2021 (8) TMI 503 - AT - Income Tax

Penalty levied under the provision of section 271(1)(c) - whether the assessee has concealed the particulars of income by not disclosing the capital gain in the income tax return? - HELD THAT - AO was not conscious about the charge under which the penalty was to be levied under the provisions of section 271(1)(c) of the Act. Accordingly we hold that the penalty order is not sustainable and therefore the penalty cannot be levied on this technical ground. As we have decided the issue in favour of assessee on technical ground, we do not find any reason to give our finding on merit. Hence the ground of appeal of the Revenue is dismissed.

Summary

Issues:
1. Appeal filed by Revenue against deletion of penalty under section 271(1)(c) of the Income Tax Act.
2. Whether the penalty was rightly deleted by the CIT(A) based on the facts and circumstances of the case.

Analysis:
1. The Revenue appealed against the deletion of penalty amounting to ?77,24,050 under section 271(1)(c) of the Income Tax Act by the CIT(A). The Revenue contended that the CIT(A) erred in law by not appreciating that capital gains should be taxed on an accrual basis as per Section 5 of the Act. The Revenue also argued that the appellant's ignorance of the law was not a valid excuse, especially given the professional advice available to the appellant. Additionally, the Revenue claimed that the CIT(A) erred in accepting the bonafides of the assessee without substantial evidence on record to support such claims. The Revenue further cited the principle established by the Hon'ble Apex Court regarding voluntary disclosure not absolving the appellant from penalty proceedings.

2. The key issue revolved around whether the penalty was rightly deleted by the CIT(A) in the case. The assessee, an individual, had not disclosed capital gain income of ?3,74,95,382 in the income tax return, which was discovered by the AO during assessment proceedings. The AO initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income, which was confirmed by the AO in the penalty order. However, the CIT(A) deleted the penalty after considering the appellant's rectification of the mistake and offering the capital gains for taxation, along with paying the necessary tax before the penalty order was passed. The CIT(A) believed that there was no intention to conceal income, and the penalty provisions were not applicable in this case.

3. The Tribunal analyzed the case in detail, emphasizing the importance of the AO reaching a clear finding regarding the specific charge under which the penalty is imposed. The Tribunal referred to previous judgments, highlighting that the penalty provisions must be strictly construed, and the AO must establish the charge for levying the penalty. In this case, the AO's penalty order lacked clarity on the specific charge under section 271(1)(c), leading the Tribunal to hold that the penalty was not sustainable on this technical ground. Consequently, the Tribunal dismissed the Revenue's appeal, ruling in favor of the assessee.

4. The Cross Objection filed by the assessee supported the CIT(A)'s decision to delete the penalty. As the grounds raised in the Cross Objection aligned with the CIT(A)'s order, the Tribunal found no need to further adjudicate on the matter and dismissed the Cross Objection as infructuous.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the penalty levied by the AO, emphasizing the importance of a clear finding by the AO regarding the specific charge under section 271(1)(c) for imposing penalties. The appeal of the Revenue was dismissed, and the Cross Objection filed by the assessee was also dismissed as infructuous.