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2017 (11) TMI 108 - AT - Income TaxLevy of penalty u/s.271(1)(c) - capital gain - Held that - In this case, all the information given in the return was not found to be incorrect or inaccurate. In this case, any statement made or any detail supplied by the assessee is factually not incorrect hence, prima-facie assessee could not be held guilty or furnishing inaccurate particulars of income. In order to expose the assessee to the penalty unless the case is strictly covered by the provision the penalty provision cannot be invoked. In this case assessee mainly made a claim of capital gain which is as per Revenue assessee is not entitled by itself would not attract the penalty under section 271(1)(c) of the Act. We find that assessee has merely claimed the capital gain which was not acceptable or was not acceptable to Revenue would not attract the penalty under section 271(1)(c) of the Act. We notice that the assessee has furnished all the details and claim made by the assessee, in our view, cannot be considered to be not bonafide, i.e. it was one of the possible claims. Further the assessee has offered explanation before the tax authorities and the same was not found to be false. Under these set of facts, we are of the view that the impugned penalty is not sustainable. Accordingly, we set aside the order passed by the learned CIT(A) and direct the Assessing Officer to delete the penalty. - Decided in favour of assessee.
Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961. 2. Determination of the nature of income (capital gain vs. income from other sources). 3. Validity and specificity of the penalty notice under Section 274 read with Section 271(1)(c). Detailed Analysis: 1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act, 1961: The primary issue was whether the penalty of ?42,07,500/- levied under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars of income was justified. The assessee argued that the penalty notice was ambiguous and did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars. The Tribunal noted that the Assessing Officer (AO) had not clearly indicated the specific charge in the penalty notice, merely inserting the words "wrong claim u/s.54". This ambiguity was found to be against the principles of natural justice. The Tribunal cited several judgments, including the Karnataka High Court’s decision in CIT Vs. Manjunatha Cotton and Ginning Factory, which held that a penalty notice must clearly state the grounds for penalty. Consequently, the Tribunal quashed the penalty proceedings due to the ambiguous notice. 2. Determination of the Nature of Income (Capital Gain vs. Income from Other Sources): The case involved the classification of ?1,25,00,000/- received by the assessee. Initially, the AO held that this amount was not taxable as a long-term capital gain but was taxable in the hands of the assessee's father. However, under Section 263, the Commissioner reviewed the order and classified the amount as income from other sources under Section 56(1). The Tribunal noted that the assessee had disclosed all relevant details and made a claim for capital gain, which was not accepted by the Revenue. The Tribunal emphasized that merely making an unsustainable claim does not amount to furnishing inaccurate particulars of income. The Tribunal referenced the Supreme Court's decision in Reliance Petroproducts Ltd., which held that an incorrect claim in law does not constitute furnishing inaccurate particulars of income. 3. Validity and Specificity of the Penalty Notice under Section 274 read with Section 271(1)(c): The Tribunal scrutinized the validity of the penalty notice issued under Section 274 read with Section 271(1)(c). It was found that the notice did not specify whether the penalty was for concealment of income or for furnishing inaccurate particulars, which is a requirement as per judicial precedents. The Tribunal cited the jurisdictional High Court’s decision in the case of Shri Samson Perinchery, which followed the Karnataka High Court's ruling that a penalty notice must clearly state the grounds for penalty to ensure the assessee understands the charges against them. The Tribunal concluded that the penalty notice's ambiguity led to a violation of the principles of natural justice, rendering the penalty proceedings invalid. Conclusion: The Tribunal allowed the appeal, setting aside the order of the CIT(A) and directing the AO to delete the penalty. The decision was based on the ambiguity in the penalty notice and the principle that an unsustainable claim does not equate to furnishing inaccurate particulars of income. The Tribunal emphasized the importance of clear and specific penalty notices to uphold the principles of natural justice.
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