2016 (6) TMI 798 - AT - Income Tax

Penalty u/s 271(1)(c) - taxability of income from sale of land - as per revenue income earned from sale of land is liable to be taxed and the assessee has not entitled for deduction under section 54B - Held that - The assessee had a bona fide belief that M/s. Alpha Commercials according to the mutual agreement invested the money in residential property so as to facilitate the assessee to have a benefit under section 54F/54B of the Act. However the Assessing Officer has not considered the explanation offered by the assessee as bona fide and he simply rejected the explanation by saying that the assessee has made a wrong claim in the original return of income and failed to disclose all material facts truly and wholly. According to the Assessing Officer had it been there is no survey the assessee s claim would have been gone unnoticed. However it is not the case of the Assessing Officer that the assessee s claim was false or bogus. Neither the Assessing Officer nor the Commissioner of Income-tax (Appeals) examined the claim of the assessee that whether the assessee has given money to M/s. Alpha Commercials for the purpose of investment in residential property. The Assessing Officer observed that just because the assessee has remitted the demand raised by the Department it cannot be a reason for levying the penalty. However he has not found the claim of the assessee that the assessee has handed over the money to M/s. Alpha Commercial for investment in residential property. Further when the assessee has given an explanation that he has given money to Alpha Commercials for the purpose of investment in residential house it is the duty of the Assessing Officer to examine the records of M/s. Alpha Commercials to find out whether the claim of the assessee is genuine or not. The Assessing Officer without making investigation cannot presume that the explanation given by the assessee is false or bogus. In the present case the assessee submitted a detailed explanation before the Assessing Officer. Thereafter it is the duty of the Assessing Officer to establish that the assessee has concealed income or furnished inaccurate particulars of income. In the present case the Assessing Officer has accepted the amount offered by the assessee as his income and levied penalty without making any enquires and investigation to disprove that the explanation given by the assessee is either false or bona fide. Therefore in our opinion the penalty cannot be levied in the present case. - Decided in favour of assessee

Issues Involved:
1. Sustaining the addition by the Commissioner of Income-tax (Appeals).
2. Levy of penalty under section 271(1)(c) of the Income-tax Act, 1961.
3. Non-admission of the appeal by the Commissioner of Income-tax (Appeals) without assigning reasons in respect of quantum addition.
4. Delay in filing appeals before the Commissioner of Income-tax (Appeals).

Detailed Analysis:

1. Sustaining the Addition by the Commissioner of Income-tax (Appeals):
The appeals concern the assessment year 2010-11, where the primary issue is the addition sustained by the Commissioner of Income-tax (Appeals). The assessee initially filed a return of income admitting a total income of ?7,31,544 and claimed an exemption under section 54B for the sale of agricultural land. However, a survey revealed that the land sold was urban, not agricultural, leading to the reassessment and inclusion of long-term capital gains of ?1,90,27,203. The Assessing Officer recomputed the income to ?1,96,98,760 and initiated penalty proceedings for furnishing inaccurate particulars and concealing income.

2. Levy of Penalty under Section 271(1)(c) of the Income-tax Act, 1961:
The penalty proceedings were initiated on the grounds that the assessee claimed an incorrect exemption under section 54B, knowing the land was urban. The assessee argued that the sale consideration was intended to be used for purchasing agricultural land, but the funds were misappropriated by M/s. Alpha Commercials. The Assessing Officer and Commissioner of Income-tax (Appeals) found the explanation unsatisfactory and imposed a penalty of ?39,13,426. However, the Tribunal noted that the penalty proceedings are independent of assessment proceedings and require clear evidence of concealment or inaccurate particulars, which was not satisfactorily established by the Assessing Officer.

3. Non-admission of the Appeal by the Commissioner of Income-tax (Appeals) without Assigning Reasons in Respect of Quantum Addition:
The assessee contended that the Commissioner of Income-tax (Appeals) did not admit the appeal against the reassessment order within the stipulated time, citing a bona fide belief that the penalty would not be levied. The Tribunal found that the Commissioner of Income-tax (Appeals) had a superficial approach and did not consider the human probabilities and substantial justice. The Tribunal emphasized that the expression "sufficient cause" should be interpreted liberally to advance substantial justice, and the delay of 175 days was condoned.

4. Delay in Filing Appeals before the Commissioner of Income-tax (Appeals):
The Tribunal considered the delay of 175 days in filing the appeals and found the reasons provided by the assessee, including reliance on professional advice and the belief that the penalty would not be levied, to be reasonable. The Tribunal held that the delay should be condoned to ensure substantial justice, citing the Supreme Court's principles in the case of Collector, Land Acquisition v. Mst. Katiji, which advocate for a pragmatic approach in condoning delays to avoid injustice.

Conclusion:
The Tribunal allowed the appeals for statistical purposes, remitting the issue of the allowability of deduction under section 54B back to the Commissioner of Income-tax (Appeals) for fresh consideration. The penalty levied under section 271(1)(c) was deleted, emphasizing that the Assessing Officer failed to prove deliberate concealment or furnishing of inaccurate particulars by the assessee. The Tribunal's decision ensures that the matters are decided on merits rather than technicalities, promoting substantial justice.

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