2022 (1) TMI 935 - AT - Income Tax

Levy of penalty imposed u/s. 271(1)(c) - Assessee had attempted to set off the capital gains earned during the year against a false claim of capital loss - HELD THAT - As mistake was noticed by the Assessing officer during the course of assessment proceedings and on being confronted on the issue, the assessee surrendered the Long Term Capital Loss. We have also gone through the computation of income filed by the assessee and we see that this amount of capital loss has been duly mentioned in the computation of income. Therefore, apparently, we find that there is no concealment of any material fact by the assessee. At best, it can be said that the claim made by the assessee with respect to the Long Term Capital Loss was an incorrect claim or a wrong claim but it was not a false claim by any measure in as much as there was only a mistake in the legal sense that the gift made by the assessee to the son was considered as a transfer in the computation of income and the resultant figure was shown as a capital loss. It is also a fact on record that the assessee had accepted the same at the time of assessment proceedings. On the facts of the present case, we are of the considered opinion that it is not a case where the particulars of income in relation to which the penalty has been levied were either incorrect or were concealed. The amount of capital loss has duly been disclosed in the computation of income and, therefore, it cannot said to be a case of the assessee attempting to make a false claim. The Hon'ble Apex Court in the case of CIT Vs. Reliance Petro Products Ltd. 2010 (3) TMI 80 - SUPREME COURT has clearly held that if all the particulars of income are duly disclosed, the mere disallowance of claim or non-acceptance of a claim would not attract levy of penalty u/s. 271(1)(c) of the Act. - Decided in favour of assessee.

Summary

Issues:
1. Condonation of delay in filing the appeal.
2. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961.

Condonation of Delay:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax-1, Ludhiana, upholding the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The Authorized Representative submitted a delay of 9 days in filing the appeal due to misplaced documents. The Senior DR opposed the delay condonation. The Tribunal, considering substantial justice, condoned the delay and admitted the appeal for regular hearing.

Levy of Penalty:
The assessee, a partner in a firm engaged in textile yarn processing, filed a return declaring income of ?8,11,800. During scrutiny, it was found that the assessee wrongly claimed a Long Term Capital Loss of ?7,14,554 related to a gifted property. The Assessing officer added this amount to the income, leading to the penalty imposition. The CIT(A) upheld the penalty, prompting the appeal challenging it. The Authorized Representative argued it was a genuine mistake due to a typographical error by the Chartered Accountant, not deliberate. The Senior DR contended it was a false claim with deliberate collusion between the CA and the assessee.

Analysis of Penalty Imposition:
Upon review, the Tribunal found the mistake was not a deliberate attempt to furnish inaccurate particulars but a typographical error. The assessee disclosed all particulars of income, indicating no concealment. Citing precedent, the Tribunal held that a mere disallowance of a claim does not warrant a penalty under section 271(1)(c). Referring to relevant judgments, the Tribunal concluded that no penalty was legally imposable in this case. Consequently, the order of the CIT(A) was set aside, directing the Assessing officer to delete the penalty addition.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that the penalty was not justified given the circumstances of the case and the disclosure of all income particulars.