2013 (9) TMI 1125 - AT - Income Tax

Assessee wins penalty appeal under Interest Tax Act for AY 2001-02

ICICI Bank Limited (Erstwhile ICICI Ltd.) Versus Dy. Commissioner of Income Tax Circle–3 (1), Aayakar Bhavan, Mumbai

The Tribunal ruled in favor of the assessee, setting aside the penalty imposed under section 13 of the Interest Tax Act, 1974 for the assessment year ... Penalty u/s 271(1)(c) - claim for deduction of interest tax - Held that:- It cannot be held that the assessee’s claim for deduction of interest tax collected by the borrowers from the chargeable interest cannot be held to be not bonafide at least at the time of filing of return of income. Even though such a claim has been disallowed under the re–assessment proceedings and also confirmed by the appellate authority, however, the same cannot be held that in the penalty proceedings such a finding will apply automatically. In the penalty proceedings, the assessee can very well furnish explanation as to what was the bonafide ground and reasons for claiming such a deduction and if such an explanation has not been found to be false, the penalty cannot be levied. In this case, it cannot be held that the assessee has furnished any kind of inaccurate particulars because all the details were duly furnished along with the return of income and simply because such a claim was not allowed in the subsequent proceedings, it cannot be held that the assessee is guilty of furnishing of inaccurate particulars of income. - Decided in favour of assessee. Issues:Challenge to penalty proceedings under section 13 of the Interest Tax Act, 1974 for assessment year 2001-02 based on disallowance of interest tax recovered from borrowers.Analysis:1. The appeal was filed by the assessee against the order imposing a penalty of Rs. 2,00,66,239 under section 13 of the Interest Tax Act, 1974 for the assessment year 2001-02. The penalty was related to the disallowance of interest tax recovered from borrowers, confirmed by the Commissioner (Appeals) in Mumbai.2. The assessee, a public institution engaged in banking activities, filed its interest tax return for the assessment year 2000-01 showing chargeable interest at Rs. 4472,11,45,510. The return included interest tax recovered from borrowers amounting to Rs. 9121,01,772, which was later disallowed. The claim was initially allowed during scrutiny assessment under section 8(2) but was later re-opened for disallowance under section 10 of the Act, leading to penalty proceedings.3. In the penalty proceedings, the assessee argued that the deduction of interest tax from borrowers was bonafide and not an attempt to conceal income. The assessee cited legal precedents to support their claim that penalty should not be levied for issues involving legal interpretation with two possible views.4. However, the Assessing Officer and the Commissioner (Appeals) rejected the assessee's explanation, leading to the imposition of the penalty. The Commissioner (Appeals) upheld the penalty citing previous decisions against the assessee in similar cases.5. The assessee contended that their claim for deduction was based on a genuine belief supported by legal decisions, and there was no concealment of income. They argued that the penalty was unjustified, especially considering the allowance of similar deductions in previous assessments without penalty imposition.6. The Tribunal considered the bonafide nature of the assessee's claim, especially since it was supported by a High Court decision at the time of filing the return. The Tribunal emphasized that the penalty cannot be solely based on subsequent decisions against the assessee, following the principle laid down by the Supreme Court in a relevant case.7. Ultimately, the Tribunal ruled in favor of the assessee, stating that the claim for deduction of interest tax was bonafide and not an attempt to furnish inaccurate particulars of income. The Tribunal highlighted that the penalty cannot be imposed solely based on disallowance in subsequent proceedings, overturning the Commissioner (Appeals) decision.8. The Tribunal allowed the assessee's appeal, setting aside the penalty imposed under section 13 of the Interest Tax Act, 1974 for the assessment year 2001-02. The decision was based on the bonafide nature of the claim and the absence of inaccurate particulars in the income disclosure.This summary provides a detailed analysis of the legal judgment, covering the issues involved and the Tribunal's decision in each aspect of the case.