2015 (10) TMI 1715 - AT - Income Tax

Penalty u/s 271(1)(c) - furnishing inaccurate particulars and concealed the income - CIT(A) deleted the penalty - Held that - The Tribunal in quantum matters in the case of the assessee 2015 (10) TMI 1743 - ITAT JAIPUR has allowed the appeal of the assessee by deleting the addition. Since the addition made by the AO, no longer survives, no penalty is leviable on the assessee u/s 271(1)(c) of the Act. The ld. CIT (A) also deleted the penalty imposed @ 200% of tax sought to be evaded of ₹ 10,94,116/- under section 271(1)(c) of the Act after discussing the matter at length. In view of the above facts, we uphold the order of the ld. CIT (A). - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of penalty under section 271(1)(c) for furnishing inaccurate particulars of income.
2. Application of section 50C in determining capital gains.
3. Interpretation of IT Act provisions regarding transfer of property by a company.
4. Consideration of balance sheet information in penalty imposition.
5. Applicability of penalty under section 271(1)(c) based on quantum additions.

Issue 1: Deletion of penalty under section 271(1)(c) for furnishing inaccurate particulars of income:
The appeal filed by the Revenue challenged the deletion of a penalty of Rs. 10,94,116 imposed by the AO under section 271(1)(c) for furnishing inaccurate particulars of income. The AO initiated penalty proceedings based on confirmed additions by the CIT (A). The AO found the assessee liable for penalty due to concealment of income. However, the CIT (A) allowed the appeal and deleted the penalty. The CIT (A) observed that the quantum order in favor of another shareholder in a similar case covered the appellant's situation. The CIT (A) emphasized that the transfer of land was by the company, a separate entity from individual shareholders. The CIT (A) concluded that penalty imposition was not justified without specific evidence of additional money received by the shareholders. The Tribunal upheld the CIT (A) decision, stating that since the addition made by the AO was deleted, no penalty was leviable under section 271(1)(c).

Issue 2: Application of section 50C in determining capital gains:
The assessment for A.Y. 2006-07 involved the transfer of two properties by the assessee, leading to the computation of capital gains. The AO determined the deemed selling price based on share capital and indexed cost, resulting in short capital gains. The AO invoked section 271(1)(c) for furnishing inaccurate particulars of income. However, the CIT (A) and the Tribunal found that the application of section 50C was not appropriate in this case. The Tribunal's decision in a related case supported the appellant's position, emphasizing that the addition based on the deeming provisions under section 50C was not justified. This finding influenced the deletion of the penalty imposed by the AO.

Issue 3: Interpretation of IT Act provisions regarding transfer of property by a company:
The case involved the transfer of property by a company, Unique Propcon Pvt. Ltd., to another company. The AO treated the transfer as below market price, leading to the computation of short-term capital gains for the assessee. However, the CIT (A) and the Tribunal disagreed with this approach. They highlighted that the company's status as a separate entity necessitated any addition under section 50C to be made in the company's hands, not the individual shareholders. The balance sheet information provided by the appellant further supported this interpretation, leading to the deletion of the penalty under section 271(1)(c).

Issue 4: Consideration of balance sheet information in penalty imposition:
The balance sheets of the company involved in the property transfer were crucial in determining the penalty imposition under section 271(1)(c). The appellant presented the balance sheets for the relevant assessment years, indicating the property as an asset. This information played a significant role in the CIT (A) and Tribunal decisions to delete the penalty. They emphasized that without specific evidence of additional money received beyond the transfer price, penalty imposition was not warranted.

Issue 5: Applicability of penalty under section 271(1)(c) based on quantum additions:
The penalty under section 271(1)(c) was imposed by the AO due to confirmed quantum additions. However, the CIT (A) and the Tribunal disagreed with the AO's approach, leading to the deletion of the penalty. The Tribunal's decision in a related case and the absence of concrete evidence supporting the additions influenced the final outcome. The Tribunal upheld the CIT (A) decision, emphasizing that since the quantum additions were deleted, no penalty was justified under section 271(1)(c).

This detailed analysis of the judgment highlights the key issues surrounding the deletion of the penalty under section 271(1)(c) and the various legal interpretations and considerations that influenced the final decision.