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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: SHRI G.S. PANNU (VP) & SHRI RAM LAL NEGI (JM)
O R D E R
PER RAM LAL NEGI, JM
This appeal has been filed by the assessee against order dated 10/06/2014 passed by the Ld. Commissioner of Income Tax (Appeals)-17, Mumbai, for the assessment year 2010-11, whereby the Ld. CIT (A) has dismissed the appeal filed by the assessee against penalty order passed u/s 271 (1)(c) of the Income Tax Act, 1961 (for short ‘the Act’).
2. In the present case AO passed the assessment order under section 143(3) of the Act determining the total income at Rs. 3,17,53,650/-after making various additions and disallowances including addition of Rs. 26,65,078/-on account of long term capital gain on sale of land/building. The 2 Assessment Year: 2010-11 assessee did not prefer appeal against the said assessment order. Accordingly, the AO passed penalty order and imposed penalty of Rs. 6,03,910/-under section 271(1)(c) of the Act. In the first appeal, the Ld. CIT(A) dismissed the appeal of the assessee and confirmed the penalty levied by the AO. Against the said order, the assessee is in appeal before the Tribunal.
3. The assessee has preferred the present appeal on the following effective grounds:- 1. “The learned CIT (A), erred in levying penalty u/s 271 (1)(c) of the Income Tax Act 1961. Your appellant humbly prays that the entire amount of said penalty be deleted.
The learned AO erred in coming to the conclusion that your appellant had deliberately and consciously attempted to conceal the true particulars of its income and evaded payment of tax thereon. He ought to have appreciated that all the relevant facts and records were produced before the income tax authorities at various stages of assessment proceedings. On these facts and under the circumstances there was no concealment as contemplated under sec. 271 (1)(c) Income Tax Act, 1961.
Without prejudice to the above it is humbly submitted that the learned AO has not recorded in the assessment order u/s 143
(3) of the Income Tax Act, 1961 his satisfaction that your appellant had concealed any income or furnished inaccurate particulars of income.
Hence these proceedings initiated u/s 271 (1)(c) Income Tax Ac, 1961 are bad in law and need to be quashed.”
Before us, the learned counsel for the assessee submitted that the Ld. CIT(A) has wrongly confirmed the penalty levied under section 271 (1)(c) of the Act. As submitted by the Ld. counsel, the assessee company had acquired two plots of vacant land in Nasik and one in Pune in the course of its business and 3 Assessment Year: 2010-11 had disclosed in its balance sheet at cost. During previous year relevant to the assessment year under consideration the assessee company removed the above said three plots of land from its fixed asset block intending to transfer the same to its associate concern by passing a resolution and entering into an agreement. The contention of the assessee is that since during the year relevant to the assessment year under consideration the said plots were not transferred within the meaning of section 2 (47) of the Act, the company did not offer the capital gain to tax. Although the assessee company had not registered the document of transfer yet the assessee accepted the capital gain worked out on the basis of the documents submitted before the AO during the course of assessment proceedings to buy peace of mind and avoid litigation. Accordingly, the assessee agreed to pay full tax and did not challenge the assessment order. The Ld. counsel further submitted that since, the assessee had submitted the entire details before the AO no question of furnishing of inaccurate particulars of income does arise.
Per contra, the Ld. departmental representative (DR) relying on the order passed by the authorities below submitted that since the assessee failed to offer capital gain in the computation of income earned from transfer plots aforesaid and since this fact came to the notice of the AO during the assessment proceedings, the AO rightly brought to tax the long term capital gain amounting to Rs. 26, 65, 077/-. The Ld. DR further submitted that since the assessee has concealed the particulars of income the Ld. CIT(A) has rightly upheld the penalty levied under section 271(1)(c) of the Act. 6. We have gone through the orders passed by the authorities below in the light of the rival contentions of the parties. The only grievance of the assessee is that the Ld. CIT(A) has wrongly confirmed the penalty levied by the AO. The contention of the assessee is that since the plots had not been transferred within the meaning of section 2(47) of the Act during the previous year, it did not offer the long term capital gain to tax in the assessment year under 4 Assessment Year: 2010-11 consideration. In the light of the aforesaid fact, the Ld. counsel submitted that during the assessment proceedings the assessee agreed to pay the tax on the capital gains in question to cooperate the department and buy peace of mind. Therefore, offering of tax by the assessee under the aforesaid circumstances do not ipso facto make the assessee liable for penalty u/s 271(1)(c) of the Act.
We find force in the contention of the Ld. counsel for the assessee. As per the settled law assessment proceedings and penalty proceedings are two distinct and independent proceedings and quantum addition does not automatically held the assessee liable for penalty u/s 271(1)(c) of the Act. In order to levy penalty under section 271(1)(c) of the Act the AO has to record his satisfaction on the basis of evidence that the assessee has concealed the particulars of its income or furnished inaccurate particulars of such income. Further as per explanation the addition or disallowance shall be taken into consideration for the purpose of clause (c) of the said section if the assessee fails to offer any explanation in respect of any fact material to computation of the total income, or the same is found to be false or fails to prove that such explanation is bona fide and that it has disclosed all the facts which is material for computation of total income.
In the present case, the assessee did not offer the tax on capital gain under a bona fide belief that since the transfer had not taken place within the meaning of section 2(47) of the Act, it was not required to offer tax on the said capital gain. Admittedly, the plots in question had not been transferred by the assessee by executing registered deeds at the time of filing return of income or even at the later stage, therefore, in our considered view, the assessee had reason to believe that it was not required to offer tax on the capital gain in the assessment year under consideration. Since, the issue as to whether the capital gain in question was taxable in the assessment year under consideration was debatable, the explanation given by the assessee is bona fide within the Explanation (B) to section 271(1)(c) of the Act.
5 Assessment Year: 2010-11