- (1.) THE appeal was admitted in terms of the following question : "Whether the mistake committed by counsel in advising the assessee and the assessee on such advice submitted return omitting a particular item to be shown in the return can be said to be an act committed by the assessee in concealing deliberately the item of income and thus is liable for penalty under s. 271(1)(c) of the IT Act ?"
(2.) THE relevant assessment year is 1992-93. THE assessee appellant is an individual and is carrying on the business, of transport. In the preceding year, the assessee was a partner in M/s Gautam Roadways but became proprietor from the asst. yr. 1991-92. He filed the return on 21st Sept., 1992. THE appellant has sold his immovable property on 26th April, 1991, for Rs. 5 lacs and purchased two flats, one on 6th May, 1991, and another on 29th May, 1991, for total sum of Rs. 5,56,000. THE capital gain comes to Rs. 1,40,000. In the original return, the assessee claimed that as he has purchased the immovable property against the consideration received on sale of house property on 26th April, 1991, therefore, no capital gain tax is attracted. THEreafter, he filed the revised return claiming that the capital gain tax is not payable as it is long-term capital gain and assessee has purchased the property within 6 months, against the consideration received on sale of his house property on 26th April, 1991. THE AO did not accept this explanation and taxed this amount i.e. difference of Rs. 1,40,000 as short-term capital gain. No appeal has been preferred. THErefore, that addition has become final. THEreafter, the AO has initiated the penalty proceedings under s. 271(1)(c) of the IT Act, 1961, and levied the penalty of Rs. 1,04,110. In appeal before the CIT(A), the penalty amount has been reduced to Rs. 63,974 and in appeal before the Tribunal, the Tribunal has reduced the penalty amount to Rs. 53,312 vide order dt. 23rd Nov., 2000. Learned counsel for the assessee appellant Mr. J.K. Ranka submits that the assessee has disclosed the basic facts regarding transaction and sale of the house property which was sold on 26th April, 1991, and in the revised return the assessee has annexed a note along with the revised return that as assessee has purchased new residential properties against the consideration received on sale of his house property on 26th April, 1991, the assessee is not liable to pay any tax on such capital gain. That capital gain was calculated to Rs. 1,41,000 and penalty has been imposed but learned counsel Mr. Ranka submits that when the transaction regarding sale and purchase of the properties, in question has been disclosed in the return, no penalty is attracted. Mr. Mathur, learned counsel for the respondents, submits that in the original return he has not shown any capital gain tax. In the revised return though he has submitted a note but he has not furnished full and true particulars of the income, therefore, the penalty is attracted under s. 271(1) (c) of the IT Act, 1961. Heard learned counsel for the parties. The fact is not in dispute that year ending is 31st March, 1992, and assessee has filed the revised return containing a note which reads as under : "II Capital Gain : For the reasons given below. In view of the transactions of the purchases and sale of residential properties the assessee within the stipulated period of 2 years used long-term capital gain in purchase of new residential property as described in Sch. 'X' and so the long-term capital gain earned are all exempt and are not liable to be taxed. So capital gains have been shown as exempt."
(3.) HE further submits that assessee has though brought to the notice of the Department that there was a transaction and assessee has sold the immovable property on 26th April, 1991, but on the advise of the advocate Mr. M.C. Ranka, the assessee has claimed that capital gain is not liable to tax. Mr. J.K. Ranka has brought to our notice the affidavit given on oath by Mr. M.C. Ranka that in fact by his mistake the assessee has shown 'long-term capital gain' and claimed exemption, but the transaction has been disclosed in the return. That was his mistake and not the mistake of the assessee. The relevant portion in para 3 of the affidavit reads as under : "That the revised return was filed in consultation with me and in accordance with my advice. I am working individually. I do not form part of any firm. My view was found mistaken. I was unaware of the view adopted by the AO. The mistake was bona fide and was committed after due diligence." When the assessee has disclosed the transaction which is the basis for capital gain tax and though wrongly claimed exemption from the capital gain tax, but that cannot be a case of penalty under s. 271(1)(c) of the IT Act, 1961. If it has claimed any exemption after disclosing the relevant basic facts and under the ignorance of the provision of the Act, 1961, and not offered that amount for tax, in such cases, penalty should not be imposed. In such cases rather it is the duty of the AO to ask further details and tax income if it is liable to tax and that has been done in this case. In view 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.;