2013 (8) TMI 813 - AT - Income Tax

Penalty u/s 271(1)(c) - Addition in long term capital gain - Held that - When for the addition made by the A.O. which is confirmed by the Tribunal, a substantial question of law is admitted that the issue is not free from debate - It cannot be said that the assessee has concealed his income or furnished inaccurate particulars of income and, therefore, penalty is not justified - Decided in favour of assessee

Summary

Issues:
1. Justification of penalty imposed under section 271(1)(c) for addition made on long term capital gain under section 45(3) of the Income Tax Act, 1961.

Detailed Analysis:
The appellant contested the levy of a penalty under section 271(1)(c) for an addition made by the Assessing Officer (A.O.) on long term capital gain under section 45(3) for the assessment year 1995-96. The grounds raised by the appellant included arguments against the imposition of the penalty, citing that there was no concealment of income or furnishing of inaccurate particulars. The appellant also challenged the validity of the reopening of the assessment year and the vague nature of the show cause notice for the penalty. Furthermore, the appellant argued that the penalty was imposed without recording satisfaction of concealment, making it liable to be dismissed. Additionally, the appellant claimed that the addition of capital gain was debatable, and they genuinely believed in the advice provided by their Chartered Accountant regarding the tax liability, seeking the deletion of the penalty under section 271(1)(c).

The appellant's representative highlighted that the issue of the addition made by the A.O. under section 45(3) was debatable, as evidenced by the admission of the appeal by the Hon'ble Gujarat High Court. The representative argued that since the issue was debatable, even if the addition was ultimately upheld by the High Court, the penalty would not be justified. On the other hand, the Departmental Representative (D.R.) supported the penalty order and the decision of the Ld. CIT(A).

Upon considering the submissions, the Tribunal focused on determining the justification of the penalty imposed by the A.O. under section 271(1)(c) for the addition made on long term capital gain under section 45(3). The Tribunal emphasized that the penalty is applicable in cases of concealment of income or furnishing inaccurate particulars. Given the debatable nature of the issue, as admitted by the High Court, the Tribunal concluded that the penalty was not justified. Consequently, the Tribunal ruled in favor of the appellant, deleting the penalty amount.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that in cases where the issue is debatable, the imposition of a penalty under section 271(1)(c) for an addition made on long term capital gain should be carefully assessed to ensure its justification under the provisions of the Income Tax Act, 1961.