PREM CHAND GUPTA,NEW DELHI vs. ITO, NEW DELHI

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ITA 6744/DEL/2015Status: DisposedITAT Delhi26 December 2017AY 2011-123 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since the assessee voluntarily declared the short-term capital gain upon realizing the oversight and paid the tax, the penalty levied for this omission was not sustainable. The ad-hoc addition was deleted by the CIT(A) and not challenged.

What were the facts?

The assessee sold a flat, resulting in a capital gain which was not initially declared. The assessee later declared this gain and paid tax. The Assessing Officer also made an ad-hoc addition for disallowing 1% of works cost due to improper maintenance of bills and vouchers.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable when the assessee voluntarily declares and pays tax on an escaped income upon realizing the omission.

Which sections of the Income-tax Act were involved?

Section 145,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH: ‘H’ NEW DELHI

Before: SHRI G.D. AGRAWAL, HON’BLE & SHRI K.N. CHARY

For Appellant: Adv. Sh. Piyush Kumar Kamal, Adv
Hearing: 26.12.2017Pronounced: 26.12.2017

ORDER PER K. NARSIMHA CHARY, J.M.

Aggrieved by the order dated 23.10.2015 in Appeal No. 244/2014-15 passed by the Ld. Commissioner of Income Tax (Appeals)-20, New Delhi (for short called as the “Ld. CIT(A)”), assessee preferred this appeal.

2.

Facts stated in brief are that the assessee is a contractor and during the course of assessment proceedings for the AY 2011-12, it was found that the assessee sold the flat that was purchased on 18.05.2010 for Rs. 40,28,000/- was sold on 25.03.2011 for a sum of Rs. 45 lacs resulting in capital gain of Rs. 4,72,000/- which the assessee has not declared the said income in the return. However, by letter dated 12.03.2014 assessee declared the same and offered the tax thereon. Ld. AO 1

Rs. 6,24,350/- by disallowing 1% of the total works cost u/s 145 of the Act on the ground that the bills and vouchers were not properly maintained and are not subject to verification. Assessing Officer initiated penalty proceedings u/s 271 (1)(c) of the Income Tax Act, 1961 (for short called as the “Act”) in respect of the capital gains and also the ad-hoc addition at 1% of contract receipts and levied a penalty of Rs. 3,38,769/-. Ld. CIT (A) confirmed the addition made on account of the capital gains but deleted the ad hoc addition at 1% of the contract receipts.

3.

It is the argument of the Ld. AR that it is only by inadvertence, the receipt on account of capital gain escaped their attention while filing the return of income but when it was realized, by way of letter dated 12.03.2014, the fact was brought to the notice of the authorities and due taxes were paid. Ld. DR argued that it is only when confronted during the scrutiny the assessee offered the tax on this short term capital gain, as such, penalty is sustainable.

4.

On an examination of the assessment order, we find that there is no allegation as to the Assessing Officer detecting the escapement of this particular income before the assessee realizing and offering it to the tax. Assessment order reads that during the course of assessment proceedings the assessee disclosed vide letter dated 12.03.2014 that he had sold the property against which the capital gain was worked out. What is not to be found from the assessment order, cannot be supplemented by the Ld. DR during arguments. In the circumstances, we are of the opinion that it is a case of the 2 assessee non-declaring the short term capital gains by inadvertence and since the assessee realized the same and offered for tax the penalty cannot be sustained. We, therefore, while allowing the appeal direct the AO to delete the penalty.

5.

In the result, the appeal of the assessee is allowed.

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