2016 (7) TMI 1129 - AT - Income Tax

Penalty under section 271(1) (c) - Held that - CIT (A) has deleted the penalty on the arguments advanced by the assesesse, which were not raised before the assessing officer. Hence, in the interest of Justice we set aside the whole issue of the penalty before the assessing officer with a direction to decide the issue afresh after considering all the arguments raised by the assessee. We also held that that the assessee is further entitled to raise any new/ fresh arguments as the penalty proceedings are separate and independent proceedings then the assessment proceedings and the Ld. AO may decide the issue on merit - Decided in favour of revenue for statistical purposes.

Summary

Issues involved:
Appeal against deletion of penalty u/s 271(1)(c) of the Income Tax Act.

Analysis:
1. The appeal was filed by the revenue challenging the deletion of penalty by the Commissioner of Income Tax (Appeals) against the assessment order. The assessee had not disclosed capital gain on the revalued shops transferred into stock in trade, resulting in an addition of &8377; 1,13,27,415. The assessing officer initiated penalty proceedings u/s 271(1)(c) for non-disclosure. The assessee contended that the revised return was filed before finalization of assessment to avoid litigation, and no concealment was intended. The CIT (A) deleted the penalty, citing the disclosure of income in a subsequent year and the absence of concealment intent. The revenue appealed against this decision.

2. The revenue argued that the non-disclosure of capital gain was intentional, not an oversight, and the revised return was filed after detection by the assessing officer. They contended that surrendering income with conditions does not absolve from penalty, and the CIT (A) erred in relying on a Gujarat High Court decision regarding income assessment disputes. The revenue maintained that the penalty was rightly imposed.

3. The assessee defended that the non-disclosure was due to a misunderstanding regarding the revaluation reserve and the shops' transfer to a society. They claimed that the facts were disclosed in previous tribunal orders and notices, showing a bona fide belief without intent to conceal income. The disclosure was made before detection by the assessing officer, and the penalty should not be levied.

4. The ITAT analyzed the arguments and found discrepancies in the handling of the case. The CIT (A) considered arguments not raised before the assessing officer, leading to the penalty's deletion based on new information. The ITAT set aside the penalty issue, directing the assessing officer to reevaluate after considering all arguments raised by the assessee. The ITAT emphasized the independence of penalty proceedings from assessment and allowed the revenue's appeal for statistical purposes.

In conclusion, the ITAT directed a fresh consideration of the penalty issue, emphasizing the importance of all arguments being presented before the assessing officer for a fair decision. The judgment highlighted the need for a comprehensive review of facts and legal contentions in penalty proceedings separate from assessment procedures.