2019 (3) TMI 583 - HC - Income Tax

Penalty u/s 271(1)(c) - undisclosed capital gain - mismatch between the assessee s declared income and the claim of the refund of advance tax - HELD THAT - We find that the Tribunal has given elaborate reasons for deleting the penalty. The record suggests that assessee had not offered certain receipts to tax under bonafide belief that the same was not taxable. Quite apart from the existence of the letter dated 20th September, 2010 not being disputed by the revenue either before the CIT (Appeals) or the Tribunal, during the assessment proceedings undoubtedly the assessee had made full representation why according to his belief the receipt was not chargeable to tax. Merely because the Assessing Officer did not accept such a stand of the assessee, would not automatically permit revenue to levy penalty. See COMMISSIONER OF INCOME-TAX VERSUS RELIANCE PETROPRODUCTS PVT. LTD. 2010 (3) TMI 80 - SUPREME COURT - No question of law in this respect arises. Penalty for breach of Section 54EC - HELD THAT - Amount involved is extremely small and we therefore, do not entertain the question without going into merits thereof. We however record the confession of Shri Joshi for the assessee that the question whether investment under section 54EC can be total of ₹ 50 lakhs in all or would be capped to ₹ 50 lakhs in a assessment year, permitting similar such investment in the next year was not free from doubt. The assessee had no intention to breach this ceiling.

Summary

Issues:
1. Justification of not upholding the penalty under Section 271(1)(c) of the Income Tax Act.
2. Reduction of penalty related to excess claim of exemption under Section 54EC of the Act.

Issue 1: Penalty under Section 271(1)(c) of the Act
The primary dispute in this case revolved around the deletion of the penalty imposed by the Assessing Officer against the assessee under Section 271(1)(c) of the Income Tax Act, 1961. The revenue contended that the assessee failed to declare sizable income as capital gain in the return for the assessment year 2010-11, leading to penalty proceedings. However, the Tribunal deleted the penalty, emphasizing that the assessee had filed the return with relevant information on the same day and provided detailed grounds for not including the capital gain. The Tribunal noted that the information provided was not found to be incorrect, relying on the Supreme Court's decision in Commissioner of Income Tax vs. Reliance Petroproducts Pvt. Ltd. The Tribunal also considered the Chartered Accountant's opinion obtained by the assessee, leading to the deletion of the penalty.

Issue 2: Penalty for Breach of Section 54EC of the Act
The second question addressed the penalty related to the breach of Section 54EC of the Act concerning excess claim of exemption. The amount involved was small, and the Court did not delve into the merits of the issue. However, it acknowledged the uncertainty regarding the investment ceiling under Section 54EC and noted the assessee's lack of intention to breach the limit. The Court dismissed the Income Tax Appeal, concluding that the penalty for breach of Section 54EC was not entertained due to the minimal amount involved and the uncertainty surrounding the investment ceiling.

In conclusion, the High Court of Bombay upheld the Tribunal's decision to delete the penalty under Section 271(1)(c) of the Income Tax Act, emphasizing the assessee's bona fide belief and the full disclosure of information. Additionally, the Court did not entertain the penalty issue related to the breach of Section 54EC due to the small amount involved and the uncertainty regarding the investment ceiling.