2025 (8) TMI 31 - AT - Income Tax

Penalty under Section 271(1)(c) deleted as concealment not established despite income addition upheld

Smt. Soni Sonu Mirchandani Versus ACIT, Central Circle-5, New Delhi

The ITAT Delhi deleted the penalty under section 271(1)(c) imposed on the assessee for alleged concealment and furnishing inaccurate particulars of ... Penalty u/s 271(1)(c) - assessee alleged to have concealed as well as furnished inaccurate particulars her taxable income - Indexed cost of acquisition for LTCG shown by the assessee on sale of shares was restricted - AO held that the appellant had concealed particulars of income by stating that money was given to her for equalization of interests in family property and thus was 'owelty'. HELD THAT:- We find no reason to sustain the impugned penalty. It is made clear that at the best; the assessee claims to have invoked 'owelty' principle to contend before the learned lower authorities that amount received herein does not represent her taxable income which has been rejected all along, in quantum proceedings. That being the case, the tribunal hereby quotes CIT vs. Reliance Petroproducts (P) Ltd. [2010 (3) TMI 80 - SUPREME COURT] that it is not each and every disallowance/addition which automatically results of the impugned penalty as both these proceedings are parallel in nature, to delete the impugned penalty levied by the learned lower authorities in very terms. Assessee's appeal is allowed. ISSUES: Whether concealment of income or furnishing of inaccurate particulars of income under section 271(1)(c) of the Income Tax Act, 1961 is established in respect of Rs. 45,00,000/- received by the assessee.Whether the amount of Rs. 45,00,000/- received pursuant to a family settlement arrangement qualifies as 'owelty' and is exempt from capital gains tax under section 45 of the Income Tax Act, 1961.Whether penalty under section 271(1)(c) can be sustained when additions have been confirmed in quantum proceedings.Whether the transaction involving shares constitutes a sale or a family settlement for the purposes of capital gains taxation. RULINGS / HOLDINGS: It was held that the assessee had 'concealed particulars of income' by not disclosing the Rs. 45,00,000/- received as sale consideration for shares, and thus penalty under section 271(1)(c) was rightly imposed by the Assessing Officer and upheld by the CIT(A), subject to further adjudication.The amount received was not considered as 'owelty' under a family settlement but rather as sale consideration for transfer of shares, thereby attracting capital gains tax under section 45; the family settlement claim was rejected as the transaction was a simple sale and purchase of shares.The Tribunal ultimately deleted the penalty under section 271(1)(c) despite confirming the addition in quantum proceedings, relying on the principle that 'it is not each and every disallowance/addition which automatically results of the impugned penalty as both these proceedings are parallel in nature.'The transaction was held to be a sale of personal shares acquired by gift, not a division of family property or equitable partition, and thus not exempt from capital gains tax as claimed by the assessee. RATIONALE: The court applied the provisions of section 271(1)(c) of the Income Tax Act, 1961 regarding penalty for concealment of income or furnishing inaccurate particulars, alongside section 45 relating to capital gains on transfer of capital assets.Precedent was considered, including the principle from CIT vs. Reliance Petroproducts (P) Ltd. that penalty proceedings under section 271(1)(c) are independent and parallel to quantum proceedings and do not automatically follow from every addition or disallowance.The Tribunal examined the factual matrix and documentary evidence, finding no proof of a genuine family settlement or equitable partition; the transaction was a straightforward sale, negating the assessee's claim of 'owelty'.The decision reflects a doctrinal clarification that mere invocation of family settlement principles without evidentiary support cannot negate capital gains tax liability or penalty for concealment.The Tribunal's deletion of the penalty despite confirming the addition indicates a nuanced approach distinguishing between quantum of income and penalty liability under the Act.