2021 (6) TMI 805 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - Defective notice issued u/s 274 - computation of short-term capital gain - HELD THAT - We find the assessee in the instant case during the course of assessment proceedings had surrendered an income for the computation of short-term capital gain which amount was received by him on 13th December 2011 by cheque and which relates to A.Y. 2012-13. The assessee had paid tax on the above amount. As further to be noted that the assessee had surrendered the above income before it was detected by the Department although only statutory notices had been issued. The Hon ble Supreme Court in the case of PricewaterhouseCoopers 2012 (9) TMI 775 - SUPREME COURT while deleting the penalty upheld that the imposition of penalty on the assessee is not justified. We are satisfied that the assessee had committed an inadvertent and bona fide error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars. We find the assessee in the instant case had received an amoun on 13th December 2011 which relates to A.Y. 2012-13 and therefore we find merit in the argument of the ld. counsel for the assessee that non-inclusion of the same while computing the income for A.Y. 2014-15 is only an inadvertent and bonafide error which the assessee came to know later on and had voluntarily offered the income and paid tax. A perusal of the notice issued u/s 274 r.w.s. 271 shows that the inappropriate words in the said notice have not been struck off. The coordinate Benches of the Tribunal following the decisions cited by the ld. Counsel for the assessee (supra) are consistently taking the view that where the inappropriate words in the penalty notice has not been struck off and notice does not specify as to under which limb of the provisions the penalty u/s 271(1)(c) has been initiated then levy of penalty u/s 271(1)(c) of the Act is not sustainable and has to be deleted - Appeal filed by the assessee is allowed.

Summary

Issues:
Levy of penalty under section 271(1)(c)

Analysis:
The appeal was against the penalty of ?1,44,200 imposed by the Assessing Officer (AO) under section 271(1)(c) and upheld by the Commissioner of Income Tax (Appeals) [CIT(A)] for the assessment year 2014-15. The AO determined the total income of the assessee at ?42,75,320, making an addition of ?4,66,660 on account of additional income from short-term capital gain. The penalty proceedings were initiated as the AO held that the assessee concealed income and furnished inaccurate particulars. The CIT(A) confirmed the penalty.

The assessee argued that the undisclosed income was voluntarily offered during assessment proceedings after realizing the mistake of not including an amount received earlier. The counsel cited a Tribunal decision and a Supreme Court case to support that penalty is not applicable for voluntary disclosure due to a genuine mistake. The second argument focused on technicalities in the penalty notice, claiming it did not specify the grounds for penalty initiation, citing legal precedents to support the claim.

After considering arguments and relevant case law, the Tribunal found that the undisclosed income was due to an inadvertent and bona fide error, voluntarily disclosed and taxed by the assessee. The Tribunal also noted technical deficiencies in the penalty notice, following precedents that penalties under section 271(1)(c) must be specific and justified. Therefore, the Tribunal allowed the appeal, setting aside the penalty imposed by the AO and upheld by the CIT(A).

In conclusion, the Tribunal ruled in favor of the assessee, emphasizing the inadvertent nature of the error and the technical deficiencies in the penalty notice. The decision highlighted the importance of genuine disclosure and proper legal procedures in penalty imposition under section 271(1)(c) of the Income Tax Act.