2017 (8) TMI 745 - AT - Income Tax

Tribunal quashes penalty for income concealment, emphasizes consistency and bonafide conduct

Mr. Farhad Khurshed Wadia, C/o. S.R Chitalia & Co. Versus Asst. CIT, Circle -16 (1), Mumbai

The Tribunal quashed the penalty of Rs. 6,21,100/- imposed under Section 271(1)(c) for the concealment of income, allowing the appeal of the assessee. The ... Levy of penalty under Sec. 271(1)(c) - addition of interest income - Revised Computation of Income - Held that:- When no penalty had been imposed in the hands of the assessee in respect of similar ‘interest income’ which was offered for tax by the assessee by way of a ‘Revised Computation of Income’ in the course of the assessment proceedings in his case for A.Y. 2010-11, therefore, an inconsistent and whimsical approach on the part of the A.O, therein leading to levy of penalty under Sec. 271(1)(c) in respect of similar ‘interest income’ which too was offered for tax by the assessee by way of ‘Revised Computation of Income’, cannot be sustained in the eyes of law. We further find that the bonafides of the assessee that the aforesaid ‘interest income’ had inadvertently remained omitted to be reflected in his ‘Return of income’ for the year under consideration, viz. A.Y. 2011-12, further stands fortified from the very fact that the assessee had duly reflected the ‘interest income’ relatable to the said advances/deposits in his ‘Return of income’ for A.Y. 2012-13, which was e-filed on 30.08.2012. That as the aforesaid ‘Return of income’ for A.Y. 2012-13 was filed by the assessee before the issue of notice u/s 143(2) for A.Y. 2011-12 on 08.09.2012, therefore, we are of the considered view that it can fairly be concluded that such reflection of ‘interest income’ in the return of income for A.Y. 2012-13 clearly reflects the bonafide mistake of the assessee in failing to have reflected the ‘interest income’ during the year under consideration, viz. A.Y. 2011-12, which on coming to the notice of the assessee, was thus voluntarily offered for tax by the assessee. Thus we quash the penalty imposed by the A.O under Sec. 271(1)(c). -Decided in favour of assessee. Issues Involved:1. Imposition of penalty under Section 271(1)(c) of the Income-tax Act, 1961.2. Assessee's omission of interest income in the original return of income.3. Filing of revised computation of income by the assessee.4. Determination of whether the omission was bonafide or deliberate.5. Consistency in the tax authority's approach to similar cases in different assessment years.Detailed Analysis:1. Imposition of Penalty under Section 271(1)(c):The core issue revolves around the imposition of a penalty of Rs. 6,21,100/- under Section 271(1)(c) for concealment of income. The assessee contended that the penalty should be deleted as the omission of interest income was inadvertent and subsequently corrected.2. Assessee's Omission of Interest Income:The assessee, employed with a media company, filed the return of income for A.Y. 2011-12 declaring Rs. 68,02,888/-. During scrutiny, it was found that certain interest income was omitted. The omitted interest income totaled Rs. 20,09,722/- from various parties, including Net 4 India Ltd., Darshaw K.D.B Mehta, Shapoorjee Chandhbhoy Finvest Pvt. Ltd., and ICICI Bank Ltd.3. Filing of Revised Computation of Income:Upon realizing the omission during the assessment proceedings for the preceding year (A.Y. 2010-11), the assessee filed a revised computation of income for A.Y. 2011-12, including the omitted interest income and paid the corresponding tax and interest. The revised computation increased the total income to Rs. 92,37,010/-.4. Determination of Bonafide or Deliberate Omission:The Assessing Officer (A.O) and the Commissioner of Income Tax (Appeals) [CIT(A)] did not accept the assessee's explanation that the omission was due to the unavailability of details at the time of filing the original return. They concluded that the omission was deliberate, leading to the imposition of the penalty. However, the assessee argued that the omission was inadvertent and corrected voluntarily before any specific query was raised by the A.O.5. Consistency in Tax Authority's Approach:The assessee highlighted that no penalty was imposed for a similar omission in the preceding year (A.Y. 2010-11), where the interest income of Rs. 12,88,273/- was also omitted and later included in a revised computation. The inconsistency in the tax authority’s approach was argued to be whimsical and not legally sustainable.Tribunal's Findings:- The Tribunal noted that the assessee voluntarily filed the revised computation before any specific query was raised by the A.O.- It was observed that penalty proceedings are quasi-criminal in nature, and penalties should not be imposed for technical or venial breaches.- The Tribunal referenced the Supreme Court’s judgment in Hindustan Steel Limited vs. State of Orissa, emphasizing that penalties should not be imposed unless the conduct was contumacious or dishonest.- The Tribunal found that the assessee's omission was a bonafide mistake, as evidenced by the inclusion of similar interest income in the return for A.Y. 2012-13, filed before the notice for A.Y. 2011-12 was issued.- The Tribunal also relied on precedents where penalties were not imposed in similar situations, reinforcing the need for consistency in the tax authority’s approach.Conclusion:The Tribunal quashed the penalty of Rs. 6,21,100/- imposed under Section 271(1)(c), allowing the appeal of the assessee. The decision emphasized the importance of consistency, bonafide conduct, and the quasi-criminal nature of penalty proceedings, concluding that the assessee should not be penalized for a technical lapse corrected voluntarily.Order Pronouncement:The appeal of the assessee was allowed, and the order was pronounced in the open court on 26/07/2017.