Case Law Details
Kantibhai Tulshibhai Bhadani Vs ITO (ITAT Surat)
The appeal before the Income Tax Appellate Tribunal (ITAT), Surat arose from an order of the Commissioner of Income Tax (Appeals) confirming a penalty of ₹18,41,949 imposed under Section 271(1)(c) of the Income Tax Act for Assessment Year 2014–15. The assessee had originally filed a return declaring income of ₹2,97,370. However, the assessment under Section 143(3) resulted in a total income of ₹91,91,500 after an addition of ₹89,14,121 relating to disallowance of Long Term Capital Gain. Subsequently, penalty proceedings were initiated for alleged furnishing of inaccurate particulars of income.
The assessee challenged the penalty, contending that the notice issued under Section 274 read with Section 271(1)(c) did not specify whether the penalty was for concealment of income or for furnishing inaccurate particulars, as both limbs were mentioned without clarity. It was also argued that there was no concealment, as the assessee had sold agricultural land and was under the belief that such income was not taxable as capital gains. The omission to offer the income was described as a bona fide mistake rather than deliberate concealment. It was further pointed out that the assessee was one of the co-owners of the land and that no addition had been made in the cases of other co-owners.
The Tribunal examined the notice and found that it lacked a specific charge, as it did not clearly indicate the exact ground for penalty. Relying on judicial precedents, the Tribunal held that such a defective notice is not sustainable in law. It also observed that the assessee had disclosed all relevant details and that the failure to offer the income arose from a mistaken understanding regarding the nature of agricultural land. The Tribunal noted that in the absence of clear evidence of concealment or furnishing of inaccurate particulars, penalty could not be justified.
Accordingly, the Tribunal held that the penalty imposed under Section 271(1)(c) was not sustainable. The order of the Commissioner (Appeals) was set aside, and the appeal of the assessee was allowed.
FULL TEXT OF THE ORDER OF ITAT SURAT
This appeal is filed by the Assessee is against the order passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), on 21-01-2025 for Assessment Year 2014-15.
2. The assessee has raised the following grounds of appeal:
1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of the assessing officer in levying penalty of Rs.18,41,949/- u/s. 271(1)(c).
2. It is therefore prayed that the penalty levied by the assessing officer may please be deleted
3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.
3. The assessee filed Return of Income for Asst. Year 2014-15 on 31-03-2015 declaring total income of Rs.2,97,370/-. The assessment order u/s. 143(3) of the Act was passed on 13-12-2016 determining total income at Rs.91,91,500/- with addition of Rs.89,14,121/- in respect of disallowance under Long Term Capital Gain. Penalty proceedings u/s. 271(1)(c) of the Act were initiated for furnishing inaccurate particulars of income thereby concealment of income. In respect of u/s. 274 r.w.s. 271(1)(c) of the Act dated 13-12-2016 was issued and served to the assessee. The Assessing Officer after taking on record, the reply of the assesse imposed penalty of Rs.18,41,949/- u/s. 271(1)(c) of the Act in respect of furnishing inaccurate particulars.
4. Being aggrieved by the penalty order, the assessee filed appeal before Ld. CIT(A). The Ld. CIT(A) dismissed the appeal of the assessee.
5. The Ld. A.R. submitted that notice u/s. 271(1)(c) r.w.s. 274 of the Act has not mentioned under which the penalty will be imposed on the assessee as both the limbs of Section 271(1)(c) of the Act were mentioned and no specific charge was made out in the notice u/s. 274 r.w.s. 271(1)(c) of the Act. Besides this, the Ld. A.R. submitted that there was no concealment of income or furnishing of inaccurate particulars as the assesse has sold agricultural land and was under the impression that the same is tax neutral. Besides this, the assessee has not offered the said income for Long Term Capital Gain. Thus merely having a second opinion cannot be treated as concealment of income or furnishing of inaccurate particulars.
6. The Ld. D.R. relied upon the assessment order in the order of the Ld. CIT(A).
7. We have heard both the parties and perused the relevant materials available on record. It is pertinent to note that notice issued u/s. 274 r.w.s. 271(1)(c) dated 13-12-2016 has not given the details as relates to whether the penalty will be imposed for concealment of particulars of income or furnishing inaccurate particulars of such income. Thus the decision of the Hon’ble Apex Court in the case of CIT vs. M/s. SSA’s Emerald Meadows (CC No. 11485/2016 order dated 05.08.2016) emerging from Karnataka High Court decision in case of CIT vs. Manjunatha Cotton & Ginning Factory order dated 23-11-2015. Besides this, the assessee has given all the details and in fact has not offered Long Term Capital Gain in light of the land sold where the assessee is one of the co-owners. The assesse was under impression that the same should have not been offered for Long Term Capital Gain and hence it is merely a mistake on the part of the assessee as the land he sold is an agricultural land and was under impression that the same amount to agriculture income. The assessee is one of the co-owners and in fact and other co-owners case, the Assessing Officer has not made any addition. Therefore the question of concealment of income or furnishing of inaccurate particulars of income does not arise in present assessee’s case.
8. In the result, the appeal of the Assessee is allowed.
Order pronounced in the open court on 06 -04-2026
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