The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) deleted the penalty under Section 271(1)(c) of the Income Tax Act, 1961 due to the non-awareness of tax payment by the assessee.
The assessee did not file the return of income originally and the assessment under Section 144 read with Section 147 of the Income Tax Act was finalized determining the total income of Rs. 26,64,227/-. The Assessing Officer observed that the assessee, her mother, brother, and two sisters have jointly sold the land for the consideration of Rs. 1,33,00,000/-. The assessee confirmed before the Stamp Duty Authority that she received Rs. 26,60,000/- as sales consideration through cheques.
The assessee did not file the return of income and did not pay the capital gain tax on the sale of immovable property. The Assessing Officer estimated the long-term capital gain at Rs. 26,60,000/- as well as the bank interest of Rs. 4,227/- which was not offered to tax. Penalty proceedings under Section 271(1)(c) of the Income Tax Act were initiated for both additions.
During the course of penalty proceedings, the assessee filed its submissions which were considered and thereafter the Assessing Officer imposed the penalty of Rs. 2,81,034/- under Section 271(1)(c) of the Income Tax Act. The Commissioner of Income Tax (Appeal) [CIT(A)] dismissed the appeal of the assessee.
The Authorized Representative submitted that the assessee had not paid any taxes earlier as she was under the bonafide belief that no tax is payable on the sale of “agriculture land” since the assessee is uneducated and is not aware of the provisions of income tax which resulted into not paying the taxes. And an addition made during the course of assessment proceedings by itself cannot be enough to initiate, leave aside conclude, penalty proceedings under Section 271(1)(c) of the Income Tax Act.
The Single-member bench comprising of Suchitra R. Kamble (Judicial member) held that the assessee has not filed return of income and it appears that the assessee being not aware about the tax on sale consideration of the land is genuine.
The decision of the Gujarat High Court in the case of Sun on Peak Hotel (P.) Ltd. was applicable in the present case as the assessee herein has a genuine case of not being aware of tax payment. Thus, the penalty imposed under Section 271(1)(c) of the Income Tax Act was not justifiable. Thus, the appeal of the assessee was allowed.
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