2018 (3) TMI 1464 - AT - Income Tax

Penalty u/s 271(1)(c) - treating declaration as Long term Capital gains as wrong and erroneous - bonafide belief -sale consideration received against sale of furniture, being the solitary transaction, would be treated as income from other sources and not capital gain - contention of the assessee has been that it was done under the bonafide belief that the furniture and fixtures sold with the building partake the character of sale consideration of capital asset - Held that - The bonafide of the assessee appears to have not been considered by the ld. Authorities below in right perspective. At the initial stage of quantum proceedings, there were two different opinions of the Revenue authorities itself on this issue, inasmuch as the Assessing Officer treated the impugned sum as income from other sources whereas the ld. CIT(A) in first round of appeal by the assessee treated the same amount as income from long-term capital gain. Once, the Revenue Authorities had expressed two views on the same issue, how the bonafide of the assessee to show the said amount as income from long term capital gains could be doubted by the Authorities below. However, the fact remains, that the assessee had declared all particulars of the impugned receipts before the Revenue authorities. Mere making of a claim not found sustainable under law, the same would not amount to concealment of income or furnishing of inaccurate particulars of income for saddling penalty against the assessee as held by Hon ble Apex Court in Reliance Petroproducts (2010 (3) TMI 80 - SUPREME COURT). It is also notable that there is no comments of the authorities below on declaration of the impugned amount in the return of income, though it was shown under different. Only the head of income has been changed by the Assessing Officer. There being no concealment of the impugned sale consideration on the part of assessee, not a fit case to impose penalty u/s. 271(1)(c) - Decided in favour of assessee

Summary

Issues Involved:
Challenge to the imposition of penalty under section 271(1)(c) of the IT Act, 1961 for declaring an amount as Long term Capital gains which was treated as income from other sources.

Detailed Analysis:

Issue 1: Grounds for Challenging Penalty
The appeal was filed against the penalty imposed under section 271(1)(c) of the IT Act, 1961. The appellant contended that the penalty was wrongly confirmed by the Commissioner of Income Tax (Appeals) and that the declaration of the amount as Long term Capital gains was not erroneous. The appellant argued that the change in the head of income did not constitute concealment of income or furnishing inaccurate particulars of income.

Issue 2: Assessment of Long term Capital Gains
The Assessing Officer observed that the appellant included the amount received against the sale of furniture and fittings in the total sale consideration for computing capital gains. However, the Assessing Officer treated this amount as income from other sources, leading to the imposition of penalty. In the quantum appeal, the Commissioner reversed this view and held that the furniture and fixture amount was an integral part of the sale consideration for computing long term capital gains.

Issue 3: Reassessment and Penalty Proceedings
The case was remitted back to the Assessing Officer by the ITAT for reconsideration. Subsequently, the Assessing Officer added the amount as income from other sources in the fresh assessment order. Penalty proceedings were initiated under section 271(1)(c) of the IT Act based on the change in the head of income. The appellant argued that the declaration was made in good faith and that the penalty was unjustified.

Issue 4: Adjudication on Penalty
The appellant contended that the income was declared in the return of income, albeit under a different head, and that the change in taxability did not amount to concealment of income. The authorities failed to consider the bonafide belief of the appellant. The Tribunal found merit in the appellant's arguments, emphasizing that the declaration of income was made with bonafide belief and there was no concealment. The Tribunal also noted the absence of contrary material from the Revenue to support the penalty.

In conclusion, the Tribunal allowed the appeal, highlighting that the appellant's declaration of income was made in good faith, and there was no concealment or furnishing of inaccurate particulars of income. The penalty under section 271(1)(c) of the IT Act was deemed unjustified in this case.