1996 (3) TMI 171 - AT - Income Tax

Tribunal cancels penalty for company's non-disclosure of interest income

The tribunal canceled the penalty imposed on a public limited company under section 271(1)(c) of the Income Tax Act for non-disclosure of interest income ... Assessing Officer, Assessment Year, Liability To Penalty, Undisclosed Income Issues:1. Penalty imposed under section 271(1)(c) for non-disclosure of interest income received from the Income-tax Department.Detailed Analysis:The appeal was filed by a public limited company against a penalty of Rs. 4,04,092 imposed under section 271(1)(c) of the Income Tax Act. The company maintained an account called 'Income-tax Account' where all tax payments and refunds were recorded. The company received a refund of Rs. 7,05,382, which included interest amounts for different assessment years. However, the interest received was not declared as income in the return filed by the company. The Assessing Officer added the interest amount to the company's income as undisclosed income, resulting in a penalty being imposed. The company contended that the non-disclosure was due to a lack of details provided in the refund voucher and was not intentional concealment. The company argued that it did not willfully submit a false return due to significant losses incurred.During the penalty proceedings, the Assessing Officer did not accept the company's explanation and imposed the penalty citing provisions of Explanation 4 to section 271(1)(c). The CIT(Appeals) upheld the penalty, leading to the company appealing further. The company argued that the non-disclosure was an error or lack of alertness, not intentional concealment. The company cited legal authorities and judgments to support its contention that penalty should not be imposed for bona fide errors. The Departmental Representative, however, argued that the company's failure to correct the return during assessment indicated obstinacy.The tribunal, after considering the arguments, decided to cancel the penalty and give the benefit of doubt to the company. The tribunal noted that while the company was negligent in not verifying the interest component of the refund, there was no evidence of intentional concealment. The tribunal highlighted the company's significant losses and lack of contumacious conduct. It referenced legal principles emphasizing that penalty should be imposed only for contumacious conduct or willful non-compliance with the law. The tribunal concluded that the company's conduct did not warrant penalty imposition under section 271(1)(c) of the Income Tax Act.The tribunal also discussed Explanation 4(a) to section 271(1)(c), clarifying that it enables penalty computation even in cases of assessed losses but does not define concealment. The tribunal emphasized that the main provision should determine concealment, as interpreted by the Orissa High Court in a previous judgment. Ultimately, the tribunal held that the company was not liable for the penalty, and the penalty imposed was canceled, allowing the appeal.