2014 (8) TMI 1160 - AT - Income Tax

Penalty u/s 271(1)(c) - addition in respect of interest on fixed deposits with bank - Held that - We are unable to approve the stand of the Revenue that the said income has been detected by the Assessing Officer before its declaration by the assessee. No doubt, it was not declared in the return of income but was declared by way of a revised computation of income filed during the assessment proceedings. Every mistake or omission does not ipso facto lead to levy of penalty u/s 271(1)(c) of the Act. In so far as the present issue is concerned, the overall circumstances explained by the learned counsel before us, in our view, mitigate the rigors of section 271(1)(c) of the Act qua the impugned sum of ₹ 4,60,091/-. Therefore, we set-aside the order of the CIT(A) on this aspect and direct the Assessing Officer to delete the penalty levied with respect to the addition at ₹ 4,60,091/- on account of interest on FDRs with Dena bank. Addition on account of land as short term capital gain - Held that - The ingredients necessary to impose penalty u/s 271(1)(c) of the Act qua the impugned transaction are fulfilled. In the present case, it is quite evident that the transaction resulting in short term capital gain on sale of Pirangut property was not declared in the return of income filed. It is also clear 7 that the purchase as well as sale of the property is by way of duly executed conveyance deeds and therefore it is not a case where assessee was not aware of the income accruing to her on account of the impugned transactions. Considering the totality of facts and in the absence of any plausible and bonafide explanation coming-forth from the assessee, we find that the said income has been rightly subjected to levy of penalty u/s 271(1)(c) of the Act. We hereby affirm the orders of the authorities below on this aspect. Income by way of TDR sale receipts - Held that - For addition on account of sale of TDR it is not in dispute that the same reflects a transaction undertaken by assessee s late husband Satish D. Misal prior to his death in the year 2003. It is quite evident that assessee was not a party to the transaction and that she is in receipt of money as legal heir of her deceased husband -merely because an assessee has agreed to an addition, cannot be conclusive for the purpose of penalty u/s 271(1)(c) of the Act. Quite clearly, it is a trite law that assessment proceedings and the penalty proceedings are independent proceedings and that the findings in the assessment proceedings are not conclusive for the purposes of adjudicating the levy of penalty although such findings may be relevant for the purposes of 10 penalty proceedings. In-fact, as per case of Anantharam Veerasingaiah & Co. vs. CIT 1980 (4) TMI 2 - SUPREME COURT penalty proceedings are independent of the assessment proceedings and penalty cannot be levied merely on the basis of the findings in the assessment proceedings. Penalty u/s 271(1)(c) of the Act is not attracted - Decided in favour of assessee.

Summary

Issues Involved:
1. Penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961.
2. Addition of interest on bank deposits.
3. Addition of short-term capital gain.
4. Addition of TDR sale receipts.

Detailed Analysis:

1. Penalty Imposed under Section 271(1)(c) of the Income-tax Act, 1961:
The core issue pertains to the penalty imposed by the Assessing Officer (AO) amounting to Rs. 45,38,213/- under Section 271(1)(c) of the Income-tax Act, 1961. This penalty was based on three additions made to the returned income: interest on bank deposits, TDR sale receipts, and short-term capital gain.

2. Addition of Interest on Bank Deposits:
The AO added Rs. 4,60,091/- as interest on fixed deposits with Dena Bank, which was not declared in the original return but was included in a revised computation submitted during assessment proceedings. The AO levied a penalty for concealment of income. The assessee argued that the omission was a genuine error, as the interest was credited by the bank after the renewal of old FDRs, which occurred post the close of the financial year. The CIT(A) sustained the penalty, but the Tribunal found the omission to be bona fide and directed the AO to delete the penalty.

3. Addition of Short-term Capital Gain:
The AO added Rs. 35,00,000/- as short-term capital gain from the sale of property, which the assessee did not declare in the original return. The assessee explained that the omission was unintended and accepted the addition during assessment proceedings. The Tribunal upheld the penalty, noting that the transaction was not declared in the return, and the assessee was aware of the income from the property sale. The Tribunal affirmed the orders of the authorities below, finding no plausible explanation from the assessee.

4. Addition of TDR Sale Receipts:
The AO added Rs. 1,11,67,378/- from TDR sales, which the assessee claimed were executed by her deceased husband and received as a result of a court dispute settlement. The assessee treated the receipt as a capital receipt not chargeable to tax but agreed to pay tax during assessment proceedings. The AO levied a penalty, arguing that the income was unearthed during assessment and would have remained untaxed otherwise. The CIT(A) deleted the penalty, and the Tribunal affirmed this, finding the assessee's explanation bona fide. The Tribunal noted that the assessee was not a party to the original transaction and received the amount as a legal heir, rebutting the presumption of concealment.

Conclusion:
The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's cross-objection. It directed the deletion of the penalty on the interest income and upheld the penalty on the short-term capital gain. The Tribunal found the deletion of the penalty on TDR sale receipts justified, considering the bona fide explanation provided by the assessee. The Tribunal emphasized that assessment and penalty proceedings are independent, and the findings in assessment proceedings are not conclusive for penalty imposition.