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2015 (1) TMI 1308 - AT - Income TaxPenalty u/s 271 - contention of the assessee that there was no mala fide intention on the part of the assessee to justify the levy of penalty - Held that - It is now settled principle that penalty u/s. 271(1)(c) of the Act is a civil liability and mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities and willful concealment is not an essential ingredient for attracting civil liability. In the case of CIT V Manjunatha Cotton 3, 68, 14, 038 made by him. We find that the disallowance of 3, 68, 14, 038 was made only because the assessee could not substantiate the claim of reinvestment by producing any material evidence in this regard. The contention that the assessee is unable to produce any evidence because of litigation in the property is hard to accept. As pointed out by the Assessing Officer and the learned CIT (Appeals) the assessee could not furnish any details at all. In the absence of a shred of evidence it is not possible to accept the contentions of the assessee on the claim of making reinvestment to the extent of 3, 68, 14, 038. From the above factual matrix it is amply clear that the assessee has failed to discharge the onus on him to establish with material evidence the claim of having incurred the expenditure on reinvestment. Interest on repayment of Housing Loan - Held that - It is not in dispute that the claim for deduction on account of interest on housing loan made in the return of income was admittedly erroneous and this erroneous claim was detected by the Assessing Officer in the course of assessment proceedings. For the reasons discussed and the reasoning given earlier in this order while dealing the earlier grounds of appeal (supra) the levy of penalty u/s. 271(1)(c) of the Act on this issue is justified. Assessment of income from layout formation as income from business - Held that - In the case on hand the assessee s decision to declare the income from layout formation in the return of income filed on 30.6.2008 as income from capital gain was a conscious one. The assessee has not been able to furnish any explanation supported by material evidence for the same and therefore in our view has not been able to rebut the presumption of concealment. In this view of the matter we are of the considered opinion that the learned CIT (Appeals) was correct in upholding the action of the Assessing Officer in levying penalty u/s.271(1)(c) of the Act. As regards the issue of the quantum of income to be considered for levy of penalty u/s. 271(1)(c) of the Act in our view the Assessing Officer is wrong in considering the entire assessed income for levy of penalty. The only issue of dispute is the income from Singapore Layout formation; whether the income is to be assessed as business income or income from capital gain and which was only declared in the belated return of income filed on 30.6.2008 after the survey action on 1.2.2008; when actually return of income for Assessment Year 2007-08 was due by 31.7.2007 Therefore in our view it is not appropriate for the Assessing Officer to have considered the entire income which included income from other activities as concealed income as there was no dispute with respect to those items of income declared. Thus the penalty leviable u/s.271(1)(c) of the Act should be on the assessed income as reduced by commission income and other income if any declared in the return of income in respect of which there is no dispute. The Assessing Officer is directed accordingly.
Issues Involved:
1. Penalty under section 271(1)(c) of the Income Tax Act, 1961. 2. Disallowance of cost of improvement. 3. Disallowance of exemption under section 54B. 4. Disallowance of interest on repayment of housing loan. 5. Classification of income from layout formation as business income instead of capital gains. Detailed Analysis: 1. Penalty under Section 271(1)(c) of the Income Tax Act, 1961: The primary issue revolves around the penalty levied under section 271(1)(c) for concealment of income or furnishing inaccurate particulars of income. The Tribunal emphasized that penalty under this section is a civil liability, and mens rea (malicious intent) is not necessary for imposing such penalties. The Tribunal cited various judicial precedents, including CIT v. Manjunatha Cotton & Ginning Factory, to support this view. The onus is on the assessee to furnish evidence to substantiate their claims and rebut the presumption of concealment. 2. Disallowance of Cost of Improvement: The assessee claimed a deduction of Rs. 1,56,98,159 towards the cost of improvement of land sold. However, the assessee could not furnish any evidence to substantiate this claim. The Tribunal noted that the onus of proving the genuineness of the expenditure lies on the assessee, which was not discharged in this case. The Tribunal upheld the penalty on this ground, noting that the failure to provide evidence supports the presumption of concealment of income. 3. Disallowance of Exemption under Section 54B: The assessee claimed an exemption of Rs. 10,38,54,742 under section 54B, which was partially disallowed by the Assessing Officer due to lack of evidence for reinvestment. The Tribunal observed that the assessee failed to produce any evidence to substantiate the claim of reinvestment amounting to Rs. 3,68,14,038. The Tribunal upheld the penalty on this ground, emphasizing that the inability to provide evidence sustains the presumption of concealment of income. 4. Disallowance of Interest on Repayment of Housing Loan: The assessee claimed a deduction of Rs. 1,50,000 towards interest on repayment of a housing loan, which was disallowed as the property and loan were in the name of the assessee's wife. The Tribunal dismissed the assessee's contention of a bona fide belief, noting that the claim was admittedly erroneous and detected by the Assessing Officer during assessment. The Tribunal upheld the penalty on this ground as well. 5. Classification of Income from Layout Formation as Business Income: The assessee declared income from the sale of plots in 'Singapore Layout' as capital gains, while the Assessing Officer assessed it as business income based on findings from a survey under section 133A. The Tribunal noted that the assessee's decision to declare the income as capital gains was a conscious one and not supported by any material evidence. The Tribunal upheld the penalty, noting that the assessee failed to rebut the presumption of concealment. However, the Tribunal directed that the penalty should be levied only on the disputed income from layout formation and not on the entire assessed income. Conclusion: The Tribunal dismissed the assessee's appeal for Assessment Year 2006-07, upholding the penalties levied under section 271(1)(c) for various disallowances. For Assessment Year 2007-08, the Tribunal partly allowed the appeal for statistical purposes, directing that the penalty be levied only on the disputed income from layout formation. The Tribunal emphasized the importance of substantiating claims with evidence to rebut the presumption of concealment of income.
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