2016 (4) TMI 1151 - AT - Income Tax

Penalty under section 271(1)(c) - excess deduction claimed on account of interest on borrowed capital in respect of self occupied property - Held that - The assessee has paid the interest amount claimed as deduction. It may be a fact that due to oversight or ignorance of relevant statutory provision the assessee had claimed the excess deduction on account of payment of interest payment of the self occupied property. However for claiming such deduction no malafide intention can be imputed to the assessee. As such deduction claimed possibly could be on account of human error no penalty can be imposed under section 271(1)(c) as held by the Hon ble Supreme Court in Price Waterhouse Coopers Pvt. Ltd. (2012 (9) TMI 775 - SUPREME COURT ). In view of the aforesaid we delete the penalty imposed under section 271(1)(c) of the Act. - Decided in favour of assessee.

Summary

Issues:
Imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961 for excess deduction claimed on account of interest on borrowed capital in respect of self-occupied property.

Analysis:
The appeal was against the order confirming the penalty under section 271(1)(c) of the Income Tax Act, 1961 for an amount of Rs. 89,950 for the assessment year 2008-09. The Assessing Officer restricted the deduction claimed by the assessee on interest payment to Rs. 1.50 lakh under section 24(b) of the Act, leading to the initiation of penalty proceedings. The assessee contended that the excess deduction was a bona fide mistake and human error, not an intentional act to conceal income or provide inaccurate particulars. The Authorized Representative argued that since the interest payment was actually made, the penalty should not apply. The Departmental Representative, however, supported the penalty imposition, highlighting that without scrutiny, the excess relief claimed would have gone unnoticed. The Tribunal observed that while the excess deduction was due to oversight or ignorance of the law, there was no malicious intent on the part of the assessee. Citing relevant case laws, the Tribunal ruled that no penalty could be imposed for a bona fide error, deleting the penalty under section 271(1)(c) and allowing the assessee's appeal.

Conclusion:
The Tribunal, after considering the submissions and evidence, concluded that the penalty imposed under section 271(1)(c) for the excess deduction claimed on interest payment was unjustified. Recognizing the mistake as a human error without any deliberate attempt to evade tax, the Tribunal referred to relevant legal precedents to support its decision to delete the penalty. Consequently, the assessee's appeal was allowed, and the penalty under section 271(1)(c) was removed.