ARJUN SHAMDAS BHAGTANI,,PUNE vs. ASSISTANT COMMISSIONER OF INCOME-TAX,,

The brief facts of the case as emanating from records are : The assessee has filed return of income for the impugned assessment year on 31-03-2009 declaring total income of Rs.9,17,428/-. The case of the assessee was selected for scrutiny and accordingly, statutory notice u/s. 143(2) of the Act was issued to the assessee on 15-09-2009. During the course of scrutiny assessment proceedings, the assessee declared Rs.27,90,000/- on account of Long Term Capital Gain on sale of land at Pisoli. The Assessing Officer made addition of the said amount and also initiated penalty proceedings u/s. 271(1)(c) for concealment of income. The Assessing Officer vide order dated 30-06-2010 passed u/s. 271(1)(c) levied penalty of Rs.3,87,000/- on account of undisclosed Long Term Capital Gain.

Shri C.H. Naniwadekar appearing on behalf of the assessee submitted that the assessee inadvertently failed to disclose Long Term Capital Gain arising from sale of land at Pisoli in the return of income. In scrutiny assessment proceedings the assessee suo-motu disclosed Long Term Capital Gain. The assessee did not contest the quantum addition. The appeal filed by assessee before the First Appellate Authority was withdrawn. The assessee could not disclose the Long Term Capital Gain by filing revised return as the original return was filed after the due date. The

On the other hand Mrs. Shweta Mishra representing the Department vehemently defended the order of Commissioner of Income Tax (Appeals) in upholding the levy of penalty. The ld. DR submitted, but for scrutiny assessment the Long Term Capital Gain earned by the assessee would not have come to the light and would have escaped tax net. It is a clear case of concealment of income by the assessee.

We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The assessee in appeal has assailed levy of penalty on the addition of Rs.27,90,000/- as Long Term Capital Gain. It is an undisputed fact that the assessee failed to disclose Long Term Capital Gain on sale of plot at Pisoli in his return of income and it was only during scrutiny assessment proceedings that the assessee disclosed Capital Gain on sale of plot. It is also not disputed that the assessee had filed his return of income for the impugned assessment year on 31-03-2009 i.e. beyond the due date as prescribed under the provisions of section 139(1) of the Act. Therefore, the assessee had no occasion to file revised return of income to rectify his mistake.

Purportedly, during scrutiny assessment proceedings the assessee voluntarily offered the Long Term Capital Gain on sale of plot at Pisoli. A perusal of the assessment order does not reveal that the Long Term Capital Gain on sale of plot was detected by the Assessing Officer in scrutiny proceedings. No specific enquiry was made by the Assessing Officer with respect to sale transactions of the land. No material has been brought before us by the Revenue to show that the disclosure of Long Term Capital Gain by the assessee was on account of some documentary evidence/information perceived by the Assessing Officer. Thus, the only way of coming to light such income is voluntarily disclosure by the assessee during scrutiny assessment proceedings.

The ld. AR has placed reliance on the decision of Chennai Bench of the Tribunal in the case of Assistant Commissioner of Income Tax Vs. H. Balasubramanian (supra), wherein penalty u/s. 271(1)(c) was levied on additional income offered by the assessee voluntarily in scrutiny assessment proceedings. The Assessing Officer levied penalty u/s. 271(1)(c) for concealment of income. The Tribunal after placing reliance on the decision of Hon’ble Madras High Court in the case of Commissioner of Income Tax Vs. S. Sankaran reported as 241 ITR 825 deleted levy of penalty u/s. 271(1)(c). The Tribunal held that the additional income declared voluntarily by the assessee during the course of assessment proceedings, cannot lead to conclusion that the assessee deliberately concealed the said income in return of income and hence, no penalty u/s. 271(1)(c) on such addition is warranted.

Taking into consideration in the facts of the present case and the decision rendered in the case of Assistant Commissioner of Income Tax Vs. H. Balasubramanian (supra), we are of considered view that no penalty u/s. 271(1)(c) is attracted where the assessee has voluntarily disclosed the income from Long Term Capital Gain during scrutiny assessment proceedings. Thus, the impugned order is set aside and the appeal of assessee is allowed.

In the result, the appeal of assessee is allowed.