2023 (12) TMI 1334 - AT - Income Tax

Penalty u/s 271(1)(c) - bogus LTCG on penny stock - CIT(A) deleted addition - HELD THAT - As observed by the CIT(Appeals), and rightly so, as the assessee had offered LTCG on sale of 2500 shares of M/s. Blueprint Securities Ltd. as a part of her total income in the return of income filed in response to the notice u/s. 148 of the Act, therefore, the AO without establishing that the assessee had concealed her income, could not have saddled her with penalty u/s. 271(1)(c) of the Act. We, thus, concur with the view taken by the CIT(Appeals), who had rightly vacated the penalty u/s. 271(1)(c) of the Act and uphold the same. Decided against revenue.

Summary

Issues involved:
1. Justification for deleting penalty imposed by AO under Sec. 271(1)(c) related to tax evasion from claim of bogus LTCG on penny stock.
2. Validity of deleting penalty for concealment of income in light of Supreme Court and High Court judgments.
3. Assessment proceedings, penalty initiation, and justification for deleting penalty by CIT(Appeals).

Analysis:

Issue 1:
The appeal was filed by the revenue against the order passed by the Commissioner of Income-Tax (Appeals) related to the penalty imposed under Sec. 271(1)(c) for the assessment year 2012-13. The revenue questioned the deletion of the penalty, citing a circular from CBDT allowing appeals in cases of organized tax evasion activity. The Tribunal noted that the assessee had disclosed additional income from the sale of shares, which was earlier claimed as exempt, during assessment proceedings. The Tribunal upheld the CIT(Appeals)' decision to vacate the penalty, stating that without establishing income concealment, the penalty could not be imposed.

Issue 2:
The validity of deleting the penalty for concealment of income was challenged by the revenue based on Supreme Court and High Court judgments. The CIT(Appeals) observed that the assessee had offered the additional income voluntarily during assessment proceedings, and the revenue did not raise objections to the explanation provided. Relying on legal precedents, the CIT(Appeals) concluded that as the assessee disclosed the income, no penalty under Sec. 271(1)(c) was warranted. The Tribunal concurred with the CIT(Appeals) and dismissed the revenue's appeal.

Issue 3:
The assessment proceedings involved the reopening of the case under Sec. 147, where the assessee declared additional income from the sale of shares. The Assessing Officer initiated penalty proceedings under Sec. 271(1)(c) for alleged concealment of income. The CIT(Appeals) noted discrepancies in the penalty initiation process and the lack of specific mention by the AO regarding the nature of the alleged concealment. The CIT(Appeals) emphasized the importance of the revenue establishing income concealment before imposing penalties. Ultimately, the Tribunal upheld the CIT(Appeals)' decision to vacate the penalty based on the assessee's voluntary disclosure and lack of evidence of concealment.

This detailed analysis covers the issues raised in the legal judgment comprehensively, highlighting the key arguments and decisions made by the authorities involved.