2024 (12) TMI 1340 - AT - Income Tax

Penalty under Section 271(1)(c) not imposable when assessee voluntarily paid tax before reassessment notice under Section 148

Asha Soni Versus The Deputy Commissioner of Income Tax Circle-1 (1), Bilaspur (C.G.)

Asha Soni Versus The Deputy Commissioner of Income Tax Circle-1 (1), Bilaspur (C.G.) - TMI Issues Involved:1. Whether the penalty under Section 271(1)(c) of the Income Tax Act, 1961 for concealment of income was justified.2. The applicability of Explanation 1 and Explanation 4 of Section 271(1)(c) concerning the assessee's actions and the timing of her revised return and tax payment.3. The relevance of judicial precedents concerning voluntary disclosure and penalty imposition.Detailed Analysis:1. Justification of Penalty under Section 271(1)(c):The primary issue was whether the penalty imposed on the assessee for 'concealment of income' under Section 271(1)(c) was justified. The penalty was based on the assessee's claim for exemption under Section 10(38) for long-term capital gains (LTCG) on the sale of shares, which was later found to be incorrect. The assessee argued that the penalty was unjustified as she had voluntarily paid the taxes on the income from the sale of shares before the issuance of the notice under Section 148. The Tribunal noted that the assessee had paid the taxes voluntarily three years prior to the notice, indicating her bona fides and lack of intent to conceal income. The Tribunal found that the assessee's actions fell within the concession provided in 'Explanation-1(B)' of Section 271(1)(c), which considers the bona fide nature of the taxpayer's actions.2. Applicability of Explanation 1 and Explanation 4 of Section 271(1)(c):The Tribunal examined whether the conditions for imposing a penalty under Section 271(1)(c) were met, particularly in light of Explanation 1 and Explanation 4. Explanation 1 presupposes an addition or disallowance in the assessment, which was not present in this case as the assessee's revised return was accepted without any additions. Explanation 4 concerns the computation of penalty, which becomes unworkable in the absence of any addition/disallowance. The Tribunal agreed with the assessee's contention that no penalty could be imposed since her revised return was accepted as filed, and no further income was added or disallowed by the Assessing Officer.3. Relevance of Judicial Precedents:The Tribunal considered various judicial precedents, including the Supreme Court's judgment in Mak Data P. Ltd vs. Commissioner Of Income Tax II, which held that voluntary disclosure does not absolve an assessee from penalty proceedings. However, in this case, the Tribunal found that the assessee's voluntary payment of taxes before the initiation of proceedings demonstrated her bona fides, distinguishing it from the precedents cited by the Revenue. The Tribunal also referred to decisions from the ITAT, Raipur, and ITAT, Jaipur, where penalties were vacated in similar circumstances, reinforcing the view that the penalty was not justified in this case.Conclusion:The Tribunal concluded that the penalty under Section 271(1)(c) was not justified due to the assessee's bona fide actions in voluntarily paying the taxes well before the initiation of proceedings and the acceptance of her revised return without any additions. The Tribunal set aside the order of the CIT(Appeals) and vacated the penalty of Rs. 10,90,397/-, allowing the appeal in favor of the assessee.