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Ms. Leela Mondal Versus Income-tax Officer, Wd-50 (2) , Kolkata

2016 (7) TMI 375 - ITAT KOLKATA

Penalty u/s. 271(1)(c) - as per assessee income arising from 'Redemption of Mutual funds' is exempted from tax - AO treated the said exempted income as short Term Capital Gain and added the income to total income and taxed thereon at special rate @ 10% u/s. 111A - Held that:- We find that the plea of the assessee is bona fide and also find that the AO had levied penalty for filing inaccurate particulars of income in respect of short term capital gains of ₹ 6,51,937/- and levied penalty of .....

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Sr. DR ORDER Per Shri M. Balaganesh, AM: This appeal by assessee is arising out of order of CIT(A)-XXXII, Kolkata vide Appeal No. 66/XXXII/11-12/50(2)/Kol dated 30.07.2013. Assessment was framed by ITO, Ward-50(2), Kolkata u/s. 143(3) of the Income tax Act, 1961 (hereinafter referred to as the Act ) for AY 2008-09 vide his order dated 29.12.2010. 2. The only issue to be decided in this appeal of assessee is as to whether penalty u/s. 271(1)(c) of the Act could be levied in the facts and circumst .....

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uring the course of hearing u/s.143(2) of the Act, the Ld. AO asked for an explanation of exempted income which was shown in the 'Schedule El' of the return Form No. ITR- 4. In reply, the assessee explained that the closing balance of the investment in Mutual Funds as on 31.03.2008 had been shown in the 'Balance sheet' in the return Form No. ITR - 4 for the Assessment Year 2008-09. The income from said investment in Mutual Funds had been shown as exempted income in the 'Sched .....

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s short Term Capital Gain and added the income to total income and taxed thereon at special rate @ 10% u/s. 111A of the Act. No appeal has been preferred against this order by the assessee. Therefore, that addition has become final. Thereafter, the AO has initiated the penalty proceedings u/s. 271(1)(c) of the Act. The assessee was asked to explain, vide penalty notice dated 29.12.2010 as to why penalty u/s. 271(1)(c) of the act should not be imposed. In reply, the assessee offered explanation t .....

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: 1. That the Ld. CIT(A) erred in dismissing the appeal against the order of penalty u/s. 271(1)(c) without considering the material facts and regular particulars. 2. That as the order of the Ld. CIT(A) devoid of merit, bad in law, the same should be quashed and your appellant given such relief as prayed for. 4. The Ld. AR before us heavily relied on the written submissions filed along with the appeal Memo. The Ld. AR reiterated the same submissions as submitted before the lower authorities in t .....

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) of the Income-tax Act, 1961, and levied penalty. The Tribunal reduced the penalty. On further appeal to the High Court: 'Held, that the assessee had shown "Long Term Capital Gain" and claimed exemption but transaction has been disclosed in the return. There was no concealment of income and penalty could not be imposed.' Decision of this case: "When the assessee has disclosed the transaction which is the basis for capital gains tax and through wrongly claimed exempted fro .....

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iew of these facts on record, we see no reason to sustain the order of the Tribunal. The order of the Tribunal is set aside and penalty is cancelled. The appeal stands allowed accordingly." 5. The Ld. AR also placed reliance on the decision of Hon ble Supreme Court in the case of Pricewaterhouse Coopers Pvt. Ltd. Vs. CIT reported in 348 ITR 306 (SC), wherein it was held as under:- In this case the Tax Audit Report was filed along with the return and in unequivocally stated that the provisio .....

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ppears to us that all that has happened in the present case is that through a bonafide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. This decision of the Supreme Court skirted the issue of mensrea which is already covered by the larger bench s decision and laid special emphasis on the fact that the assessee had mentioned the exact amount and .....

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hat the said exempted income of ₹ 10,86,573/- which includes as under: LTCG ₹ 2,89,620/- , STCG ₹ 7,96,953/- (excluding Security Transaction Tax of ₹ 12,341) and this fact has also been reflected in the Assessment Order- "As per the written submission the assessee earned L TCG for an amount of ₹ 289,620/-; STCG for an amount of ₹ 7,96,953/- and dividend from Mutual Funds for an amount of ₹ 13,833/-" It is clear that in course of assessment proc .....

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t apply where the controversy is regarding the legality of the claim made by the assessee. Further, when the assessee offers an explanation in discharge of the onus cast upon him by Explanation 1 to section 271(1)(c), the A.O. must consider the explanation objectively and unless he finds the same against the human probabilities or unless there are any real inconsistencies or factual errors in such an explanation, the AO ought to accept the same. We only find that there is a mistake of understand .....

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ubted with. It only amounts to sheer ignorance of law. However, the belief of the assessee seems to be bonafide and that cannot be doubted with. It is well settled that Ignorantia juris non excusat meaning ignorance of law is of no excuse . However, this maxim has been duly considered by the Hon ble Apex Court in the case of Motilal Padampat Sugar Mills Co. Ltd vs State of Uttar Pradesh & Ors reported in (1979) 118 ITR 326 (SC) wherein it was observed that :- there is no presumption that eve .....

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ble to know all the common law. But it was Lord Atkin who, as in so many other spheres, put the point in its proper context when he said in Evans vs Bartlam (1937) AC 473 : …. The fact is that there is not and never has been a presumption that every one knows the law. There is the rule that ignorance of the law does not excuse, a maxim of very different scope and application. It is, therefore, not possible to presume, in the absence of any material placed before the court , that the appel .....

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But the Ld. CIT(A) had confirmed the levy of penalty on the ground of concealment of income. Hence, there is a basic difference on the charge attributed on the assessee by the revenue. In these circumstances, penalty could not be imposed on the assessee. In this regard, we place reliance on the decision of Hon ble Karnataka High Court in the case of CIT Vs. MANJUNATHA COTTON AND GINNING FACTORY & Ors. reported in (2013) 359 ITR 565 (Kar.), wherein it was held as under: The final conclusion .....

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xistence of such conditions should be discernible from the Assessment Order or order of the Appellate Authority or Revisional Authority. f) Even if there is no specific finding regarding the existence of the conditions mentioned in Section 271(1)(c), at least the facts set out in Explanation 1(A) & (B) it should be discernible from the said order which would by a legal fiction constitute concealment because of deeming provision. g) Even if these conditions do not exist in the assessment orde .....

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llenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by authorities it has resulted in payment of such tax or such tax liability came to be admitted and if not it would have escaped from tax net and as opined by the assessing officer i .....

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on referred to in Explanation IB to Section 271 of the Act should be clear and without any ambiguity. o) If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. p) Notice under Section 274 of the Act should specifically state the grounds mentioned in Section 271 .....

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