2012 (9) TMI 196 - AT - Income Tax

Penalty u/s 271(1)(c) - Revenue contending intentionally concealment of income by inflating the cost of acquisition of house property thereby reducing long term capital gain - Held that - Admittedly, there was a mistake in the computation of long term capital gain by the assessee and the assessee company furnished revised computation before the AO and also offered explanation for the mistake. This mistake cannot be considered as concealment of income by the assessee company. CIT(A) deleted penalty on observation that AO had not issued any show cause notice pointing out the mistake and no positive material was brought on record to prove that the assessee had inflated the expenditure and deflated the receipts to reduce the taxable income pertaining to long term capital gain. Since findings are based on justified and reasonable grounds, hence deletion of penalty is upheld - Decided in favor of assessee

Summary

Issues:
- Appeal against deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961 for A.Y. 2006-07.

Analysis:
1. The appeal was filed by the Revenue against the deletion of penalty by CIT(A) under section 271(1)(c) of the Income Tax Act, 1961. The dispute arose from the computation of long term capital gain on the sale of a flat by the assessee company. The AO initiated penalty proceedings after assessing the long term capital gain differently from the assessee's return.

2. The Revenue contended that the assessee intentionally concealed income by manipulating the cost of acquisition of the property, resulting in a lower declared long term capital gain. The AO imposed a penalty of Rs. 3,30,000, which was deleted by the CIT(A), leading to the appeal before the Tribunal.

3. During the proceedings, the assessee did not appear, and the Tribunal proceeded ex parte. The Revenue argued that the assessee failed to provide documentary evidence to support the claimed long term capital gain, indicating intentional concealment. The AO found discrepancies in the cost of the property and brokerage details, justifying the penalty.

4. The Tribunal referred to a judgment by the ITAT Pune Bench, emphasizing that the imposition of penalty under section 271(1)(c) should not solely rely on additions to income. The CIT(A) examined the case and found that the AO did not issue a show cause notice regarding the alleged mistake in computation. The CIT(A) concluded that the assessee's explanation was bona fide and reasonable, hence canceling the penalty.

5. Citing the Supreme Court's decision in Union of India vs. Dharmendra Textile Processors, it was highlighted that willful concealment is not a requirement for imposing civil liability under section 271(1)(c). The assessee's submissions, including the discovery of the error and revised computation, were considered by the CIT(A) to be genuine and in line with legal precedents.

6. Ultimately, the Tribunal upheld the CIT(A)'s decision, finding no justification to interfere with the order. The appeal by the Revenue was dismissed, affirming the cancellation of the penalty under section 271(1)(c) for the assessment year in question.