2023 (6) TMI 262 - AT - Income Tax

Penalty u/s. 271(l)(c) - revised return of income in which the assessee disclosed details of sale of immovable properties - Whether revised return was filed pursuant to notice under section 143(2) issued by the Department ? - HELD THAT - The revised return of income, in which the assessee disclosed details of sale of immovable properties was not in pursuance to notice issued by the Department u/s 143(2) as on perusal of notices issued by the Department, it is seen that the query regarding the sale of immovable properties was enquired into for the first time by the Department vide notice dated 30-06-2016, whereas the assessee had already filed revised return of income on 31-10-2015. Also in the notice dated 31-08-2015, there is no mention regarding sale of immovable properties by the assessee, and hence, it cannot be inferred that the assessee made a declaration regarding the sale of immovable properties pursuant to the aforesaid notice. Department has not been able to bring forth any communication/information/evidence to show that it was within the knowledge of the assessee, that the assessment proceedings had been initiated to enquire into the aspect of sale of immovable properties by the assessee. Contention that the revised return of income was filed beyond the due prescribed date, it has been brought to our attention that the return of income was filed online and the same was accepted by the Department website and accordingly the same has been validated by the Department. It is a well-settled principle of law that if the assessee has made disclosure in the return of income, without the Department having brought the fact of omission on part of the assessee to the notice of the assessee, then it cannot be inferred that the revised return was filed pursuant to the omission having been detected by the Department. we are of the considered view that nothing has been brought forth by the Department to substantiate that the revised return of income was filed in pursuance to information contained in notice under section 143(2) of the Act. Accordingly, looking into the instant facts, we are hereby deleting the penalty imposed under section u/s 271(1)(c) of the Act. Decided in favour of assessee.

Summary

Issues:
The appeal involves issues related to penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for non-disclosure of long-term capital gains in the original return of income and subsequent filing of a revised return.

Summary of Judgment:

Issue 1: Validity of Penalty under Section 271(1)(c)

The assessee contended that the penalty of Rs. 10,67,798/- was erroneously confirmed by the CIT(A) as the notice under section 271(1)(c) was issued without specifying the grounds for the penalty. The assessing officer imposed the penalty for non-disclosure of long-term capital gains in the original return of income. The CIT(A) upheld the penalty order, stating that the revised return filed by the assessee was invalid as it was beyond the due date and the disclosure of capital gains was made only after a notice under section 142(1) was issued. The CIT(A) found that the disclosure by the assessee was not voluntary and justified the penalty based on the decision of the Hon. Gujarat High Court in a similar case.

Issue 2: Voluntary Disclosure by Assessee

The assessee argued that the revised return disclosing the capital gains was filed voluntarily before detection by the assessing officer and should not warrant a penalty under section 271(1)(c). The CIT(A) noted that the sole reason for scrutiny was the non-declaration of income from capital gains, and the department had information about the transaction. The CIT(A) found that the revised return was not filed voluntarily before detection by the AO and relied on the decision of the Hon. Gujarat High Court to confirm the penalty.

Issue 3: Appeal Against Penalty

The assessee appealed the CIT(A)'s decision, arguing that the revised return was not filed in response to the notice issued by the department and that the penalty was unjustified. The Department contended that the revised return was filed beyond the due date and the assessment proceedings were initiated to inquire into the taxability of the undisclosed capital gains. The ITAT considered the facts and held that the revised return was not filed in response to the department's notice, and there was no evidence that the assessee was aware of the reason for the assessment proceedings. Relying on legal precedents, the ITAT concluded that the penalty under section 271(1)(c) was not justified in this case.

Conclusion:

In light of the above observations, the ITAT allowed the appeal of the assessee and deleted the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.

This summary provides a detailed overview of the judgment, addressing each issue raised in the appeal regarding the penalty imposed on the assessee for non-disclosure of capital gains in the original return of income and the subsequent filing of a revised return.