RAJAN KALIMUTHU,CHENNAI vs. CIT, CHENNAI

2 - In the light of the above decision, we are of the considered opinion that Id.CIT(A) ought not have deleted the penalty based on the decision of Manjunatha Cotton and Ginning Factory (supra) and therefore we remand the matter back to the Id. Commissioner of Income Tax (Appeals) for adjudication of the appeal on merits.

Consequently, an appellate order has been passed by Ld. CIT(A) on 24-03-2022 again confirming the penalty which is in further challenge before us.

During set-aside appellate proceedings, the assessee raised legal ground and submitted that notice issued u/s 274 did not specify the exact charge viz. concealment of income or furnishing of inaccurate particulars of income. For the same, reliance was placed, inter-alia, on the decision of Hon’ble Bombay High Court in Pr. CIT vs. Goa Coastal Resorts and Recreation (P.) Ltd. (113 Taxmann.com 574). The Special Leave Petition filed by the revenue was dismissed by Hon’ble Apex Court. However, this plea was rejected by Ld. CIT(A) considering the decision of Hon’ble Madras High Court in Sundaram Finance Ltd. (403 ITR 407) as well as the decision in Gangotri Textiles Ltd. vs. DCIT (121 Taxmann.com 171). Further, the issue was to be decided only on merits as directed by the Tribunal. 5. On merits, it transpired that the assessee sold land and building for Rs.200 Lacs and no capital gains were reflected against the same since the proceeds thereof were invested in purchase of land for construction. The Ld. CIT(A) noted that this transaction was not reflected in the return of income. The Ld. AO denied deduction u/s 54 and assessed capital gains of Rs.47.21 Lacs which attained finality. Therefore, the non-disclosure of gains would amount to concealment. Accordingly, the penalty as levied by Ld. AO was confirmed. Aggrieved, the assessee is in further appeal before us.

However, fact on record would reveal that the assessee is a non- resident. The assessee sold a property and invested substantial sale proceeds (more than 75%) in purchase of land. The assessee could not visit India and complete the construction work. However, the assessee was under a bona-fide belief that the same transaction need no be shown in the Income Tax Return as there was no capital gains tax liability due to investments in land. Subsequently, upon being pointed out by Ld. AO that the conditions of Sec. 54 were not fulfilled, the assessee accepted the computations and paid due taxes as determined by Ld. AO. Simply because the additions were accepted by the assessee and not challenged any further would not be a good enough reason to levy the penalty as held by Delhi Tribunal in Rai Industrial Power Pvt. Ltd. vs. DCIT (ITA 4862/Del/2013). The case before us is a case of bona-fide belief of the assessee that the capital gains computations would be nil on account of substantial investment in land. Therefore, it is not a fit case for confirmation of penalty. By 4 - deleting the same, we allow corresponding grounds raised