2015 (10) TMI 595 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - disallowance of excess cost of acquisition claimed by the assessee, while computing capital gains arising on sale of land - Held that - In the present case, the assessee had furnished the explanation giving reasons for mistake in mentioning the amount of cost of acquisition of land. It has been stated that the mistake was bonafide. In the books of account the amount was correctly mentioned. Since, it was the first year of filing returns by using computer software, there is every possibility of committing error in transformation stage. Therefore, there was no reason to disbelieve the reasons given by the assessee. The Department has not been able to discharge the onus of establishing that the assessee had deliberately concealed the income or furnished inaccurate particulars of income. Thus, in view of the facts of the case, we accept the explanation furnished by the assessee and delete the penalty levied u/s. 271(1)(c) of the Act. - Decided in favour of assessee.

Summary

Issues:
Levy of penalty u/s. 271(1)(c) for disallowance of excess cost of acquisition in computing capital gains arising from the sale of land.

Analysis:
1. The appeal was filed against the order confirming the penalty for disallowance of excess cost of acquisition while computing capital gains from the sale of land for the assessment year 2006-07.
2. The mistake in the cost of land was not noticed during assessment but was observed during appellate proceedings, leading to penalty proceedings u/s. 271(1)(c).
3. The Commissioner of Income Tax (Appeals) partly accepted the appeal by deleting the penalty for denial of adjustment of brought forward business loss but upheld the penalty for the incorrect cost of acquisition.
4. The assessee argued that the incorrect figure was due to a computer software error, a bonafide mistake, and not deliberate concealment, citing relevant case laws.
5. The Department contended that the assessee deliberately inflated the cost to suppress capital gains, citing previous instances of alleged misconduct by the family members.
6. The Tribunal observed that the error was inadvertent, as the correct value was in the books, and the penalty was deleted as the Department failed to prove deliberate concealment.

Conclusion:
The Tribunal accepted the explanation provided by the assessee, considering the shift to computerized filing and the absence of deliberate concealment. Citing precedents, the Tribunal emphasized the Department's burden to prove concealment, leading to the deletion of the penalty u/s. 271(1)(c).