2016 (5) TMI 234 - AT - Income Tax

Penalty u/s 271(1)(c) - excess claim of cost of acquisition - Held that - The excess claim of cost of acquisition made by the assessee was not detected by the Assessing Officer, but the assessee had suo motu and voluntarily brought to the notice of the Assessing Officer by letter dated 17.09.2013. The assessee had furnished all the relevant documents which would show the share of the assessee in the said land, e.g., the copy of sale deed of the said land was placed on the record of the Assessing Officer which clearly point out the share of the assessee. Thus, there was no attempt on the part of the assessee to hide or conceal anything relating to this claim. In view of the above facts and circumstances of the case, the Assessing Officer was not justified in imposing penalty. Reliance placed on the decision of Reliance Petro Products P Ltd, reported (2010 (3) TMI 80 - SUPREME COURT ), wherein it is held that mere rejection of any claim would not automatically invite penalty so long as the claim is bonafide and genuine, the rejection of such claim would not amount to furnishing inaccurate particulars of income. In the light of above, delete the penalty imposed u/s 271(1)(c) of the Act. - Decided in favour of assessee

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act.

Analysis:
The judgment pertains to an appeal against the order of the CIT (A) confirming the penalty imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act. The key issue before the Tribunal was whether the CIT (A) was justified in upholding the penalty amounting to Rs. 1,62,420. The case involved the assessee, an individual engaged in the business of organizing and developing construction schemes, who had inadvertently understated Short Term Capital Gain (STCG) due to an error in computing the cost of acquisition on the sale of land. The assessee voluntarily disclosed this error to the Assessing Officer, who nonetheless initiated penalty proceedings under section 271(1)(c).

The assessee contended that there was no intention to conceal income or furnish inaccurate particulars, as the error was rectified voluntarily before detection by the Assessing Officer. The Tribunal noted that the assessee had provided all relevant documents, such as the sale deed, to substantiate the share in the land. Relying on the decision in Reliance Petro Products P Ltd, the Tribunal held that a genuine and bonafide claim, even if rejected, does not automatically attract penalty under section 271(1)(c). Therefore, the Tribunal concluded that since there was no attempt to hide information and the claim was genuine, the penalty was unwarranted, and it was deleted.

In the final decision, the Tribunal allowed the appeal of the assessee, setting aside the penalty imposed under section 271(1)(c) of the Income Tax Act. The judgment emphasized the importance of the bonafide nature of claims and the voluntary disclosure of errors by taxpayers in determining the applicability of penalties under the Act.