2024 (12) TMI 21 - AT - Income Tax

Penalty u/s 271(1)(c) - penalty qua the relief already granted by ITAT in quantum-proceeding - HELD THAT - We agree that the penalty u/s 271(1)(c) is not sustainable qua the relief already granted by ITAT in quantum-proceeding because the very basis of imposition of penalty has collapsed to that extent. Therefore, the AO is directed to delete penalty to that extent. This deletion is, however, subject to the rider that if the revenue is in further appeal before High Court against the quantum deleted by ITAT and the ITAT s order is reversed, the revenue shall have power to revive the penalty in accordance with law. Penalty qua the long-term capital gain - The addition is a result of a fair view taken by ITAT in the matter of estimation and hence to that extent, it should not be considered as concealment. Being so, we hereby come to the conclusion that penalty is sustainable for first component of Rs. 3,85,258/- but not for other component of Rs. 2,40,998/-. We hold accordingly. Penalty qua the undisclosed interest income - It is culled out from assessment-order that the assessee received sale-proceeds of immovable properties through cheques in his bank account (Para 2.5 of assessment-order) and the impugned interest income is also from bank accounts. Therefore, it can be discerned that when the AO, vide order-sheet entry dated 12.09.2012, questioned the assessee to explain the transactions of sale of immovable properties, the assessee had to declare not only capital gain but also interest from banks in the revised return. Therefore, the plea of AR that the declaration of interest income was voluntary is not acceptable and the same is rejected. Consequently, the imposition of penalty qua the interest income is hereby upheld.

Summary

Issues:
Assessment of penalty under section 271(1)(c) of the Income-tax Act, 1961 based on additions made in the assessment order for Assessment Year 2010-11.

Analysis:
The judgment pertains to an appeal filed by the assessee against the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961. The case originated from the assessment proceedings for the Assessment Year 2010-11, where the Assessing Officer (AO) made substantial additions to the total income declared by the assessee. The additions included undisclosed long-term capital gains, interest income, and unexplained cash credits. The Commissioner of Income-Tax (Appeals) confirmed some of the additions, which led to the imposition of a penalty by the AO.

The assessee challenged the penalty order before the Commissioner of Income-Tax (Appeals), who upheld the penalty. Subsequently, the assessee appealed before the ITAT, disputing the penalty imposed. The ITAT analyzed the case in detail, considering the various components of the additions made by the AO.

The ITAT divided the assessee's grievance into two parts. Firstly, it addressed the penalty concerning the relief granted by the ITAT in the quantum proceedings. The ITAT held that the penalty was not sustainable to the extent that relief had been granted by the ITAT. However, it added a rider that if the ITAT's order was reversed by a higher forum, the revenue could revive the penalty.

Secondly, the ITAT examined the penalty related to the remaining additions of long-term capital gains and interest income. The ITAT considered the arguments presented by both sides regarding the concealment of income and voluntary disclosure by the assessee. The ITAT referred to relevant case laws and observed that the revised return filed by the assessee was invalid due to being filed beyond the statutory time limit. The ITAT upheld the penalty for the capital gain component but deleted the penalty for the estimation difference in capital gain. Additionally, the penalty for the undisclosed interest income was upheld.

In conclusion, the ITAT partly allowed the appeal by deleting the penalty concerning the relief granted by the ITAT in the quantum proceedings, upholding the penalty for the capital gain component, and the undisclosed interest income component. The judgment provided a detailed analysis of the facts and legal principles governing the imposition of penalties under section 271(1)(c) of the Income-tax Act, 1961.