2013 (11) TMI 1 - AT - Income Tax

Penalty u/s 271(1)(C) - Suppression of long term capital gains - Inaccurate particulars of income furnished - Held that - After taking into account the cost inflation index for the year 1991-92 & 1996-97, the assessee has declared income from long term capital gain at ₹ 1,14,96,713/-. The Assessing Officer perused the registered deeds in respect of these properties purchased & sold and found that the assessee s share in these properties was 1/4th and the total cost of acquisition of the assessee should have been 2,80,312/4 70,078/-. It was also noticed that the assessee has purchased this property on 29.05.1998 whereas while computing capital gain, it has been mentioned to be purchased in the year 1991-92 and thus has computed capital gain by taking the cost inflation index. These discrepancies were pointed out to the assessee by the Assessing Officer but assessee did not tender any explanation in this regard and he himself admitted in the penalty proceeding that overstatement of cost of acquisition (Rs. 11,07,453/- instead of ₹ 5,06,604/-) of the land sold during the relevant year was a mistake and was not done with a mala fide intention to evade tax. Assessing Officer imposed the penalty after adopting the prescribed procedure under the law @ 300% and the same was confirmed by learned First Appellate Authority. Explanation filed by the assessee state that the overstatement of cost of acquisition of the land sold during the relevant year was the mistake of his accountant - Therefore, penalty @ 300% is very much on higher side on account of mistake committed by the assessee s accountant - The assessee has not produced any evidence supporting the mistake of his accountant - assessee has filed inaccurate particular of income to evade the tax due and has also admitted before the Assessing Officer that overstatement of cost of acquisition of the land sold during the relevant year was a mistake of his accountant - Penalty reduced to 100% - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Confirmation of penalty imposed under Section 271(1)(C) of the Income-tax Act, 1961.
2. Assessment of the accuracy of particulars furnished by the assessee.
3. Legality of initiation and completion of penalty proceedings by the Assessing Officer (A.O.).
4. Appropriateness of the penalty amount (300%) imposed by the A.O.

Issue-wise Detailed Analysis:

1. Confirmation of Penalty Imposed under Section 271(1)(C):
The primary issue revolves around the confirmation of the penalty imposed by the A.O. under Section 271(1)(C) for furnishing inaccurate particulars of income. The assessee declared long-term capital gains inaccurately, leading to the initiation of penalty proceedings. The A.O. determined that the assessee had furnished inaccurate particulars by overstating the cost of acquisition and incorrectly reporting the year of acquisition. The penalty was confirmed by the CIT(A), and the appellate tribunal upheld the imposition of the penalty but reduced it from 300% to 100%.

2. Assessment of the Accuracy of Particulars Furnished by the Assessee:
The A.O. found discrepancies in the assessee's declaration of long-term capital gains. The assessee reported the cost of acquisition of properties inaccurately, claiming full ownership instead of a 1/4th share and using the wrong year of acquisition for cost inflation index calculations. The A.O. recalculated the long-term capital gains and found that the assessee had understated the gains by Rs. 6,00,849/-. The assessee admitted the mistake but attributed it to an error by his accountant, not a deliberate attempt to evade taxes.

3. Legality of Initiation and Completion of Penalty Proceedings by the A.O.:
The assessee challenged the legality of the penalty proceedings initiated by the A.O. However, the tribunal found that the A.O. had followed due process, issuing notices and providing opportunities for the assessee to explain the discrepancies. The A.O. issued a notice under Section 274 read with Section 271(1)(C) and considered the assessee's written submissions before imposing the penalty. The tribunal upheld the legality of the proceedings.

4. Appropriateness of the Penalty Amount (300%) Imposed by the A.O.:
The A.O. imposed a penalty of 300% of the tax sought to be evaded, amounting to Rs. 4,04,490/-. The assessee argued that the penalty was excessive, given that the inaccuracies were due to an accountant's mistake. The tribunal acknowledged that while the assessee had filed inaccurate particulars, the penalty at 300% was excessive. Taking a lenient view, the tribunal reduced the penalty to 100% of the tax sought to be evaded, considering the circumstances and the admission by the assessee that the error was not intentional.

Conclusion:
The tribunal concluded that the assessee had indeed furnished inaccurate particulars of income, justifying the imposition of a penalty. However, the penalty was reduced from 300% to 100% of the tax sought to be evaded, reflecting a more balanced approach given the nature of the mistake. The appeal was partly allowed, modifying the impugned orders accordingly.