The imposition of penalty under Section 271(1)(c) of the Income Tax Act requires clear evidence of intentional concealment or furnishing of inaccurate particulars; it cannot be sustained where the assessee demonstrates bona fide conduct through voluntary disclosure of tax liability arising from statutory non-compliance.

आदेश / O R D E R

PER S. R. RAGHUNATHA, AM :

This appeal by the assessee is filed against the order of the Learned Commissioner of Income Tax (Appeals) National Faceless Appeal Centre (NFAC), Delhi [‘ld. CIT(A)’] dated 13.06.2025 and pertains to assessment year 2015-16 against the penalty order of the Faceless Assessment Unit, Income Tax Department (AO) passed u/s.271(1)(c) of the Income Tax Act, 1961 (in short ‘the Act’) dated 11.03.2025.

2. The assessee is in appeal against the order of the ld.CIT(A) confirming the levy of penalty u/s.271(1)(c) of the Act amounting to Rs.39,46,200/- on the following concise grounds of appeal: -

“1. Learned CIT(A) erred in confirming the penalty of Rs.39,46,200/- levied u/s.271(1)(c) by AO on 08.01.2022.

2. Learned CIT(A) erred in confirming the penalty without appreciating the peculiar facts of this case. Appellant having lost the capital gains account passbook, lost sight of the time limit prescribed under section 54(2).

3. Bonafide of the appellant is proved by the fact that unutilised portion of CG was still lying in the Capital Gains Account and only during the course of reassessment proceedings he came to know of the legal position and only after completion of the reassessment proceedings and with the authorization of AO appellant withdrew the balance amount lying in CG A/c and therefore paid the entire tax due. Thus, intention of legislature u/s.54(2) was not given a go by appellant.

4. Since the unutilised portion of CG was already there and disclosed, this is not a case of concealment of income by appellant.

5. CIT(A) failed to notice non compliance of Sec.274(2).

6 Authorities below erred in quantifying the penalty levied.

3. The brief facts of the case emanating from the records are that the assessee is an Individual and filed his return of income for the impugned year declaring a total income of Rs.31,16,310/-. Information was available on record that the assessee had sold an immovable property for Rs.5 Crores and claimed deduction u/s.54EC of the Act for Rs.50 Lakhs and along with deduction u/s.54 of the Act. The assessee had also deposited a sum of Rs.2.50 crores in the Capital Gains Account Scheme. However, only an amount of Rs.75,85,380/- was utilized before the expiry of the prescribed period of three years.

4. On the basis of the information, case of the assessee was reopened for the impugned year on 13.02.2020 by issue of notice u/s.148 of the Act asking the assessee to file the requisite return of income. The assessee in his reply insisted that he has already filed his return of income earlier and mentioned about covid related problems. Further, as per the request of the assessee, his earlier return was replicated and treated as return in response to notice issued u/s.148 of the Act. All statutory notices were issued calling for details and information on the issue but the assessee remained non-compliant during the assessment proceedings. Subsequently, a show cause notice along with draft order was issued to which also the assessee failed to respond. Thereafter, the AO passed the assessment order dated 07.09.2021 assessing total income at Rs.2,05,30,930/-. In doing so, the AO made an addition of Rs.1,74,14,620/- (Rs.2,50,00,000 less Rs.75,85,380) to the returned income of Rs.31,16,310/- on account of difference in utilization of the amount deposited in the capital gain account scheme amounting to Rs.75,85,380/- and total amount deposited in capital gain account scheme amounting to Rs.2,50,00,000/-. Subsequently, the AO initiated penalty proceedings u/s. 271(1)(c) of the Act for concealment of income.

5. The assessee during the penalty proceeding submitted his response on 02.11.2021 to