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2018 (7) TMI 654 - AT - Income TaxPenalty u/s. 271(1)(c) - whether the treatment given by the assessee to the sale proceeds of unsold stock can be treated as furnishing of inaccurate particulars? - Held that - We find that the fact of sale of flats was never concealed. There is a difference of opinion between the AO and the assessee about the treatment to be given to the transaction. As far as quantum proceedings are concerned, they stand on different footing. Any addition to the income of an assessee or disallowance of a claim cannot and should not lead to automatic levy of penalty. What has to be seen is that as to whether the explanation filed by the assessee during the penalty proceedings was a plausible explanation. In the case under consideration the assessee had claimed that it was under bonafide impression that profit arising to it was taxable under the head capital gains. Taxability of an item of income under a particular head should not result in levy of penalty - Decided in against revenue
Issues:
1. Challenge to deletion of penalty imposed for furnishing inaccurate particulars under section 271(1)(c) of the Act. Analysis: The case involved a dispute regarding the treatment of profit arising from the sale of flats by an assessee-firm engaged in the business of building and development. The Assessing Officer (AO) contended that the profit should be treated as business income as the flats were part of unsold stock in trade. The First Appellate Authority and the ITAT had upheld the AO's decision in the quantum proceedings. Subsequently, penalty proceedings were initiated against the assessee for allegedly evading tax by changing the head of income. The AO imposed a penalty of ?41,02,084 under section 271(1)(c) of the Act. In the penalty proceedings, the assessee argued that it had disclosed all relevant facts and had a bonafide belief that the profit was taxable under the head of capital gains. The assessee provided detailed explanations and cited relevant case laws to support its position. The FAA, after considering the submissions, deleted the penalty levied by the AO. During the appeal before the ITAT, the Departmental Representative (DR) argued that the penalty was justified as confirmed by the FAA and the Tribunal in the quantum proceedings. However, the Authorized Representative (AR) for the assessee relied on judgments of the Hon'ble Bombay High Court and other cases to support the contention that the assessee had disclosed all necessary details about the transactions. The ITAT analyzed the facts and held that the treatment given by the assessee to the sale proceeds of unsold stock did not amount to furnishing inaccurate particulars. The ITAT emphasized that the fact of the sale was never concealed, and there was a genuine difference of opinion between the AO and the assessee regarding the treatment of the transaction. The ITAT concluded that the explanation provided by the assessee was plausible and that the taxability of income under a particular head should not lead to the automatic imposition of a penalty. Therefore, the ITAT confirmed the order of the FAA and dismissed the appeal filed by the AO. In conclusion, the ITAT upheld the deletion of the penalty imposed by the AO, emphasizing the importance of a plausible explanation and the absence of concealment of facts in determining the applicability of penalties under section 271(1)(c) of the Act. Order pronounced on 18th May, 2018.
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