2014 (6) TMI 700 - AT - Income Tax

Levy of penalty u/s 271(1)(c) of the Act LTCG on sale of flat Failure to furnish accurate details - Held that - The assessee had shown the indexed cost at Rs. 7. 36 lakhs, during the assessment proceedings before the AO, he revised the claim of indexation and same was rejected by the AO - the revision of indexation claim was one of the arguments taken by the assessee during the assessment proceedings - During the assessment proceedings, assessee can plead various things the contentions cannot be compared with filing of inaccurate particulars or concealing the particulars of income - the disallowance/addition of any amount during the assessment proceeding they are confirmed by the appellate authorities do not justify the automatic levy of penalty - Penalty proceedings are totally different from the assessment proceeding though they are directly related with the assessment - assessee had requested to take on record hire claim of indexation the assessee had not furnished inaccurate particulars or had concealed his income thus, the order of the FAA is reversed Decided in favour of Assessee.

Issues:
1. Validity of penalty under section 271(1)(C) of the Act for inaccurate particulars.
2. Revision of indexation claim during assessment proceedings.
3. Justification of penalty imposition by AO.
4. Assessee's plea against penalty imposition.
5. Disallowance of alternate claims during assessment proceedings and its impact on penalty imposition.

Issue 1: Validity of penalty under section 271(1)(C) of the Act for inaccurate particulars:

The case involved the appeal against the order of the CIT(A)-5 confirming the penalty imposed by the Assessing Officer (AO) under section 271(1)(C) of the Act. The AO had levied a penalty of Rs. 17,77,975 for furnishing inaccurate particulars. The First Appellate Tribunal (FAA) also upheld the penalty. However, the Appellate Tribunal, in its analysis, found that the revision of the indexation claim by the assessee during the assessment proceedings did not amount to furnishing inaccurate particulars or concealing income. The Tribunal emphasized that rejecting alternate claims or pleadings during assessment proceedings does not automatically justify the imposition of a penalty. The Tribunal concluded that the assessee had not concealed income or furnished inaccurate particulars, thereby deciding the effective ground of appeal in favor of the assessee.

Issue 2: Revision of indexation claim during assessment proceedings:

The assessee had initially shown the indexed cost at Rs. 7.36 lakhs in the return of income. However, during the assessment proceedings, the assessee revised the claim of indexation, which was rejected by the AO. The FAA held that the revision of the indexation claim was inadmissible and contrary to the provisions of the Act. The FAA agreed with the AO's decision to levy the penalty under section 271(1)(C) of the Act. Subsequently, the Appellate Tribunal considered the revision of the indexation claim as one of the arguments put forth by the assessee during the assessment proceedings and ruled that such revisions or alternate claims do not necessarily constitute furnishing inaccurate particulars or concealing income.

Issue 3: Justification of penalty imposition by AO:

The AO imposed the penalty under section 271(1)(C) of the Act based on the grounds that the assessee had wrongly claimed indexed cost and made an inadmissible deduction. The AO held that the assessee's explanation was not substantiated and that the claim of indexation was not in line with the Act. The AO justified the penalty imposition by citing that the assessee had furnished inaccurate particulars. However, the Appellate Tribunal disagreed with this justification and reversed the order of the FAA, ultimately allowing the appeal filed by the assessee.

Issue 4: Assessee's plea against penalty imposition:

The Authorized Representative (AR) representing the assessee argued that the revision of the indexation claim was made during the assessment proceedings and was presented as one of the arguments. The AR contended that all necessary facts were available to the AO, and the assessee did not conceal income or furnish inaccurate particulars. The Departmental Representative (DR) supported the order of the FAA. The Appellate Tribunal, after considering the submissions, concluded that the revision of the indexation claim did not amount to furnishing inaccurate particulars, leading to the allowance of the appeal filed by the assessee.

Issue 5: Disallowance of alternate claims during assessment proceedings and its impact on penalty imposition:

The Appellate Tribunal highlighted that while the AO rejected the alternate claims or pleadings made by the assessee during the assessment proceedings, such disallowances or additions in the quantum proceedings do not automatically warrant the imposition of a penalty. The Tribunal emphasized the distinction between assessment proceedings and penalty proceedings, stating that the rejection of alternate claims during assessment does not necessarily imply the furnishing of inaccurate particulars. The Tribunal, considering the peculiar facts and circumstances of the case, concluded that the assessee had not concealed income or furnished inaccurate particulars, leading to the reversal of the FAA's order and the allowance of the appeal in favor of the assessee.

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