2016 (5) TMI 1163 - AT - Income Tax

Levy penalty u/s 271(1)(c) - undisclosed capital gain - assessee has sold the property during the financial year 2007-08 and computed the capital gain for the assessment year 2009-10 for which no satisfactory explanations has been offered - Held that -AO dealing with the matter is to consider whether the explanations offered by the assessee or the person as the case may be is reasonable and as regards the reason was on account of reasonable cause. In the present case on hand on perusal of the available records we find that the assessee has voluntarily disclosed the capital gains for the assessment year 2009-10 on transfer of immovable property. Whether the particular capital gain is taxable for the assessment year 2008-09 or 2009-10 is a finding of fact which needs to be examined with reference to the facts available on record. The assessee proved that he had handed over the possession of the property in the financial year 2009-10. It is also undisputed fact that he had disclosed the capital gain for the A.Y. 2009-10. Penalty u/s 271(1)(c) of the Act could be imposed when all the necessary facts were not disclosed by the assessee before the assessing officer. We further noticed that when the facts was brought to the notice of the assessee the assessee has accepted the proposal mooted by the A.O. and offered the capital gain in respect of 3 sale deeds for the assessment year 2008- 09. Therefore the A.O. was not correct in coming to the conclusion that the assessee has concealed the particulars of income for the assessment year 2008-09. In the present case on hand the assessee has disclosed necessary facts before the A.O. before the assessment was reopened for the impugned assessment year. Therefore we are of the view that it is not a fit case for levy of penalty for concealment of income or furnishing inaccurate particulars of income. Therefore we direct the A.O. to delete the penalty levied u/s 271(1)(c) of the Act. - Decided in favour of assessee

Summary

Issues Involved:
1. Legality of penalty proceedings under Section 271(1)(c) of the Income Tax Act.
2. Determination of the assessment year for capital gains tax.
3. Allegation of concealment of income or furnishing inaccurate particulars of income.

Issue-wise Detailed Analysis:

1. Legality of Penalty Proceedings under Section 271(1)(c) of the Income Tax Act:
The assessee challenged the legality of the penalty proceedings, arguing that the Assessing Officer (A.O.) did not specifically record whether the penalty was for concealment of income or furnishing inaccurate particulars. The Tribunal found no merit in this argument, stating that the A.O. had issued a show cause notice proposing to levy penalty for both concealment of particulars of income and furnishing inaccurate particulars. Thus, the A.O. had arrived at proper satisfaction before initiating penalty proceedings. Consequently, the additional ground raised by the assessee was rejected.

2. Determination of the Assessment Year for Capital Gains Tax:
The assessee sold an immovable property through four sale deeds, three of which were registered in the financial year 2007-08 and one in 2008-09. The assessee claimed that the possession of the property was handed over in the financial year 2008-09, thus offering the resultant capital gain for the assessment year 2009-10. The A.O. disagreed, stating that the transfer took place in the financial year 2007-08 as per the sale deeds, and thus, the capital gain should be taxed in the assessment year 2008-09. The Tribunal noted that the assessee had disclosed the capital gain for the assessment year 2009-10 before the assessment was reopened for 2008-09, indicating a bonafide belief regarding the assessment year for the capital gain.

3. Allegation of Concealment of Income or Furnishing Inaccurate Particulars of Income:
The A.O. levied the penalty on the grounds that the assessee willfully concealed the particulars of income and furnished inaccurate particulars. The assessee contended that there was no willful concealment, as the capital gain was declared for the assessment year 2009-10, and the return was filed before the assessment for 2008-09 was reopened. The Tribunal found that the assessee had disclosed all necessary facts and had a bonafide belief regarding the assessment year for the capital gain. The Tribunal referred to the Supreme Court's judgment in CIT Vs. Reliance Petro Products Pvt. Ltd., which held that merely making an incorrect claim does not amount to furnishing inaccurate particulars of income. It also cited the Karnataka High Court's decision in CIT vs. Manjunatha Cotton & Ginning Factory, emphasizing that penalty under Section 271(1)(c) is not automatic and depends on the existence of a reasonable cause.

The Tribunal concluded that the A.O. was incorrect in concluding that the assessee willfully concealed particulars of income, as the assessee had voluntarily disclosed the capital gain for the assessment year 2009-10. Therefore, the penalty under Section 271(1)(c) was not warranted.

Conclusion:
The Tribunal directed the A.O. to delete the penalty levied under Section 271(1)(c) of the Act, and the appeal filed by the assessee was partly allowed. The order was pronounced in the open court on 6th May 2016.