2021 (5) TMI 58 - AT - Income Tax

Penalty u/s. 271(l)(c) - long term capital gain income - Assessee argued that AO had not specified in the notice u/s.271(1)(c) r.w.s. 274 and in the penalty order whether the penalty was leviable for concealment of income or for furnishing inaccurate particulars thereof - HELD THAT - We note that the assessing officer has initiated the penalty proceedings on one footing and concluded on other footing. Therefore, in our opinion, the basis of levy of penalty itself is not correct. The assessee company sold the land to Ambuja Cement for a consideration and out of the said receipt the bank loans were to be paid by the company. When this fact (that the said amount was not disclosed in the original return by way of capital gain) was drawn to the attention of the Director, Shri Rajendra Singh Yadav, he immediately and voluntarily offered the long term capital gain in the hand of the company by revising the return of income. The amount received from the transferee company of M/s Ambuja Cement has been shown by the assessee-company under the head loan and advances, hence, there is no conscious concealment of income, as held by the various Hon ble High Courts These are the three varying degrees of defaults and the statute clearly keeps up the distinction between the three modes. In Hindustan Steel Ltd. v. State of Orissa 1969 (8) TMI 31 - SUPREME COURT observed that whether the penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all relevant circumstances and that even if a minimum penalty is prescribed the authority competent to impose the penalty will be justified in refusing to impose a penalty when there is a mere technical or venial breach of the provisions of the Act. The words may direct that such person shall pay by way of penalty in section 271 leave a certain amount of discretion in imposition of penalty which need not be imposed when there is a minor breach of the law and when having regard do the facts ends of justice require that the assessee should not be penalized. So also where the circumstances of a case establish that the mistake is accidental and inadvertent and there is no material at all to justify any want of bona fide or any gross neglect, imposition of penalty is not justified. Mahadeshwara Movies 1980 (4) TMI 5 - KARNATAKA HIGH COURT Therefore, in the assessee s case the penalty is not leviable unless it is shown that there is a conscious concealment or furnishing of inaccurate particulars of income. Therefore, we delete the penalty imposed under section 271(1) (c ) of the Act. - Decided in favour of assessee.

Summary

Issues Involved:
1. Confirmation of penalty under section 271(1)(c) of the Income Tax Act for Long Term Capital Gain (LTCG).
2. Ambiguity in the penalty notice regarding the specific charge (concealment of income or furnishing inaccurate particulars).

Detailed Analysis:

1. Confirmation of Penalty under Section 271(1)(c) for LTCG:

The assessee, a private limited company engaged in coal trade, filed its return of income for AY 2008-09 declaring a total income of ?10,37,714/-. The scrutiny assessment finalized on 29.12.2010 resulted in a total income of ?9,51,17,548/- due to two additions: an estimated business income of ?19,60,875/- and a Long Term Capital Gain (LTCG) of ?9,31,56,673/-. The Assessing Officer (AO) initiated penalty proceedings under section 271(1)(c) for both concealment of income and furnishing inaccurate particulars of income.

The penalty order levied a penalty of ?2,13,31,470/- being the minimum penalty at 100% of the tax sought to be evaded. The CIT(A) deleted the penalty concerning the estimated business income but confirmed the penalty on the LTCG addition. The CIT(A) found that the non-disclosure of LTCG could not be considered a bona fide mistake, noting that the revised return was filed only after the AIR information was provided to the assessee.

2. Ambiguity in Penalty Notice:

The assessee argued that the penalty notice was ambiguous as it did not specify whether the penalty was for concealment of income or for furnishing inaccurate particulars. The AO initiated penalty proceedings for LTCG on the ground of concealment of income in the assessment order but cited both grounds in the penalty order, leading to uncertainty.

The Tribunal noted that the AO must be clear and specific about the charge when initiating penalty proceedings. The AO's failure to specify the exact charge in the assessment order and the penalty order rendered the penalty proceedings invalid. This view was supported by the Hon’ble Supreme Court in T Ashok Pai and the Hon’ble Gujarat High Court in Manu Engineering Works and Nayan C. Shah vs. ITO.

Merits of the Case:

The Tribunal observed that the property sale was duly reflected in the regular books of the assessee company and the amount received was shown as advances instead of recognizing it as LTCG due to the illness and subsequent death of one of the directors, which led to mismanagement. The Tribunal found no conscious concealment of income or filing of inaccurate particulars, considering it a genuine mistake.

The Tribunal cited the Hon’ble Supreme Court in Anantharam Veerasinghaiah & Co. vs. CIT, emphasizing that penalty should not be imposed unless there is conscious concealment of income. The Tribunal also referred to the Hon’ble High Court of Madras in Sivagaminatha Moopanar & Sons vs. CIT and CIT vs. J.K.A. Rajappa Chettiar, supporting the view that inadvertent mistakes corrected by a revised return should not attract penalties.

Conclusion:

The Tribunal concluded that the penalty proceedings were invalid due to the ambiguity in the penalty notice and the lack of conscious concealment of income by the assessee. The penalty imposed under section 271(1)(c) was deleted, and the appeal filed by the assessee was allowed. The order was pronounced on 04/02/2021.