2024 (12) TMI 1340 - AT - Income Tax

Penalty u/s 271(1)(c) - assessee had wrongly claimed exemption u/s. 10(38) - HELD THAT - Though the assessee had in her original return of income filed u/s. 139(1) raised a claim for exemption u/s. 10(38) on sale of shares of M/s Capital trade links, but she had thereafter, on her own voluntarily deposited the taxes corresponding to the aforesaid income on 14.02.2019 i.e. three years prior to issuance of notice u/s. 148 of the Act by the AO. We, thus, find substance in the claim of the Ld. AR that as the assessee had voluntarily paid tax on the income arising on sale of shares of M/s Capital trade links i.e. way back three years prior to initiation of proceedings u/s. 148 by the A.O, therefore, the same clearly establishes her bonafides, which, thus, clearly brings her explanation within the meaning of the concession provided in Explanation-1(B) of Section 271(1)(c) of the Act. Alternatively, we also find substance in the Ld. AR s contention that as the assessee in her return of income filed in compliance to notice u/s. 148 of the Act had included the income on sale of shares of M/s Capital trade links which, thereafter, had been accepted by the A.O vide his order u/ss. 147/144B as such, therefore, in absence of any amount having been added/disallowed while framing the said assessment, no penalty u/s. 271(1)(c) of the Act could have been imposed on her. Explanation 1 of Section 271(1)(c) pre-supposes an addition/disallowance made in the hands of the assessee. Apart from that, the machinery provision contemplated in Explanation 4 for computing the amount of penalty as per Section 271(1)(iii) of the Act, in absence of any addition/disallowance made in the course of assessment/reassessment proceedings is also rendered as unworkable. Our aforesaid view is fortified by the order of Renu Behl 2023 (12) TMI 1334 - ITAT RAIPUR wherein the Tribunal involving identical facts had vacated the penalty imposed by the A.O on the assessee. In Puspendra Surana 2013 (8) TMI 969 - RAJASTHAN HIGH COURT the Tribunal had held that as the assessee had declared the income from LTCG on sale of agricultural land in his revised return of income, which thereafter, was accepted by the A.O and there was no material available on record by which it could be inferred that there was deliberate concealment on the part of the assessee, thus, there was no justification in imposing penalty u/s. 271(1)(c) of the Act. Decided in favour of assessee.

Summary

Issues Involved:

1. Whether the penalty under Section 271(1)(c) of the Income Tax Act, 1961 for concealment of income was justified.
2. The applicability of Explanation 1 and Explanation 4 of Section 271(1)(c) concerning the assessee's actions and the timing of her revised return and tax payment.
3. The relevance of judicial precedents concerning voluntary disclosure and penalty imposition.

Detailed Analysis:

1. Justification of Penalty under Section 271(1)(c):

The primary issue was whether the penalty imposed on the assessee for "concealment of income" under Section 271(1)(c) was justified. The penalty was based on the assessee's claim for exemption under Section 10(38) for long-term capital gains (LTCG) on the sale of shares, which was later found to be incorrect. The assessee argued that the penalty was unjustified as she had voluntarily paid the taxes on the income from the sale of shares before the issuance of the notice under Section 148. The Tribunal noted that the assessee had paid the taxes voluntarily three years prior to the notice, indicating her bona fides and lack of intent to conceal income. The Tribunal found that the assessee's actions fell within the concession provided in "Explanation-1(B)" of Section 271(1)(c), which considers the bona fide nature of the taxpayer's actions.

2. Applicability of Explanation 1 and Explanation 4 of Section 271(1)(c):

The Tribunal examined whether the conditions for imposing a penalty under Section 271(1)(c) were met, particularly in light of Explanation 1 and Explanation 4. Explanation 1 presupposes an addition or disallowance in the assessment, which was not present in this case as the assessee's revised return was accepted without any additions. Explanation 4 concerns the computation of penalty, which becomes unworkable in the absence of any addition/disallowance. The Tribunal agreed with the assessee's contention that no penalty could be imposed since her revised return was accepted as filed, and no further income was added or disallowed by the Assessing Officer.

3. Relevance of Judicial Precedents:

The Tribunal considered various judicial precedents, including the Supreme Court's judgment in Mak Data P. Ltd vs. Commissioner Of Income Tax II, which held that voluntary disclosure does not absolve an assessee from penalty proceedings. However, in this case, the Tribunal found that the assessee's voluntary payment of taxes before the initiation of proceedings demonstrated her bona fides, distinguishing it from the precedents cited by the Revenue. The Tribunal also referred to decisions from the ITAT, Raipur, and ITAT, Jaipur, where penalties were vacated in similar circumstances, reinforcing the view that the penalty was not justified in this case.

Conclusion:

The Tribunal concluded that the penalty under Section 271(1)(c) was not justified due to the assessee's bona fide actions in voluntarily paying the taxes well before the initiation of proceedings and the acceptance of her revised return without any additions. The Tribunal set aside the order of the CIT(Appeals) and vacated the penalty of Rs. 10,90,397/-, allowing the appeal in favor of the assessee.