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TMI Blog2024 (5) TMI 1259X X X X Extracts X X X X X X X X Extracts X X X X ..... ing defects in their tax returns before their Assessing Authorities. This is more so when, as in the present case, the assessee had also paid the interest on the differential tax to cover the period of delay in payment thereof. The payment of statutory interest having compensated the exchequer adequately, to further penalise the assessee would tantamount to an act of overkill and would be antithetical to the rule of law. We are of the firm view that the honesty of an assessee cannot attract the penal provisions under the I.T. Act and that, in the instant case, the essential pre-conditions for the invocation of the provisions of Section 271(1) (c) of the I.T. Act against the assessee were not established. Explanation 1 to Section 271 which clarifies that where as in the instant case, a satisfactory explanation has been offered by the assessee, well before the issuance of a notice to him under Section 148 of the I.T. Act and the admission of additional income made by the assessee has been accepted by the Revenue which completed the assessment under Section 143 read with Section 147 of the I.T. Act on that basis, the explanation offered by the assesee with regard to the differential i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts and in the circumstances of the case should not the Tribunal have held that the appellant had concealed long term capital gain on transfer of equity shares by furnishing inaccurate and false particulars and therefore liable to penalty under Section 271(1)(c) of the Act? 2. The brief facts necessary for disposal of this appeal are as follows: The respondent/assessee had filed a return dated 30.07.2011 for the assessment year 2011-12 declaring a total income of Rs.70,74,466/-. In the said return, he had also computed a capital gain of Rs.37,66,168/-. The said return was processed under Section 143(1) of the I.T. Act on 28.12.2012. Subsequently, it came to the notice of the Revenue that there might have been a suppression of the capital gain declared by the assessee in the return that was filed on 30.07.2011. A summons was therefore issued under Section 131 of the I.T. Act to the respondent/assessee on 19.05.2014 calling for certain details with a view to ascertaining whether there was any suppression of income. While the respondent/assessee sought some time for furnishing the details and the Department granted the assessee the said time by issuing a fresh summons dated 05.06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is not with regard to the assessment completed against the respondent/assessee but with regard to the penalty that was imposed on him under Section 271(1)(c) of the I.T. Act immediately thereafter. It would appear that while by Annexure 'F' notice dated 30.01.2015, the Revenue proposed the imposition of a penalty on the respondent/assessee on the ground that the assessee had concealed particulars of his income or furnished inaccurate particulars of such income , the said notice did not clearly mention which of the two grounds i.e., concealment of income or furnishing inaccurate particulars of income formed the basis on which the notice for penalty had been issued. Notwithstanding the aforesaid discrepancy in the notice, the respondent/assessee preferred a detailed reply citing reasons as to why a penalty under Section 271(1)(c) could not be imposed on him. The explanation of the assessee did not however find favour with the Assessing Authority, who, by Annexure 'G' order dated 20.07.2015 confirmed a penalty equal to 100% of the tax allegedly sought to be evaded, namely, Rs.3,26,57,795/- on the respondent/assessee. 6. In the appeal preferred by the assessee b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame forward and admitted before the Revenue authorities that he was convinced of the mistake occassioned at the time of filing the original return, and that he was ready and willing to pay the differential amount of tax computed by him based on a revised computation of the capital gains earned by him. We further find from the records that the differential tax, together with interest thereon, was subsequently paid by the respondent/assessee when he was afforded an opportunity of doing so by filing the necessary returns pursuant to the notice issued to him under Section 148 of the I.T. Act. In our view, on the peculiar facts of this case, the notice issued under Section 148 of the I.T. Act has to be seen as one that literally enabled the respondent/assessee to pay the differential tax along with interest thereon by filing a fresh return that was recognised under the I.T. Act. We have to remind ourselves that, but for the notice under Section 148 of the I.T. Act, the assesseee in the instant case could not have paid the differential tax that was admitted by him as payable, because the time limit for filing returns in terms of Section 139 of the I.T. Act had already expired. At any rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led. It will be seen from a perusal of Section 271 of the I.T. Act that it is a specific provision providing for imposition of penalties, and is a complete code in itself, regulating the procedure for the imposition of penalties prescribed. The proceedings are therefore to be conducted in accordance therewith, subject always to the rules of natural justice. The provisions for the assessment and levy of tax will not apply as such for the imposition of penalty, and when there is a specific provision, it is trite that it alone will govern the imposition of penalties. In terms of Section 271(1)(c) of the I.T. Act, the penal provision is attracted only when the conditions therein are fulfilled namely, when there is a concealment of the particulars of an assessee's income or when the assessee has furnished inaccurate particulars of such income. The crucial question that arises for consideration before us is whether on the facts of the instant case those pre-conditions existed for initiating proceedings under Section 271 of the I.T. Act. Further, the provisions of Section 271(1) of the I.T. Act mandate that the existence of the conditions precedent for imposition of penalty under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to tax, well before the Assessing Authority himself could determine it, can be seen as having concealed or incorrectly stated the facts leading to his liability. To invoke the penal provisions of the Act against an assessee in such a situation would throw to the winds the elements of fairness in tax administration and discourage asssessees from disclosing defects in their tax returns before their Assessing Authorities. This is more so when, as in the present case, the assessee had also paid the interest on the differential tax to cover the period of delay in payment thereof. The payment of statutory interest having compensated the exchequer adequately, to further penalise the assessee would tantamount to an act of overkill and would be antithetical to the rule of law. We are of the firm view that the honesty of an assessee cannot attract the penal provisions under the I.T. Act and that, in the instant case, the essential pre-conditions for the invocation of the provisions of Section 271(1) (c) of the I.T. Act against the assessee were not established. 10. We might also in this connection notice Explanation 1 to Section 271 which clarifies that where in respect of any facts materi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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