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Income Tax Appellate Tribunal, MUMBAI BENCHES “E”, MUMBAI
Before: Shri Mahavir Singh, & Shri Ashwani Taneja
आदेश / O R D E R
Per Ashwani Taneja (Accountant Member): This appeal has been filed by the Assessee against order of Ld. Commissioner of Income Tax (Appeals), Mumbai-21 (in short ‘CIT(A)’}, dated 20.08.2013 passed against penalty order u/s 271(1)(c) of the Act, dated 23.06.2011 for Assessment Year 2008-09 on the following Grounds: “1)The Learned DCIT has erred in law as well as fact of the case in:- a)levying penalty u/s 271(1)(c)of Rs. 181492/- 2) That the findings of the learned ACIT are erroneous and are utter disregard of fact and
2 Mr. Shahzaad S. Dalal circumstances and materials produced and on record given the detail and case laws levying penalty of Rs.181492/-. 3) That the learned Dy. C I.T. failed to consider that the income accrued cannot be treated as concealment of income for technical error and levied penalty u/s 271(1) (c) as decided in number of cases on account of object clause and accepted assessment u/s 143(3)to inaccurate particular does not ar ise and beside c ase law g iven above, wherein two view the assessee shall not be penalised for a view favourable to him in filing return. 4) T hat the le arned DC IT ought to h ave considered all facts and circumstances and on proper appreciation thereof and evidence and materials on record and submission and explanation given ought to have:- a) Not levied penalty u/s 271(1) (c) of Rs. 181492/-.
That your petitioner pray accordingly and craves leave to add to or to alter or amend the above grounds of appeal as and when occasions arises.”
During the course of hearing, arguments were made by Shri Mukarram Sadiko, Authorised Representatives (AR) on behalf of the Assessee and by Shri Vishwas Mundhe, Departmental Representative (DR) on behalf of the Revenue
The solitary issue raised in this appeal is with regard to levy of penalty of Rs.1,81,492/-, on the ground that the interest income accrued during the year was not included in its income by the assessee. The brief background is that the assessee is an individual earning income from salary, house property and capital gains etc. During the course of assessment proceedings, it was noted by the AO that the assessee had failed to include the amount of interest accrued
3 Mr. Shahzaad S. Dalal on the amount invested in HDFC Bank and RBI taxable bonds. The assessee replied that this interest income was not accrued of on accrual basis since no amount of interest was to be received before maturity period. Interest along with the principal was received on date of maturity only. Under the facts and circumstances of this case, interest would be taxable only on the receipt of the same. But, AO was not satisfied and therefore, he made the addition. Subsequently, the AO initiated penalty proceedings wherein it was submitted by the assessee that assessee did not contest the addition to avoid litigation but assessee has consistently followed this method of accounting. The impugned interest income has already been added in subsequent year as and when interest was received. Thus, there was no concealment or furnishing of inaccurate particulars of income. But, the AO was not satisfied, therefore, he levied the penalty of Rs.1,81,482/- on the aggregate amount of interest of Rs.5,33,956/-. In the appeal before Ld. CIT(A) also detailed submissions were made but he did not accept submissions of the assessee and confirmed the penalty. 3.1. During the course of hearing before us, Ld. Counsel stated that actually there is no suppression of income. Entire interest amount has been disclosed in the returns filed by the assessee up to A.Y. 2012-13. Copy of return filed in A.Y.2012- 13 was put before us in support of these averments. Under these circumstances, it was requested that in substance there is no concealment of income, therefore, no penalty should have been levied if facts and circumstances of the case would have been considered in totality by the lower authorities.
4 Mr. Shahzaad S. Dalal 3.3. Per contra Ld. DR relied upon the orders of the lower authorities. 3.4. We have gone through the facts of this case as well as order passed by the lower authorities and also returns filed by the assessee for subsequent years. It is noted by us with the assistance by the parties that entire amount of interest stands disclosed in the return of subsequent years i.e. A. Ys. 2006-07 to 2012-13. Following details were submitted in support of the factual submissions made by the Ld. Counsel before us:
Interest on Principal of Rs.35 lakhs of Bond Ledger Date of Investment amount in Rs. Principal amount 18.06.2005 35,00,000/- Maturity value 18.06.2011 56,03,500/- Cumulative Interest 21,03,500/- Interest considered in various assessment years in the assessment orders. A.Y. 2006-07 Added by AO in order u/s 143(3) 3,19,071 A.Y:2007-08 Added by AO in order u/s 143(3) 4,17,276 A.Y.2008-09 Added by AO n order u/s 143(3) 4,17,276 A.Y.2010-11 Added by AO n order u/s 143(3) 4,17,276 A.Y. 2012-13 Shown by assessee in Return of Income 5,32,601/-
5 Mr. Shahzaad S. Dalal Total 2,103,500 Interest on Principal of Rs.10 Lakhs. Bond Ledger Number: Date of investment Amount in Rs. Principal amount 07.01.2006 10,00,000 Maturity value 07.01.2012 16,01,000 Cumulative Interest 6,01,000 Interest considered in various assessment years in the assessment orders. A.Y:2006-07 Added by AO in order u/s 143(3) 26,901 A.Y.2008-09 Added by AO in order u/s 143(3) 1,17,680 A.Y.2008-09 Added by AO in order u/s 143(3) 1,16,680 A.Y. 2012-13 shown by Assessee in Return of income 6,01,000 Hence, to state, all the interest of the Bonds of Rs.10 lakhs was taken fully in the maturity year again by the assessee.
3.5. It has been explained by the assessee right from the beginning that the assessee has been following cash basis and was under bona fide belief that the interest would be taxed in the year of maturity. It was also submitted that assessee was persuaded with the following note mentioned in the bond papers attached with GOI 8% Savings (Taxable) Bonds-2003: C. The interest on 8% Saving (Taxable) cumulative bonds is neither paid or credited/provided for, prior to maturity of 6 Mr. Shahzaad S. Dalal the bonds and hence TDS is applied at the time of maturity. 3.6. Thus, influenced by the aforesaid note, the assessee formed this belief that entire amount will be taxable in the year of maturity of bonds. Therefore, under these circumstances, impugned interest income was not offered to tax by the assessee in its returns on accrual basis. But, in any case, entire interest income has already been offered to tax in subsequent years. Thus, taking into account all the facts and circumstances of the case, we find that explanation of the assessee is bona fide. The assessee chose a particular course and followed a particular method of accounting, on consistent basis and in bonafide manner, under these circumstances it is difficult for us to hold that approach followed by the assessee was aimed towards concealment or furnishing of inaccurate particulars of income. Thus, in our considered view keeping in view total facts and circumstances of this case, it is not a case of concealment or furnishing of inaccurate particulars of income. Therefore, penalty levied by the AO is directed to be deleted.
As a result, this appeal filed by the assessee is allowed.
Order pronounced in the open court on 11th January, 2017.