Case Law Details
Mohd Kasim Khilji Vs ITO (ITAT Jaipur)
The ITAT Jaipur considered an appeal against the order of the National Faceless Appeal Centre (NFAC) dated 11.10.2025 confirming the levy of penalty under Section 271(1)(c) of the Income-tax Act, 1961. The penalty related to Long Term Capital Gain (LTCG) of ₹8,60,275, which had not been disclosed in the original return filed under Section 139 but was subsequently disclosed through a revised computation during reassessment proceedings initiated under Section 147.
In response to a notice issued under Section 148, the assessee filed a return along with a revised computation disclosing the LTCG of ₹8,60,275. The reassessment under Section 147 accepted the income returned by the assessee. However, the Assessing Officer levied a penalty under Section 271(1)(c) on the ground that the LTCG had been disclosed only during the reassessment proceedings. The penalty amounted to ₹1,79,036, being the tax sought to be evaded.
The Tribunal disagreed with the orders of the lower authorities. It observed that it was not the Revenue’s case that the assessee disclosed the LTCG only after being cornered. The Tribunal noted that the assessee voluntarily declared the LTCG in the revised computation filed in response to the notice under Section 148 and did so before becoming aware of the reasons for reopening the assessment.
The Tribunal examined Explanation 3 to Section 271(1)(c), which deems certain income disclosed in response to a notice under Section 148 as concealed income in specified circumstances. It observed that Explanation 3 applies where an assessee fails to furnish a return under Section 139 within the prescribed period and subsequently files a return only after receiving a notice under Section 148. In the present case, the assessee had originally filed a return under Section 139. During the hearing, the Departmental Representative was asked to explain how Explanation 3 applied in such circumstances but was unable to provide a satisfactory reply.
The Tribunal held that the assessee’s case did not fall within the scope of Explanation 3 to Section 271(1)(c). Consequently, the income disclosed in the return filed in response to the notice under Section 148 could not be treated as concealed income for the purpose of imposing penalty under Section 271(1)(c). The Tribunal directed deletion of the penalty and allowed the appeal.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
The present appeal has been filed by the assessee against the order passed by the National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “Ld. CIT(A)”), dated 11.10.2025 under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) confirming the levy of penalty u/s 271(1)(c) of the Act.
2. The assessee in this appeal has taken following grounds of appeal:-
1. That the penalty order is contrary to the facts on record, since the assessment u/s 147 was completed accepting the assessee s revised computation with zero demand, establishing that the assessee had made a complete and true disclosure.
2. That the penalty imposed is arbitrary, excessive and deserves to be deleted.
3. That the appellant craves leave to add, amend, modify OR withdraw any ground of appeal before OR at the time of hearing.
4. That on the facts and in the circumstances of the case, the penalty order passed u/s 271(1)(c) is bad in law, void ab initio and liable to be quashed
5. That the Learned Assessing Officer erred in law and on facts in levying penalty u/s 271(1)(c) without recording any clear OR specific satisfaction regarding concealment of income OR furnishing of inaccurate particulars, rendering the penalty unsustainable in law.
6. That the penalty levied is unjustified as there was no concealment of income nor furnishing of inaccurate particulars, the assessee had suo-moto disclosed the long term capital gain during the reassessment proceedings and filed a correct revised computation before completion of assessment.
7. hat the Learned AO failed to appreciate that the difference between the return filed u/s 148 and the corrected computation was only due to a bona fide and unintentional mistake of claiming deduction u/s 54 instead of section 54F, and not due to any deliberate act of concealment.
8. That the AO/CIT(A) erred in ignoring binding judicial precedents holding that penalties cannot be levied for bona fide, inadvertent and technical mistakes, especially when complete particulars of capital gains and investments were fully disclosed
3. The penalty was levied on the income of Long Term Capital Gains of Rs.8,60,275/-, which the assessee had not disclosed in the return of income filed u/s 139 of the Act, but however, had disclosed the same by way of a revised computation in reassessment proceedings initiated on the assessee u/s 147 of the Act. In response to notice issued u/s 148 of the Act, the assessee had filed return along with the revised computation disclosing the Long Term Capital Gains earned by him amounting to Rs.8,60,275/-. The income returned by assessee was accepted in the assessment framed u/s 147 of the Act. The penalty u/s 271(1)(c) of the Act for concealment/furnishing of inaccurate returns of income was levied on a Long Term Capital Gains of Rs.8,60,275/-, since it was disclosed by the assessee only in reassessment proceedings. The penalty levied was the tax on the income sought to be evaded amounting to Rs.1,79,036/-.
4. I have gone through the orders of the Authorities below and I have noted that, the said penalty has been levied by the AO and confirmed by the Ld. CIT(A) for the reason that the assessee had not disclosed the Long Term Capital Gains in the original return filed and it was only when the AO issued notice u/s 148 of the Act, that the assessee filed revised computation disclosing the Long Term Capital Gain of Rs.8,60,275/-.
5. I am not in agreement with the orders of Authorities below. It is not the case of the Revenue that the assessee disclosed the income on Long Term Capital Gain, only when cornered. The fact of the matter is that, in response to notice u/s 148 of the Act and before becoming aware of the reasons for which the case of the assessee was reopened, the assessee voluntarily declared income from Long Term Capital Gains in the revised computation of income filed by it. Further Section 271(1)(c) of the Act, specifically treats incomes declared only in returns filed in response to notice u/s 148 of the Act, as deemed concealment of income in Explanation 3 to the said section, as per which, it is only when the assessee has originally not filed any return of income u/s 139 of the Act till the expiry of time for framing assessment u/s 153 of the Act and only subsequently, in response to notice u/s 148 of the Act, the assessee files return declaring its income, that such income declared by the assessee is treated to have been concealed for the purposes of levying penalty u/s 271(1)(c) of the Act. Explanation 3 to Section 271(1)(c) of the Act reproduced herein for clarity:-
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Failure to furnish returns, comply with notices, concealment of income, etc.
271. (1) If the Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner (Appeals) or the Principal Commissioner or Commissioner in the course of any proceedings under this Act, is satisfied that any person—
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(c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or
Explanation 3.—Where any person fails, without reasonable cause, to furnish within the period specified in sub-section (1) of section 153 a return of his income which he is required to furnish under section 139 in respect of any assessment year commencing on or after the 1st day of April, 1989, and until the expiry of the period aforesaid, no notice has been issued to him under clause (i) of sub-section (1) of section 142 or section 148 and the Assessing Officer or the Joint Commissioner (Appeals) or the Commissioner (Appeals) is satisfied that in respect of such assessment year such person has taxable income, then, such person shall, for the purposes of clause (c) of this subsection, be deemed to have concealed the particulars of his income in respect of such assessment year, notwithstanding that such person furnishes a return of his income at any time after the expiry of the period aforesaid in pursuance of a notice under section 148.
6. The said Explanation was pointed out to the Ld. DR during the course of hearing before me and was asked to explain in the facts of the assessee’s case ,where the assessee had originally filed return of income u/s 139 of the Act, how Explanation 3 was attracted to levy penalty on the assessee. Ld. DR was unable to give a satisfactory reply to the same.
7. In the light of the above, it is amply clear that, the assessee’s case is not covered by Explanation 3 to Section 271(1)(c) of the Act and therefore, the income declared by the assessee in the return filed in response to notice u/s 148 of the Act does not tantamount to concealment of income, so as to attract levy of penalty under Section 271(1)(c) of the Act. I accordingly direct deletion of the penalty levied in the present case amounting to Rs.8,60,275/-.
8. In the result, the appeal filed by the assessee is Order pronounced in the open court on 25.06.2026
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