Penalty for Long Term Capital Gain Deleted: Ambiguity in Notice

The Tribunal found the penalty proceedings invalid due to ambiguity in the penalty notice and the absence of conscious concealment of income by the assessee. The penalty under section 271(1)(c) for Long Term Capital Gain was deleted, and the appeal by the assessee was allowed.

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Issues Involved:
1. Confirmation of penalty under section 271(1)(c) of the Income Tax Act for Long Term Capital Gain (LTCG).
2. Ambiguity in the penalty notice regarding the specific charge (concealment of income or furnishing inaccurate particulars).

Detailed Analysis:

1. Confirmation of Penalty under Section 271(1)(c) for LTCG:

The assessee, a private limited company engaged in coal trade, filed its return of income for AY 2008-09 declaring a total income of Rs. 10,37,714/-. The scrutiny assessment finalized on 29.12.2010 resulted in a total income of Rs. 9,51,17,548/- due to two additions: an estimated business income of Rs. 19,60,875/- and a Long Term Capital Gain (LTCG) of Rs. 9,31,56,673/-. The Assessing Officer (AO) initiated penalty proceedings under section 271(1)(c) for both concealment of income and furnishing inaccurate particulars of income.

The penalty order levied a penalty of Rs. 2,13,31,470/- being the minimum penalty at 100% of the tax sought to be evaded. The CIT(A) deleted the penalty concerning the estimated business income but confirmed the penalty on the LTCG addition. The CIT(A) found that the non-disclosure of LTCG could not be considered a bona fide mistake, noting that the revised return was filed only after the AIR information was provided to the assessee.

2. Ambiguity in Penalty Notice:

The assessee argued that the penalty notice was ambiguous as it did not specify whether the penalty was for concealment of income or for furnishing inaccurate particulars. The AO initiated penalty proceedings for LTCG on the ground of concealment of income in the assessment order but cited both grounds in the penalty order, leading to uncertainty.

The Tribunal noted that the AO must be clear and specific about the charge when initiating penalty proceedings. The AO's failure to specify the exact charge in the assessment order and the penalty order rendered the penalty proceedings invalid. This view was supported by the Hon’ble Supreme Court in T Ashok Pai and the Hon’ble Gujarat High Court in Manu Engineering Works and Nayan C. Shah vs. ITO.

Merits of the Case:

The Tribunal observed that the property sale was duly reflected in the regular books of the assessee company and the amount received was shown as advances instead of recognizing it as LTCG due to the illness and subsequent death of one of the directors, which led to mismanagement. The Tribunal found no conscious concealment of income or filing of inaccurate particulars, considering it a genuine mistake.

The Tribunal cited the Hon’ble Supreme Court in Anantharam Veerasinghaiah & Co. vs. CIT, emphasizing that penalty should not be imposed unless there is conscious concealment of income. The Tribunal also referred to the Hon’ble High Court of Madras in Sivagaminatha Moopanar & Sons vs. CIT and CIT vs. J.K.A. Rajappa Chettiar, supporting the view that inadvertent mistakes corrected by a revised return should not attract penalties.

Conclusion:

The Tribunal concluded that the penalty proceedings were invalid due to the ambiguity in the penalty notice and the lack of conscious concealment of income by the assessee. The penalty imposed under section 271(1)(c) was deleted, and the appeal filed by the assessee was allowed. The order was pronounced on 04/02/2021.

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