2024 (2) TMI 792 - HC - Income Tax

Penalty u/s 271(1)(c) - addition made on account of mistake in treating the income from transfer of depreciable asset as long-term capital gain instead of short term capital gain as per provisions of Section 50 - HELD THAT - Assessee had neither concealed any income nor furnished any incorrect particulars of such income. Admittedly, assessee had shown correct sale consideration of the property and also shown correct cause of depreciation in the return of income, so no income as such has been concealed. The only thing that assessee did was claiming a particular income (Capital Gain) under different head namely under long term capital gains as against short term capital gains. Assessee claims that it was done under bonafide belief that the asset was a long-term asset as it was held for more than three years. Just because assessee was a director in some companies cannot be a reason to state that claiming this short-term capital gain as long-term capital gain was to avoid payment of any tax - entire short term capital gain was paid even before the assessment order was passed. A mere making of claim, which is not sustainable in law, by itself, will not amount to furnishing incorrect particulars regarding the income of assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars as held in Reliance Petroproducts Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT - Decided in favour of assessee.

Summary

Issues Involved:
1. Reversal of the CIT(A) order and confirmation of the levy of concealment penalty by the Tribunal.
2. Levying concealment penalty under Section 271(1)(c) of the Income Tax Act, 1961, on the addition made due to the mistake in treating the income from the transfer of a depreciable asset as long-term capital gain instead of short-term capital gain.
3. Confirmation of the penalty without appreciating that the appellant neither concealed any particulars of income nor furnished any inaccurate particulars of income.

Summary:

Issue 1: Reversal of CIT(A) Order and Confirmation of Penalty by Tribunal
The Tribunal reversed the CIT(A) order and confirmed the levy of concealment penalty under Section 271(1)(c) of the Income Tax Act, 1961. The High Court noted that the CIT(A) had allowed the appellant's appeal, accepting the explanation that the error in declaring the gain as a long-term capital gain was due to a bona fide impression. The Tribunal, however, did not consider the judgment of the Hon'ble Apex Court in Reliance Petroproducts Pvt. Ltd., which held that merely making a claim which is not sustainable in law does not amount to furnishing inaccurate particulars of income.

Issue 2: Levying Concealment Penalty under Section 271(1)(c)
The Assessing Officer (A.O.) imposed a penalty under Section 271(1)(c) for filing inaccurate particulars of income at the rate of 200% of the alleged tax sought to be evaded. The High Court observed that the A.O. levied the penalty because the assessee revised its computation of income during assessment proceedings and after the show cause notice. The High Court, referencing the Reliance Petroproducts Pvt. Ltd. case, stated that submitting an incorrect claim in law does not amount to furnishing inaccurate particulars. The assessment order was passed after the assessee furnished its revised computation of income, and no information given in the return was found to be incorrect or inaccurate.

Issue 3: Confirmation of Penalty Without Appreciating No Concealment or Inaccurate Particulars
The High Court emphasized that the appellant had neither concealed any income nor furnished incorrect particulars. The appellant had shown the correct sale consideration and depreciation in the return of income. The only issue was the claim of long-term capital gain instead of short-term capital gain, which was under a bona fide belief. The High Court reiterated that making a claim that is not sustainable in law does not amount to furnishing inaccurate particulars of income. The entire short-term capital gain tax was paid before the assessment order was passed.

Conclusion:
The High Court concluded that the Tribunal was not correct in interfering with the CIT(A) order. All questions were answered in favor of the appellant, and the appeal was allowed with no order as to costs.