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2022 (5) TMI 372 - AT - Income TaxPenalty u/s 271(1)(c) - Addition on account of long term capital gain - bogus long term capital gain of penny stock - HELD THAT - It is not in dispute that during the assessment the assessee filed revised computation of income and surrendered the long term capital gain. It is also undisputed fact that the AO has not issued any show cause notice to the assessee on the issue of long term capital or on penny stock. The case of assessee throughout the proceeding are that she intended to avail benefit of TDS Scheme, however, the case of assessee has already been selected for scrutiny so she could not apply for availing the benefit of IDS Scheme. As in CIT Vs Suraj Bhan 2006 (4) TMI 107 - PUNJAB AND HARYANA HIGH COURT by following the decision of Hon'ble Supreme Court in CIT Vs Suresh Chand Mittal 2001 (6) TMI 63 - SC ORDER held that when the assessee files a revised return showing higher income and gives explanation that he offered higher income to buy peace of mind and avoid litigation, penalty cannot be imposed merely on account of higher income having been subsequently declared. We are of the view that no penalty was leviable on the facts of the present case and we direct to delete the same. - Decided in favour of assessee.
Issues:
Assessment of penalty under Section 271(1)(c) of the Income Tax Act for surrendering long term capital gain on shares claimed as exempt. Detailed Analysis: Issue 1: Assessment of Penalty The appeal was against the order of the Commissioner of Income Tax (Appeals) confirming the penalty imposed by the Assessing Officer under Section 271(1)(c) of the Income Tax Act. The Assessing Officer initiated penalty proceedings after the assessee surrendered long term capital gain on shares claimed as exempt in the return of income. The penalty was levied at 100% of the tax sought to be evaded, amounting to Rs. 3,38,136. Issue 2: Assessee's Submission The assessee, in response to the penalty proceedings, argued that the surrender of income was voluntary, and she had paid the due tax along with interest. The revised computation of income was accepted by the Assessing Officer. The assessee explained that she intended to take advantage of the Income Declaration Scheme (IDS) but could not do so as her case was selected for scrutiny. The transaction was supported by documentary evidence and conducted through a registered broker via banking channels. Issue 3: CIT(A) Decision The Commissioner of Income Tax (Appeals) upheld the penalty, stating that the assessee had taken a bogus long term capital gain and surrendered it to avoid litigation. Citing the Supreme Court case of MAK Data (P) Ltd. Vs CIT, the CIT(A) held that voluntary disclosure does not absolve the assessee from penalty under Section 271(1)(c). It was concluded that the assessee intentionally concealed income to evade tax, justifying the penalty. Issue 4: ITAT Decision The Income Tax Appellate Tribunal (ITAT) considered the submissions of both parties and reviewed the lower authorities' orders. It noted that the assessee had voluntarily surrendered the long term capital gain and paid the tax due. The ITAT found that no show cause notice was issued by the Assessing Officer regarding the long term capital gain or penny stock. Referring to legal precedents, including the decision in CIT Vs Suraj Bhan, the ITAT held that no penalty was warranted in this case. Consequently, the ITAT allowed the appeal and directed the deletion of the penalty. In conclusion, the ITAT ruled in favor of the assessee, finding that no penalty was justified in the circumstances of the case where the income was voluntarily surrendered, taxes were paid, and no concealment was detected during the assessment process.
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