ARUN GUPTA (HUF), HYDERABAD,HYDERABAD vs. ACIT, CIRCLE-6(1), HYDERABAD, HYDERABAD

All these appeals are filed by the assessee against the orders of the Ld. CIT(A)—9, Hyderabad in appeal Nos. 0077, 0103, 0130/ACIT, Circle-6(1)/2015-16, dated 29/01/2016 for the AYs 2002-03, 2003-04 & 2004-05 respectively and in appeal No.0916/2014-15/CIT(A)-6/16- 17, dated 10/02/2017 for the A.Y. 2007-08 passed U/s. 271(1)(c) r.w.s 250(6) of the Act.

The assessee has raised several grounds in all its appeals however, the crux of the issue is that the Ld. CIT (A) has erred in upholding the penalty levied by the Ld. AO invoking the provisions of section 271(1)(c) of the Act.

The brief facts of the case are that the Search & Seizure operations were conducted in the case of Arun Gupta on 14/12/2007. During the course of Search, it was observed that Sri Arun Gupta and his spouse Smt. Pushpa Gupta had jointly purchase a house property at A-108, Journalist Colony, Jubilee Hills, Hyderabad for a purchase consideration of Rs. 2,25,00,000/-. It was also revealed that the assessee had paid on money of Rs. 1,54,00,000/- for the same transaction. On query, the assessee had explained that some funds from the HUF of the assessee was also utilised for the purchase of the house property. In the above background notice u/s. 153C was issued in the case of the assessee’s HUF. In response the assessee HUF filed its returns of income. The relevant details of the return of income are extracted here under for reference:-

Thereafter, assessment U/s. 143(3) r.w.s 153C of the Act was completed accepting the return of income filed by the assessee. Subsequently, the Ld. AO invoked penalty proceedings U/s. 271(1)(c) of the Act and levied penalty on the assessee for Rs.2,899/-, Rs. 4,639, Rs. 17,498/- and Rs. 93,420/- for the AYs: 2002-03, 2003-04, 2004-05 and 2007-08 respectively by rejecting the plea of the assessee that inadvertently the interest income earned by the assessee was omitted to be taken into account. The Ld. AO had opined that only as a result of search the interest earned on Fixed Deposits maintained by the assessee in various banks was revealed and it was a wilful and conscious act of the assessee for concealing the particulars of income in order to evade tax. On appeal, the Ld. CIT (A) agreed with the view of the Ld. AO and by placing reliance in section 5A introduced by Finance Act, 2007 w.e.f 1/6/2007 confirmed the order of the Ld. AO.

At the outset, we do not find any merit in the order of the ld. Revenue Authorities for imposing penalty on the assessee by invoking the provisions of section 271(1)(c) of the Act. From the facts of the case, it appears that it is only an inadvertent omission on the part of the assessee for not taking into account of the interest accumulated on the FDs maintained with various banks. The amount of FDs is also not phenomenal. It is also obvious that the Banks would have deducted tax at source for the interest earned by the assessee on its fixed deposits. It is also apparent that as soon as the assessee realised its omission, it had filed the return of income and the same was accepted without any addition. In this situation, we are reminded of the decision of the Hon’ble Apex Court in the case of Price Water House Coopers Pvt Ltd vs. CIT and others reported in 348 ITR 306 wherein it was held that the failure on the part of the assessee to include the provision for gratuity to its total income in the return of income does not mean that the assessee was guilty of either furnishing inaccurate particulars or attempting to conceal its income.

Considering the peculiar facts and circumstances of the present appeals before us, We are of the considered view that the ratio laid down by the Hon’ble Apex Court cited herein above is squarely applicable to the present cases before us. It is quite natural that when individuals / HUF maintain Fixed Deposits in piecemeal with various banks, the interest earned on the fixed deposits might be lost sight off as the interest gets automatically accumulated with the deposits. The need to evaluate those Fixed Deposits will arise only when funds are required for a specific purpose. In the case of the assessee-HUF it appears that the assessee took stock of the Fixed Deposits when they were in the process of purchasing the house property and the interest earned by those Fixed Deposit was inadvertently omitted to be taken into account. Hence, we are of the view that it is only an unintended omission on the part of the assessee. It is pertinent to mention that the decisions relied on by the ld. DR are not applicable to the facts and circumstances of these cases before us. Therefore, in the interest of justice, we hereby set aside the orders of the Ld. CIT (A) and further direct the Ld. AO to delete the penalty imposed on the assessee by invoking the provisions of section 271(1)(c) of the Act in all these cases for the relevant Assessment Years.

In the result, all the four appeals of the assessee are allowed in its favour.