TMI Blog2015 (10) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue of taxability of interest was in the favour of the assessee by virtue of series of decisions of the Tribunal in the earlier years in assessee's own case. Not only that, there were certain High Courts decisions also which were in the favour of the assessee as pointed out by the learned counsel. Thus the issue whether interest income will fall within the "Principle of Mutuality" or not itself was debatable as there were many conflicting decisions. In this background we hold that at the time of filing return of income the assessee's claim was not only bona fide but had a foundational fact in the form of Tribunal orders. Accordingly, we hold that the Ld.CIT(A) has rightly deleted the penalty as the claim of non taxability of interest i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w of charging section. The subject matter of penalty here in these appeals are taxability of interest income earned by the assessee, comprising of interest on fixed deposit with bank and other interest income which has been taxed as income from other sources by the assessing officer. The said interest income was claimed as exempt under the Principles of Mutuality. 4. It has been stated before us that the assessee is being regularly assessed to tax since earlier years and from A.Y. 1997-98 to 2005-06, the Income tax Tribunal in assessee's own case had held that all the interest income including interest other than fixed deposits with the bank are not exigible to tax. The copies of Tribunal order right from A.Ys. 1998-99 to 2005-06 hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not chargeable to tax at the time of filing of the return of income. Reliance was also placed on the decision of Hon'ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd.(2010) 322 ITR 158. However, the assessing officer held that ultimately the issue taxability of interest income has been decided against the assessee as it does not fall within the Principles of Mutuality. In such a situation the penalty becomes imperative on the following grounds:- a) Though the assessee states that the interest income has not been concealed, the same has not been offered to tax under the pretext that the same is covered under the Principle of Mutuality, which tantamount to filing of inaccurate particular of income. b) The case c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt decision, does not mean that the assessee is guilty of furnishing inaccurate particulars. 6. The Ld.CIT(A) deleted the penalty on the ground that, in the earlier years the issue of taxability of interest was decided in the favour of the assessee and it was only after the decision of Bombay High Court which was rendered on 17.06.2010, this issue was decided against the assessee. Thus so far as penalty proceedings u/s 271(1)(c) are concerned, the assessee was not clear as to whether the interest on deposits is governed by 'Principle of Mutuality' or not and hence it cannot be considered that the assessee has furnished any inaccurate particulars of income or falls in the category of a claim which was not sustainable at the time o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 271(1)(c) are attracted. He submitted that there were three High Court decisions in favour of the assessee prior to the Supreme Court decision in the case of Bangalore Club Vs. CIT (supra) decisions which were as under:- (i) Delhi HC-All India Oriental Bank of Commerce Welfare Society [(2003) 130 Taxman 575 (Delhi)] (ii) Karnataka HC- Canara Bank Golden Jubilee Staff Welfare Fund [(2009) 308 ITR 202 (Karn)] (iii) Delhi HC-Standing Conference of Public Enterprises (Scope) [(2009) 319 ITR 179 (Del)] In such a situation even though the matter has been decided against the assessee in the quantum proceedings, no penalty u/s 271(1)(c) can be said to be leviable. 9. We have heard the rival submissions and also perused the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se in the penalty proceedings are different from those in the assessment proceedings. So far as penalty proceedings are concerned it has to be seen, whether at the time of filing return of income, the claim made by the assessee is based on some bona fide belief or not. A mere making of a claim which may not be found sustainable in law later on, cannot be held against the assessee, that he is guilty of making a false claim. It is an admitted fact that, at the time of filing of return of income the issue of taxability of interest was in the favour of the assessee by virtue of series of decisions of the Tribunal in the earlier years in assessee's own case. Not only that, there were certain High Courts decisions also which were in the favou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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