Appeal success: Penalty under Income Tax Act for 2015-16 deleted due to reasonable cause

The Appellate Tribunal allowed the appeal, deleting the penalty imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2015-16. The Tribunal found a reasonable cause for the delay in disclosing interest income, considering the delayed availability of TDS information as explained by the assessee. The penalty was deemed unwarranted, and the order upholding the penalty was set aside.

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Issues:
Challenge to penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for assessment year 2015-16.

Analysis:

1. Background and Assessment Proceedings:
The appeal was filed challenging the penalty imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2015-16. The assessee, a resident individual, had initially declared an income of Rs. 5,87,730/- but later revised the computation to include interest income from fixed deposits and savings bank accounts. The Assessing Officer found disparities in the income declared and the actual interest earned, leading to the initiation of penalty proceedings.

2. Initial Assessment and Penalty Imposition:
The Assessing Officer initiated penalty proceedings under section 271(1)(c) alleging inaccurate particulars of income due to the undisclosed interest income. The assessee explained that the TDS information was not available earlier, leading to the omission in the original return. Despite the revised computation and explanation, the penalty of Rs. 1,66,504/- was imposed.

3. Appellate Tribunal's Analysis:
The Appellate Tribunal reviewed the case and noted that the assessee had indeed offered the entire interest income during the assessment proceedings, even if it was not initially included in the return. The Tribunal found merit in the explanation provided by the assessee regarding the delayed availability of TDS information on the 26AS site, supported by a certificate from the bank. This delay was considered a reasonable cause for the initial omission.

4. Decision and Ruling:
Based on the factual findings and the explanation provided by the assessee, the Appellate Tribunal concluded that there was a reasonable cause for the delay in offering the interest income to tax. Therefore, the penalty imposed under section 271(1)(c) was deemed unwarranted, and the Tribunal set aside the order of the Commissioner (Appeals) upholding the penalty.

5. Final Verdict:
Consequently, the appeal was allowed, and the penalty imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2015-16 was deleted. The decision was pronounced in the open court on 27th October 2022, in favor of the assessee.

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