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2014 (1) TMI 495

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.... Income Tax Act, 1961 (hereinafter referred to as the "Act"), imposing penalty upon the assessee. Counsel for the appellant submits that, as the assesse furnished inaccurate particulars with intent to evade tax, the Tribunal has erred in setting aside the penalty. The assessee firm having accepted that fixed deposits in the name of its partners and expartners, may be assessed as income of the firm, the return was clearly incorrect. The penalty was, therefore, a necessary consequence of furnishing incorrect particulars with mens rea to evade tax. Counsel for the appellant submits that the following question of law arises for adjudication:-          " Whether, on the facts and the circumstances of the....

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....tion 271(1)(c) either for filing of inaccurate particulars or concealment of income would have been imposed. The appellant has shown the asset under consideration regularly in the books of account and also shown the interest income accrued on the FDRs. The only difference is the understanding of the appellant regarding the passing of an entry relatable to interest. One argument put forth by the Auditors for passing of the entry is that if FDRs are purchased in the name of the firm proper entry should be made by debiting the capital account and each and every partner in whose name the FDRs is made. Under the circumstances the capital account of the partner will get reduced and the FDR will not appear in the balance sheet of the firm. Second ....

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....re, deleted. In the result the appeal of the appellant is accepted." A perusal of the order passed by the Tribunal reveals that the respondent had disclosed the assets under consideration, and the interest income accruing on fixed deposit receipts, in its books of accounts. The Tribunal has held that explanation proferred by the assessee that they were advised to directly credit interest in the name of the partners, which was later found to be legally impermissible, is logical and, therefore, does not attract penalty under Section 271(1)(c) of the Act or fall within the mischief of furnishing incorrect particulars or concealment of income, so as to invite a penalty. Even otherwise as, held by the Hon'ble Supreme Court in CIT versus Relia....