2017 (7) TMI 959 - HC - Income Tax

Penalty under Section 271(1) (c) - Transfer exigible to tax by reference to Section 2(47)(v) of the Income Tax Act, 1961 read with Section 53-A of the Transfer of Property Act, 1882 - JDA entered by assessee - Held that - Learned counsel for the appellant has not been able to controvert the applicability of the decision rendered in C.S. Atwal s case (2015 (7) TMI 878 - PUNJAB & HARYANA HIGH COURT ) and that no capital gains on unrealized amount would accrue or arise to the assessee. Once that is so, no penalty under Section 271(1) (c) of the Act would be exigible. The substantial questions of law claimed in this appeal are answered in favour of assessee.

Summary

Issues:
1. Appeal against deletion of penalty for undisclosed capital gain
2. Interpretation of long term capital gain tax provisions

Issue 1: Appeal against deletion of penalty for undisclosed capital gain

The appellant-revenue filed an appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal (ITAT) deleting the penalty imposed on the assessee for undisclosed capital gain. The primary question raised was whether the ITAT was correct in deleting the penalty when the assessee had not fully disclosed the accrued capital gain. The ITAT had upheld the addition made on account of long term capital gain, and the matter was pending before the Supreme Court. The appellant contended that inaccurate particulars of income were furnished by the assessee, leading to the penalty imposition. The Tribunal had relied on a previous High Court order in a similar case to delete the penalty, which was the subject of contention in this appeal.

Issue 2: Interpretation of long term capital gain tax provisions

The case involved a Joint Development Agreement (JDA) where the assessee transferred land to a developer in exchange for consideration. The dispute centered around the calculation of long term capital gain tax on the total consideration received by the assessee. The Assessing Officer had added a significant amount to the capital gain declared by the assessee, leading to the penalty imposition under Section 271(1)(c) of the Act. However, the CIT(A) and the Tribunal had ruled in favor of the assessee, citing a previous High Court decision that influenced the outcome. The High Court analyzed the provisions of Section 2(47) of the Act, the applicability of Section 53A of the Transfer of Property Act, and the concept of possession in such transactions. The Court concluded that no further capital gains would accrue to the assessee on the unrealized amount, thereby dismissing the appeal and upholding the deletion of the penalty.

In summary, the High Court dismissed the appeal by the appellant-revenue, upholding the deletion of the penalty for undisclosed capital gain by the ITAT. The judgment provided a detailed analysis of the long term capital gain tax provisions, emphasizing the interpretation of relevant statutory provisions and case law. The Court's decision was influenced by a previous case involving similar issues, where it was established that no additional capital gains would arise for the assessee. The judgment clarified the applicability of tax laws in transactions involving property transfers and highlighted the importance of accurate disclosure of income to avoid penalties under the Income Tax Act.