Penalty u/s 271(1)(c) not Leviable When no Inaccurate Particulars of Income are Furnished by the Assessee: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, has recently, in an appeal filed before it, held that penalty under Section 271(1)(c) of the Income Tax Act is not leviable when no inaccurate particulars of income were furnished by the assessee.

The aforesaid observation was made by the Ahmedabad ITAT, when an appeal was filed before it by the assessee, as against the order passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi, for the Assessment Year 2015-16.

The ground of the assessee’s appeal being that the CIT(A)-NFAC has erred in conforming the levy of penalty of Rs.27,884/- under section 271(1)(c) of the Income Tax Act, the brief facts of the case were that the assessee was an employee Co-operative Credit Society , who was engaged in the business of banking i.e. providing credit facilities to its members, accepting deposits from members and investing surplus fund with other financial Institutions when money not required immediately for lending purposes.

It so happened that it was observed by the Assessing Officer that the assessee had shown the deposit of Rs.73,20,536/- with banks in its Balance Sheet, along with of Rs.57,17,326/- in its Profit & Loss account as interest income, as the assessee had claimed deduction under Section80P(2)(a)(i) of the Income Tax Act, amounting to Rs.12,25,412/- as interest income received from Baroda Guj. Gramin Bank & Bank of Baroda.

The return of income being filed by the assessee, declaring the total income at Rs. NIL, the Assessing Officer on the basis of the Supreme Court’s decision in case of Totgars Cooperative Sale Society Limited vs. ITO, and the decision of the Gujarat High Court in the case of State Bank of India vs. CIT, had allowed deduction under Section 80P(2)(a)(i) of the Income Tax Act on income earned from members only, while disallowing the claim of 80P(2)(a)(i) of the Income Tax Act, on the income i.e., interest earned from financial institutions.

Subsequently, the Assessing Officer initiated penalty proceedings for furnishing inaccurate particulars of income, by issuing notice under Section 274 read with a Section 271(1)(c) of the Income Tax Act. And after taking cognisance of the assessee’s reply/details, imposed penalty of Rs.27,884/- under Section 271(1)(c).

Being aggrieved by this penalty order, that the assessee had filed an appeal before the CIT(A). And the CIT(A) dismissed the appeal of the assessee.

It is in this circumstance that the assessee has preferred the present appeal before the Ahmedabad ITAT.

Hearing the opposing contentions of both sides as submitted by Shri Jaimin Gandhi, the AR on behalf of the assessee, and by Shri R.R. Makwana, the Sr. DR on behalf of the Revenue, the ITAT coram of Suchitra Kamble, the Judicial Member, thus held:

“The decision of Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts, is apt in the present case as the assessee is under bonafide belief that interest income earned on bank deposits is also coming under the purview of claim for deduction under Section 80P of the Act. Thus, the penalty under Section 271(1)(c) of the Act fails on the count of furnishing inaccurate particulars of income. Therefore, the penalty does not survive.”

To Read the full text of the Order CLICK HERE

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