2023 (1) TMI 172 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - assessee had claimed excess long-term capital loss in the original return and thus wilfully attempt to defraud the Revenue by not disclosing the true and correct income - HELD THAT - As is evident from the record, the assessee initially claimed long-term capital loss on the sale of residential property, wherein she is holding a 50% share. On pointing out the discrepancy during the assessment proceedings, the assessee filed a revised statement of income wherein the long-term capital loss was re-computed. It is not a case wherein due to incorrect computation of capital loss there was any impact on the taxable income for the year under consideration. However, only the loss claimed in the return, which was carried forward to future years for set-off was reduced. Further, it is also not a case wherein the assessee has disputed the computation of long-term capital loss without any substantial basis. Thus, once the discrepancy was pointed out, the assessee readily revised the statement of income and recomputed the long-term capital loss which has also been accepted by the Revenue without any variation in the assessment order. Therefore we are of the considered opinion that the assessee made a bona fide mistake in the computation of a long-term capital loss in its original return of income, which was corrected by the assessee by filing the revised computation during the assessment proceedings. We are of the considered view that this is not a fit case for the levy of penalty under section 271(1)(c) - Accordingly, the grounds raised in the present appeal are allowed and the AO is directed to delete the penalty, as affirmed by the learned CIT(A). Appeal by the assessee is allowed.

Summary

Issues:
Challenge to penalty under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
The appellant challenged the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, arising from discrepancies in long-term capital loss claimed in the return of income for the assessment year 2015-16. The appellant initially claimed a long-term capital loss of Rs. 7,36,071 on the sale of a residential property, which was later revised to Rs. 1,10,174 during assessment proceedings. The Assessing Officer levied a penalty of Rs. 1,28,934, alleging willful attempt to defraud the Revenue by not disclosing the true income. The appellant contended that the revised computation was made in good faith after discrepancies were pointed out, and there was no impact on the taxable income for the year. The appellant argued that there was no concealment or furnishing of inaccurate particulars of income. The Departmental Representative, however, supported the penalty citing improper disclosure of long-term capital loss.

The Tribunal analyzed the case, noting that the appellant rectified the computation of long-term capital loss upon identification of discrepancies during assessment proceedings. It was observed that the revised computation did not affect the taxable income for the relevant year, as only the loss claimed in the return was reduced and carried forward for set-off in future years. The Tribunal found that the appellant rectified the mistake in good faith and without disputing the computation of long-term capital loss. Referring to a previous case, the Tribunal highlighted that the term "inaccurate particulars of income" requires a conscious element of furnishing incorrect details in the return, coupled with circumstantial evidence. The Tribunal concluded that the penalty under section 271(1)(c) was not justified in the present case, as there was no intention to provide inaccurate particulars of income. Consequently, the Tribunal allowed the appeal and directed the Assessing Officer to delete the penalty as upheld by the Commissioner of Income Tax (Appeals).

In conclusion, the Tribunal ruled in favor of the appellant, holding that the penalty under section 271(1)(c) of the Income Tax Act, 1961, was not warranted in the circumstances of the case. The appellant's appeal was allowed, and the penalty was directed to be deleted.