2016 (12) TMI 1599 - AT - Income Tax

Penalty u/s 271(1)(c) - capital gain addition - JDA agreement - AO had imposed penalty treating the whole amount of sale consideration to be received by assessee as accruing during the year - Held that - The Hon ble Punjab & Harayana High Court in the case of C.S. Atwal Vs. CIT, Ludhiana 2015 (7) TMI 878 - PUNJAB & HARYANA HIGH COURT had deleted the similar addition confirmed by the Hon ble ITAT and has held that capital gain under these circumstances can be worked out only on the basis of sale consideration received by assessee JDA agreement was not completed and assessee had not received the balance payments and had also not received the two flats as promised in the agreement. The ld. CIT(A) has also held that the belief of the assessee that the capital gains on which he had to pay tax has to be computed only on the basis of the amount which he had actually received, cannot be considered to be totally unreasonable. It is undisputed fact that in the present case the assessee had declared capital gains on proportionate basis and therefore, cannot be said to have furnished wrong particulars of income or concealment of income. Appeal filed by the Revenue is dismissed.

Summary

Issues:
Appeal against deletion of penalty under section 271(1)(c) of the Income Tax Act.

Analysis:
1. The appeal was filed by the Revenue challenging the deletion of penalty under section 271(1)(c) by the ld. CIT(A). The case involved a member of a cooperative society who sold land through a Joint Development Agreement. The Assessing Officer imposed a penalty based on the view that the receipt of part of the sale consideration constituted "Part Performance" of the contract, leading to the imposition of a penalty amounting to ?75,55,249.

2. The assessee contended that the amounts received were duly shown in the income tax returns for the respective assessment years and that the balance amount was believed to be taxable in the year of receipt. The ld. CIT(A) accepted the assessee's submissions and deleted the penalty imposed by the Assessing Officer.

3. During the appeal, the Revenue heavily relied on the Assessing Officer's order, while the assessee argued that the declared capital gain was based on the amount received from one of the parties involved in the transaction. The Punjab & Haryana High Court's decision in a similar case was cited, emphasizing that capital gains should be calculated based on the actual amount received by the assessee.

4. The High Court's decision highlighted that the Joint Development Agreement was not completed, and the assessee had not received the full consideration or the promised flats. The court ruled in favor of the assessee, stating that the belief that capital gains should be computed based on the actual received amount was not unreasonable. As the assessee had declared capital gains proportionately, there was no concealment or furnishing of wrong particulars of income.

5. Consequently, the ITAT upheld the decision of the ld. CIT(A) and dismissed the appeal filed by the Revenue, emphasizing that the assessee's approach to declaring capital gains was reasonable and in accordance with the law.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the reasoning behind the decision to delete the penalty under section 271(1)(c) of the Income Tax Act.