2013 (9) TMI 804 - HC - Income Tax

Penalty u/s 271(1)(c) of the Income Tax Act Held that - Reliance has been placed upon the case of CIT vs. Suresh Chandra Mittal; 2001 (6) TMI 63 - SUPREME Court , wherein it was held that if the assessee had offered additional income to buy peace of mind and to avoid litigation, penalty under section 271(1)(c) of the Act could not be levied. In the instant case, there is no malafide intention on the part of the assessee and the A.O. has not brought any evidence on record to prove that there was concealment of income. Before surrender, the A.O. and the assessee have reached to a compromise that no penal action be taken in the instant case but the A.O. has levied the penalty without discovering any new facts. The gift given by one Sri Mohd. Shoaib was accepted by the A.O. without taking any action. Thus, the surrender was on agreed basis as per the ratio laid down by this Court in the case of Commissioner of Income Tax vs. Saran Khandsari Sugar Works 1999 (9) TMI 15 - ALLAHABAD High Court . Moreover, in the instant case, the A.O. did not ask about the amount of sale consideration minus gift in question Decided in favor of Assessee.

Summary

Issues:
1. Interpretation of provisions of Income Tax Act regarding capital gains and penalty under section 271(1)(c).
2. Validity of penalty imposed by Assessing Officer.
3. Consideration of surrender by the assessee as a compromise to buy peace.
4. Application of principles of concealment of income under section 271(1)(c) of the Income Tax Act.

Analysis:
1. The main issue in this case revolved around the interpretation of provisions of the Income Tax Act concerning capital gains and the imposition of penalty under section 271(1)(c). The appellant contested the judgment passed by the Income Tax Appellate Tribunal, arguing that the assessee failed to disclose income from the sale of property as capital gains, leading to liability for penalty under the Act.

2. The Assessing Officer (A.O.) treated the transaction as a sale and computed long-term capital gains under section 48 of the Income Tax Act. The appellant justified the penalty order, claiming that the gift amount was part of the sale consideration, and the surrender of income by the assessee was not voluntary. The appellant relied on various legal precedents to support their argument.

3. On the other hand, the respondent, representing the assessee, defended the impugned order, stating that the surrender was made to avoid conflict with the tax authorities. The respondent argued that there was no evidence of concealment of income or malicious intent on the part of the assessee. The respondent highlighted discrepancies in the A.O.'s approach, citing a gift received by the minor son of the assessee that was not scrutinized.

4. The High Court, after hearing both parties and examining the evidence, concluded that there was no malafide intention on the part of the assessee. The Court noted that the A.O. did not provide any new evidence to establish concealment of income. The Court referenced legal precedents to support its decision, emphasizing that if additional income was offered to avoid litigation, penalty under section 271(1)(c) could not be imposed. The Court upheld the orders of the lower authorities, stating that the surrender was based on an agreed basis and that no penal action was warranted.

In conclusion, the High Court ruled in favor of the assessee, dismissing the appeal filed by the department. The judgment highlighted the importance of considering the circumstances and intent behind the surrender of income in determining the applicability of penalties under the Income Tax Act.