2020 (6) TMI 189 - AT - Income Tax

Penalty u/s 271(1)(c) - addition of Capital gain under the provisions of section 45(3) and Disallowance of the interest expenses - assessee suo-moto revised the computation of income - HELD THAT - Assessee has offered income by filing the revised computation of income which was accepted by the revenue. The assessee has filed such revised computation of income before the detection by the revenue about such additions made during the assessment proceedings. Thus it can be inferred that the assessee has not disclose the income with any dishonest intent. Accordingly, in our considered view the assessee cannot be visited with the penalty under section 271 (1)(c) of the Act. Addition in the present case under the head capital gain has been made under the provisions of section 45(3) representing the such addition during the assessment proceedings being deemed income does not automatically attract the penalty provisions as envisaged under the provisions of section 271(1)(c) of the Act. As such, the onus, in the case of deemed income as specified under section 45(3) of the Act, lies on the Revenue to prove that such deemed income is the real income of the assessee in order to attract the penalty provisions specified under section 271(1)(c) - See case of CIT Vs. Baroda Tin works Box 1995 (9) TMI 18 - GUJARAT HIGH COURT We hold that the assessee has not deliberately undisclosed the income under the head capital gain and claimed excessive interest expenses. As such the assessee himself suo-moto revised the computation and paid the taxes before any finding from the AO. Accordingly, in such a situation the penalty provisions cannot be attracted. Hence, we set aside the finding of the learned CIT (A) and direct the AO to delete the penalty imposed by him. Thus the ground of appeal of the assessee is allowed. - Decided in favour of assessee Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT - Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited 2020 (5) TMI 359 - ITAT MUMBAI

Issues Involved:
1. Confirmation of penalty levied under section 271(1)(c) of the Income Tax Act, 1961.
2. Determination of whether the assessee furnished inaccurate particulars of income.
3. Consideration of the timing and intent behind the revised computation of income filed by the assessee.
4. Impact of the COVID-19 pandemic on the pronouncement of the order.

Issue-wise Detailed Analysis:

1. Confirmation of Penalty Levied Under Section 271(1)(c):
The primary issue in this appeal is whether the learned CIT (A) erred in confirming the penalty levied by the AO amounting to ?5,45,725/- under section 271(1)(c) of the Income Tax Act. The penalty was imposed for furnishing inaccurate particulars of income and thereby concealing income.

2. Determination of Whether the Assessee Furnished Inaccurate Particulars of Income:
The facts reveal that the assessee, an individual and a partner in various firms, had his assessment framed under section 143(3) of the Act. The AO initiated penalty proceedings under section 271(1)(c) for two additions: a capital gain of ?15,94,965/- under section 45(3) and a disallowance of interest expenses amounting to ?1,69,948/-. The AO issued a notice under section 274, which the assessee responded to by explaining that the capital gain arose from the valuation of land transferred to the firm, duly recorded in the books. Despite this, the AO held that the income was only offered for tax after the case was selected for scrutiny and issued a notice under section 142(1). The AO also noted that the assessee did not provide an explanation for the excess interest expenses claimed.

3. Consideration of the Timing and Intent Behind the Revised Computation of Income Filed by the Assessee:
The assessee argued that the revised computation of income and payment of taxes were made before the issuance of the notice under section 142(1). The revised computation was filed on 31st December 2015, while the notice under section 142(1) was issued on 5th July 2016. The key point of contention is whether the revised computation was a proactive disclosure or a reaction to the scrutiny notice. The tribunal noted that the revised computation was filed before the detection of the income by the AO, indicating no dishonest intent.

4. Impact of the COVID-19 Pandemic on the Pronouncement of the Order:
The tribunal acknowledged the unprecedented situation caused by the COVID-19 pandemic, which disrupted judicial work and led to delays in pronouncing orders. The tribunal referred to the Hon'ble Mumbai Tribunal's decision in the case of JSW Limited, which extended the time for pronouncing orders due to the lockdown. The tribunal emphasized the need to interpret the time limits pragmatically, considering the extraordinary circumstances.

Conclusion:
The tribunal concluded that the assessee had not deliberately concealed income or furnished inaccurate particulars. The revised computation of income was filed before the AO's detection, and the penalty provisions under section 271(1)(c) were not applicable. The tribunal set aside the CIT (A)'s order and directed the AO to delete the penalty. The appeal of the assessee was allowed.

Additional Note on Pronouncement Delay:
The tribunal also addressed the delay in pronouncing the order due to the COVID-19 pandemic, explaining the exceptional circumstances and the need for a pragmatic approach to interpreting the time limits for pronouncing orders. The order was pronounced beyond the 90-day period due to the lockdown and related disruptions.

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