IN INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM ITA No.798/PUN/2017/Assessment year : 2011-12 Jagadish Uddav Kulkarni, Anugrah , T. A. Kulkarni Colony, Appellant. Sadh Waswani Road, Nashik. PAN : ABRPK1388H. v/s Income Tax Officer, Ward 1(4), Nashik. Respondent Assessee by : Shri C.H. Nanivadekar Revenue by : Shri Pankaj Garg. Date of Hearing : 15.07.2019 Date of Pronouncement: 03.09.2019 ORDER PER ANIL CHATURVEDI, AM : 1. This appeal filed by assessee is emanating out of order of Commissioner of Income Tax (A) 1, Nashik dated 16.01.2017 for assessment year 2011-12. 2. relevant facts as culled out from material on record are as under :- Assessee is individual having income from profit from partnership firms, income from business and other sources. Assessee filed his return of income for A.Y. 2011-12 on 18.10.2011 declaring total income of Rs.21,65,565/-. case was initially processed u/s 143(1) of 2 Act and thereafter, case was re-opened after issuing notice u/s 148 of Act which was also served on assessee. Thereafter, case was taken up for scrutiny and subsequently assessment was framed u/s 143(3) r.w.s. 147 of Act vide order dt.11.09.2015 and total income was determined at Rs.30,05,925/- inter-alia by making addition of Rs.8,24,455/- on account of long term capital gains. On aforesaid addition of long term capital gains, AO vide penalty order dated 08.03.2016 passed u/s 271(1)(c) of Act levied penalty of Rs.1,05,942/- for concealing income. Aggrieved by order of AO, assessee carried matter before Ld.CIT(A), who vide order dated 16.01.2017 (in appeal No.Nsk/CIT(A)-1/714/2015-16) upheld penalty levied by AO and dismissed appeal of assessee. Aggrieved by order of Ld.CIT(A), assessee is now in appeal before us and has raised following grounds : 1. learned Commissioner of Income Tax (Appeals) erred on facts and in law in confirming penalty u/s 271(1)(c) for alleged concealment of income in respect of long term capital gains amounting to Rs.8,24,455/-. 2. learned Commissioner of Income Tax (Appeals) erred on facts and in law in confirming penalty u/s 271(1)(c) for alleged concealment of income in respect of dividends shown as exempt amounting toRs.5,060/-. 3. Both grounds being inter-connected are considered together. 4. In original return of income assessee had claimed exemption of Rs.8,24,455/- u/s 10(38) of Act on transfer of shares. It was noticed by AO that shares were sold in open offer and assessee had not paid any Security Transaction Tax and therefore capital gain earned on transfer of such shares was not exempt from tax. To bring aforesaid long term capital gains to tax, case was re-opened u/s 148 of Act. In return of income filed pursuant to notice u/s 148 of Act, assessee had offered aforesaid long term capital gains to tax and had also paid tax. AO was of view that only due to issuance of notice 3 u/s 148 of Act, assessee had revised return of income and offered long term capital gains to tax. He was of view that had case not been re-opened, amount of long term capital gains would have escaped assessment and thus there was concealment of income. On amount of capital gains brought to tax, he levied penalty of Rs.1,05,942/- u/s 271(1)(c) of Act. Aggrieved by penalty order of AO, assessee carried matter before Ld.CIT(A) who dismissed appeal of assessee. Aggrieved by order of Ld.CIT(A), assessee is now in appeal before us. 5. Before us, Ld.A.R. reiterated submissions made before AO and Ld.CIT(A) and further submitted that assessee was under bonafide belief that profits on sale of shares were exempt from tax. Subsequently, when it came to his knowledge that as assessee had not paid security transaction tax, amount of capital gain tax was not exempt, he paid tax. He submitted that non-offering of capital gains initially was not with any malafide intention and was due to bonafide belief that capital gains was exempt from tax. Later on, coming to know correct position of law, assessee offered capital gains and also paid taxes. He therefore submitted that case of assessee cannot be considered to be one for which penalty u/s 271(1)(c) of Act be levied. In support of his contention, he also placed reliance on decision in case of NSE IT Ltd., Vs. DCIT reported in (2018) 193 TTJ 813 (Mumbai). He also placed on record copy of aforesaid decision. He therefore submitted that penalty levied u/s 271(1)(c) of Act be deleted. Ld.DR on other hand, supported orders of AO and ld.CIT(A). 4 6. We have heard rival submissions and perused material on record. issue in present ground is with respect to levy of penalty u/s 271(1)(c) of Act. 7. necessary ingredients for attracting Explanation-1 to Section 271(1)(c) are that: (i) person fails to offer explanation, or (ii) he offers explanation which is found by AO or ld.CIT(A) or ld.CIT to be false, or (iii) person offers explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all facts relating to same have been disclosed by him. If case of any assessee falls in any of these three categories, then according to deeming provision provided in Explanation-1 to Section 271(1)(c) amount added or disallowed in computing total income shall be considered as income in respect of which particulars have been concealed, for purposes of clause (c) of Section 271(1), and penalty follows. On other hand, if assessee is able to offer explanation, which is not found by authorities to be false, and assessee has been able to prove that such explanation is bona fide and that all facts relating to same have been disclosed by him, then in that case penalty shall not be imposed. 8. case for levy of penalty for concealment of income has to be evaluated in terms of provisions of Explanation 1 to Section 271(1)(c), as per which if in relation to any addition in assessment, assessee offers no explanation or offers explanation which is found to be false or is not able to substitute explanation and is also not able to prove that explanation is bonafide, addition made would amount to concealment of particulars, of income. It is well settled that parameters of judging justification for addition made in assessment case of assessee 5 is different from penalty imposed on account of concealment of income or filing inaccurate particulars of income and that certain disallowance/addition could legally be made in assessment proceedings on preponderance of probabilities but no penalty could be imposed u/s. 271(1)(c) of Act on preponderance of probabilities and Revenue has to prove that claim of expenses by assessee was not genuine or was inflated to reduce its tax liability. Before us, Ld.A.R. has given reasons for not offering capital gains to tax initially but was offered subsequently in return of income filed in response to notice u/s 148 of Act. submissions have not been controverted by Revenue nor have they been found to be untrue. Further, there is nothing on record to demonstrate that assessee had concealed particulars of income. Considering totality of aforesaid facts and also relying on decision of Bombay ITAT in case of NSE IT Ltd., Vs. DCIT (supra), we are of view that in present case no case for levy of penalty u/s. 271(1)(c) of Act has been made out. We thus direct deletion of penalty u/s. 271(1)(c) of Act. Thus, grounds of assessee are allowed. 9. In result, appeal of assessee is allowed. Order pronounced on 3rd day of September, 2019. Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER Pune Dated : 3rd September, 2019. (Copy of Order forwarded to : 1. Appellant 2. Respondent 3. CIT(A)-1, Nashik. 4. Pr. CIT-1, Nashik. 5 DR, ITAT, B Pune; 6. Guard file. BY ORDER True Copy Sr. Private Secretary & ITAT, Pune. Jagadish Uddav Kulkarni v. Income-tax Officer, Ward 1(4), Nashik