TaxTMI 
TaxTMI 
2018 (10) TMI 486
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....he appellant filed its return of income for the Assessment Year 2011-12 at Rs. 3,01,500/- plus agricultural income of Rs. 2,90,000/-. The assessment u/s 143(3) of the Income Tax Act, 1961 was completed on 19.03.2014 at an income of Rs. 21,67,630/- after making addition of Rs. 15,14,000/- on account interest received on Fixed Deposits Receipts by the appellant from HP State Agricultural and Rural Development Bank, Nahan. The Assessing Officer initiated penalty proceedings u/s 271(l)(c) of the Act for concealment of income at the time of assessment proceedings separately. The Assessing Officer after considering the submissions of the appellant, imposed penalty of Rs. 4,88,002/- under section 271(l)(c) of the Act by holding that the appellant had concealed the particulars of income. The said penalty order has been confirmed by the Ld. CIT(A) holding that the assessee has concealed particulars of income. 4. During the hearing before us, Ld. AR argued that the assessee has already agreed for the addition of Rs. 15,16,126/- during the assessment proceedings being the interest earned on the FDR purchased from HP State Agricultural and Rural Development Bank. He argued that it was a bonaf....
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....efiance of law or guilty of conduct, contumacious or dishonest, or acted in conscious disregard to its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flow* from a bona fidebelief that the offender is not liable to act in the manner prescribed by the statute 8. Ld. AR also relied on the judgment in the case of CIT vs Manjunatha Cotton end Ginning Factory, reported in [2013](359 ITR 565), wherein it has been held as under:- The imposition of penalty is not automatic, i.e., imposition of penalty even if the tax liability is admitted, is not automatic. Even if the assessee has not challenged the order of assessment levying tax and interest and has paid the same, that by itself would not be sufficient for the authoritie....
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....e assessee has concealed his income and furnished inaccurate particulars of income, the penalty proceedings were initiated against the assessee and penalty was levied by the AO on both accounts i.e for concealment as well as furnishing of inaccurate particulars. 4. The assessee had appealed against the penalty order before the Ld CIT appeal. In respect of the undisclosed interest, the assessee made the following submission before the Ld CIT (A): "...The appellant herein had not diselosed sueh interest in his return of income since the appellant was under a bonafide belief that such income from a state owned Agricultural and Rural development bank would be exempt from tax under section 10(1) of the Act". However, considering the submissions of the assessee, the Ld C1T (A) has passed a detailed order relying upon the relevant Judicial decisions of the H'ble Supreme Court and confirmed the penalty order passed by AC). 5. During the hearing on 09.07.2018, the counsel of the assessee mentioned before H'ble Bench that the HP State Agricultural Bank had not deducted the TDS on the interest component and hence the assessee was under the impression that the interest inco....
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....nafide belief for escaping penalty proceedings. e) It is important to note that the assessee has not only derived interest on FDR from HP State Agricultural Bank, but from other Rural Bank as well i.e Himachal Gramin Bank. However, he has shown the interest income from FDRs with Himachal Gramin Bank. Thus, the assessee claim of bonafide belief that he was not required to declared income from Rural/agricultural banks falls flat on this account as well. f) The claim of the assessee in the appellate proceedings that he was under bonafide belief that interest income from state owned agriculture and development bank was exempt under Section 10(1) is again misleading. Section 1 0 ( 1 ) gives exemption to income from agriculture and not interest income earned on FDRs with Agricultural/Rural banks, considering the fact that the interest income received from similar other bank i.e. Himachal Gramin bank has been disclosed in the return. 8.3 During the hearing specific query was raised to the parties as to whether the interest payment from HP State Agricultural and Rural Development Bank was exempted from the TDS provisions or not for which the Ld. DR submitted as under: 1. During t....
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....or recently introduced purpose i.e. Rural Housing against the security of agricultural land. In addition to it now Bank is going to introduce Kisan Credit Card Scheme for the rural people at low rate of interest and Kisan Clubs and Women Self Help Groups are being organized by the Bank for increasing the economical status of the rural people." 3. From the above description, it is very clear that this bank is not a land development bank as claimed and hence is required to deduct TDS under Section 194A of the Act. 8.4 Ld. AR reiterated that it is a fact that the TDS has not been deducted on the interest payments made to the assessee. 9. We have gone through the facts on record. We find that HP State Cooperative Agriculture & Rural Development Bank Ltd. is not exempted from deducting the TDS. The assessee has shown the agricultural income even though it is non taxable in the return of income. Similarly the assessee has also shown the interest received on FDR's from SBI, Nahan, ICICI Bank, Nahan and also Himachal Gramin Bank, Nahan. Hence the plea that the interest on FDR's have been omitted on a bonafide belief that the interest on FDR's is not taxable cannot be accepted. The as....
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.... u/s 276C of the Income-tax Act." 9.1 Originally in the 1922 Act Section 28 which authorizes the levy of penalty contained the word deliberately in sub-sec (3) for imposing the penalty for concealment. Same position prevailed in the original Section 271 in 1961 Act and the same read as under: "271 - Failure to furnish returns, comply with the notice, concealment of income etc. (1) If the ITO or the Appellant Assistant Ld. Commissioner in the course of any proceedings under this Act, is satisfied that any person-- (a) ---------------------- (b) --------------------- (c) As concealed particulars of his income or deliberately furnished inaccurate particulars of such income." 9.2 Because of the expression deliberately it was earlier believed that unless and until some income was intentionally concealed by a person, penalty cannot be imposed. Because of the expression ''deliberately" it was held in case of CIT V. Anwar AM, 76 ITR 696, that penalty proceedings are penal in nature and even if explanation of the assessee is false, it does not necessarily give rise to the inference that disputed amount is income. The head note in this case reads as under: "Proceedin....
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....espect of any amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation is bonafide and all the facts relating to the same and material to the computation of his total income have been disclosed by him." Proviso was amended by Taxation Laws (Amendment Act and Miscellaneous Provisions) Act 1986 w.e.f. 10.9.1986. Commenting on this explanation the Hon'ble Supreme Court in case of K.P. Madhusudanan V CIT" (supra) observed as under: "The Explanation to Section 271(l)(c) is a part of section 271. When the Assessing Officer or the Appellate Assistant Commissioner issues a notice u/s 271, he makes the assessee aware that the provisions thereof are to be used against him. These provisions include the Explanation. By virtue of the notice u/s 271 the assessee is put to notice that, if he does not prove, in the circumstances stated in the Explanation, that his failure to return his correct income v/os not due to fraud or neglect, he shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof, and, consequently be liable to the penalty under the section. No express invocation of....