Case Law Details
Brief of the case
In the case of Suvaprasanna Bhatacharya vs ACIT, ITAT Kolkata held that although the satisfaction need not be recorded in a particular manner but from a reading of the assessment order as a whole such satisfaction should be clearly discernible. It was further held that ‘concealment of income’ and ‘furnishing inaccurate particulars of income’ carry different connotations. Levy of penalty has to be clear as to the limb for which it is levied.
Facts of the case
The assessee, an individual, was a professional artist. During the course of assessment proceedings, the assessee was asked source of funds for making investment in units of mutual funds. In reply, the assessee submitted that the source of income which was not disclosed to the department was out of sale proceeds of paintings which was accepted by the A.O. The AO also noted investments were made through bank accounts of the Assessee with Standard Chartered Bank, Salt Lake, Kolkata and Kotak Mahindra Bank Ltd., Kolkata which were not disclosed in the balance sheet filed along with the original return of income. Income was assessed u/s 143(3) of the I.T.Act, 1961. Demand notice was issued and also penalty proceeding u/s 271(1)(c) initiated. The Assessee did not raise his concern over the issue of taxability of income from sale of paintings to avoid litigation but challenged the levy of penalty u/s 271(1)(c) in respect of the addition which was imposed by the AO and confirmed by the CIT(A). Before imposing penalty show cause notice u/s 274 was issued, in response of which assessee submitted that he was an eminent artist and not aware of the intricacies of tax laws. He was advised by his tax consultant that income from sale of art is not taxable as it was in the nature of person effects and hence not a capital asset within the meaning of the definition of the said term u/s.2(14)(ii) of the Act. The assessee also pointed out that the sale of paintings was not done by him as an adventure in the nature of trade. The paintings were kept for years over because of his aesthetic sense. It gave him tremendous pleasure and pride of profession. The paintings were therefore his “personal effects”. The sale was effected for the very purpose of making investments in the units of mutual funds and to earn income from such investments for his livelihood. The submissions did not find favour with the AO. The AO held that the assessee had deliberately tried to conceal his professional receipt by depositing it in the bank account not disclosed to the department which was also upheld by CIT(A). Aggrieved assessee filed the appeal before the tribunal challenging the validity of penalty order.
Contention of Assessee
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