2025 (2) TMI 1375 - AT - Income Tax

Penalty under 271(1)(c) for alleged inaccurate income disclosure rejected where disclosed short-term capital gain was accepted

Penalty liability under section 271(1)(c) was contested on the ground of alleged inaccurate particulars of income; the tribunal found the assessee had ... Penalty proceedings u/s. 271(1)(c) - income offered by the assessee in the return of income filed u/s 139(4) - HELD THAT:-Even though assessee has filed its return of income on 24/03/2024, however, assessee’s case was selected for scrutiny and notice u/s.143(2) was issued on 02/09/2014 that is much after the disclosure in the return of income. In the assessment order return of income filed on 02/09/2014 and the income offered as short term capital gain on sale of land has been accepted and there is no disallowance or any adverse drawn by the AO with regard to disclosure of short term capital gain. Only addition which has been added by the ld. AO is in respect to adhoc disallowance of expenses and disallowance on account of depreciation. No way, the ld. AO has found that assessee has furnished any inaccurate particulars of income during the course of assessment proceedings. It is also not brought on record that it is only the enquiry conducted by the Investigation department which prompted assessee to offer short term capital gain but the fact of the matter is that assessee had short term capital gain in the return filed u/s.139 which has been accepted by the ld. AO. Thus in such a case, no penalty can be levied. Appeal of the Revenue is dismissed. Issues: Whether penalty under Section 271(1)(c) can be levied where the assessee disclosed capital gains in the return of income filed under Section 139(4) and that disclosure was accepted in the assessment proceedings initiated under Section 143(2).Analysis: The appeal concerns deletion of penalty levied under Section 271(1)(c) after the assessee filed a return under Section 139(4) declaring short-term capital gain. The return was filed before initiation of scrutiny under Section 143(2) and the income so offered was accepted in the assessment except for unrelated disallowances; there was no finding that the assessee furnished inaccurate particulars of income during assessment. The factual sequence and acceptance of the declared income in assessment proceedings were examined against the legal requirement for imposing penalty under Section 271(1)(c).Conclusion: Penalty under Section 271(1)(c) cannot be sustained where the assessee had disclosed the capital gain in the return filed under Section 139(4) and the same disclosure was accepted in assessment proceedings under Section 143(2); outcome is in favour of the assessee and the penalty is deleted.