2024 (5) TMI 1394 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - bogus LTCG - exemption of Long Term Capital Gain u/s 10(38) of the Act on sale of shares denied - revised income declaration was not voluntary but a response to the notice issued u/s 148 - HELD THAT - We find that in MAK Data (P.) Ltd. 2013 (11) TMI 14 - SUPREME COURT held that voluntary disclosure does not release the assessee from the mischief of penal proceedings. Further it is evident from the record that though the assessee claimed the transaction of shares of M/s. Action Financial Services (India) Ltd to be genuine however did not bring any material of record to support its contention and straight away upon receipt of notice u/s 148 offered to tax the LTCG on the sale of shares of M/s. Action Financial Services (India) Ltd. There is also no material on record to show that the assessee subsequently again claimed the Long Term Capital Gain to be exempt. Since the additional income on account of the aforesaid Long Term Capital Gain was offered to tax only in response to the notice issued u/s 148 we agree with the findings of the lower authorities that the same is not voluntary but is consequential to the issuance of notice u/s 148 of the Act. In view of the above we also do not find any merits in the submissions of the assessee that no penalty can be levied in the present case since the returned income and assessed income are same as the only basis of issuance of notice u/s 148 was the alleged bogus LTCG claimed as exempt by the assessee in the original return of income and which was subsequently offered to tax by the assessee in response to notice issued u/s 148 - we find no infirmity in the impugned order in upholding the levy of penalty u/s 271(1)(c) of the Act and therefore the same is upheld. As a result the grounds raised by the assessee are dismissed.

Summary

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

Analysis:
The appeal was filed challenging the penalty order passed under section 271(1)(c) of the Act for the assessment year 2015-16. The assessee raised grounds stating that the penalty was unjustified as there was no concealment of income or furnishing of inaccurate particulars. The dispute revolved around the penalty of Rs. 90,922 imposed by the Assessing Officer. The facts revealed that the assessee initially declared a total income of Rs. 26,14,480 and later, after receiving a notice under section 148 of the Act, declared a total income of Rs. 32,02,220, offering Long Term Capital Gain of Rs. 5,87,740 for tax. The Assessing Officer concluded that the difference in income declared before and after the notice represented concealed income, justifying the penalty. The CIT(A) upheld the penalty, stating that the additional income offered was not voluntary but in response to the notice. The Tribunal agreed with the lower authorities, emphasizing that the disclosure was not voluntary and upheld the penalty under section 271(1)(c) of the Act.

The Tribunal referred to the case law of MAK Data (P.) Ltd. Vs. CIT, [2013] 358 ITR 593 (SC), which established that voluntary disclosure does not absolve the assessee from penal consequences. It was noted that the assessee did not provide evidence to support the genuineness of the share transactions in question and only declared the Long Term Capital Gain for tax after receiving the notice. The Tribunal found that the additional income offered was a direct result of the notice under section 148 of the Act, indicating a lack of voluntariness. The Tribunal rejected the argument that no penalty should be imposed since the returned and assessed incomes were the same, emphasizing that the notice was based on the alleged bogus Long Term Capital Gain initially claimed as exempt. Consequently, the Tribunal upheld the penalty under section 271(1)(c) of the Act, dismissing the appeal by the assessee.

In conclusion, the Tribunal upheld the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, based on the lack of voluntariness in the additional income declaration by the assessee in response to a notice, as established by the lower authorities and supported by relevant case law. The appeal by the assessee was dismissed, affirming the penalty decision.