Ms.Prema Gopal Rao v DCIT (I.T.A. No.8653/Mum/2011 dated 07.01.2015) Mumbai ITAT

Background:

The assessee filed original return of income on 10.09.2004 declaring total income of Rs.12,16,600/-, which included Long Term Capital Gain on sale of Shares of Rs.3,60,305. The case was selected for scrutiny vide issue of notice u/s 143(2). After the receipt of the said notice, the assessee filed revised return of income, wherein the assessee revised the Long term Capital gains upwards to Rs.14,87,789/-. The AO completed the assessment as per the Revised return of income by making certain disallowances. In the penalty proceedings, the AO took the view that the assessee has revised the return of income only after the enquiry was initiated by him and accordingly, levied penalty on the upward adjustment of long term capital gains.

CIT(A) also confirmed the penalty on the reasoning that  filing of revised return of income was not voluntary, since it was filed after selection of the original return of income for scrutiny.

HELD:

• The revised return of income was filed within the time prescribed u/s 139(5) of the Act. Even though the assessed filed the revised return of income after the receipt of notice u/s 143(2) of the Act, yet the admitted fact remains that the assessing officer did not seek any type of particulars in that notice.
• Hence the mistake in the Long term Capital gain could not have come to the notice of the AO at that point of time, meaning thereby, it should be construed that the assessee has declared the higher amount of Long term capital gain voluntarily upon its detection. 
• In the ruling of Delhi ITAT in the case of ACIT Vs. Ashok Raj Nath (2013)(33 taxmann.com 588), the assessee had filed revised return of income beyond the time prescribed u/s 139(5) by enhancing the Long term capital gain, after the receipt of notice u/s 143(2) of the Act. Even though the revised return was invalid, the AO completed the assessment by accepting the income declared in the revised return. Under these set of facts, the Tribunal had held that the additional amount of capital gain disclosed in the revised return did not tantamount to detection of concealment of income u/s 271(1)(c) of the Act.
• Hence, we are unable to agree with the view of the tax authorities that the revised return of income was not voluntary one, but the assessee was constrined to enhance the Long term capital gain only upon the receipt of notice u/s 143(2) of the Act.