2015 (1) TMI 1464 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - Undisclosed sale of plots - facilitator under public development scheme - slums area in city of Chandigarh development by Chandigarh Administration floated a scheme - as argued assessee worked as a nodal agency to Chandigarh Administration - Chandigarh Administration to raise funds for the said scheme decided to develop Rajiv Gandhi Chandigarh Technology Park (RGCTP) on Public Private Partnership basis and to generate funds through auction of plots in this park and facilitate the development assessee purchased certain lands from Chandigarh Administration and after necessary formalities, some of the plots were auctioned though public auction HELD THAT - Parties has ultimately reached to an amicable settlement with regard to the taxability of the proceeds received on auction of the plots. The Hon'ble Supreme Court has clearly observed that no penalty proceedings would be initiated. In our opinion in view of the amicable settlement reached and the assurance given before the Hon'ble Supreme Court as well as High Court, no penalty could be levied. We feel that this is not a fit case of levy of penalty and accordingly we set aside the order of Ld. CIT(A) and delete the penalty. - Decided in favour of assessee.

Summary

Issues involved:
1. Dispute regarding confirmation of levy of penalty u/s 271(1)(c) of the Act.
2. Whether penalty u/s 271(1)(c) should be levied on the assessee.
3. Deletion of penalty on consultancy charges claimed as expenditure.

Analysis:
1. The judgment involved appeals by the assessee and Revenue against separate orders of CIT(A) Chandigarh regarding the confirmation of penalty under section 271(1)(c) of the Act. The dispute arose from the taxation of funds received through the auction of plots in Rajiv Gandhi Chandigarh Technology Park (RGCTP). The Assessing Officer taxed the funds as the assessee's income, leading to penalty proceedings. The Hon'ble Punjab & Haryana High Court intervened, suggesting an amicable settlement between the parties. The Supreme Court later confirmed an agreement that resolved the tax liability issue and prevented the initiation of penalty proceedings.

2. The Hon'ble High Court ultimately ruled in favor of the assessee, emphasizing the amicable settlement reached by the parties regarding the taxability of the auction proceeds. As per the settlement and assurances given before the courts, no penalty proceedings were to be initiated. Consequently, the penalty levied by the CIT(A) was set aside and deleted, considering the amicable resolution and the agreements made before the higher courts.

3. In a separate issue, penalty under section 271(1)(c) was imposed on the assessee for claiming consultancy charges as revenue expenditure instead of capital expenditure. The Assessing Officer treated the expenditure as capital, leading to the penalty. However, the CIT(A) deleted the penalty, noting that the assessee had made full disclosure regarding the expenditure. The Tribunal upheld the deletion, stating that the nature of the expenditure, though debatable, did not amount to inaccurate particulars or concealment. Therefore, the penalty was not justified, and the CIT(A)'s decision was confirmed.

In conclusion, the judgment resolved the issues of penalty imposition under section 271(1)(c) in a tax dispute and clarified the treatment of certain expenditures, emphasizing the importance of full disclosure and the nature of the expenses.