2019 (2) TMI 1590 - HC - Income Tax

Penalty u/s 271(1)(c) - assessee had computed tax at the concessional rate - lower computation of payable tax on capital gain - revised return filed - HELD THAT - The issue pertains to penalty imposed by the AO u/s 271(1)(c). Such penalty was deleted by the Tribunal. The Tribunal noticed that the assessee had made full disclosure of the storm term capital gain, however, had computed the tax at lower rate which the assessee did not qualify since the said shares did not offer security transaction tax. Upon such error being pointed out, the assessee without any opposition promptly revised the return. Tribunal viewed the lower computation of payable tax as arising from a bonafide error. Additionally, as noted that the Tribunal found that upon said error being pointed, the assessee offered the income to tax through revised return. No question of law - Decided against Revenue

Summary

Issues:
- Appeal against the deletion of penalty under Section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
1. The primary issue in this case is the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961. The Tribunal had deleted this penalty, prompting the Revenue to appeal. The core question raised was whether the Tribunal was correct in deleting the penalty without appreciating that the assessee had computed tax at a concessional rate not applicable to their case, resulting in a loss of ?76,91,773 to the Revenue.

2. The Tribunal's decision to delete the penalty was based on the fact that the assessee had made a full disclosure of the short-term capital gain but had mistakenly computed the tax at a lower rate, which was not valid as the shares did not involve security transaction tax. Upon realizing this error, the assessee promptly revised the return without any opposition.

3. The Tribunal considered the lower computation of payable tax as a genuine mistake made in good faith by the assessee. Furthermore, it noted that the assessee rectified the error by offering the income to tax through the revised return. Consequently, the Tribunal found no legal issue to be addressed, leading to the dismissal of the Tax Appeal.

In conclusion, the High Court upheld the Tribunal's decision to delete the penalty under Section 271(1)(c) of the Income Tax Act, 1961, as it deemed the error in tax computation to be unintentional and rectified promptly by the assessee.