2017 (5) TMI 62 - AT - Income Tax

Taxable capital gains on sale of property - Addition in the hands of the appellant - Held that - Assessee failed to dispute the fact that the assessee was one of the 15 co-owners of the immovable property in question fetching total consideration price of 30 lacs wherein his share was that of 2 lacs only. We therefore conclude that both the lower authorities have rightly made the impugned addition in assessee s hands. Penalty u/s 271(1)(c) - Held that - It is evident in this factual backdrop that the Assessing Officer s scrutiny revolved around AIR information disclosing the assessee to have acted as power of attorney of the other fourteen co-owners in acting as the sole vendor receiving entire sale consideration of 30 lacs. The fact however remains that his share therein was of 2 lacs only. We therefore conclude that the lower authorities have erred in proceeding to impose the impugned penalty by treating the said AIR information and subsequent developments as the foundation for holding the assessee to have concealed his income. It is further not clear as to how the entire sale consideration of 2 lacs would be treated as assessee s income since the same is either capital gains or business income to be subjected to the appropriate computation under respective heads. Be that is it may we grant the assessee benefit of doubt as he was not there sole owner of the property in question. We therefore direct the Assessing Officer to delete the impugned penalty in question

Summary

Issues:
1. Assessment of capital gains addition in quantum appeal.
2. Imposition of penalty under Section 271(1)(c) in penalty appeal.

Analysis:
1. Assessment of Capital Gains Addition:
- The case involved two appeals for the assessment year 2008-09 regarding capital gains addition. The first appeal pertained to the quantum case where the Assessing Officer added &8377; 30 lacs as capital gains, later restricted to &8377; 2 lacs by the CIT(A).
- The Assessing Officer received information about an immovable property transaction by the assessee, leading to the addition of &8377; 30 lacs as income in the assessment order. The assessee, being one of the fifteen members of a registered organization, contested this addition.
- The CIT(A) concluded that the property was jointly held by 15 members, including the appellant, and directed the addition to be restricted to &8377; 2 lacs in the assessee's hands. The remaining capital gains were to be taxed in the hands of the other co-owners.

2. Imposition of Penalty under Section 271(1)(c):
- The penalty appeal challenged the correctness of the penalty of &8377; 62,000 imposed under Section 271(1)(c) for the capital gains addition of &8377; 2 lacs. The Assessing Officer and CIT(A) considered this addition as concealment of income by the assessee.
- The penalty was based on the assessee acting as the power of attorney for the other co-owners in the property transaction. However, the actual share of the assessee was only &8377; 2 lacs out of the total consideration of &8377; 30 lacs.
- The Tribunal found that the lower authorities erred in imposing the penalty as the entire sale consideration could not be treated as the assessee's income. The Tribunal granted the benefit of doubt to the assessee, considering he was not the sole owner of the property, and directed the deletion of the penalty.

In conclusion, the former appeal regarding the capital gains addition was dismissed, while the latter appeal challenging the penalty imposition was allowed. The Tribunal pronounced the judgment on April 28, 2017.