Penalty under Section 271(1)(c) not applicable when land sale addition made through deeming provisions without concealment intent

ITAT Ahmedabad held that penalty u/s 271(1)(c) was not leviable where assessee failed to disclose land sale in original return. Despite AO adding difference between purchase price and fair market value u/s 56(2)(vii)(b), no penalty was imposed as assessee had already paid taxes including TDS u/s 194IA on sale date, demonstrating no tax evasion intent. Addition was made through deeming provisions without evidence of income concealment or deliberate inaccurate particulars. Following Gujarat HC precedent in Sun on Peak Hotel case, penalty cannot be levied based solely on deeming provisions. Appeal decided in favour of assessee.

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Issues involved:
The issues involved in this case are the confirmation of penalty under Section 271(1)(c) of the Income Tax Act, 1961 by the Ld. CIT(A) for non-disclosure of capital gains, the validity of the notice initiating penalty proceedings, and the explanation of the source of payment for stamp duty charges.

Confirmation of Penalty under Section 271(1)(c):
The appellant filed an appeal against the order of the Ld. CIT(A) confirming the penalty levied by the Assessing Officer under Section 271(1)(c) of the Act. The Assessing Officer added the difference in property value to the total income of the assessee under Section 56(2)(vii)(b) of the Act and also made an addition for unexplained payment of stamp duty charges. The Ld. CIT(A) upheld the additions, stating that the appellant's claim of forgetting to declare short-term capital gains (STCG) was contradictory as proper books of accounts were maintained. The Ld. CIT(A) also rejected the argument that penalty cannot be levied on deemed additions, emphasizing that penalty can be imposed for concealment of income regardless of it being a normal or deemed addition.

Validity of Penalty Notice:
The appellant contended that the notice initiating penalty proceedings was defective as it was issued for furnishing inaccurate particulars of income or concealment of income, which was deemed null and void. However, the Ld. CIT(A) confirmed the penalty, stating that the appellant failed to explain the source of payment for stamp duty charges, leading to the penalty under Section 271(1)(c) of the Act.

Explanation of Source of Payment for Stamp Duty Charges:
During the appeal, the appellant argued that the non-disclosure of the property sale in the original return was inadvertent, as taxes had already been paid on the sale and no additional tax liability arose during the assessment proceedings. The appellant also contended that penalty cannot be imposed on deemed additions under Section 56(2)(vii)(b) of the Act. In response, the Ld. D.R. argued that penalty can be levied even in tax-neutral transactions, citing a Supreme Court case. However, the Tribunal held that no penalty was justifiable as there was no intention to evade taxes, and the additions were made based on deeming provisions without evidence of deliberate concealment of income.

Separate Judgment:
The Order was pronounced by Judicial Member Shri Siddhartha Nautiyal on December 13, 2023, allowing the appeal of the assessee and deleting the penalty under Section 271(1)(c) of the Act based on the facts and legal principles discussed in the judgment.

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