Tribunal cancels penalty under section 271(1)(c) for non-disclosure of interest income.

The Tribunal set aside the CIT(A)'s order and directed the AO to delete the penalty of Rs. 18,390 imposed under section 271(1)(c) of the Income Tax Act, 1961. The appeal of the assessee was allowed as the Tribunal found that the non-disclosure of interest income and the disallowance of expenses claimed against interest income did not warrant the imposition of penalties.

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Issues Involved:
1. Confirmation of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Non-disclosure of interest income.
3. Disallowance of expenses claimed against interest income.

Detailed Analysis:

1. Confirmation of Penalty under Section 271(1)(c)
The primary issue is whether the penalty of Rs. 18,390/- imposed under section 271(1)(c) of the Income Tax Act, 1961, for A.Y. 2013-14, was justified. The assessee appealed against the CIT(A)'s order confirming this penalty.

2. Non-Disclosure of Interest Income
The assessee, a partner in M/s Apex Logistics, filed a return declaring an income of Rs. 41,99,530/-. During scrutiny, it was found that the assessee did not disclose interest income of Rs. 34,912/- from FDR and savings bank accounts. The AO initiated penalty proceedings for concealment and furnishing inaccurate particulars of income. The assessee claimed this omission was inadvertent and lacked dishonest intent. The CIT(A) upheld the penalty, stating the non-disclosure was detected only due to scrutiny and would have otherwise gone undetected.

3. Disallowance of Expenses Claimed Against Interest Income
The assessee claimed expenses of Rs. 24,612/- (including Rs. 612 for bank charges) against interest income from the partnership firm. The AO disallowed these expenses, stating they were not eligible for deduction. The CIT(A) confirmed the penalty, rejecting the assessee's argument that the expenses were legitimate, and ruled that the claim was not legally correct.

Tribunal's Findings:

Non-Disclosure of Interest Income
The Tribunal noted that the interest income of Rs. 34,912/- was less than 1% of the total declared income of Rs. 41,99,530/-. It concluded that the omission was without dishonest intent, referencing the ITAT Pune Bench's decision in Kanbay Software India Pvt. Ltd. (122 TTJ 721), which emphasized the importance of considering human probabilities and bona fide explanations. Thus, the Tribunal held that no penalty should be imposed for this non-disclosure.

Disallowance of Expenses
Regarding the disallowed expenses of Rs. 24,612/-, the Tribunal observed that the claim was not found to be false, merely inaccurate or wrong. Citing the Supreme Court's decision in Reliance Petro Products Pvt. Ltd. (322 ITR 158), it held that a mere unsustainable claim does not amount to furnishing inaccurate particulars of income. Therefore, the penalty for this disallowance was also deemed unjustified.

Conclusion:
The Tribunal set aside the CIT(A)'s order and directed the AO to delete the penalty of Rs. 18,390/-. The appeal of the assessee was allowed.

Additional Note:
The Tribunal acknowledged the delay in pronouncing the order due to the COVID-19 lockdown, referencing the Hon’ble Mumbai Tribunal's decision in JSW Limited Vs Deputy Commissioner of Income Tax, which allowed for extensions beyond the usual 90-day period under exceptional circumstances.

Order Pronounced: 02-06-2020

Result: The appeal of the assessee is allowed.

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