No Penalty u/s 271(1)(c) on filing revised return when no such questionnaire was issued with notice

No Penalty u/s 271(1)(c) on filing revised return when no such questionnaire was issued with notice u/s 143(2)

ABCAUS Case Law Citation
ABCAUS 3463 (2021) (03) ITAT

Important case law relied referred:
CIT vs. SSA’s Emerald Meadows
Pr. CIT vs. Sahara India Life Insurance Company Ltd.
ITO vs. Sitashri Trading & Finance Pvt. Ltd
CIT vs. Jindal Polyester & Steel Ltd. 365 ITR 225 (All)

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming imposition of penalty u/s 271(1)(c) of the Income Tax Act, 1961 (the Act).

The assessee filed original return of income under the normal provisions of the Act declaring income u/s 115JB of the Act. On issuance of the income tax scrutiny notice u/s 143(2) of the Act, assessee filed revised return of income u/s 139(5) of the Act.

In the revised return the assessee increased the taxable book profit u/s 115JB of the Act. Whereas in the original return income from long term capital gain exempt u/s 10(38) of the Act was excluded while computing the taxable book profit.

The AO declined the contentions raised by the assessee that due to bonafide and inadvertent error, exempt income u/s 10(38) of the Act had been reduced by taxable book profit.

The AO levied penalty u/s 271(1)(c) @ 100% of tax sought to be evaded.

Before the Tribunal, the assessee contended that AO had failed to specify in the show-cause notice issued u/s 271(1)(c)/274 of the Act if the assessee concealed the particulars of income or has   furnished inaccurate particulars of income.

The Tribunal observed that undisputedly, in the original return of income, assessee had disclosed all the true and full particulars relating to sale of shares and long term capital gains. It was also not in dispute that in the original return, assessee had claimed deduction of long term capital gains in computing book profit u/s 115JB of the Act. It was also not in dispute that in the revised return filed after issuance of notice u/s 143 (2) of the Act, assessee had computed the book profit

First of all, the Tribunal held that when the notice issued by the AO was bad in law being vague and ambiguous having not struck of unrelated clause or specified which limb of section 271(1)(c) of the Act the same had been issued, the penalty proceedings initiated u/s 271(1)(c) were not sustainable.  

On the question of filing revised return only after issuance of notice u/s 143(2) of the Act to the assessee was concerned, the Tribunal noted that again undisputed fact was that with the notice u/s 143(2), no questionnaire was issued pointing out wrongly computing of the book profit, leading to the reasonable inference that the mistake was inadvertent on the part of assessee.

The Tribunal further noted that Coordinate Bench of the   Tribunal decided the identical issue in favour of the assessee by following the decision rendered by Hon’ble High Court where it was held that when the questionnaire issued by the AO did not contain even a whisper on the issue, filing of revised computation of book profit can hardly be said to be only when the ambiguity was pointed out by the AO.

In the instant case, following the decision of Hon’ble Supreme Court, Hon’ble High Court and the Coordinate Bench of the Tribunal, it was held that initiating penalty u/s 271(1)(c) of the  Act on the basis of vague and ambiguous notice issued u/s 143 (2) of the Act was not sustainable.

It was also held that mere difference in the computation of book profit under bonafide mistake is not furnishing of inaccurate particulars of income particularly when assessee had filed balance sheet, profit & loss account showing all the capital gains and had subsequently rectified the mistake by filing revised return.  

Accordingly, the penalty was ordered to be deleted and appeal was allowed in the favour of the assessee.  

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