Appeal success: Penalty canceled for interest on income tax refund. Error deemed bona fide.

The Tribunal allowed the appeal, canceling the penalty imposed under s.271(1)(c) on interest on income-tax refund not included in the Return of Income. It found no intentional omission of taxable income and considered the error as bona fide due to lack of information, directing the Assessing Officer to exercise discretion in favor of the assessee. The penalty was deemed unwarranted, emphasizing the absence of deliberate conduct and highlighting the possibility of carelessness in failing to notice the interest component in Form 26AS during filing.

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Issues:
Challenge to penalty under s.271(1)(c) for interest on income-tax refund not included in the Return of Income.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax(Appeals) confirming the penalty under s.271(1)(c) of the Income Tax Act on interest on income-tax refund not included in the Return of Income for Assessment Year 2014-15. The assessee argued that the interest income on IT refund was not known until reconciliation with Form No.26AS, and the mistake was unintentional. The assessee promptly paid the taxes upon discovery of the error, claiming it was a bona fide mistake due to lack of information. The Department, however, relied on the lower authorities' orders.

The Tribunal considered the submissions and noted that penalty proceedings were initiated for non-disclosure of interest received on excess tax paid. It was observed that the assessee, being a large taxpayer, had no motive to conceal the interest received from the Income Tax Department. The Tribunal cited the Hindusthan Steel Ltd. case, emphasizing that penalties cannot be imposed merely because it is lawful to do so. In the absence of intentional omission of taxable income, the Tribunal found merit in the assessee's argument that it was a bona fide error. The Tribunal concluded that the AO should have exercised discretion in favor of the assessee, given the circumstances. It was highlighted that the failure to notice the interest component in Form 26AS at the time of filing did not indicate deliberate conduct but possibly carelessness. Therefore, the penalty was canceled, and the appeal of the assessee was allowed.

In conclusion, the Tribunal set aside the order of the Commissioner of Income Tax(Appeals) and directed the Assessing Officer to cancel the penalty imposed under s.271(1)(c) on the interest on income-tax refund not included in the Return of Income.

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