2021 (6) TMI 709 - AT - Income Tax

Penalty u/s 271(1)(c) - additional income offered by assessee by way of LTCG in revised return - DR submits that the mistake in the original return of income was apparent as the assessee has not offered the additional income, offered in the revised return - as per AO belated return cannot be revised - HELD THAT - In reply to the show-cause notice under section 274 read with section 271(1)(c) the assessee explained that due to bonafide mistake while filing original return, the LTCG was not offered. The assessee explained that the mistake was due to the fact that sale consideration paid through cheque was not cleared by 31.03.2013. We find that these facts are not disputed by AO - it is not in dispute that the assessee filed revised return before issuing notice under section 143(2) of the Act. The assessee has also paid due tax along with interest thereon. In our view, the assessee has shown reasonable cause within the meaning of section 273B and no penalty was leviable in the facts and circumstances of the present case. The Hon ble Punjab Haryana High Court in CIT vs. Suraj Bhan. 2006 (4) TMI 107 - PUNJAB AND HARYANA HIGH COURT by following the decision of Hon ble Supreme Court in CIT Vs Suresh Chand Mittal 2001 (6) TMI 63 - SC ORDER held that when the assessee files a revised return showing higher income and gives explanation that he offered higher income to buy peace of mind and avoid litigation, penalty cannot be imposed merely on account of higher income having been subsequently declared. In view of the aforesaid factual and legal discussion, we are of the view that no penalty was leviable on the facts of the present case. Appeal of assessee is allowed.

Summary

Issues:
- Appeal against penalty order under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2013-14.

Detailed Analysis:

1. Background and Assessment: The appellant, engaged in construction work, initially declared a taxable income for AY 2013-14. Later, a revised return was filed disclosing long term capital gain. The AO noted the discrepancy and initiated penalty proceedings.

2. Assessee's Response: The appellant explained that the revised return was filed due to an inadvertent mistake in the original return, where the full sale consideration was not disclosed. The appellant rectified the error promptly upon realization and paid the additional tax due.

3. Penalty Imposition: The AO, however, rejected the explanation and imposed a penalty, considering the revised return invalid due to being filed after the due date. The CIT(A) upheld the penalty, leading to the appeal before the Tribunal.

4. Tribunal's Consideration: The Tribunal analyzed the facts, noting that the AO accepted the additional income offered by the appellant in the revised return. The appellant demonstrated a bona fide mistake and rectified it promptly, paying the due tax before any notice was issued under section 143(2) of the Act.

5. Legal Precedents: The appellant cited legal precedents to support the argument that penalty cannot be imposed when additional income is declared in a revised return to avoid litigation. The Tribunal found merit in this argument and ruled in favor of the appellant.

6. Decision and Rationale: Citing the Punjab & Haryana High Court's decision and the Supreme Court's ruling, the Tribunal concluded that no penalty was warranted in this case. The appellant's actions were deemed reasonable, and no evasion of tax was found.

7. Final Verdict: The Tribunal allowed the appeal, emphasizing that the appellant had rectified the error in good faith and had no intention to evade tax. The decision was announced in June 2021, favoring the appellant and overturning the penalty imposed by the lower authorities.