2014 (4) TMI 1233 - AT - Income Tax

Penalty levied u/s. 271(1)(c) - assessee had filed his revised return of income voluntarily declaring the capital gain accrued to him from the sale of agricultural land measuring about 1 acre at Kalapatty village - Reopening of assessment - Held that - One cannot simply presume the assessee had filed the revised return only after he came to know about the survey proceedings in the premises of the Shri Chinnasamy Selvaraj. There is no categorical finding on this aspect also by the AO which CIT (A) had clearly observed in his order. The concept of presumption or an after-thought by the assessee cannot be plainly inferred only by considering the chronological events of the fact without looking at the root of the basic facts. There is also no finding by the Ld. Assessing Officer on the fact that the relevant asset was located within 8 Kilometers radius from the municipal limit of Coimbatore town which the assessee had himself voluntarily admitted. It is worthwhile to mention here that under normal circumstances one does not always realize the location of his assets with respect to its distance from the municipal limit of a particular city. In the present case the asset is located beyond the municipal limit of Coimbatore city; though within 8 Kilometers from the radius of such prescribed limit. Therefore there is a possibility of bona fide misconception by the assessee on the issue. However when the assessee realized his folly he earnestly computed his tax liability under the head capital gain and voluntarily filed the revised return of income promptly along with proof of payment of tax. AO after obtaining the relevant information from the revised return treated the return of income as lodged however acted upon the return filed by the assessee by accepting the income declared in the revised return subsequent to issuance of notice U/s. 148 and on receipt of the reply from the assessee to treat the revised return as return filed in response to notice U/s 148 and further proceeded to levy penalty. But this is not a case suitable for levy of penalty u/s. 271(1)(c) because the entire addition has resulted from the voluntary disclosure by the assessee though omitted to be disclosed while filing the original return of income due to bonafide reasons. - Decided in favour of the assessee.

Summary

Issues Involved:
1. Validity of the revised return filed by the assessee.
2. Imposition of penalty under Section 271(1)(c) of the Income Tax Act for concealment of income or furnishing inaccurate particulars.

Issue-wise Detailed Analysis:

1. Validity of the Revised Return Filed by the Assessee:
The assessee, an individual earning salary income and income from house property, initially filed his return of income electronically on 27.09.2008 for the assessment year 2008-09, declaring an income of Rs. 3,05,498/-. Subsequently, the assessee filed a revised return admitting long-term capital gain of Rs. 2,67,68,546/-, but the revised return was treated as invalid by the Assessing Officer as it was filed after the time limit prescribed under Section 139(5) of the Income Tax Act. The Assessing Officer issued a notice under Section 148, treating the capital gain as income escaped from assessment and initiated penalty proceedings under Section 271(1)(c).

2. Imposition of Penalty Under Section 271(1)(c):
The core issue was whether the penalty under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars was justified. The assessee contended that the omission of capital gains in the original return was due to a bona fide misconception that the sale of agricultural lands located outside Coimbatore Corporation area would not attract capital gains tax. Upon realizing the correct legal position, the assessee voluntarily filed a revised return including the capital gains and paid the due taxes.

The Assessing Officer rejected the assessee's explanation, stating that ignorance of law is not a valid defense against penalty and that the revised return was not filed voluntarily but due to the survey action conducted on the purchaser of the property. The penalty of Rs. 53,53,707/- was levied, being 100% of the tax evaded.

Findings and Reasoning of the Commissioner of Income Tax (Appeals) [CIT(A)]:
The CIT(A) deleted the penalty, providing several reasons:
- The Assessing Officer did not discuss how the information about the sale of land came to his notice for issuing the notice under Section 148.
- The assessment was completed by accepting the income returned in response to the notice under Section 148 without any finding of concealment of income by the assessee.
- The facts did not support the view that the filing of the revised return was only after the detection of concealment by the department.
- The revised return was filed before the issuance of the notice under Section 148, indicating it was not an afterthought.
- The Delhi High Court's ratio in the case of CIT Vs. Kohinoor Impex Pvt. Ltd. was cited, which states that if disclosure is made before detection, it may not attract penalty under Section 271(1)(c).

Tribunal's Decision:
The Tribunal upheld the CIT(A)'s order, emphasizing that the assessee had filed the revised return voluntarily, declaring the capital gain and paying the tax promptly upon realizing the correct legal position. The Tribunal noted the absence of a categorical finding by the Assessing Officer that the revised return was filed due to the survey proceedings. The Tribunal concluded that the omission in the original return was due to a bona fide misconception and not an attempt to conceal income. Therefore, the Tribunal found no infirmity in the CIT(A)'s order and confirmed it, deciding the issue in favor of the assessee.

Conclusion:
The appeal of the Revenue was dismissed, and the cross objections of the assessee were allowed. The Tribunal's decision was pronounced on 17th April 2014, at Chennai.