Jamnaben Parshottamdas Patel Vs ITO (ITAT Ahmedabad)
Penalty under Section 271(1)(c) Deleted Where Income Was Fully Disclosed but Recharacterised:
The Ahmedabad Bench (SMC) of the Income Tax Appellate Tribunal (ITAT) allowed the assessee’s appeal for AY 2011-12 and deleted the penalty of ₹64,071 levied under section 271(1)(c), holding that mere recharacterisation of income does not amount to concealment or furnishing of inaccurate particulars.
In this case, the assessee had disclosed profits from sale of shares as long-term capital gains in the return. During reassessment proceedings, the Assessing Officer treated the same income as business income and made an addition under section 68, which was sustained in quantum proceedings. Based on this, penalty proceedings under section 271(1)(c) were initiated and penalty was imposed.
The Tribunal observed that:
- The assessee had fully disclosed the transaction and the income in the return;
- There was no suppression of facts or concealment;
- The dispute was only regarding the head under which income was taxable; and
- For invoking section 271(1)(c), the Revenue must clearly establish either concealment of income or furnishing of inaccurate particulars, which was absent in the present case.
The ITAT held that confirmation of quantum addition by itself does not automatically justify penalty, especially when the issue involves classification of income and not non-disclosure.
Accordingly, the Tribunal set aside the order of the CIT(A) and deleted the penalty, allowing the appeal in full.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
