2014 (12) TMI 509 - AT - Income Tax

Tribunal Upholds CIT(A)'s Decision on Interest Tax Penalty

ACIT, (LTU), Delhi Versus M/s. The Oriental Insurance Co., Ltd.,

The Tribunal upheld the CIT(A)'s decision to delete the penalty imposed under Section 13(1)(c) of the Interest Tax Act. It was found that the penalty was ... Penalty u/s 13(1)(c) of Interest Tax Act – Approval from Committee of Disputes - Held that:- The assessee during the assessment proceedings submitted that chargeability of interest on account of call money with the bank and chargeability of interest on the discounting scheme were not liable to interest tax under the provisions of Interest Tax Act The assessee company has filed the details of interest claimed in the return of chargeable interest and it was supported by the accounting policy of the assessee company - The interest has been claimed on the bona-fide belief that it is allowable in computing its chargeable interest - no penalty can be imposed for disallowance of a claim made on the bona fide belief as decided in Hindustan Steel Limited Vs State of Orissa [1969 (8) TMI 31 - SUPREME Court] - CIT(A) rightly concluded that the penalty imposed by the A.O. u/s 13(1)(c) of the Interest Tax Act is to be set aside – Decided against revenue. Issues Involved:1. Deletion of penalty under Section 13(1)(c) of the Interest Tax Act.2. Chargeability of interest on call money with banks and discounting schemes under the Interest Tax Act.3. Applicability of penalty provisions under Section 13(1)(c) for the assessment year 1992-93.Issue-wise Detailed Analysis:1. Deletion of Penalty under Section 13(1)(c) of the Interest Tax Act:The department's appeal challenges the order of the CIT(A) which deleted the penalty of Rs. 44,42,839/- imposed under Section 13(1)(c) of the Interest Tax Act. The penalty was initially imposed by the Assessing Officer (A.O.) on the grounds that the assessee did not disclose certain interest amounts, resulting in the avoidance of interest tax. The CIT(A) deleted the penalty, and the department contended that the CIT(A)'s action was incorrect and unwarranted.2. Chargeability of Interest on Call Money with Banks and Discounting Schemes:During the assessment proceedings, the assessee argued that interest on call money with banks amounting to Rs. 2,13,17,614/- and interest on the discounting scheme amounting to Rs. 8,74,28,576/- were not liable to interest tax under the Interest Tax Act. However, the A.O. included these amounts in the chargeable interest and initiated penalty proceedings. The CIT(A) deleted the penalty, agreeing with the assessee's contention that the additions were debatable and required interpretation of the Interest Tax Act.3. Applicability of Penalty Provisions under Section 13(1)(c) for the Assessment Year 1992-93:The assessee contended that Section 13(1)(c) was not applicable for the assessment year 1992-93, and hence, the imposition of penalty was bad in law. The CIT(A) accepted this argument and deleted the penalty. The department argued that the definition of 'interest' under Section 2(28A) of the Income Tax Act, 1961, supported the A.O.'s decision to impose the penalty. However, the assessee relied on various judicial precedents, including the Supreme Court's decision in CIT vs. Reliance Products Ltd., to argue that no penalty could be imposed for a claim made on a bona fide belief.Conclusion:The CIT(A) concluded that the penalty was not warranted as the assessee had not concealed any particulars of interest income nor furnished inaccurate particulars. The Tribunal upheld the CIT(A)'s order, agreeing that the penalty was not justified. The Tribunal noted that the assessee's case involved debatable issues requiring interpretation of the Interest Tax Act, and the penalty could not be imposed merely because the claim was not accepted by the revenue. The appeal of the revenue was dismissed, and the order of the CIT(A) was upheld. The Tribunal emphasized that no contrary material or convincing argument was presented to take a different view.Final Judgment:The appeal of the revenue was dismissed, and the order of the CIT(A) deleting the penalty was upheld. The Tribunal pronounced the order in the open court on 04th March, 2014.