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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC-I’ : NEW DELHI
Before: SHRI P.K. BANSAL
This appeal is filed at the instance of the assessee against the order of the CIT (Appeals) dated 01.04.2015.
The only issue involved in this appeal is levy of the penalty by the AO u/s 271(1)(c) of the Income-tax Act, 1961 (hereinafter ‘the Act’).
I heard the rival contentions and carefully considered the same along with the orders of the authorities below. I noted that in this case, the AO levied the penalty on the assessee in respect of a sum of Rs.11,55,507/- added in the income of the assessee. The assessee declared the capital gain of Rs.9.97 lakhs on the sale of 27 plots (assessee’s share was 25% thereof) and also claimed exemption u/s 54B and 54EC of the Act. The AO took the view that the AO assessed the income from the sale of the plots as business income instead of capital gain shown by the assessee and treated the sum of Rs.11,11,225/- as the income from business. In addition to this, he added a sum of Rs.44,282/- towards the interest income from saving bank account which was not disclosed by the assessee. The penalty u/s 271(1)(c) was levied by observing as under :-
“ I am satisfied that the assessee’s device was to reduce the tax burden and thus made himself liable for the levy of penalty u/s 271(1)(c). Accordingly by penalty of Rs.2,99,025/- @ 100% of tax sought to be levied. Tax on Returned income Rs.26,870/- Tax on concealed income Rs.(11,11,225/- + Rs.44,282/- = Rs.11,55,507/-) Rs.2,99,025/- Minimum penalty @ 100% Rs.2,99,025/- Maximum penalty @ 300% Rs.8,97,025/- Penalty levied minimum Rs.2,99,025/- I therefore, imposed a penalty u/s 271(1)(c) at Rs.2,99,025/- for the default of concealment of particulars of income and furnishing inaccurate particulars of such income.”
The CIT (A) confirmed the order of the AO. From the provisions of section 271(1)(c), it is apparent that the penalty u/s 271(1)(c) can be levied if the AO in the course of any proceedings under the Act is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. Thus, there must be a specific charge and the charge levied must be either concealment of the particulars of income or furnishing of inaccurate particulars of income. Explanation 1 is applicable in the case of concealment of the particulars of income. It cannot be applied in case of filing of the inaccurate particulars of income. In the case of concealment of particulars of income, there is a deemed concealment of the particulars of the income in view of the Explanation 1 and the onus is on the assessee to prove that he has not concealed the particulars of the income while in the case of furnishing of inaccurate particulars of income, the onus is on the revenue to prove that the assessee has furnished the inaccurate particulars of income. Merely making a claim which may not be allowable by AO cannot be regarded that the assessee has furnished the inaccurate particulars of income. I am of the view that until and unless, a specific charge is levied, the penalty levied by the AO cannot be survived in the eyes of law. In this case, the AO simply observed that the assessee made himself liable for the levy of the penalty u/s 271(1)(c) but in the subsequent paragraph, he imposed the penalty for the default of concealment of the particulars of income and furnishing of inaccurate particulars of such income.
This itself proves that the AO is not sure what fault has been committed by the assessee. Hon’ble Gujarat High Court in the case of New Sorathia Engineering Co. v. CIT [2006] 282 ITR 642 (Guj) has clearly laid down that it is incumbent upon the AO to state whether penalty is being levied for concealment of particulars of income or whether any inaccurate particulars of income had been furnished by the assessee. In the absence of clear-cut finding being given by the AO, Hon’ble High Court declared the order passed for levying the penalty to be invalid. Similar view has been taken by the Hon’ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton and Ginning Factory – 359 ITR 565. No contrary decision was brought to my knowledge by the ld. DR. On this basis itself, the penalty is liable to be deleted.
I may further add that the case of the assessee even on merit is covered, in my opinion, by the decision of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. – 322 ITR 158, to which at Tribunal the undersigned was the author, and the Hon’ble Supreme Court held that mere making of the claim which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding income of the assessee, such claim made in the return cannot amount to inaccurate particulars. Merely, in this case, the assessee has claimed the income under the head capital gain which was not accepted or was not acceptable to the revenue by itself would not, in my view, attract the penalty u/s 271(1)(c) as it is neither the case of furnishing of inaccurate particulars nor concealment of the particulars of income. I accordingly set aside the order of the CIT (A) and delete the penalty levied u/s 271(1)(c) of the Act.
In the result, the appeal filed by the assessee is allowed. Order pronounced in open court on this 18th day of February, 2016.