2003 (1) TMI 55 - HC - Income Tax

Whether the mistake committed by counsel in advising the assessee and the assessee on such advice submitted return omitting a particular item to be shown in the return can be said to be an act committed by the assessee in concealing deliberately the item of income and thus is liable for penalty under section 271(1)(c) of the Income-tax Act 1961? - we see no reason to sustain the order of the Tribunal. The order of the Tribunal is set aside and penalty is cancelled. The appeal stands allowed accordingly.

Summary

Issues:
1. Whether a mistake by counsel advising the assessee on submitting a return can be considered deliberate concealment by the assessee, leading to a penalty under section 271(1)(c) of the Income-tax Act, 1961?

Detailed Analysis:
The case involves the assessment year 1992-93, where the appellant, an individual engaged in the transport business, sold an immovable property and purchased two flats. Initially, the appellant claimed no capital gain tax was applicable due to the property purchase against the sale consideration. However, the Assessing Officer disagreed, treating the difference as short-term capital gain. Subsequently, penalty proceedings under section 271(1)(c) were initiated, resulting in a penalty imposition of Rs. 1,04,110.

In the appeal process, the penalty amount was successively reduced to Rs. 63,974 by the Commissioner of Income-tax (Appeals) and further to Rs. 53,312 by the Tribunal. The appellant contended that the transaction details were disclosed in the return, and the mistaken exemption claim was due to counsel advice. On the other hand, the respondents argued that the revised return lacked full and true particulars, justifying the penalty under section 271(1)(c).

The Court noted the appellant's disclosure of the transaction and the mistake in claiming exemption, attributing it to counsel's advice. The counsel's affidavit confirmed the inadvertent error, emphasizing the disclosure of the transaction in the return. The Court opined that if an exemption claim was made in good faith, based on disclosed facts and ignorance of tax provisions, penalty imposition was unwarranted. It was deemed the Assessing Officer's responsibility to seek clarification and tax the income if necessary, which was done in this case.

Conclusively, the Court overturned the Tribunal's decision, canceling the penalty and allowing the appeal based on the disclosed transaction details and the inadvertent exemption claim, absolving the appellant from penalty liability under section 271(1)(c) of the Income-tax Act, 1961.