2015 (6) TMI 366 - AT - Income Tax

Levy of Penalty u/s.271(1)(c) - assessee has furnished return of income only after issuance of notice u/s.148 - While computing the long term capital gain the AO computed the market value of one of the land at ₹ 1,15,50,000/- by applying provisions of section 50C as against the value declared by the assessee at ₹ 91 lakhs - Held that - For the purpose of invoking the provisions of Explanation 3 to section 271(1) the conditions enumerated are cumulative. The AO having issued a notice u/s.148 to the petitioner within the period specified u/s.153(1), the third condition namely that no notice u/s.142(1) or section 148 should have been issued within the period specified in sub-section 1 of section 153 is clearly not satisfied and therefore it was held that the failure on the part of the petitioner to furnish the return within the period cannot be deemed to be concealment within the meaning of Explanation 3 to section 271(1)(c) of the I.T. Act. See Chhaganlal Suteriya Vs. ITO 2011 (5) TMI 641 - Gujarat High Court Even otherwise also we find the Pune Bench of the Tribunal in the case of Agricultural Produce Market Committee (2015 (6) TMI 347 - ITAT PUNE while deciding an identical issue had cancelled the penalty levied by the AO u/s.271(1)(c) holding the Explanation 3 below Sec. 271(1)(c) which is deeming provision, is applicable to the assessee as period mentioned u/s. 153(1) has expired and then only the assessee filed the returns of income but at the same time the assessee can still avail the Explanation 1 to establish the bonafide for not filing the returns of income within the time allowed u/s. 139 of the Act. In the present case, we are of the opinion that the explanation of the assessee is bonafide for not filing the returns of income for both these assessment years within the meaning of Explanation 1 below Sec. 271(1)(c) of the Act and in our opinion no penalty can be levied on the assessee on the charge of concealing the particulars of income for both the assessment years. - Decided in favour of assessee.

Summary

Issues Involved:
1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:

The appeal concerns the levy of a penalty amounting to Rs. 58,35,106/- under Section 271(1)(c) of the Income Tax Act, 1961, imposed by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)].

Facts of the Case:
The assessee, a non-filer of the return of income for the year under consideration, was issued a notice under Section 148 on 24-12-2010. In response, the assessee filed its return on 11-03-2013, declaring a total income of Rs. 2,02,69,504/-, which included long-term capital gain of Rs. 74,99,876/-. During the assessment proceedings, the AO observed discrepancies in the sale consideration of non-agricultural land and applied Section 50C to adopt the market price for capital gain calculation, determining the long-term capital gain at Rs. 99,45,876/-.

CIT(A) Proceedings:
The assessee challenged the additions before the CIT(A), who upheld the AO's valuation but allowed a further cost deduction of Rs. 25,00,000/- for enhanced compensation paid. The AO initiated penalty proceedings under Section 271(1)(c), which the assessee contested, claiming no concealment of income or furnishing of inaccurate particulars. The AO rejected these explanations and levied the penalty, which the CIT(A) upheld, stating that the assessee had concealed its taxable income and furnished inaccurate particulars by not declaring the correct capital gains.

Arguments before the Tribunal:
The assessee argued that the property was sold in a public auction and that the fair market value should be the auction price, not the value adopted by the AO. It was contended that the penalty was not justified as the notice under Section 148 was issued within two years from the end of the relevant assessment year, and thus, Explanation 3 to Section 271(1)(c) was not applicable. The assessee relied on the Gujarat High Court decision in Chhaganlal Suteriya Vs. ITO, which held that mere failure to furnish a return does not amount to concealment under Section 271(1)(c).

Tribunal's Findings:
The Tribunal noted that the AO had issued the notice under Section 148 within the specified period, thus not satisfying the conditions for invoking Explanation 3 to Section 271(1)(c). The Tribunal also considered the Pune Bench decision in Agricultural Produce Market Committee, Jalgaon, which under similar circumstances, had canceled the penalty levied under Section 271(1)(c). The Tribunal concluded that the assessee's explanation for the delay in filing the return due to financial constraints was bona fide and that the penalty was not justified.

Conclusion:
The Tribunal set aside the order of the CIT(A) and directed the AO to cancel the penalty, allowing the appeal filed by the assessee. The Tribunal emphasized that the conditions for invoking Explanation 3 to Section 271(1)(c) were not met and that the assessee had provided a reasonable cause for the delay in filing the return.

Result:
The appeal filed by the assessee was allowed, and the penalty under Section 271(1)(c) was canceled. The judgment was pronounced in the open court on 20.5.2015.