SRI A RAMAMURTHY,CHENNAI vs. DCIT CIRCLE 1, CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax(Appeals)-10, Chennai dated 27.03.2018 confirming the penalty levied by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961.

Shri P.Rajasekaran, learned representative for the assesse, submitted that the assessee filed return of income disclosing long term capital gain of ₹4,51,26,505/- arising out of transfer of immovable property. During the course of assessment proceedings, the Assessing Officer made addition of ₹7,76.263/- being accrued interest on the fixed deposits with Indian Bank, T.Nagar branch. According to the learned representative, the fixed deposit with Indian Bank was made out of the capital gains disclosed by the assesse. The assessee has no right to receive the accrued interest, till the fixed deposit attained maturity. The bank authorities have not issued Form 16A for deduction of tax as required under section 203 of the Income-tax Act. Moreover, the assessee has the option of disclosing interest income accrued on the fixed deposit, either in the year of accrual or in the year in which the fixed deposit attains maturity. Therefore, it cannot be construed as concealment of income by the assessee.

On the contrary, Shri Guru Bashyam, learned DR submitted that assessee has not disclosed the interest income of ₹7,76,263/-, therefore the Assessing Officer made addition to the total income. Since the assessee has not disclosed the interest income, the Assessing Officer found that the assessee concealed his income, therefore levied penalty under section 271(1)(c) of the Act.

We have considered the rival submissions on either side and perused the relevant materials available on record. Admittedly, the assessee disclosed capital gain of ₹4,51,26,505/-. The Assessing Officer found that there was TDS deducted by the Indian Bank on the fixed deposit of ₹4.20 crores. The assessee has deposited ₹4.20 crores out of the long term capital gains with the Indian Bank, T.Nagar branch. Admittedly, the deposit is a cumulative deposit and the accrued interest at the fixed deposit will be added to the deposit. The entire amount would be paid only on the maturity of the fixed deposit. The question now arises for our consideration is whether the assessee has concealed the accrued interest income of ₹7,76,263/- on the fixed deposit of ₹4.20 crores. This Tribunal is of the considered opinion that even though interest was credited to the fixed deposit, the assessee has no right to receive interest, till the fixed deposit attained maturity. The interest on the fixed deposit would be paid by the bank either on termination of the fixed deposit or the fixed deposit attains maturity. In those circumstances, this Tribunal is of the opinion that there was no concealment of income for the purpose of levy of penalty under section 271(1)(c) of the Act. Therefore, this Tribunal is unable to uphold the orders of lower authorities. Accordingly, the orders of both the authorities below are set aside and penalty levied by the Assessing Officer under section 271(1)(c) is deleted.