2014 (11) TMI 293 - AT - Income Tax

Penalty u/s 271(1)(c) Inaccurate particulars furnished or not - Whether offering the tax at a concessional rate applicable on a different category of income would amount to furnishing inaccurate particulars of income attracting the provisions of section 271(1)(c) - Held that - The Long Term Capital Gain arose on sale of paintings, therefore, the income from Long Term Capital Gain from sale of paintings is not allowable for concessional rate of tax as per the proviso to section 112(1) of the Income Tax Act - Though, by applying concessional rate of tax at 10% on the ground that the assessee has not taken the benefit of indexed cost for computation of Long Term Capital Gain would help the assessee if in the return of income, the assessee has given the impression that the Long Term Capital Gain is arising from the transfer of listed shares, bonds, securities etc., however, in the return of income the assessee has mentioned the capital gain arising from the sale of paintings - The source of income has been explained by the assessee in all the return of income which remains same and, therefore, there is no change in the source of income and the category of income which is specified as capital gain from sale of paintings then even if the assessee has applied incorrect rate of tax in the revised return, it would not constitute that the assessee has changed the class/nature of income eligible for concessional tax u/s 112(1) of the Income Tax Act. When there is no attempt on the part of the assessee to show the Long Term Capital Gain in a different category then merely because a concessional rate of tax was applied in the revised return does not ipso facto lead to the conclusion that the assessee has concealed the particulars of income - all the facts and circumstances supports the explanation of the assessee that the concessional rate of tax on Long Term Capital Gain was applied on the basis of the advice of the Chartered Accountant, therefore, it was a bona fide mistake - The explanation is quite reasonable as per the Explanation 1B of section 271(1) of the Income Tax Act particularly in view of the fact that the assessee did not claim the benefit of indexed cost while computing the Capital Gain thus, the order of the CIT(A) is upheld for deleting the penalty by following the decision in Price Waterhouse Coopers (P.) Ltd. Versus Commissioner of Income-tax, Kolkata 2012 (9) TMI 775 - SUPREME COURT Decided against revenue.

Summary

Issues Involved:
1. Deletion of penalty levied under Section 271(1)(c) of the Income Tax Act.
2. Whether filing a revised return with a lower tax rate constitutes furnishing inaccurate particulars of income.
3. Applicability of penalty based on revised return versus original return.
4. Bona fide mistake and reliance on Chartered Accountant's advice.

Issue-wise Detailed Analysis:

1. Deletion of Penalty Levied Under Section 271(1)(c) of the Income Tax Act:
The revenue contested the CIT(A)'s decision to delete the penalty of Rs. 66,19,900/- levied under Section 271(1)(c) for furnishing inaccurate particulars of income. The penalty was initially imposed because the assessee filed a revised return applying a concessional tax rate of 10% on long-term capital gains from the sale of paintings, which was later corrected to 20% in a subsequent revised return.

2. Whether Filing a Revised Return with a Lower Tax Rate Constitutes Furnishing Inaccurate Particulars of Income:
The assessee, a senior citizen, initially filed a return with a 20% tax rate on capital gains from paintings. Later, based on advice from a Chartered Accountant, a revised return was filed applying a 10% concessional rate. The AO considered this as furnishing inaccurate particulars, noting that the concessional rate applies only to gains from listed shares, bonds, etc. The CIT(A) accepted the assessee's explanation that the mistake was bona fide and based on professional advice, thus ruling out deliberate concealment of income.

3. Applicability of Penalty Based on Revised Return Versus Original Return:
The revenue argued that the second revised return, correcting the tax rate back to 20%, was not voluntary but prompted by a notice under Section 143(2). The CIT(A) and the tribunal noted that the revised return was filed before any show cause notice and that the assessee consistently disclosed the source of income as capital gains from paintings. The tribunal emphasized that the penalty provisions should consider the entire context, including the bona fide belief and professional advice received by the assessee.

4. Bona Fide Mistake and Reliance on Chartered Accountant's Advice:
The assessee argued that the incorrect tax rate was applied due to a bona fide mistake based on the Chartered Accountant's advice. The tribunal found this explanation reasonable, especially since the assessee did not claim the benefit of indexed cost, which would have been available. The tribunal referenced the Supreme Court's decision in Price Waterhouse Coopers Pvt. Ltd., supporting the view that mistakes made on professional advice can be considered bona fide.

Conclusion:
The tribunal upheld the CIT(A)'s decision to delete the penalty under Section 271(1)(c), finding that the assessee's actions did not amount to furnishing inaccurate particulars of income. The tribunal concluded that the revised return filed under Section 139(5) merges with the original return, and thus, the penalty cannot be based solely on the revised return. The appeal by the revenue was dismissed, and the order was pronounced in the open court on 05-11-2014.