2023 (12) TMI 276 - AT - Income Tax

Penalty u/s 271(1)(c) - assessee received proceeds of bogus LTCG - unexplained cash credit u/s 68 - HELD THAT - Assessee has already offered the same for tax suo-motto as admitted during the course of survey. The AO has not discussed anything on merit as to how this constitute filing inaccurate particulars of income and simply imposed penalty for furnishing inaccurate particular of income. In our opinion, the assessment proceedings are distinct and different from the penalty proceedings. In this case, the AO has only issued show cause notice to the assessee and then proceeded to impose the penalty by ignoring the fact that the assessee has made disclosure of income during survey and has also not contested the issue in appeal. AO has passed an order in a very cryptic manner. In our opinion, the addition is only on the basis of admission of the assessee and the AO nowhere demonstrated that the claim of the assessee was either found to be false either during assessment proceedings or during penalty proceedings In the present case, the assessee has fully disclosed the particulars of the capital gain and claimed the same as exempt u/s 10(38) of the Act and thus fully disclosed all the facts qua the gain on sale of shares. The case of the assessee is also supported by the decision of Reliance Petroproducts (P.) Ltd 2010 (3) TMI 80 - SUPREME COURT in which the as held that where the assessee has fully disclosed the particulars in the return of income then it is not liable to penalty proceedings on the ground that the disclosure made by the assessee are not as per the provision of the Act or not acceptable to the revenue. Accordingly we set aside the order of Ld. CIT(A) and direct the AO to delete the penalty. Decided in favour of assessee.

Summary

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

Issue 1: Confirmation of penalty under section 271(1)(c)

The appeal was against the order of the Commissioner of Income Tax (Appeals) confirming a penalty of Rs. 16,22,332 imposed by the Assessing Officer under section 271(1)(c) of the Act for the assessment year 2015-16. The penalty was imposed based on the assessee's receipt of Rs. 52,51,973 as proceeds of bogus Long Term Capital Gain (LTCG) from the sale of penny stock of CCL International Ltd. during a survey operation. The assessee voluntarily disclosed this amount as undisclosed income during the survey. The Assessing Officer (AO) imposed the penalty for willfully furnishing inaccurate particulars of income without discussing the merit of the case. The Commissioner dismissed the appeal due to nonappearance of the assessee.

Upon considering the facts and contentions, the Appellate Tribunal noted that the assessee had admitted to receiving the LTCG during the survey. The AO treated the amount as unexplained cash credit under section 68 of the Act, ignoring the fact that the assessee had already offered it for tax during the survey. The AO imposed the penalty without demonstrating how the assessee furnished inaccurate particulars of income. The Tribunal emphasized the distinction between assessment and penalty proceedings, highlighting that the AO failed to show that the assessee's claim was false. Referring to a similar case, the Tribunal held that the assessee's explanation, supported by documentary evidence, was not proven false during assessment or penalty proceedings. The Tribunal also cited a Supreme Court decision stating that full disclosure in the return of income exempts the assessee from penalty proceedings even if the revenue finds the disclosure unsatisfactory. Consequently, the Tribunal set aside the Commissioner's order and directed the AO to delete the penalty.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the importance of full disclosure and the need for the AO to provide substantive reasons for imposing penalties under section 271(1)(c) of the Income Tax Act.