Case Law Details
Sanjay Chandulal Upadhyay Vs ITO (ITAT Ahmedabad)
Introduction: In a recent ruling, the Income Tax Appellate Tribunal (ITAT) Ahmedabad delivered a significant verdict in the case of Sanjay Chandulal Upadhyay vs. Income Tax Officer (ITO). The crux of the matter revolved around whether a bonafide mistake in computing income tax amounts to furnishing inaccurate particulars or concealment of income. The ITAT’s decision is pivotal as it pertains to the deletion of a penalty imposed under Section 271(1)(c) of the Income Tax Act for the Assessment Year 2013-14.
Detailed Analysis:
1. Background of the Case: The assessee initially filed the income tax return on 31.01.2014, declaring a total income of Rs. 5,60,737/-. Subsequently, a revised return of income was filed on 31.03.2015, disclosing a total income of Rs. 9,93,733/-. The assessment was concluded under Section 143(3) of the Income Tax Act, 1961, resulting in a total income of Rs. 11,80,970/-.
2. Penalty Initiation: During the assessment proceedings, the Assessing Officer noticed that the assessee had claimed expenses related to the Ahmedabad Urban Development Authority (AUDA) amounting to Rs. 2,08,037/-. This expense was attributed to the entire land. Consequently, the Assessing Officer made an addition of Rs. 6,20,210/- under the “Capital Gain” category. Subsequently, penalty proceedings under Section 271(1)(c) of the Act were initiated, alleging the furnishing of inaccurate particulars of income. A notice under Section 174 read with Section 271(1)(c) was issued on 25.05.2016, and a penalty of Rs. 1,92,000/- was imposed.
3. CIT(A) and Assessee’s Arguments: The CIT(A) upheld the penalty. At the time of the ITAT hearing, no one appeared on behalf of the assessee. Therefore, the arguments made by the assessee before the CIT(A) were considered for the present appeal. The assessee contended that the mistake in computing income and filing the revised income was due to a bonafide belief that the entire charges paid to AUDA could be claimed as a deduction under Capital Gain. The assessee emphasized that this belief did not constitute furnishing inaccurate particulars or concealment of income.
4. ITAT’s Decision: After considering the case, the ITAT ruled in favor of the assessee. The ITAT held that the bonafide mistake or belief of the assessee in claiming the entire AUDA charges as a deduction under Capital Gain did not amount to furnishing inaccurate particulars or concealing income. In support of its decision, the ITAT cited the Hon’ble Supreme Court’s decision in the case of CIT vs. Reliance Petroproducts (P) Limited, 322 ITR 158. Consequently, the penalty was deleted.
Conclusion: The ITAT Ahmedabad’s decision in the case of Sanjay Chandulal Upadhyay vs. ITO establishes a crucial precedent. It clarifies that a bonafide mistake in computing income tax does not constitute the furnishing of inaccurate particulars or concealment of income under Section 271(1)(c) of the Income Tax Act. This decision is significant as it ensures that taxpayers are not penalized for genuine errors or misconceptions in their tax returns, promoting fairness and equity in the tax assessment process.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the Assessee against order dated 16.03.2023 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2013-14.
2. The Assessee has raised the following ground of appeal :-
“1. The Learned CIT(A) grossly erred in law and on facts of the case in passing the order u/s. 250 of the IT. Act dated 16/03/2023 confirming the penalty of INR 1,92,000/- for A.Y. 2013-14.
2. The Learned CIT(A) grossly erred in law and on facts of the case in passing the impugned order without appreciating the legal and factual position that in as much as the appellant had filed return of income disclosing the short-term capital gain. Penal provision of section 271(l)(c) is not attracted.
3. The Learned CIT(A) grossly erred in law and on facts of the case in passing the impugned order and levying penalty with respect to short term capital gain of INR 7,83,507/- in utter disregard to the fact that the appellant had voluntarily filed a revised return of income disclosing short term capital gain, before the department had detected the omission and before the department had issued any show cause notice in that regard.
4. The Learned CIT(A) grossly erred in law and on facts of the case in passing the impugned order and levying penalty with respect to disallowance of cost of improvement of INR 1,87,234/- (being 90% disallowance of AUDA charges i.e., Rs.2,08,037) on his own assumption and whim that the total expenses should have borne by all co-owners of the property and ignoring the general business module in the case.
5. The Learned CIT(A) grossly erred in law and on facts of the case in passing the impugned order without recording a finding of fact in the penalty order to the effect that appellant had submitted the default of concealment of income or furnishing the inaccurate particulars of income.
6. The Learned CIT(A) grossly erred in law and on facts of the case in passing the impugned order without considering the various judgments which were specifically brought to the notice of the CIT(A) in the written submission filed.
7. It is therefore prayed that impugned penalty may please be deleted.”
3. The return of income was filed by the assessee on 31.01.2014 declaring total income of Rs.5,60,737/-. Thereafter, the assessee has filed his revised return of income on 31.03.2015 declaring total income at Rs.9,93,733/-. The assessment was completed under Section 143(3) of the Income Tax Act, 1961 vide order dated 25.02.2016 determining total income of Rs.11,80,970/-. During the assessment proceedings the Assessing Officer noticed that the assessee had claimed expenses relating to AUDA to the tune of Rs.2,08,037/- which was related to the entire land and, therefore, the Assessing Officer made addition of Rs.6,20,210/- under the head of “Capital Gain”. Thereafter, penalty proceedings under Section 271(1)(c) of the Act was initiated for furnishing of inaccurate particulars of income and notice under Section 174 read with Section 271(1)(c) of the Act was issued on 25.05.2016. In response to the said notice, the assessee filed its reply which was taken into account and the Assessing Officer imposed penalty of Rs.1,92,000/- under Section 271(1)(c) of the Act.
4. Being aggrieved by the Penalty Order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
5. At the time of hearing none appeared on behalf of the assessee , therefore, the submissions made by the assessee before the CIT(A) are taken as contentions of the assessee for the present appeal before the Tribunal (ITAT).
6. The Ld. DR relied upon the Assessment Order, Penalty Order and the order of the CIT(A).
7. Heard the Ld. DR and perused all the relevant material available on record. The assessee while computing the income and filing revised income was under bonafide mistake/bonafide belief that the assessee can claim the entire charges of amount paid to the AUDA as Capital Gain as deduction under Capital Gain. The said standard belief or mistake cannot be termed as furnishing of inaccurate particulars or concealment of income. The decision of Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts (P) Limited, 322 ITR 158 is applicable in assessee’s case. Therefore, the penalty does not survive. Appeal of the assessee is allowed.
8. In the result, appeal filed by the assessee is allowed.
Order pronounced in the open Court on this 8th September, 2023.
