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The ITAT held that penalty under section 271(1)(c) for concealment of income cannot be sustained where the assessee filed return in response to section 148 notice and computed long-term capital loss after considering section 50C and pre-indexed cost of improvements. Since the capital gains computation resulted in a loss and no tax liability arose, the foundational addition for imposing penalty ceased to exist. The Tribunal relied on established legal principles that penalty under section 271(1)(c) cannot survive if the quantum addition is deleted or substantially modified to extinguish tax liability. Consequently, the appeal of the assessee was allowed, and the penalty was set aside.
The ITAT held that penalty under section 271(1)(c) for concealment of income cannot be sustained where the assessee filed return in response to section 148 notice and computed long-term capital loss after considering section 50C and pre-indexed cost of improvements. Since the capital gains computation resulted in a loss and no tax liability arose, the foundational addition for imposing penalty ceased to exist. The Tribunal relied on established legal principles that penalty under section 271(1)(c) cannot survive if the quantum addition is deleted or substantially modified to extinguish tax liability. Consequently, the appeal of the assessee was allowed, and the penalty was set aside.
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