ITAT Deletes Penalty since Non- offering of LTCG to tax was out of Ignorance of Assessee [Read Order]

Imposing Penalty - ITAT - Taxscan

Kolkata bench of Income Tax Appellate Tribunal (ITAT) recently held that penalty under section 271(1)(c) of the Income Tax Act 1961 cannot be levied since non-offering of Long Term Capital Gain (LTCG) to tax which the same was out of ignorance of the assessee.

Sole effective issue in this case was addition made by Assessing Officer (AO) on account of penalty levied under section 271(1)(c) of the Income Tax Act 1961, whether it is possible or not since non-offering of LTCG to tax out of ignorance of the assessee.

During the year under consideration, the assessee has sold its long term assets and earned an income of Rs. 53, 33,336 only as capital gains. However, the impugned income was not offered to tax but the disclosure of the same was made in the balance sheet filed along with the income tax return.

During the assessment proceedings the AO found that the assessee has earned long term capital gain which was not offered to tax but discourse was made in the balance sheet. And accordingly he made the addition of Long Term Capital Gains earned by assessee and also initiated the penalty proceedings and he finally imposed the penalty under section 271(1)(c) of the Act for Rs. 10,98,667.

Assessee contended that the LTCG income was not offered to tax due to lack of knowledge of income tax and amount of capital gains was duly disclosed in the balance sheet therefore, it cannot be considered as concealment of income to evade the tax liability.

After hearing the rival submissions of both the parties the division bench consists of Judicial Member S.S.Viswanethra Ravi and Accountant Member Waseem Ahmed observed that while analyzing the materials facts and records it is clear that assessee has earned LTCG which was not offered to tax. It is also undisputed that the disclosure of the same made in balance-sheet of the assessee. Thus it has found that non- offering of LTCG to the tax was not deliberate and it was merely out of ignorance of the assessee.

The tribunal bench further said that in such a situation imposition of penalty under section 271(1) (c) of the act in the present case cannot be sustained and the same is directed to be cancelled.

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