2017 (1) TMI 256 - AT - Income Tax

Penalty u/s. 271(1)(c) - assessment u/s 153A - capital gain computation - Held that - We find that in this case the search action was conducted on 04.03.2010.The return of income in response to notice u/s 153A was filed on 17.10.2011 declaring income of ₹ 1,30,36,600/- subsequently, the assessee has revised his declared income to ₹ 1,37,77,640/- on 26.12.2011.We noticed that at the time of filing of return of income the assessee had computed long term capital gain as long term because this land was acquired initially through banakhat/agreement for sale on 1st Nov, 1994. for which the purchase deed was registered on 24th Feb, 2006. We have also considered the facts reported by the assessee and occurring of mistake because the period of holding was required to be calculated from the date of registration of purchase document and not from the date of banakhat. We find that assessee has disclosed the complete details of sale and purchase of land. We have noticed that the differences in the income was arising only because of indexation of the purchase of land which was not available in the case of short term capital gain. The original return itself was filed after the search action in response to notice under section 153A of the act which was revised to correct the mistake as elaborated above in this order. Looking to the above facts, we find that correction of working of capital gain in view of above stated facts and circumstances is not the case where the assessee had concealed the particular of income declared only because of search action. Accordingly, we considered that the Ld. Commissioner of Income Tax(A) is not justified in sustaining the penalty levied by the assessing officer. - Decided in favour of assessee.

Issues Involved:
1. Imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Determination of whether the assessee concealed income or furnished inaccurate particulars of income.
3. Application of Explanation 5A to section 271(1)(c) in cases of revised returns filed post-search operations.

Issue-Wise Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c):
The central issue revolves around the imposition of a penalty amounting to ?2,51,880 under section 271(1)(c) of the Income Tax Act, 1961. The penalty was imposed by the assessing officer (AO) on the grounds that the assessee had revised the declared income from ?1,30,36,600 to ?1,37,77,640 after a search action, which led to the initiation of penalty proceedings under section 271(1)(c) read with Explanation 5A of the Act.

2. Determination of Concealment or Inaccurate Particulars:
The assessee argued that the initial computation of long-term capital gain was based on the holding period calculated from the date of the banakhat (agreement for sale) dated 1st Nov 1994, whereas the purchase deed was registered on 24th Feb 2006. The revision of income to short-term capital gain was based on the advice of the chartered accountant, who clarified that the holding period should be calculated from the date of registration of the purchase document, not the banakhat. The assessee contended that this was a bona fide mistake corrected by revising the return, and thus, should not attract a penalty.

3. Application of Explanation 5A to Section 271(1)(c):
The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the penalty, referencing Explanation 5A to section 271(1)(c), which deems any income declared in the return filed in response to a notice under section 153A, and not disclosed in the returns filed prior to the search, as concealed income. The CIT(A) cited various case laws, including the Supreme Court's judgment in Reliance Petroproducts Pvt Ltd., which emphasized that to attract penalty under section 271(1)(c), there must be a finding that the assessee furnished inaccurate particulars of income or concealed income.

The CIT(A) noted that the assessee did not offer any explanation for not including the additional income in the original return filed before the search. The CIT(A) concluded that the revised return was not voluntary but made under compulsion due to the search, thus justifying the penalty.

Appellate Tribunal's Decision:
The Appellate Tribunal considered the arguments and facts presented by both sides. It noted that the search action was conducted on 04.03.2010, and the return in response to notice under section 153A was filed on 17.10.2011, followed by a revised return on 26.12.2011. The Tribunal found that the assessee had disclosed complete details of the sale and purchase of the land and that the difference in income arose solely due to the indexation benefit, which was not available for short-term capital gains.

The Tribunal concluded that the correction of the capital gain computation was a bona fide mistake and not an attempt to conceal income. The Tribunal held that the CIT(A) was not justified in sustaining the penalty, as the assessee had not concealed income but merely corrected an error in the computation of capital gains.

Conclusion:
The appeal of the assessee was allowed, and the penalty imposed under section 271(1)(c) was set aside. The Tribunal's decision emphasized that the correction of a bona fide mistake in the computation of income does not amount to concealment or furnishing of inaccurate particulars of income, thereby not warranting a penalty under section 271(1)(c).

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