2014 (5) TMI 273 - AT - Income Tax

Cancellation of penalty u/s 271(1)(c) of the Act Capital gains not declared amounts to furnishing of inaccurate particulars of income or not Held that - The assessee had not received the balance 50% of the sale consideration till the land was released - The provisions of MOU clearly provide that the assessee shall have to refund the said advance of 50% of sale consideration if it could not get the land released CIT(A) rightly held that it is debatable to hold whether the appellant had already obtained approval from the Haryana Government prior to the impugned transfer of land or not - no prudent purpose could be served for the assessee by filing inaccurate particulars in the current years while the assessee had already offered for tax the capital gains on sale of impugned land in the AY 2000-01 - the capital gain in respect of the transfer of land should be taxed in the AY 2000-01 and not in the year under consideration could be called debatable but the same could not be said as a conscious act of tax avoidance it does not amount to furnishing of inaccurate particulars of income or concealment of particulars of income the order of the CIT(A) of cancelling the penalty is upheld Decided against Revenue.

Summary

Issues Involved:
1. Whether the Commissioner of Income Tax (Appeals) [CIT(A)] was correct in canceling the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961 for not declaring capital gains during the assessment year (AY) 1998-99.

Issue-wise Detailed Analysis:

1. Penalty under Section 271(1)(c) for Concealment of Income:
The revenue contested the CIT(A)'s decision to cancel the penalty of Rs. 2,20,28,050/- imposed under Section 271(1)(c) for not declaring capital gains of Rs. 6,29,37,264/- during AY 1998-99. The Assessing Officer (AO) had determined that the transaction of land fell under the definition of "transfer" as per Section 2(47)(v) of the Income Tax Act, which involves allowing possession of immovable property in part performance of a contract as referred to in Section 53A of the Transfer of Property Act, 1872. The AO argued that the capital gains should have been declared in AY 1998-99 and not doing so amounted to furnishing inaccurate particulars of income or concealment of income.

2. Findings of the Quantum Proceedings:
The AO's findings during the quantum proceedings, supported by the ITAT's order dated 20.01.2012, indicated that there was a transfer of capital asset and the gain arising therefrom was assessable in AY 1998-99. The AO argued that there was a deliberate attempt by the assessee to conceal income by not disclosing the capital gains, which attracted penalty under Section 271(1)(c).

3. Assessee's Defense:
The assessee contended that the AO took a hyper-technical approach and that quantum and penalty proceedings are distinct. The assessee argued that all necessary facts were disclosed in the return of income and that the capital gains were declared in AY 2000-01, which was prior to the AO examining the issue for AY 1998-99. The assessee also pointed to the notes to accounts, which indicated that the sale of the Compressor Division excluded part of the land under dispute.

4. CIT(A)'s Observations:
The CIT(A) found that the material facts were disclosed in the return of income and that the capital gains were declared in AY 2000-01. The CIT(A) concluded that there was no concealment of particulars of income as the issue was debatable regarding the point of incidence of capital gains. The CIT(A) also noted that the MOU between the assessee and the buyer included provisions for the release of land by the Haryana Government, and the transaction was contingent on this release.

5. ITAT's Conclusion:
The ITAT upheld the CIT(A)'s decision, agreeing that the issue was debatable and not a straightforward case of concealment or filing inaccurate particulars. The ITAT noted that the assessee had disclosed the capital gains in AY 2000-01 and that the AO was already in possession of this return. The ITAT also agreed that no prudent purpose would be served by the assessee filing inaccurate particulars in AY 1998-99 when the capital gains were already declared in AY 2000-01. The ITAT concluded that the claim of the assessee was debatable and not driven by tax avoidance, thus not amounting to furnishing inaccurate particulars or concealment of income.

Judgment:
The appeal of the revenue was dismissed, and the order of the CIT(A) canceling the penalty was sustained. The ITAT found that the assessee's actions did not constitute concealment of income or furnishing inaccurate particulars, and the penalty under Section 271(1)(c) was not warranted.

Order Pronounced:
The order was pronounced in the open court on 30.04.2014.