2023 (1) TMI 628 - AT - Income Tax

Penalty levied u/s 271(1)(c) - bogus LTCG - exemption under section 10(38) denied - HELD THAT - In this case, AO assessed the tax as offered by the assessee. AO has not made any independent investigation in respect of the assessee that the company in which shares were purchased. AO came a conclusion through general enquiry that the company in which the shares were purchased by the assessee is a bogus company. In this case, we find that the assessee has neither concealed the income nor furnished inaccurate particulars of income. The assessee filed all the details before the AO. Once it came to the notice of the assessee that the company in which shares purchased is bogus company, she offered the entire income for taxation. Thus, in our considered opinion, it is not amount to concealment of income or furnishing of inaccurate particulars warranting levy of penalty under section 271(1)(c) - CIT(A) has rightly directed the AO to delete the penalty levied under section 271(1)(c) of the Act and we find no infirmity in the order passed by the ld. CIT(A). Appeal filed by the Revenue is dismissed.

Summary

Issues:
Deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
The appeal addressed the deletion of a penalty under section 271(1)(c) of the Income Tax Act, 1961, for the assessment year 2014-15. The case involved an individual assessee who claimed long term capital gains on the sale of shares from a company later identified as bogus. The Assessing Officer initiated penalty proceedings under section 271(1)(c) after concluding that the shares were purchased from a fraudulent company. The assessee voluntarily offered the entire capital gains for taxation upon being informed of the company's dubious nature. The Assessing Officer, without conducting an independent investigation, imposed a penalty under section 271(1)(c) due to the initial claim being deemed ineligible. However, the Appellate Tribunal upheld the deletion of the penalty by the Commissioner of Income Tax (Appeals) on the grounds that the assessee did not conceal income or provide inaccurate particulars, as the entire amount was offered for taxation upon realization of the company's fraudulent status. The Tribunal found no basis for penalty imposition under section 271(1)(c) and dismissed the Revenue's appeal.

This judgment highlights the importance of voluntary disclosure and cooperation by the assessee in tax matters. It emphasizes that mere ineligibility of a claim does not automatically warrant penalty under section 271(1)(c) if there is no intent to conceal income or provide false information. The case underscores the significance of full disclosure and rectification upon discovering discrepancies, which can mitigate penalty implications. The decision showcases a balanced approach by the Appellate Tribunal in interpreting tax law provisions and upholding fairness in penalty assessments.