2003 (6) TMI 170 - AT - Income Tax

Summary

Issues Involved:
1. Legitimacy of the penalty imposed under section 271(1)(c) for filing inaccurate particulars of income.
2. Whether the assessee concealed income or furnished inaccurate particulars.
3. Applicability of Explanation-1 to section 271(1)(c).
4. Bona fide belief and ignorance of law as a defense.
5. Consideration of revised return filed by the assessee.
6. Quantum of penalty imposed.

Detailed Analysis:

1. Legitimacy of the penalty imposed under section 271(1)(c) for filing inaccurate particulars of income:
The appeal by the assessee was against the order confirming the penalty of Rs. 5 lakhs imposed by the Assessing Officer under section 271(1)(c) of the Act for the assessment year 1995-96. The penalty was for filing inaccurate particulars of income regarding the capital gain from the sale of land.

2. Whether the assessee concealed income or furnished inaccurate particulars:
The assessee declared a profit of Rs. 15,33,846 on the sale of land at Panvel but did not offer it for taxation, claiming it was agricultural land and thus not taxable. The Assessing Officer found that no agricultural income was shown in the returns for the relevant years and that the land was within 8 Kms. of Panvel Municipality, making it taxable. The assessee filed a revised return only after this was pointed out by the Assessing Officer.

3. Applicability of Explanation-1 to section 271(1)(c):
The Assessing Officer and CIT(A) both held that the case was covered by Explanation-1 to section 271(1)(c), which applies when an assessee offers an explanation found to be false or not substantiated. The assessee's claim that the land was beyond 8 Kms. from the municipality was found to be incorrect upon enquiry.

4. Bona fide belief and ignorance of law as a defense:
The assessee argued that the mistake was bona fide and due to ignorance of the law. However, the Assessing Officer and CIT(A) rejected this defense, noting that the assessee was a long-time taxpayer and assisted by tax consultants. The false claim was made knowingly, and the revised return was filed only after the falsehood was detected.

5. Consideration of revised return filed by the assessee:
The assessee filed a revised return declaring the capital gain after the Assessing Officer's enquiry. The Tribunal noted that the revised return was not filed voluntarily but after detection of the false claim. Filing a revised return does not absolve the assessee from the penalty if the original return contained false particulars.

6. Quantum of penalty imposed:
The penalty imposed was Rs. 5 lakhs, which was above the minimum but within the permissible range. The Tribunal found no grounds to reduce the penalty, given the deliberate nature of the false claim.

Conclusion:
The Tribunal upheld the penalty, concluding that the assessee had furnished inaccurate particulars of income and made a false claim regarding the taxability of the capital gain from the sale of land. The revised return did not exonerate the assessee, and the penalty was justified under section 271(1)(c) read with Explanation-1. The appeal was dismissed.