2023 (4) TMI 286 - AT - Income Tax

Penalty levied u/s 271(1)(c) - charge of furnishing inaccurate particulars of income - HELD THAT - Penalty proceedings are independent and distinct to assessment proceedings/quantum proceeding. Any addition or disallowance made under quantum proceeding does not ipso facto empower the revenue authority to levy penalty under section 271(1)(c) of the Act. In the penalty proceeding, it must be proved by the revenue based on cogent material that the assessee has either concealed income or furnished inaccurate particulars of income. Basis adopted during the assessment proceedings cannot be used in the penalty proceedings without following the due process. As such, to levy penalty under section 271(1)(c) of the Act, the revenue has to reach to unambiguous finding that the income assessed in the hand of the assessee represent actual income which has been either concealed or inaccurate particular has been furnished with regard to such income. See National Textiles vs. CIT 2000 (10) TMI 19 - GUJARAT HIGH COURT Penalty cannot be imposed upon the assessee merely on the reasoning that a particular amount assessed as income in the hand the assessee. As in case on hand the assessee in the original return of income filed under section 139 of the Act claimed exempted long-term capital which has been withdrawn in the return filed in response to notice under section 148 of the Act and due taxes on the same was deposited. The returned income was accepted by the Revenue in the assessment order finalized under section 143(3) r.w.s. 147 of the Act without being any further addition/disallowance. As relying on Kulwant Singh case 2019 (4) TMI 1287 - ITAT CHANDIGARH we set aside the finding of the learned CIT(A) and direct the AO to delete the penalty levied by him under the provisions of section 271(1)(c) - Decided in favour of assessee.

Issues Involved:
1. Whether the CIT(A) erred in confirming the penalty levied under section 271(1)(c) of the Income Tax Act.
2. Whether the penalty calculation by the AO was erroneous.
3. Whether the CIT(A) wrongly dismissed the appeal based on the appellant's non-response during assessment proceedings.
4. Whether the appellant falls outside the scope of section 271(1)(c) based on the facts and bona fide belief.
5. Whether the CIT(A) overlooked various judgments relied upon by the appellant.

Summary:

Issue 1: Confirmation of Penalty Under Section 271(1)(c)
The primary issue raised by the assessee was that the CIT(A) erred in confirming the penalty levied by the AO amounting to Rs. 1,92,717 under section 271(1)(c) of the Income Tax Act on the charge of furnishing inaccurate particulars of income. The tribunal highlighted that penalty proceedings are distinct from assessment proceedings and require proof that the assessee either concealed income or furnished inaccurate particulars. The tribunal cited the Supreme Court judgment in Reliance Petroproducts Pvt. Ltd. and the Gujarat High Court judgment in National Textiles vs. CIT, emphasizing that mere assessment of income does not justify penalty unless there is clear evidence of concealment or inaccuracy.

Issue 2: Erroneous Penalty Calculation
The assessee contended that the penalty calculation was erroneous as the tax payable should have been Rs. 57,029 instead of Rs. 1,92,717. The tribunal noted that the penalty calculation should be based on the actual tax sought to be evaded, and in this case, the assessee had already paid due taxes on the income disclosed in the return filed in response to the notice under section 148.

Issue 3: Dismissal of Appeal Based on Non-Response
The CIT(A) dismissed the appeal on the grounds that the appellant did not respond during the assessment proceedings. The tribunal found this conclusion incorrect and baseless as the appellant had filed replies with documentary proof. The tribunal stressed that the basis adopted during assessment proceedings cannot be used in penalty proceedings without following due process.

Issue 4: Applicability of Section 271(1)(c)
The appellant argued that he fell outside the scope of section 271(1)(c) based on the bona fide belief that the transaction of capital gains reported was genuine. The tribunal observed that the appellant had withdrawn the claim of exempted long-term capital gain in the return filed in response to the notice under section 148 and paid the due taxes. The tribunal referred to the Chandigarh Tribunal's judgment in DCIT vs. Kulwant Singh, which stated that if taxes are paid before the issuance of a notice under section 148, there is no tax sought to be evaded, and thus no penalty is leviable.

Issue 5: Overlooking of Judgments
The appellant claimed that the CIT(A) overlooked various judgments relied upon in the submissions. The tribunal, after considering the detailed arguments and judgments, concluded that penalty could not be imposed merely because a particular amount was assessed as income.

Conclusion:
The tribunal set aside the CIT(A)'s findings and directed the AO to delete the penalty levied under section 271(1)(c). The appeal filed by the assessee was allowed, and the order was pronounced on 06/04/2023 at Ahmedabad.

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