2014 (7) TMI 799 - AT - Income Tax

Penalty u/s 271(1)(c) Inaccurate particulars furnished Held that - Assessee had purchased various plots of land and in some cases along with building from the year 2002 to 2005 - the assessee has not carried out any repeated transactions of sale and purchase but all the plots were sold - it was not a regular activity of the assessee and there is no prior or subsequent instance of purchase and sale of property by the assessee the rejection of claim by taking a different view does not ipso facto warrant levy of penalty when there is no finding that the claim of the assessee is a bogus claim or absolutely impossible/inaccurate claim - assessee has furnished all the relevant particulars regarding purchase as well as sale of property in question - assessee let out some of the property after acquisition which shows the assessee s intention was to retain property for a longer period and not to hold simply to resell at the earliest possible occasion Relying upon CIT vs. Bennett Coleman & Co. Ltd. 2013 (3) TMI 373 - BOMBAY HIGH COURT - there is only a change of head of income and in the absence of the fact that the claim of assessee was not bonafide the Tribunal deleted the penalty imposed under section 271(1)(c) of the Act and there is no reason to interfere with the order of the Tribunal - rejection of capital gain/loss in the case of the assessee does not warrant levy of penalty is set aside Decide in favour of Assessee.

Summary

Issues:
1. Assessment of penalty under section 271(1)(c) of the Income Tax Act for the assessment year 2006-07.
2. Dispute over the treatment of income from the sale of immovable property as business income or capital gains.

Analysis:
1. The appeal was against the penalty order passed under section 271(1)(c) of the Income Tax Act. The appellant contested the levy of penalty, arguing that they had provided accurate and complete information regarding their income and that the change in the head of income by the Assessing Officer did not warrant penalty imposition. The AO treated the sale of property as business income instead of capital gains claimed by the assessee. The CIT(A) upheld the penalty, leading to the appeal before the Tribunal.

2. The assessee claimed long-term capital loss on the sale of immovable property, which the AO treated as business income. The Tribunal confirmed the treatment of income as business income in the quantum appeal. The penalty was imposed based on this treatment. The assessee argued that the properties were held as fixed assets, not for regular business activities, and the intention was not to evade tax but to claim capital loss legitimately. The AR cited relevant case laws to support the bonafide nature of the claim.

3. The Tribunal analyzed the facts, noting that the properties were held as fixed assets from acquisition, not part of regular trading activities. The assessee's intention to retain the properties was supported by letting them out for rental income. The issue of whether the income should be treated as capital gains or business income was debatable. The rejection of the claim did not establish concealment of income or inaccurate reporting. Citing precedents, the Tribunal concluded that the rejection of the capital gain/loss claim did not justify the penalty imposition, leading to the deletion of the penalty.

4. The Tribunal emphasized that the rejection of the capital gain/loss claim, though not accepted, did not indicate concealment of income. The decision was based on the facts and circumstances of the case, supporting the bonafide nature of the claim. Relying on relevant judgments, the Tribunal held that the penalty imposition was not justified in this case, leading to the allowance of the assessee's appeal and the deletion of the penalty.

In conclusion, the Tribunal allowed the appeal, emphasizing that the rejection of the capital gain/loss claim did not warrant the penalty imposition as there was no evidence of concealment or inaccurate reporting of income. The decision was based on the bonafide nature of the claim and the debatable nature of the income treatment, leading to the deletion of the penalty.