80P(2)(a)(i) of the Act. The word ‘inaccurate particulars’ has not been defined under the provisions of the Act. Thus we refer the dictionary meaning of inaccurate which denotes ‘not accurate’, something incorrect or wrong, not exact, in error. Admittedly, the claim of the assessee for the deduction under section 80P(2)(a)(i) of the Act with respect to interest income from the nationalized bank was not acknowledged by the ITAT in the quantum proceedings. Thus, it can be concluded that the claim of the assessee was inaccurate. Accordingly, it appears that the penalty provisions under section 271(1)(c) have to be invoked. Thus, if we apply this logic, then any addition made by the AO in the assessment would lead either to concealment of the particulars of income or furnishing inaccurate particulars of income. In other words the assessee furnishes the particulars of income in his income tax return which is subsequently verified by the revenue. If in the process of verification of the income of the assessee, the AO calculates different total income than the income declared by the assessee, the difference between incomes declared by assesses and assessed by the AO would amount to furnishing of inaccurate particulars of income or concealment of income. However, we note that the Hon’ble Supreme Court in the case of Dilip N Shroff vs. JCIT reproetd in 161 taxman 218 has discussed the term inaccurate by observing that the word inaccurate signifies a deliberate act or omission on the part of the assessee. Thus, to arrive at the conclusion that, the assessee has furnished inaccurate particulars of income, it has to be tested whether it has been done so with the dishonest intent which cannot be regarded as an innocent act. In other words the element of consciousness in furnishing inaccurate particulars of income coupled with circumstantial evidences should be present in the particular case. Unless, the characters of inaccurate particulars of income as discussed above are present in any particular case, the penalty provisions under section 271(1)(c) of the Act cannot be attracted.
6.1 Moving further, there is an explanation 1 to section 271(1)(c) of the Act which provides deemed concealment of income. Under the explanation 1 to section 271(1)(c) of the Act, there are 2 situations. In situation (A), if the assessee fails to offer an explanation or offers an explanation which is found to be false with respect to any fact material to the computation of income, then the amount added or disallowed shall be deemed as concealment of income. In situation (B), if the assessee fails to substantiate the explanation offered by him and fails to prove that such explanation is bona fides and that all the facts relating to such explanation and materials to the computation of income have been disclosed by him, then the amount added or disallowed to the total income of the assessee shall be deemed as concealment of income.
6.2 Coming to the present case, we have to test whether the case of the assessee falls under the main provisions of section 271(1)(c) of the Act or explanation 1 attached with it. As regards the main provisions of section 271(1)(c) of the Act, we find that the interest income from the nationalized bank was duly incorporated in the financial statements. But the same was treated as income from other sources by the AO which was subsequently confirmed by the learned CIT (A) and ITAT. If we see gross total income in either of the case remained the same. It was the deduction which has been denied by the AO with respect to the interest income from the nationalized bank after making reliance on the judgment of Hon’ble Gujarat High Court in case of State Bank of India which was passed dated 25th April 2016 reported in 72 Taxman.com 64. Likewise, the Tribunal passed the order dated 26th March 2015 reported in 57 Taxman.com 367 which was subsequently upheld by the Hon’ble Gujarat High Court. However, tax return was filed by the assessee dated 27th September 2013 which implies that the rulings/principles laid down by the ITAT and the Hon’ble Gujarat High Court was not available at that relevant time. Thus the assessee under the bona fides believe has claimed the deduction under section 80P(2)(a)(i) of the Act with respect to the interest income as discussed above. It is also pertinent to note that the assessee has claimed before the learned CIT (A) that it was allowed deduction under section 80P(2)(a)(i) of the Act with respect to the interest income from the nationalized bank with respect to the assessment years up-to 2011-12. The relevant contention of the assessee for the learned CIT (A) reads as under:
It is also pertinent to take note of the fact since inception all the previous assessments right upto A.Y. 2011-12, the deduction claimed by the assessee U/s 80P(2)(a)(i) of the Income Tax Act, 1961 having been duly allowed by the department including the Appellate Authorities.
6.3 The above contention of the assessee was not doubted by the learned CIT (A). Thus, to our considered view, the claim of the assessee at the most can be regarded as inaccurate claim which cannot be equated with the furnishing inaccurate particulars of income. It is for the reason that nothing has been brought on record by the authorities below suggesting that the assessee has furnished the particulars of income with dishonest intent.
6.4 As regards the explanation 1 to section 271(1)(c) of the Act, there was no iota of evidence suggesting that the explanation offered by the assessee was false. Thus the claim of the assessee cannot be said amounting to concealment of particulars of income. Likewise, there was no finding of the authorities below qua the fact that the assessee fails to substantiate the explanation offered by him and fails to prove that such explanation is bona fides with respect to material facts relating to the computation of total income. Thus in our considered view the provisions of explanation 1 to section 271(1)(c) of the Act cannot be attracted in the given facts and circumstances. In view of the above and after considering the facts in totality, we set aside the finding of the learned CIT (A) and direct the AO to delete the penalty levied by him under section 271(1)(c) of the Act. Hence the ground of appeal of the assessee is allowed
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 16/12/2021 at Ahmedabad.