2016 (7) TMI 503 - AT - Income Tax

Penalty u/s 271(1)(c) - assessee has failed to offer short term capital gains derived from the property given for development and called the explanation - Held that - We find that though the assessee has not disclosed short term capital gains in the original return filed, however, the assessee along with the return of income filed a balance sheet as on 31.3.2009, wherein he specifically mentioned, the amount received from the developer (paper book page no.14) and the same was explained before the A.O. (paper book page no.35). It is also the case of the assessee that notice u/s 148 of the Act was served on the assessee on 20.7.2012. However, the revised return of income filed on 16.7.2012 before receiving the notice issued by the A.O. u/s 148 of the Act and it is submitted that the revised return filed by the assessee is voluntary. The A.O. has acted upon the return filed by the assessee accepted the capital gains. Therefore, the A.O. cannot initiate the proceedings on the ground that assessee has concealed the income. We find that there is a lot of force in the argument of Ld. Counsel for the assessee. That apart the assessee has disclosed the amount received by him along with the return of income, which was also explained to the A.O. Keeping in view of the above, by considering the facts and circumstances of the case, we are of the opinion that it is not a fit case to impose penalty u/s 271(1)(c) of the Act. - Decided in favour of assessee

Summary

Issues involved:
Assessment of short term capital gains, Penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961, Interpretation of law regarding declaration of capital gains, Disclosure of income in revised return, Concealment of income, Appellate proceedings before CIT(A) and Tribunal, Judicial precedents on taxability of capital gains.

Assessment of Short Term Capital Gains:
The appellant, engaged in construction business, filed a return for the assessment year 2009-10 admitting a total income. The Assessing Officer (A.O.) completed the assessment determining the total income. Subsequently, a survey revealed undeclared income from a development agreement. The appellant revised the return, admitting short term capital gains. The A.O. accepted the revised return, completing the assessment. The issue raised was whether the capital gains should have been declared at the time of the development agreement or receipt of sale consideration.

Penalty Proceedings under Section 271(1)(c):
The A.O. initiated penalty proceedings alleging concealment of income. The appellant contended that the revised return was voluntary, submitted before receiving a notice under section 148 of the Act. The A.O. levied the penalty, stating the income was disclosed only after detection by the department. The CIT(A) upheld the penalty, citing non-disclosure in the original return. However, the Tribunal held that the appellant's disclosure in the revised return, along with the balance sheet, indicated no concealment, canceling the penalty.

Interpretation of Law Regarding Declaration of Capital Gains:
The appellant argued uncertainty regarding the timing of charging capital gains. The Tribunal noted conflicting views on this matter. The Allahabad High Court held capital gains are chargeable only on receipt of sale consideration. The Bombay High Court decisions emphasized the importance of complete disclosure and bonafide claims, stating penalties are not justified in such cases.

Disclosure of Income in Revised Return:
The appellant filed a revised return admitting short term capital gains before receiving a notice under section 148. The A.O. accepted the revised return, indicating voluntary disclosure. The Tribunal considered this voluntary disclosure and the submission of relevant documents, concluding that there was no concealment of income.

Concealment of Income:
The A.O. alleged concealment as the appellant did not disclose the capital gains in the original return. However, the Tribunal noted that the appellant disclosed the amount received from the developer in the balance sheet filed with the return. The Tribunal found no concealment as the appellant voluntarily disclosed the income before any notice was received.

Appellate Proceedings before CIT(A) and Tribunal:
The appellant appealed before the CIT(A) and then the Tribunal against the penalty imposed for alleged concealment of income. The CIT(A) upheld the penalty, but the Tribunal, after considering all submissions and relevant precedents, concluded that the penalty was not justified, allowing the appeal.

Judicial Precedents on Taxability of Capital Gains:
The Tribunal referenced various High Court decisions regarding the taxability of capital gains. These decisions emphasized the importance of complete disclosure, bonafide claims, and the timing of charging capital gains based on receipt of sale consideration. The Tribunal, in alignment with these precedents, canceled the penalty imposed on the appellant.

This detailed analysis of the judgment highlights the issues involved, the arguments presented, and the conclusions reached by the authorities and the Tribunal, providing a comprehensive understanding of the legal aspects and interpretations involved in the case.