2021 (5) TMI 758 - AT - Income Tax

Penalty u/s 271(1)(c) - undisclosed capital gain on sale of flat - bona-fide mistake or not - assessee admitted the mistake during assessment proceedings and offered short-term capital gains in the revised computation of income - During penalty proceedings, the assessee submitted that it relied on the professional advice tendered by one Shri Jitendra Chimanlal Darji that the gain so earned by the assessee were eligible for deduction u/s 54 since the assessee had purchased a new flat within two years - HELD THAT - As assessee had made investment in a new residential flat situated at C-103, Baba Sadan, 4, Bungalows, J.P. Road, Andheri (W), Mumbai which is evident from the copy of agreement as placed on record. The payment of the same was made through bank account on 28/06/2013 and 04/07/2013. Hence, the assessee would have been eligible to claim deduction u/s 54 if the property sold was a long-term capital asset. The assessee has also placed on record letter dated 11/10/2018 from Shri Jitendra Chimanlal Darji admitting the said mistake. The assessee has also filed an affidavit as to the above stated facts. All these facts and documentary evidences lend strength to assessee s submissions that the claim was under bona-fide mistake and the same was duly accepted during assessment proceedings. Under these circumstances, it could not be said that the assessee failed to offer any explanation as to wrong claim or the explanation furnished by the assessee was untrue. Therefore, keeping in view the ratio laid down by Hon ble Apex Court in Price Waterhouse Coopers Pvt. Ltd. 2012 (9) TMI 775 - SUPREME COURT held that no penalty would be leviable in case of bona-fide explanation, we are inclined to delete the impugned penalty. - Decided in favour of assessee.

Summary

Issues:
Confirmation of penalty under section 271(1)(c) for Assessment Year 2014-15.

Analysis:
In this case, the assessee appealed against the penalty of ?8,35,565 imposed under section 271(1)(c) for the Assessment Year 2014-15. The penalty was confirmed by the Commissioner of Income-Tax (Appeals) and was challenged before the Appellate Tribunal. The assessee argued against the penalty on legal grounds and merits. The counsel for the assessee contended that the inadmissible claim in the return of income was due to wrong advice from a tax consultant who was the purchaser of the assessee's property. The assessee claimed that the Assessing Officer failed to frame specific charges, making the penalty unsustainable. On the other hand, the Revenue argued that the penalty was justified as the claim made by the assessee was not admissible.

The facts leading to the penalty imposition revealed that the assessee sold a flat in Mumbai but did not declare the capital gains in the income tax return. During assessment proceedings, the mistake was acknowledged, and the revised income computation included the short-term capital gains, additional interest income, and withdrawal of loss claim from House Property. The penalty proceedings were initiated under section 271(1)(c) based on the discrepancy. The assessee explained that the error was due to professional advice received, which was later found to be incorrect. Despite the plea to drop the penalty, the Assessing Officer imposed a penalty of ?8.35 Lacs, which was upheld by the Commissioner of Income-Tax (Appeals) leading to the appeal before the Tribunal.

The Appellate Tribunal considered the arguments presented by the parties. The assessee claimed that the mistake in the return was due to erroneous advice from an individual who misrepresented himself as a Chartered Accountant. The assessee had made investments in a new residential flat, which would have qualified for deduction under section 54 if the sold property was a long-term capital asset. Documentary evidence and a letter from the advisor admitting the mistake supported the assessee's claim of bona fide error. Referring to the decision in Price Waterhouse Coopers Pvt. Ltd. v. CIT, the Tribunal concluded that since the explanation provided was bona fide, no penalty should be levied. Consequently, the Tribunal decided to delete the penalty, considering the circumstances and the legal precedent cited.

In conclusion, the appeal was partly allowed by the Appellate Tribunal, and the penalty under section 271(1)(c) for the Assessment Year 2014-15 was deleted based on the finding of a bona fide mistake in the claim made by the assessee.