SHRIDHAR JAGUSTE,MUMBAI vs. DCIT CIR 20(3), MUMBAI

Briefly stated, the facts are the assessee is engaged in agency business of selling industrial machinery and earned commission from agency business. He filed a return of income on 23.9.2009 declaring total income of Rs.71,95,842/-. The assessment was completed u/s 143(3) on 14.10.2011 determining the total income at Rs.80,90,880/-. While completing the assessment, the Assessing Officer made addition of Rs.3,53,861/- being the difference of interest on fixed deposits from Bank of Baroda shown by the assessee in the return of income under the head ‘Income from other sources’ and the AIR information obtained by the Assessing Officer in respect of interest on fixed deposit from Bank of Baroda. The Assessing Officer noticed that as per the AIR information the interest earned on fixed deposit from Bank of Baroda was Rs.4,83,296/- and whereas the assessee has shown such interest only at Rs.1,26,029/- and Rs.9,139/- aggregating to Rs.1,35,168/-. When this was pointed out to the assessee in the course of assessment proceedings, assessee has accepted that there is a difference between the AIR information and the TDS certificate issued by the bank to the assessee. The assessee submitted that as per the TDS certificate issued by the Bank, the interest was accounted for and shown in the return of income. Since there is a difference, he accepted for the addition in the assessment proceedings.

Subsequently, the penalty proceedings u/s 271(1)(c) of the Act was initiated by the Assessing Officer for the difference of addition made in the assessment by issue of notice requiring the assessee to explain as to why penalty should not be levied. In response to the said notice, assessee furnished a reply stating that he has relied on the TDS certificates issued by the Bank of Baroda and based on those certificates, he has offered the interest income of Rs.1,35,168/- in the return. He further submitted that it was only during the assessment proceedings the assessee came to know that interest income of Rs.4,89,029/- accrued on fixed deposits with Bank of Baroda and suo motu revised the income statement and offered to tax. Therefore, it was contended that there is no deliberate concealment of income or furnishing of inaccurate particulars of income. However, the Assessing Officer passed an order u/s 271(1)(c) of the Act levying penalty of Rs.1,36,278/- stating that assessee offered interest income only Rs.1,35,168/- as against Rs.4,89,029/- and the submissions that he relied on the TDS certificates issued by the Bank cannot be an excuse. Further, he also observed that it is not a difficult task to get an idea of interest income that should be earned on the deposit kept with the Bank. The Assessing Officer was of the view that since the difference is huge, there is wilful omission and lack of bona fide on the part of assessee in view of the decision of Dharmendra Textile Processors, 306 ITR 277 (SC), wherein it has been held that mens rea is not an essential ingredient for imposing penalty. On appeal, the ld. CIT(A) sustained the penalty observing that the assessee furnished revised/corrected TDS certificate during the assessment proceedings itself and, therefore, the contention of the assessee that Bank had not furnished corrected TDS certificates is not borne out from the face of record. He further observed that assessee has not been able to show that the explanation furnished is genuine and verifiable. Against this order of ld. CIT(A), assessee filed an appeal before us.

When the matter was called up for hearing on 13/07/2016, nobody appeared on behalf of assessee. However, assessee filed a letter dated 7.7.2016 stating that written submissions alongwith the necessary supporting evidences were filed on 16.12.2015 and based on such written submissions and the supporting evidences, the appeal be disposed off.

As the assessee has requested to dispose of the appeal based on the written submissions, we proceed to hear the ld. DR and dispose of the appeal on merits.

The ld. DR submits that there is a deliberate act of furnishing of inaccurate particulars of income by the assessee in not reporting the interest income entirely. The ld. DR vehemently supporting the orders of the CIT(A) submits that there is concealment or furnishing of inaccurate particulars of income by the assessee, therefore, the authorities below were justified in levying penalty u/s 271(1)(c) of the Act. The assessee in its written submissions contended that based on the TDS certificates issued by Bank of Baroda, assessee has offered interest amounting to Rs.1,26,029/- and Rs.9,139/- totalling to Rs.1,35,168/- under the head ‘Income from other sources’. However, as per the AIR information generated, it was pointed out by the Assessing Officer that the interest income was shown to the tune of Rs.4,83,296/- from Bank of Baroda and interest of Rs.5,733/- on fixed deposit with HDFC Bank totalling to Rs.4,89,029/-. Noting that there is a difference between the AIR information and the TDS certificates issued, it was contended that the assessee has accepted the difference as interest and paid the taxes accordingly.

The assessee in the written submissions contended that the bank has not issued any corrected TDS certificates for the interest as shown in the AIR information. The assessee further contended that the observations of CIT(A) that assessee has furnished new certificates before the Assessing Officer is factually not correct and the CIT(A) misunderstood the submissions of the assessee. Assessee contends that what was submitted was only a revised income statement and not corrected TDS certificates. The assessee further submitted in the written submissions as under :-

Alongwith the written submissions, assessee also furnished TDS certificates issued by Bank of Baroda in Form 16A and the statement showing details of TDS given by Bank of Baroda to the assessee. In the written submissions filed by assessee, it was contended that there is no deliberate concealment of income or furnishing of inaccurate particulars of income and placing reliance on the certificates issued by the Bank and note reconciling with AS26 may be a mistake on the part of assessee, but certainly could not be a willful attempt on the part of assessee to evade taxes, especially considering the total income offered in the return is Rs.71,95,842/- and the addition made is only Rs.3,53,861/-, which is less than 5% of the returned income. It was also further contended that at the time of filing tax return for Assessment Year 2009-10, Form 26AS was not available (as the computerization of income-tax was at the initial stage) for his verification so that assessee could have reconciled the interest and tax deducted therefrom. In the written submissions, he placed reliance on the decision of the Apex court in the case of Cement Marketing Company of India Ltd. v. ACIT, [124 ITR 15] for the proposition that the returned income cannot be said to be false unless there is amount of deliberateness in it. But where the assessee does not include a particular item under bona fide belief that he is not liable so to include it, it would not be right to condemn the return as a false return inviting imposition of penalty. Unless filing of an inaccurate return is accompanied by a guilty mind, the section cannot be invoked for imposing penalty. He also placed reliance on the decision of the jurisdictional High Court in the case of CIT v. M Bhuta & Co., 103 ITR 183 for the proposition that in the absence of deliberate concealment of income or furnishing of inaccurate particulars, penalty imposed should not be justified.

We have gone through the written submissions, perused the orders of the authorities below and heard the ld. DR. In this case, the assessee apparently reported the interest income on fixed deposit from Bank of Baroda based on the certificates issued by Bank of Baroda. Bank of Baroda has also given a statement showing the interest payable to the assessee which is tallying with the amount mentioned in the TDS certificates. It was the submission of assessee that at the time of filing the return, Form AS26 was not available, therefore, could not reconcile the interest and TDS. The contention of assessee that it was on a bona fide belief that interest was reflected based on TDS certificates cannot be ruled out for the reason that the Bank has not given any rectified Form 16A to the assessee. On a careful consideration of the facts, we find that there is no willful attempt to evade taxes by the assessee as the assessee has already returned substantial income in the return. The contention of assessee that he had acted bona fide based on the TDS certificates issued by Bank of Baroda appears to be genuine. In the circumstances, we find that there is no concealment of income or furnishing of inaccurate particulars of income by the assessee. The authorities below have not proved that the explanation given by the assessee is neither false nor genuine. Thus, we delete the penalty levied u/s 271(1)(c) of the Act.

In the result, appeal of the assessee is allowed.