Penalty u/s 271(1)(c) cannot be levied on income disclosed by an assessee at the time of moving application u/s 273A before CIT:

AO levied penalty u/s 271(1)(c) on long term capital gain (LTCG) declared by the assessee. Hon’ble ITAT observed that such LTCG was not declared in the original return of income, but was declared subsequently along with application u/s 273A before CIT for waiver of penalty to be levied u/s 271(1)(c). Alongwith the said application, assessee filed revised computation of total income duly reflecting such LTCG arising on sale of ancestral property. On the basis of the said information, AO reopened the assessment and computed the income on the basis of return of income filed by the assessee in pursuance to notice issued u/s 148. Thereafter, penalty was levied on such LTCG. AO did not detect any concealment while framing the assessment. Rather, the assessee himself had declared the LTCG arising on such land transaction. Department came to know about income from such land transaction only after the same was disclosed by the assessee. It was established that failure to disclose correct income did not arise from any fraud or any wilful negligence on his part and hence, the penalty was deleted.

[PARESH CONTRACTOR Vs. ITO – ITA Nos.2125 to 2127/Ahd/2010]