2018 (9) TMI 712 - AT - Income Tax

Penalty u/s 271(1)(c) - proof of concealment of income or furnishing of inaccurate particulars - Held that - The assessee after receiving the notice u/s 143(2) filed revised computation after coming to the knowledge that the assessee has not included the capital gains at the time of calculating computation and filing return of income, although the amounts were disclosed in the balance sheet prepared in support of return. The assessee has admitted the mistake before the AO could detect such omission. Thus, it is not a case of furnishing of inaccurate particulars or concealment of income before the AO. Section 271 comes into picture when there is a failure to furnish returns or there is concealment of income or furnishing of inaccurate particulars before the AO. But in the present case before the AO, all the relevant facts were already available and the mistake has been rectified by the assessee prior to the mistake pointed out by the AO to the assessee during the assessment proceedings. The order of the CIT(A) is not correct, as there is no concealment of income or furnishing of inaccurate particulars. The penalty levied u/s 271(1)(c) of the Act is therefore quashed. The appeal of the assessee is allowed.

Summary

Issues:
1. Dismissal of appeal by CIT(A)
2. Confirmation of penalty u/s 271(1)(c) of I.T. Act
3. Justification of not accepting explanations by CIT(A)

Issue 1: Dismissal of appeal by CIT(A)
The assessee filed an appeal against the order passed by CIT(A)-XX, New Delhi for Assessment Year 2010-11. The grounds of appeal included contentions regarding the dismissal of the appeal by the CIT(A). The assessee had initially filed a return declaring income which was later selected for scrutiny. During the assessment proceedings, errors in the computation of income were discovered, specifically related to the omission of long-term capital gains. The assessee rectified these errors by offering the capital gains for taxation and paying the due tax with interest before the scrutiny assessment commenced. The Assessing Officer accepted the revised computation without pointing out any discrepancies. The CIT(A) dismissed the appeal, leading to the assessee challenging this decision.

Issue 2: Confirmation of penalty u/s 271(1)(c) of I.T. Act
The Assessing Officer imposed a penalty under section 271(1)(c) of the Income Tax Act on the assessee. The penalty amount was set at ?4,37,379, which was 100% of the tax sought to be evaded. The assessee contended that the omission in including capital gains in the original computation and return of income was a genuine mistake and not an attempt to evade tax. The penalty was challenged on the grounds that the mistake was rectified by the assessee voluntarily before it was detected by the Assessing Officer during the assessment proceedings. The assessee argued that there was no concealment of income or furnishing of inaccurate particulars before the Assessing Officer, as all relevant facts were available and the mistake was rectified promptly.

Issue 3: Justification of not accepting explanations by CIT(A)
The CIT(A) upheld the penalty imposed by the Assessing Officer under section 271(1)(c) of the Act. The CIT(A) did not accept the assessee's explanations regarding the inadvertent omission in the computation of income that led to the inaccurate particulars being furnished. The assessee argued that the mistake was rectified voluntarily before any detection by the Assessing Officer, indicating that there was no intention to conceal income or provide inaccurate information. The Tribunal noted that the mistake was acknowledged and rectified by the assessee before any intervention by the Assessing Officer, leading to the conclusion that there was no concealment or furnishing of inaccurate particulars. Consequently, the Tribunal quashed the penalty imposed under section 271(1)(c) of the Act, allowing the appeal of the assessee.

In conclusion, the Tribunal ruled in favor of the assessee, setting aside the penalty imposed under section 271(1)(c) of the Income Tax Act. The decision emphasized the importance of rectifying genuine mistakes promptly and voluntarily, highlighting that penalties are applicable in cases of deliberate concealment or inaccurate reporting, which was not the situation in this case.