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2018 (10) TMI 782 - AT - Income TaxPenalty u/s 271(c) - assessment of long term capital gain - Held that - The assessee showed the long term capital gain in the next year whereas the sale has been completed on 31.08.2010. The assessee voluntarily furnished the detail in his return of income for the A.Y. 2012-13 in which the mater of controversy has been adjudicated above. All the facts show that the assessee was not having any intention to conceal the said income to avoid the tax, therefore, in view of the law settled in Price Waterhouse Coopers Pvt. Ltd. Vs. CIT 2012 (9) TMI 775 - SUPREME COURT we are of the view that the penalty is not liable to be sustainable in the eyes of law. Accordingly, we set aside the finding of the CIT(A) on this issue and delete the penalty. Accordingly, these issues are being decided in favour of the assessee against the revenue.
Issues Involved:
1. Legality and validity of the penalty notice under section 271(1)(c)/274 of the Income Tax Act. 2. Whether the penalty for concealment of income is justified based on the facts of the case. 3. Application of legal precedents and principles, including natural justice and non-application of mind. Detailed Analysis: 1. Legality and Validity of the Penalty Notice: The assessee challenged the penalty notice issued under section 271(1)(c)/274 of the Income Tax Act, arguing that the notice was defective as it did not specify the exact charge—whether it was for "concealment of income" or "furnishing inaccurate particulars of income." The Tribunal noted that the Assessing Officer (AO) did not tick off any specific limb in the notice, which is a requirement as per the law settled in various judgments, including CIT Vs. SSA’s Emerald Meadows and CIT Vs. Shri Samson Perinchery. The Tribunal highlighted that the penalty under section 271(1)(c) is leviable for either "concealment of particulars of income" or "furnishing inaccurate particulars of income," and both have different connotations. The failure to specify the charge in the notice rendered it defective, as it did not allow the assessee to defend themselves properly. 2. Justification of Penalty for Concealment of Income: The Tribunal examined whether the penalty for concealment of income was justified. The assessee had sold an immovable property but failed to disclose the long-term capital gain in the relevant assessment year. However, the assessee disclosed this gain in the subsequent year, even before the issuance of notice under section 142(1). The Tribunal noted that the assessee did not have an intention to conceal the income to avoid tax, as evidenced by their voluntary disclosure in the next assessment year. The Tribunal referenced the Supreme Court judgment in Price Waterhouse Coopers Pvt. Ltd. Vs. CIT, which supports the view that inadvertent mistakes without any intention to conceal income should not attract penalties. Consequently, the Tribunal concluded that the penalty was not sustainable in law. 3. Application of Legal Precedents and Principles: The Tribunal referred to several legal precedents to support its decision. It cited the Supreme Court's distinction between "concealment of income" and "furnishing inaccurate particulars of income" in the case of Dilip N. Shroff. The Tribunal also referred to the Bombay High Court’s decision in CIT-11 Vs. Samson Perinchery, which invalidated penalty notices that did not specify the exact charge. Additionally, the Tribunal discussed the importance of the principles of natural justice and the need for clear and specific charges in penalty notices, as highlighted in the Supreme Court's judgment in Dilip N. Shroff and the Bombay High Court's decision in Smt. Kaushalya & Others. The Tribunal emphasized that the AO's failure to strike off the irrelevant portions in the notice indicated non-application of mind, thus violating the principles of natural justice. Conclusion: The Tribunal allowed the appeal filed by the assessee, setting aside the CIT(A)’s order and deleting the penalty. It concluded that the defective penalty notice and the lack of intention to conceal income made the penalty unsustainable in law. The judgment underscores the importance of clear and specific charges in penalty notices and adherence to the principles of natural justice. Order Pronounced: The order was pronounced in the open court on 03.08.2018.
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