Neelkanth Township & Construction Pvt. Ltd. vs. ITO ITAT Mumbai `B’ Bench Before D. Karunakara Rao (AM) and Amit Shukla (JM) ITA No. 6062 /Mum/2012 Assessment Year: 2008-09. Decided on: 2nd December, 2014. Counsel for assessee/revenue: V. C. Shah/ Vivekanand Prempurna

Facts:
During the previous year relevant to the assessment year 2008-08, the assessee company received interest income of Rs. 5,99,644. In the return of income filed by the assessee, this income was reduced from expenses and the net expenses were carried forward as work-in-progress.

The Assessing Officer (AO) while assessing the total income treated this sum of Rs. 5,99,644 to be income of the assessee. The assessee accepted the addition. On the said addition, the AO levied penalty, u/s 271(1)(c), amounting to Rs. 1,82,289.

Aggrieved, the assessee preferred an appeal to CIT(A) who confirmed the action of the AO.

Aggrieved, the assessee preferred an appeal to the Tribunal.

Held:
The Tribunal found that the assessee has disclosed the relevant facts in the return of income. The fact of not filing further appeal on quantum addition should not come in the way of deciding the penalty proceedings. The Tribunal was of the opinion that the issue whether interest income was rightly set off against the development expenses or was to be offered as income was a debatable issue. Accordingly, penalty u/s. 271(1)(c) is not sustainable. The Tribunal decided the appeal in favor of the assessee. The appeal filed by assessee was allowed.