2016 (3) TMI 42 - AT - Income Tax

Penalty under section 271(1)(c) - assessee has not disclosed the Capital Gain from sale of property - assessee not claimed relief u/s. 54/54F - Held that - The facts of the present case suggest that it is a peculiar case where the assessee was not aware about the taxation provisions. The assessee had not disclosed the Capital Gains arising from sale of property in his return of income and at the same time had not claimed relief u/s. 54/54F of the Act for which he was eligible. The assessee accepted the addition made in assessment proceedings without any protest. In such circumstances the addition in assessment proceedings can be sustained. However, in our considered opinion it is not a fit case for levy of penalty under the provisions of section 271(1)(c) of the Act. The application of penal provisions is not automatic and the levy itself depends upon the facts and circumstances of each case. In the present case, the assessee has already suffered by paying tax on the amount on which he was otherwise eligible to claim deduction u/s. 54/54F of the Act. In view of the peculiar facts of the case we delete the penalty levied u/s. 271(1)(c) and allow the appeal of the assessee. - Decided in favour of assessee

Summary

Issues:
1. Assessment of Long Term Capital Gain
2. Penalty under section 271(1)(c) for concealing income

Assessment of Long Term Capital Gain:
The case involved an appeal against the order of the Commissioner of Income Tax (Appeals) regarding the assessment of Long Term Capital Gain for the assessment year 2006-07. The assessee, a Senior Government Officer, had not declared the capital gain arising from the sale of a property in his return of income. The Assessing Officer made an addition of the capital gain amount, and penalty proceedings under section 271(1)(c) were initiated. The assessee contended that he was ignorant of tax laws and immediately accepted the mistake when informed. He had invested the capital gain amount in the purchase of two flats in his wife's name. The assessee sought relief under sections 54/54F of the Income Tax Act, claiming that he was eligible for deduction. The Department argued that the assessee deliberately suppressed income and was not eligible for deduction as the flats were purchased in his wife's name.

Penalty under section 271(1)(c) for concealing income:
The Department contended that the penalty was rightly levied as the assessee did not disclose the capital gain in his return. The Tribunal considered the peculiar circumstances of the case, where the assessee was unaware of tax provisions and accepted the addition without protest. Despite being eligible for deduction under sections 54/54F, the assessee did not claim it. The Tribunal referred to relevant case laws to support the assessee's eligibility for deduction even if the property was purchased in the wife's name. Ultimately, the Tribunal held that the penalty under section 271(1)(c) was not justified in this case and deleted the penalty. The Tribunal emphasized that assessment and penalty proceedings are distinct, and the assessee's ignorance of tax laws did not prevent him from claiming relief in penalty proceedings.

In conclusion, the Tribunal allowed the appeal of the assessee, deleting the penalty levied under section 271(1)(c) and acknowledging the eligibility of the assessee for claiming deduction under sections 54/54F of the Act. The decision was based on the peculiar facts of the case and the assessee's genuine ignorance of tax laws.