Tribunal overturns penalty under Income Tax Act, sec. 271(1)(c). Assessee's appeal allowed.

The tribunal set aside the CIT(A)'s findings and directed the AO to delete the penalty levied under section 271(1)(c) of the Income Tax Act. The appeal by the assessee was allowed, with the order pronounced on 06/04/2023 at Ahmedabad.

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Issues Involved:
1. Whether the CIT(A) erred in confirming the penalty levied under section 271(1)(c) of the Income Tax Act.
2. Whether the penalty calculation by the AO was erroneous.
3. Whether the CIT(A) wrongly dismissed the appeal based on the appellant's non-response during assessment proceedings.
4. Whether the appellant falls outside the scope of section 271(1)(c) based on the facts and bona fide belief.
5. Whether the CIT(A) overlooked various judgments relied upon by the appellant.

Summary:

Issue 1: Confirmation of Penalty Under Section 271(1)(c)
The primary issue raised by the assessee was that the CIT(A) erred in confirming the penalty levied by the AO amounting to Rs. 1,92,717 under section 271(1)(c) of the Income Tax Act on the charge of furnishing inaccurate particulars of income. The tribunal highlighted that penalty proceedings are distinct from assessment proceedings and require proof that the assessee either concealed income or furnished inaccurate particulars. The tribunal cited the Supreme Court judgment in Reliance Petroproducts Pvt. Ltd. and the Gujarat High Court judgment in National Textiles vs. CIT, emphasizing that mere assessment of income does not justify penalty unless there is clear evidence of concealment or inaccuracy.

Issue 2: Erroneous Penalty Calculation
The assessee contended that the penalty calculation was erroneous as the tax payable should have been Rs. 57,029 instead of Rs. 1,92,717. The tribunal noted that the penalty calculation should be based on the actual tax sought to be evaded, and in this case, the assessee had already paid due taxes on the income disclosed in the return filed in response to the notice under section 148.

Issue 3: Dismissal of Appeal Based on Non-Response
The CIT(A) dismissed the appeal on the grounds that the appellant did not respond during the assessment proceedings. The tribunal found this conclusion incorrect and baseless as the appellant had filed replies with documentary proof. The tribunal stressed that the basis adopted during assessment proceedings cannot be used in penalty proceedings without following due process.

Issue 4: Applicability of Section 271(1)(c)
The appellant argued that he fell outside the scope of section 271(1)(c) based on the bona fide belief that the transaction of capital gains reported was genuine. The tribunal observed that the appellant had withdrawn the claim of exempted long-term capital gain in the return filed in response to the notice under section 148 and paid the due taxes. The tribunal referred to the Chandigarh Tribunal's judgment in DCIT vs. Kulwant Singh, which stated that if taxes are paid before the issuance of a notice under section 148, there is no tax sought to be evaded, and thus no penalty is leviable.

Issue 5: Overlooking of Judgments
The appellant claimed that the CIT(A) overlooked various judgments relied upon in the submissions. The tribunal, after considering the detailed arguments and judgments, concluded that penalty could not be imposed merely because a particular amount was assessed as income.

Conclusion:
The tribunal set aside the CIT(A)'s findings and directed the AO to delete the penalty levied under section 271(1)(c). The appeal filed by the assessee was allowed, and the order was pronounced on 06/04/2023 at Ahmedabad.

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