2019 (1) TMI 199 - AT - Income Tax

Penalty u/s 271(1)(c) - working of capital gains arising on sale of Gobi unit at Erode considered the book value of assets sold for working out the net worth in place of written down of assets as provided by section 50B due to a bonafide error - Held that - We noticed that after the sale of the Gobi unit by the assessee, the assessee has shown the book value for the purpose of calculating the LTCG whereas the assessee should claim written down value of the unit for the purpose of assessing the LTCG. Undoubtedly, as per the Section 50B the written down value is required for the purpose of assessing the long term capital gain on account of sale of Gobi unit. The assessee has shown the book value of asset and has also shown the written down value required as per the purpose of section 50B. The claim of the assessee was not allowable. There was a bonafide mistake on the part of the assessee for calculating the LTCG. The assessee has filed the revised return of income which has been accepted by the Department. In view of the revised return of income, we nowhere find any concealment of income or furnishing the inaccurate particulars of income. See PRICE WATERHOUSE COOPERS (P.) LTD. VERSUS COMMISSIONER OF INCOME-TAX, KOLKATA - I 2012 (9) TMI 775 - SUPREME COURT - Decided in favour of assessee.

Summary

Issues:
- Confirmation of penalty under section 271(1)(c) of the Income Tax Act.
- Calculation of long term capital gains on sale of Gobi unit at Erode.
- Applicability of Section 50B of the Income Tax Act.
- Justifiability of penalty imposition.
- Consideration of revised computation of income.

Analysis:
The appeal was filed against the order confirming a penalty of ?18,03,832 imposed under section 271(1)(c) of the Income Tax Act. The assessee argued that the penalty was unjustified as there was a bonafide error in calculating the long term capital gains on the sale of the Gobi unit at Erode. The assessee mistakenly considered the book value of the unit instead of the written down value as required by Section 50B of the Act. The difference in figures led to the imposition of the penalty. However, the assessee rectified the error by filing a revised computation of income, correcting the capital gain difference before the assessment completion.

Upon review, the Tribunal noted that the assessee's mistake was genuine, and the revised return of income was accepted by the Department. The Tribunal observed that there was no intention to conceal income or provide inaccurate particulars. Citing legal precedents such as Price Waterhouse Coopers (P) Ltd. Vs. CIT and other relevant cases, the Tribunal concluded that the penalty imposition was unwarranted in this scenario. The Tribunal emphasized that the assessee's actions did not amount to concealment or furnishing inaccurate particulars of income.

In light of the above analysis and legal principles, the Tribunal set aside the CIT(A)'s decision and decided to delete the penalty imposed on the assessee. The appeal was allowed in favor of the assessee, and the penalty under section 271(1)(c) was revoked. The judgment highlighted the importance of genuine errors, rectification efforts, and adherence to statutory provisions in determining the applicability of penalties under the Income Tax Act.