2016 (6) TMI 1436 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - Addition made to the capital gains - HELD THAT - Parameters of judging the justification for addition made in the assessment case of the assessee is different from the penalty imposed on account of concealment of income or filing inaccurate particulars of income and that certain disallowance/addition could legally be made in the assessment proceedings on the preponderance of probabilities but no penalty could be imposed u/s. 271(1)(c) on the preponderance of probabilities and Revenue has to prove that the claim of expenses by the assessee was not genuine or was inflated to reduce its tax liability - merely because additions have confirmed in appeal or no appeal has been filed by assessee against additions made it cannot be the sole ground for coming to the conclusion that assessee has concealed any income. Before us l.d AR has given the reasons and the facts which had resulted into addition. These submissions have not been controverted by the Revenue - there is nothing on record to demonstrate that assessee had filed inaccurate particulars of income or had concealed the particulars of income. We also get support from the judgement of CIT vs. Reliance Petroproducts Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT wherein as held that a mere making of the claim which is not sustainable in law by itself will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. We are of the view that in the present case no case for levy of penalty u/s. 271(1)(c) of the Act has been made out. We thus direct the deletion of penalty u/s. 271(1)(c) of the Act. Thus the ground of assessee is allowed.

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act on additions made under section 45(2).

Analysis:
The appeal was against the order of the Commissioner of Income Tax(Appeals) for the assessment year 2011-12, where the penalty of ?5,50,616 was levied under section 271(1)(c) on additions made to the capital gains. The Assessee, engaged in the business of builders & property developer, had converted land into stock in trade in the previous year and offered the gains for taxation in the impugned year. The Assessing Officer disallowed an excess claim of indexed cost and made an addition related to the sale of shops and flats to a family member. The Assessee contended that there was no concealment of income, and any errors were due to a genuine belief or a difference of opinion. The Assessee argued that the penalty should be deleted as the additions were made under deeming provisions. The Revenue supported the lower authorities' orders.

The Tribunal considered the provisions of Explanation 1 to Section 271(1)(c) which require the assessee to offer a genuine explanation to avoid penalty. The Tribunal noted that if the explanation is not false and all facts have been disclosed, penalty should not be imposed. It was emphasized that the justification for additions in assessment differs from penalties for concealment of income. The Tribunal found that the Assessee had provided reasons and facts for the additions, which were not refuted by the Revenue. The Tribunal also referred to a Supreme Court judgment stating that a claim not sustainable in law does not amount to furnishing inaccurate particulars. Based on these findings and legal principles, the Tribunal concluded that no case for penalty under section 271(1)(c) was made out, and directed the deletion of the penalty.

Therefore, the Tribunal allowed the Assessee's appeal, ruling in favor of the Assessee and deleting the penalty under section 271(1)(c) of the Income Tax Act.