Whether bona fide mistake was committed on advice of CA can be a reasonable explanation as per Explanation 1B of s. 271(1) and whether penalty can be avoided?

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI

BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND

SHRI VIJAY PAL RAO, JUDICIAL MEMBER

ITA NO. 2661/Mum/2013

Assessment year: - 2009-10

Assistant Commissioner of Income Tax,

MatruMandir, Tardeo Road,

Mumbai – 400 007.

Appellant

Versus.

Smt. Cecilia HareshChaganlal

5th Floor, Beach View,

Chawpatty Sea Face,

Mumbai – 400 007.

PAN: AAFPJ1044E

Respondent

Revenue by: ShriPremangal

Assessee by: ShriChetanKaria

Date of hearing 9.10.2014

Date of pronouncement 5.11.2014

ORDER

Per Vijay Pal Rao, JM

This appeal by the revenue is directed against the order dated 30.1.2013 of CIT(A) arising from the penalty order passed u/s 271(1)(c) of the Income Tax Act for the A.Y. 2009-10. The revenue has raised following ground in this appeal:-

“ Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty levied u/s 271(1)(c) of Rs. 66,19,900/- for furnishing inaccurate particulars of income without appreciating the fact that filing of revised return was intentional to evade tax as clearly evidence by the payment of self assessment tax amounting to Rs. 74.12 lacs during assessment proceedings. “

2. Brief facts emerging from record are that the assessee is an individual and a senior citizen of 80 years age. For the year under consideration, the assessee filed the return of income on 31.07.2009 wherein long term capital gains of Rs. 5,84,27,373/- on sale of paintings, were offered to tax at the normal tax rate of 20% applicable to the long term capital gains under the Act. Thereafter, the assessee filed revised return on 08-09-2009 wherein the aforesaid long term capital gains are offered to tax at the concessional tax rate of 10% under proviso to sub section (1) of section 112 of the Act. In order to scrutinize the return filed by the assessee notice u/s. 143(2) of the Act was issued on 05-09-2010, followed by the notice u/s. 142 (1) of the Act dated 24-05-2011. During the pendency of scrutiny proceedings, assessee filed the second revised return on 11- 07 -2011, in which, the aforesaid long term capital gains were offered to tax back @ 20% tax rate as in the original return and the taxes due on the impugned capital gains were paid along with interest. While completing the assessment, the AO. in his assessment order noted that the second revised return filed on 11.7.2011 is beyond the time allowed under the Act and therefore, no cognizance can be taken thereof. Accordingly the AO considered the first revised return filed on 08-09- 2009 for the purpose of assessment. Secondly the A.O. observed that by offering the impugned long term capital gains to tax @ 10% tax rate, assessee has given it the colour of long term capital gains on sale of Bonds, debentures, listed shares etc., noted in the proviso to sub section (1) of section 112 of the Act. In the opinion of the A.O., assessee has made a wrong claim in the revised return dated 08-09-2009 by offering the impugned capital gains at 10% tax rate instead of 20% tax rate and thus, furnished inaccurate particulars of her income in respect of the sale of paintings. Accordingly, the A.O. initiated penalty proceedings u/s. 271 (1 )(c) of the Act. Before the A.O., assessee submitted that owing to the advice given by her Auditor she was under the bonafide impression that the impugned capital gains are taxable at the concessional rate of 10%. It is also submitted to the AO that on being advised by the another Auditor at a subsequent date that the concessional rate does not apply to the sale of paintings but only to the listed shares and securities, the assessee once again filed the revised return dated11/7/2011 offering the impugned capital gains to tax back at the 20% tax rate. However the A.O. was of the opinion that the second revised return was not only out of time but it was also furnished on account of the notice issued u/s. 143(2) ofthe Act and not otherwise. Relying upon the decision of Hon’ble Delhi High Court in the case of CIT Vs. Zoom Communications Pvt. Ltd. (191 Taxmann 179), the A.O held that the assessee made a deliberate effort to furnish inaccurate particulars other income with a malafide intention to get the benefit of lower tax rate. Accordingly, the Assessing Officer levied the impugned penalty.

3. The assessee challenged the action of Assessing Officer before CIT(A) and contended that the revised returns were filed by the assessee voluntarily and taxes due there on were paid. It was further submitted that these returns were filed through one Shri M.B. Thakkar, Chartered Accountant, looking after the income tax matters of the assessee for the past 20 years. Therefore, the concessional rate of tax applied to the capital gain was computed as per the advice of the Chartered Accountant without claiming the benefit of cost index. Thus it was pleaded before the CIT(A) that the act of filing the revised return sand claiming concessional tax rate on capital gain arising from sale of paintings was due to bonafide belief which was later on corrected without any show cause notice given by the department. The assessee contended that the assessee did not furnish any inaccurate particulars of her income and there was only a wrong claim of a lower tax rate thereon due to the bonafide belief, hence the penalty u/s 271(1)(c) cannot be levied. The CIT(A) accepted the explanation of the assessee and was of the view that all the facts related to the impugned capital gain were fully disclosed by the assessee in the returns filed by her. The CIT(A) held that in the given facts and circumstances, the assessee cannot be held guilty of furnishing inaccurate particulars of her income and further the explanation furnished by her in this regard is found to be bonafide. Accordingly the penalty levied u/s 271(1)(c) was cancelled by the CIT(A).

4. Before us, the Ld. DR has submitted that in the original return, the assesse has offered the tax at the rate of 20% on capital gain arising from sale of paintings but subsequently the assessee filed revised return on 8.09.2009 in which the assessee had offered tax on Long Term Capital Gain at a concessional rate of 10%.By doing so, the assessee has wrongly given this Long Term Capital Gain arising from sale of paintings, the colour of long term capital gains on sale of Bonds, debentures, listed shares etc., as per section 112 of the Act. Thus the Ld. DR has submitted that this is not a case of some bonafide mistake but it was claimed by the assessee to offer Long Term Capital Gain under a different category which is absolutely incorrect and false. Therefore, the assessee had made a false claim by filing inaccurate particulars of her income treating the sale of paintings wrongly under the purview of provisions of section 112 of the Income Tax Act and thereby paying less tax at the rate of 10% instead of 20%. The assessee received the refund on the revised return of income by claiming concessional rate of tax. Thereafter, the Assessing Officer issued a notice u/s 143(2) on 15.09.2010. Upon which, the assessee again re-revised her return and offered right rate of taxationas done in the original return. The Ld. DR has submitted that the second revised return is not voluntary but only after the notice u/s 143(2) was issued by the Assessing Officer. The above action and conduct of the assessee proves that theassessee was very much aware of the correct tax of rate to be levied on the said capital gain which was applied in the original return of tax then the same was lowered in the revised return and again it was corrected in the second revised return. Submitting the claim which is incorrect and impermissible in law amounts to furnishing inaccurate particulars of income. He has relied upon the order of Assessing Officer passed u/s 271(1)(c).

To read the full judgment, please find the attached file :

Attached file :

http://www.itatonline.in:8080/itat/upload/-902941362261909748213$5%5E1REFNO

Smt_Ceceilia_Haresh_Chaganlal.pdf