Not disclosing accrued FDR interest payable on maturity was not Concealment – ITAT

Not disclosing accrued FDR interest payable on maturity was not Concealment. Penalty deleted as interest was payable on termination or on maturity

ABCAUS Case Law Citation:
ABCAUS 2645 (2018) (11) ITAT

The instant appeal of the assessee was directed against the order of the Commissioner of Income Tax(Appeals) confirming the penalty levied by the Assessing Officer (AO)under section 271(1)(c) of the Income Tax Act, 1961 (the Act).

The assessee filed return of income disclosing long term capital gain of Rs. 4.50 crores approx arising out of transfer of immovable property.

During the course of assessment proceedings, the AO found that bank has deducted TDS on the fixed deposits ( FDRs ) but the assesse had not declared the said interest income on the fixed deposits with Bank. Accordingly he made the addition for the interest amount.

Since the assessee had not disclosed the interest income, the Assessing Officer found that the assessee concealed his income, therefore he levied penalty under section 271(1)(c) of the Act.

Aggriebed by the penalty imposed, the assessee appealed to the CIT(A) who confirmed the addition.

Before the Tribunal, the assessee submitted that fixed deposit with Bank was made out of the capital gains disclosed by the assesse.

It was submitted that the assessee had no right to receive the accrued interest, till the fixed deposit attained maturity. Moreover, the assessee had the option of disclosing interest income accrued on the fixed deposit, either in the year of accrual or in the year in which the fixed deposit attains maturity.

Therefore, it was contended that non disclosure of interest income could not be construed as concealment of income by the assessee.  

The Tribunal observed that the fixed deposit were made out of the long term capital gains. The deposit was a cumulative deposit and the accrued interest at the fixed deposit was to be added to the deposit. The entire amount was payable only on the maturity of the fixed deposit.

The question for our consideration before the Tribunal was whether the assessee had concealed the accrued interest income on the fixed deposit.

The Tribunal opined that even though interest was credited to the fixed deposit, the assessee had no right to receive interest, till the fixed deposit attained maturity. The interest on the fixed deposit was to be paid by the bank either on termination of the fixed deposit or on its maturity.

Accordingly, the Tribunal held that that there was no concealment of income for the purpose of levy of penalty under section 271(1)(c) of the Act and set aside orders of both the authorities below.

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