MD, RAJKOT DISTT. CO. OP. MILK PRODUC. UNION LTD.,RAJKOT-GUJARAT vs. THE CIT(A)-2, RAJKOT-GUJARAT

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ITA 35/RJT/2017Status: HeardITAT Rajkot21 February 2022AY 2012-133 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that there was no concealment of income as the assessee had disclosed the FDRs and the non-disclosure was due to the bank's failure to communicate the accrued interest. Therefore, the penalty proceedings were quashed.

What were the facts?

The assessee, following the mercantile system of accounting, failed to disclose accrued interest income from FDRs because the bank had not communicated it. This led to an addition to total income during assessment.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable for concealment of interest income when the non-disclosure was due to the bank's failure to communicate accrued interest, despite the assessee following the mercantile system of accounting.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT

Before: SHRI WASEEM AHMED&

For Appellant: Shri J. R. Mankodi, AR
For Respondent: Shri Vidyasagar S. Ubale, Sr. D.R
Hearing: 08/02/2022Pronounced: 21/02/2022

O R D E R PER Ms. MADHUMITA ROY - JM:

The instant appeal filed by the assessee is directed against the order dated 03.11.2016 passed by the Commissioner of Income Tax (Appeals)-2, Rajkot arising out of the penalty order dated 07.08.2015 passed by the ACIT, Circle – 2(1), Rajkot under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred as to “the Act”) for the Assessment Year (A.Y.) 2012-13.

2.

The matter relates to penalty imposed under Section 271(1)(c) of the Act for concealment of interest income of the assessee to the tune of Rs. 80,945/-.

- 2 - Rajkot District Cooperative Milk Producers’ Union Ltd. vs. CIT(A) Asst.Year – 2012-13 3. We have heard the rival submissions made by the respective parties, and also perused the relevant materials available on record.

4.

The interest amounting to Rs. 2,61,960/- was added to the total income of the assessee which was accrued on FDRs with the ICICI Bank while finalizing the assessment proceeding. The said interest income remained to be accounted in the year under consideration and the same could not be declared in the interest account since the bank had not communicated about accrued interest due as the case made out by the assessee. Since the assessee was following the mercantile system of accounting the assessee did not challenge such addition before the higher forum.

On the other hand, while finalizing assessment the penalty proceeding under Section 271(1)(c) was initiated by issuance of notice dated 13.02.2015 which was ultimately culminated into levying of penalty of Rs. 80,945/- under Section 271(1)(c) of the Act for concealment of interest income of the assessee.

5.

It is an established fact that the assessee already disclosed the FDRs lying with the ICICI Bank and since the mercantile system of accounting is being followed by the assessee the assessee was unable to disclose in the return of income for non- communication of accrued interest due by the bank.

6.

Under this circumstances, the case sought to be made out by the Revenue for concealment of interest income has no legs to stand upon. On this premise the further argument of the Revenue that had there been no scrutiny assessment, this particular interest income as revealed from the records and addition made thereon would not have been done rather the assessee would have simply evaded the tax is also not tenable.

- 3 - Rajkot District Cooperative Milk Producers’ Union Ltd. vs. CIT(A) Asst.Year – 2012-13

Therefore, we do not find any concealment of income by the assessee which can lead to initiation of the penalty proceeding by the Ld. AO culminating into an order levying impugned penalty. In the absence of any merit we hereby quash the penalty proceeding. Hence, assessee’s appeal is, therefore, allowed.

7.

In the result, the appeal preferred by the assessee is allowed.

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