2017 (5) TMI 1736 - AT - Income Tax

Penalty levied u/s 271(1)(c) - non-disclosure of particulars of LTCG STCG - HELD THAT - CIT(A) has observed that the Chartered Accountant who has quantified the accounts of the assessee company has not disclosed the aforesaid sale of capital assets, as evidenced by the relevant column in Form No. 3CD, Sl. No. 14. The Chartered Accountant has reported capital gains as NIL in the said column which clearly indicates that there was deliberate concealment in reporting substantial capital gains, which arose to the assessee above ₹.21 crores. True disclosure means, disclosing in the return of income and in Form 3CD, which are filed during the filing of return of income. The assessee has not made any disclosure relating to capital gains in the return of income filed. Unintentional, honest mistake, commission of bonafide error, or typographical error, if corrected immediately upon discovery, normally, it does not warrant levy of penalty. In this case, the assessee filed the return of income on 26.09.2012 and notice under 143(2) was issued on 13.08.2013. To agree with the contention of the assessee that the mistake was bonafide and inadvertent, the assessee should have filed revised return of income by incorporating the LTCG and STCG, which arose due to sale of landed properties as well as sale of windmill immediately when it was noticed by the assessee before service of notice under section 143(2) of the Act, which was not done so in this case. Therefore, the contention of the assessee that the mistake was bonafide and inadvertent, is not acceptable. Non-disclosure of particulars of LTCG STCG with the AR of the assessee during the course of assessment proceedings and thereafter filing of computation of LTCG STCG, cannot be held as voluntary disclosure of particulars. In this case, if scrutiny assessment was not done, the true and complete facts of sale of landed properties as well as sale of windmill would not have come to the light and substantial capital gains would have totally suppressed. It is a clear cut case of concealment of true and complete particulars in the return of income, which warrant penalty under section 271(1)(c) - Decided against assessee.

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act for non-disclosure of capital gains in the return of income.

Analysis:
The appeal was filed against the penalty levied under section 271(1)(c) of the Income Tax Act for non-disclosure of capital gains in the return of income. The assessee had initially declared a total loss, but during scrutiny, it was found that significant capital gains from the sale of properties and a windmill were not disclosed. The Assessing Officer initiated penalty proceedings after the assessee admitted the oversight in not reporting these gains. The penalty was upheld by the ld. CIT(A) based on the deliberate concealment of substantial capital gains, as the Chartered Accountant had reported capital gains as "NIL" in the relevant form. The assessee contended that the omission was unintentional and due to oversight, as the entire sale proceeds were used to repay loans. However, the Tribunal noted that the assessee had sufficient time to rectify the mistake before the scrutiny assessment but failed to do so. The Tribunal held that the non-disclosure amounted to concealment of income, justifying the penalty under section 271(1)(c) of the Act. The Tribunal dismissed the appeal, upholding the penalty.

In summary, the judgment dealt with the issue of penalty under section 271(1)(c) of the Income Tax Act for the non-disclosure of capital gains in the return of income. Despite the assessee's claim of unintentional omission due to oversight, the Tribunal found that the failure to disclose significant capital gains, even after being confronted during assessment proceedings, amounted to deliberate concealment. The Tribunal emphasized that immediate correction upon discovery could have averted the penalty, but the assessee's inaction until scrutiny assessment indicated a lack of bonafide intent. The Tribunal upheld the penalty, as the non-disclosure was deemed a clear case of concealing true and complete particulars, warranting the penalty under the Act.