2016 (5) TMI 245 - AT - Income Tax

Penalty u/s 271(1)(c) - sale of agriculture land - Held that - The ld. Authorised Representative argued the grounds against the addition by the Assessing Officer though accepted the addition and also paid taxes. The assessee company is a public limited company and Books of Accounts are Audited under Companies Act and provisions of Income Tax Act. The assessee s contention that the land is agricultural land cannot be sustained with proof, as reiterated before lower authorities and also filed paper book containing central notification and guideline values and copy of patta and chitta, VAO certificate for census to substantiate that land is agricultural land fall within specified area. The assessee is arguing the penalty proceedings but not quantum appeal were the grounds to substantiate the addition are being argued. On perusal of records and lower authorities order, we find that assessee company was provided adequate opportunity of hearing and they could not substantiate with documentary evidence except relying on the notification and the decisions which the Commissioner of Income Tax (Appeals) has distinguished in his order. Therefore, we find that Commissioner of Income Tax (Appeals) has examined the issue and also explanations of the assessee were dealt. Therefore, we are not inclined to interfere with the order of the Commissioner of Income Tax (Appeals) and uphold the same. - Decided against assessee.

Issues Involved:
1. Erroneous and arbitrary order by the Assistant Commissioner of Income Tax.
2. Allegation of income concealment under Section 271(1)(c) of the Income Tax Act, 1961.
3. Characterization of land as agricultural or urban.
4. Binding nature of Central Government Notification regarding land distance from municipal limits.
5. Reliance on a report from the Department of Town Planning Authority.
6. Impact of subsequent conversion of land on capital gains computation.
7. Consideration of tax payment and income addition as concealment for penalty imposition.

Detailed Analysis:

1. Erroneous and Arbitrary Order:
The appellant contended that the order passed by the Assistant Commissioner of Income Tax, Company Circle VI(3), was erroneous and arbitrary, violating settled principles of law. The appellant argued that the Assistant Commissioner failed to appreciate that no income was concealed to attract a penalty under Section 271(1)(c) of the Income Tax Act, 1961.

2. Allegation of Income Concealment:
The appellant argued that they did not conceal any income, and the penalty under Section 271(1)(c) was unjustified. The Assistant Commissioner had concluded that the land in question was urban land based on a report from the Department of Town Planning Authority, which contradicted the appellant's claim that the land was agricultural.

3. Characterization of Land:
The appellant contended that the land was agricultural at the time of sale and only changed to urban land after specific conversion by the buyer. The Assistant Commissioner, however, treated the land as urbanized based on the town planning report, which indicated that the land could be used for various activities without requiring a conversion certificate.

4. Central Government Notification:
The appellant argued that the land was situated outside the specified limits of 8 km from Chennai and 5 km from Chengalpattu municipality, as per Central Government Notification No. SO 10(E) dated 06.01.1994 and amended Notification No. SO 1302 dated 28.12.1999. The Assistant Commissioner, however, did not accept this claim due to a lack of documentary evidence from the appellant.

5. Reliance on Town Planning Authority Report:
The Assistant Commissioner relied on the report from the Department of Town Planning Authority, which classified the land as urbanized. The appellant argued that the Assistant Commissioner should have relied on the Central Government notification instead.

6. Subsequent Conversion and Capital Gains:
The appellant argued that the subsequent conversion of the land by the buyer should not impact the computation of income under capital gains at the time of sale. The Assistant Commissioner, however, considered the land as urbanized at the time of sale and thus taxable.

7. Tax Payment and Concealment:
The appellant had paid taxes on the income, which they claimed was agricultural. They argued that the addition of income should not be considered as concealment for imposing a penalty under Section 271(1)(c). The Assistant Commissioner, however, found the explanations unsatisfactory and imposed a penalty of Rs. 29,36,625.

Tribunal's Decision:
The Tribunal upheld the order of the Commissioner of Income Tax (Appeals), which confirmed the penalty imposed by the Assistant Commissioner. The Tribunal found that the appellant failed to substantiate their claim that the land was agricultural with adequate documentary evidence. The Tribunal noted that the appellant's reliance on the Central Government notification and other documents was insufficient to prove that the land was agricultural and outside the specified limits. The Tribunal concluded that the Commissioner of Income Tax (Appeals) had adequately examined the issue and the appellant's explanations, and thus, there was no reason to interfere with the order.

Conclusion:
The appeal of the assessee was dismissed, and the penalty imposed by the Assistant Commissioner of Income Tax under Section 271(1)(c) was upheld. The Tribunal emphasized the lack of documentary evidence to support the appellant's claims and the reliance on the town planning authority's report in determining the nature of the land.

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