PRINCIPAL COMMISSIONER OF INCOME TAX VADODARA 2 vs. NATIONAL DAIRY DEVELOPMENT BOARD

Revenue is in appeal against the judgment of the Income   Tax   Appellate   Tribunal   dated   26.05.2017 raising following question for our consideration: “[a] Whether in the facts and circumstances of the case, the learned ITAT has erred in law   and   on   facts   in   deleting   the   penalty under   section   271(1)(c)   of   the   Income   Tax Act with respect to addition made on account of   interest   income   on   North   Kerala   Dairy Project Fund without appreciating that this is not a case of plausible claim based on a bonafide   interpretation   of   law,   and   the interest income on North Kerala Dairy Fund Project was clearly taxable and the penalty was   supported   by   the   decision   in   Zoom Communiation (P) Ltd. (327 ITR 310)?”

As can be seen, the issue pertains to penalty imposed by the Assessing Officer under section 271(1) C/TAXAP/515/2018 ORDER (c)   of   the   Income   Tax   Act,   1961   ('the   Act'   for short),   which   the   Commissioner   of   Income   Tax (Appeals)   deleted   and   the   Tribunal   confirmed   the decision of the Commissioner of Income Tax (Appeals).

Respondent­assessee   National   Dairy   Development Board had received certain donations for application for   specified   purposes.     The   assessee   parked   the funds and earned the interest.  The assessee neither could apply the interest for the noted purpose, nor returned   the   interest   to   the   donor.     In   this background,   the   question   of   taxing   the   interest arose.    We are informed the assessee had lost the issue upto the level of Tribunal but the assessee's appeal  before  the High Court is pending.   In such background,   the   question   of   levying   the   penalty become relevant.   The Assessing Officer was of the opinion that the assessee had made a claim which was not   justified   and   thereby   sought   to   evade   taxes. Commissioner of Income Tax (Appeals) and the Tribunal held different opinion. In their view, the question of taxability would stand on an entirely different footing   as   compared   to   penalty.     The   Tribunal,   in particular, noted that there is nothing to suggest C/TAXAP/515/2018 ORDER that the explanation of the assessee is incorrect. In that view of the matter, the penalty was deleted.

We   see   no   error   in   the   view   of   the   Tribunal. When the Tribunal find that the explanation of the assessee was plausible not levying the penalty, would not require any interference.

No   question   of   law   arises.     Tax   Appeal   is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH