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Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य, राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार/ PER Rajendra A.M.- अनुसार Challenging the order, dated 17/03/2015, of the CIT (A)-46,Mumbai,the assessee has filed the present appeal. Assessee, and individual,filed his return of income on 8/4/2011 showing income of Rs.74.19 lakhs .Besides the said salary income it had shown incomes under the head house property (-Rs.9,378) and other sources(Rs.48,734/-).The Assessing Officer(AO)completed the assessment u/s.143 (3) of the Act,making addition of Rs. 1.92 lakhs under the head under-reported interest income.He also initiated penalty proceedings for concealing the particulars of income under section 271(a)(c) of the Act.
2.Effective ground of appeal is about upholding the order of the AO levying penalty. During the assessment proceedings, the AO found that interest income earned by the assessee on saving bank account with State Bank of India and Karnataka Bank Ltd, aggregating Rs.1,92, 677/- was not offered to tax in the return filed by the assessee. Accordingly, the amount in question was added to the total income of the assessee, as the AO was of the opinion that the assessee has not filed any valid explanation. During the course of penalty proceedings the assessee stated that his mother was diagnosed with cancer in February 2009, that she passed away in August 2010, that it caused severe mental anguish and distress to the assessee, that he was unable to keep track of the financial affairs, that this led to oversight of not declaring the interest income in the return, that he had suo motu declared the interest income, that there
3337/M/15 Suvratanand S. Haridas was no independent finding on the part of the AO in that regard, that no specific query was raised by the AO about interest income, that the notice issued by the AO were general in nature. He placed reliance on the cases of Reliance Petro Products and Pricewaterhouse Coopers. However, the AO did not accept the contention of the assessee and stated that he had filed the belated return on 8.4.2011 in which the saving bank interest was not disclosed, that the amount of interest not disclosed was substantial which could have been easily overlooked by any assessee, that the interest income earned by the assessee on fixed deposits was duly offered in the return, that saving bank interest income that was not in the knowledge of that department was not disclosed by the assessee in his return of income, that the interest was offered for taxation during the assessment proceedings, that the assessee was vigilant to claim deduction of Rs.9,378/- being interest paid on capital borrowed for purchase of house property, that on the other hand he did not disclose substantial interest income, that much lesser interest income had been offered by him in the preceding assessment years, that he had earned substantial interest income during the year under consideration, that a notice was issued to the assessee under section 142 (1) of the Act to furnish information as per earlier questionnaire issued to him that assessee was left with no other option but to admit the under- reporting of interest income, that concealment of income had been done in the return of income filed and subsequent offer of such income, that in the questionnaire the assessee was directed to produce bank statements of him and his dependents, that said question would certainly lead to in pointing the omission of interest income is. Accordingly penalty at the rate of hundred percent of tax evaded was levied.
3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA). Before him it was contended that assessee’s mother was diagnosed with cancer in February, 2009 and passed away in August, 2010, that being a pilot over international routes the assessee would often be out of India, that he had to rush to Bangalore to take care of his mother, he was under severe stress, that a belated return was filed in the month of April, 2011, that this was the first and only time the assessee had failed to make a complete clear declaration of the income,that the assessee on his own self had declared the interest income, that mere inclusion of certain deduction could not result in imposition of penalty, that the assessee was not living in Mumbai for longer periods, that he did not receive any possible computation from the bank regarding saving account, that the lack of information regarding that account led to the inadvertent mistake on his part.
3337/M/15 Suvratanand S. Haridas After considering the summation of the assessee and the penalty order of the AO, the FAA held that the AO had correctly brought out the fact that assessee had not submitted correct details and particulars of income under the head income from other sources, that he had taken into consideration the smaller amounts of FD interests,that the assessee had applied himself in preparing the return of income, that it could not be said that he was too stressed due to ill- health and sad demise of his mother, that he had offered the saving bank interest while filing the returns for the earlier years that in the earlier years interest amount was very less as compared to the interest income for the year under consideration, that the AO had clearly brought out that he had asked for the bank statement of the assessee from which obviously the interest earned would have been detected, that the assessee offered to tax the under- reported interest income, that the assessee had no option but to show the interest income during the assessment proceedings, that the cases relied upon by the assessee were of no use. He referred to the matters of HCIL Kalindee ARSSPL and Zoom Communications private Ltd.(327ITR510) and held that the assessee had failed to discharge the onus and had not satisfy the conditions mentioned in explanation 1 to section 271(1)(c),that he had not proved is bona fide during the assessment/ penalty proceedings,that he had also failed in his obligation to disclose all the facts material to the competition of income on his return,that the AO had rightly levied a penalty u/s.271(1)(c).
4.During the course of hearing before us,the Authorised Representative(AR)argued that the assessee had filed a belated return of income on 08.04.2011,that the AO issued notice on 13.08. 2012,that mother of assessee was suffering from cancer and because of that he could not pay attention towards income tax matters,that no specific query was raised by the AO in his notice about saving bank interest,that the assessee had no intention of concealing the particulars of income of furnishing inaccurate particulars,that it was a bonafide mistake.He relied upon the matter of Heranba Industries Ltd.(ITA/2292/Mum/2013 dtd.08.04.2015).The Departmental Repr -esentative(DR)supported the order of the FAA and argued that in the notice issued by the AO query was raised about investments,that the assessee had shown the other incomes correctly. 5.We have heard the rival submissions and perused the material.We find that the assessee had not filed his return of income on due date, that he himself was filing the return, that while preparing the return he had included the income under the head house property and income from other sources. House property income was computed in negative.Clearly,the assessee
3337/M/15 Suvratanand S. Haridas was aware of the procedure of filing the return and method of computing the income. It is to be remembered that assessee had earned interest income of Rs. 1.92 lakhs during the year under consideration. It is not a small amount that could be ignored by a person while filing the return. It is not the case that return was filed in the first month of the subsequent financial year and that assessee had not received the statement of interest income from the bank. Return of income is not a simple piece of paper. The assessees are supposed to not only disclose their income but also has to verify that entries made in it are correct. We find that the FAA has invoke the provisions of explanation 1 to the section 271 of the Act. We find that explanation filed by the assessee does not appear to be Bona fide. The assessee is not an illiterate person who does not know the provisions of law. It is also be remembered that penalty under the Act is to compensate the revenue loss to the exchequer. Only a few of the returns, filed by the assessee is, are selected for scrutiny. It was only after the notice issued by the AO for scrutinising the return the assessee admitted to have received the interest income on savings account. Had he paid the taxes after filing the return and before the receipt of notice from the AO it could have been presumed that it was a bona fides and inadvertent mistake on part of the assessee.We would like to reproduce the relevant portion of the case of Zoom Communication (supra) and same reads as under: “19. It is true that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bona fide. If the claim besides being incorrect in law is mala fide, Explanation 1 to section 271(1)(c) would come into play and work to the disadvantage of the assessee.
The court cannot overlook the fact that only a small percentage of the Income-tax returns are picked up for scrutiny. If the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such a claim is not found to be bona fide, it would be difficult to say that he would still not be liable to penalty under section 271(1)(c) of the Act. If we take the view that a claim which is wholly untenable in law and has absolutely no foundation on which it could be made, the assessee would not be liable to imposition of penalty, even if he was not acting bona fide while making a claim of this nature, that would give a licence to unscrupulous assessees to make wholly untenable and unsustainable claims without there being any basis for making them, in the hope that their return would not be picked up for scrutiny and they would be assessed on the basis of self-assessment under section 143(1) of the Act and even if their case is selected for scrutiny, they can get away merely by paying the tax, which in any case, was payable by them. The consequence would be that the persons who make claims of this nature, actuated by a mala fide intention to evade tax otherwise payable by them would get away without paying the tax legally payable by them, if their cases are not picked up for scrutiny. This would take away the deterrent effect, which these penalty provisions in the Act have.”
3337/M/15 Suvratanand S. Haridas We are of the opinion that the assessee had failed in his obligation to disclose all facts material to computing of his income for the year under consideration.As far as the matter of Heranba Industries Ltd.is concerned,it is sufficient to say that the case does not deal with explanation 1 to section 271 of the Act.In the present case,issue before us is to decide the matter keeping in view the provisions of explanation and to deliberate upon the bona fide of explanation filed by the assessee.Considering the peculiar facts and circumstances of the case,we are of the opinion that the explanation filed by the assessee about not disclosing interest income in the return of income was not bona fide.So,confirming the order of the FAA,we decide the effective ground of appeal against the assessee.