2020 (7) TMI 728 - AT - Income Tax

Penalty u/s 271(1)(c) - whether for concealment of particulars of income or furnishing of inaccurate particulars of income? - Long Term Capital Gain earned on sale of agricultural land which was jointly held in equal share with his brother Sunil Sharma - HELD THAT - AO has not clearly mentioned the limb, on the basis of which, penalty was proposed to be imposed. AO in assessment order or penalty notices did not specify the limb under which the penalty was initiated and simply issued a pre-printed notice without striking off the unnecessary portions of the notice. If the AO was of the view that the assessee has concealed the income or furnishing inaccurate particulars of income then he should have deleted or not mentioned the other limb for imposition of penalty i.e. concealing the particulars of income. The above act of the AO clearly shows that the entire exercise of initiation of penalty proceedings has been done without application of mind. With regard to the merits of the penalty so levied, we find that it was an inadvertent human error while taking the costs of acquisition at the time of computation of capital gain. It was a bonafide and unintentional mistake which was rectified during the course of assessment itself - In case of Price Water House Coopers P. Ltd. 2012 (9) TMI 775 - SUPREME COURT held that the assessee should have been careful but in absence of due care in a case did not mean that assessee was guilty of either furnishing inaccurate particulars or attempting to conceal the income. Thus no penalty can be levied for a bona fide/inadvertent/human error . Hon'ble M.P. High Court in case of CIT vs. SKY Auto Products Pvt. Ltd. 2004 (4) TMI 28 - MADHYA PRADESH HIGH COURT held that where the assessee, a new businessman claimed depreciation for the full year in the first year of starting production though he was entitled only to fractional depreciation, it was a case of bonafide mistake on the part of the assessee. Such a ground cannot be a good ground for imposition of penalty u/s 271(1)(c). Hon'ble Supreme Court in the case of M/s. K.C. Builders vs. ACIT 2004 (1) TMI 7 - SUPREME COURT held that mere omission from the return of an item of receipt does neither amount to be concealment nor deliberate furnishing of inaccurate particulars of income unless and until there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. In the view of the above there was neither concealment nor the assessee furnished the inaccurate particulars of income. - Decided in favour of assessee.

Summary

Issues:
Appeal against penalty imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2014-15.

Analysis:
1. The assessee, an Individual deriving income from various sources, filed a return of income declaring total income which included Long Term Capital Gain. The Assessing Officer (AO) made an addition on account of Capital Gains earned on the sale of agricultural land and levied a penalty under section 271(1)(c). The penalty was confirmed by the ld. CIT (A), leading to the appeal.

2. The argument presented was that the notice issued under section 274, read with section 271(1)(c), should specify the limb of Section 271(1)(c) under which the penalty proceedings were initiated. A decision by the Hon'ble Karnataka High Court was cited to support this argument, emphasizing the importance of specifying the limb for imposition of penalty.

3. The case law highlighted that concealment of income and furnishing inaccurate particulars of income are distinct, and the Assessing Officer must determine which limb applies before initiating penalty proceedings. The High Court's decision underscored that a clear notice specifying the relevant limb is essential for the imposition of penalty.

4. The contention regarding the inadvertent human error in the computation of Long Term Capital Gain was raised. The mistake was deemed unintentional and rectified during the assessment process. The argument emphasized that the error did not amount to concealment or furnishing inaccurate particulars of income.

5. The Tribunal analyzed the facts and legal precedents cited by both parties. It was observed that the AO failed to specify the limb under which the penalty was initiated, indicating a lack of application of mind. Citing relevant case laws, including decisions by the Supreme Court and High Courts, the Tribunal concluded that the penalty was unjustified due to the inadvertent nature of the error.

6. Consequently, the Tribunal allowed the appeal, directing the AO to delete the penalty imposed under section 271(1)(c) of the IT Act for the assessment year in question. The decision was based on the lack of merit for the penalty in light of the factual circumstances and legal principles discussed during the proceedings.