2018 (6) TMI 1319 - AT - Income Tax

Penalty proceedings u/s.271(1)(c) - addition made on enhanced compensation on acquisition of land - Held that - Firstly, at the time of filing of original return of income assessee s claim for non taxability of Long Term Capital Gain was not bonafide as already a dispute was going on; and secondly, the investment in NABARD bonds was duly disclosed at the time of original return of income. Thus, it cannot be held that assessee has concealed any particulars of income or has furnished inaccurate particulars of income. We agree with the observation of the ld. CIT (A) that prior to judgment of Hon ble Supreme Court in the case of Ghanshyam (HUF) (2009 (7) TMI 12 - SUPREME COURT) there were many decisions of the Hon ble High Court wherein the year of taxability of enhanced compensation was highly debatable. This judgment of Hon ble Supreme Court had come after the closure of the financial year 31st March, 2009. Thus, at the time of filing of return of income assessee did have a bonafide belief and therefore, we do not find any infirmity in the order of the CIT (A) in deleting the penalty. Accordingly, the appeal filed by the Revenue is dismissed.

Summary

Issues:
1. Deletion of penalty on account of addition made on enhanced compensation on acquisition of land.
2. Bona fide belief of the assessee regarding taxability of enhanced compensation and investment in NABARD bonds.

Issue 1: Deletion of penalty on account of addition made on enhanced compensation on acquisition of land:
The appeal was filed by the Revenue and Cross Objection by the assessee against the order related to penalty proceedings u/s.271(1)(c) for the Assessment Year 2009-10. The Revenue contested the deletion of penalty of ?10,50,380/- concerning the addition made on enhanced compensation on land acquisition. The assessee received enhanced compensation for land acquired by Delhi Metro Rail Corporation, claiming exemption under 'capital gain.' The Assessing Officer denied the exemption, taxing the entire receipt. The first appeal upheld the penalty. However, the ld. CIT (A) deleted the penalty, considering the issue of taxability of compensation as debatable, citing various legal precedents. The Tribunal agreed with the ld. CIT (A), emphasizing the bona fide belief of the assessee regarding the taxability of the compensation, especially in light of pending litigation and conflicting judgments on the matter.

Issue 2: Bona fide belief of the assessee regarding taxability of enhanced compensation and investment in NABARD bonds:
The assessee, along with other co-owners, was awarded compensation for land acquisition. The Hon'ble Delhi High Court directed the release of the compensation, with interim orders and stays affecting the taxability. The assessee, believing the compensation to be non-taxable due to pending litigation, did not report it as Long Term Capital Gain. The investment in NABARD bonds was disclosed in the return of income. The Tribunal noted that the assessee's actions were based on a bona fide belief, considering the legal uncertainties at the time. The Tribunal agreed with the ld. CIT (A) that the penalty was unjustified, as the assessee did not conceal any income particulars or provide inaccurate information. The Tribunal dismissed the Revenue's appeal and the Cross Objection, considering the penalty deletion appropriate and the issue moot.

In conclusion, the Tribunal upheld the deletion of the penalty, emphasizing the bona fide belief of the assessee regarding the taxability of the enhanced compensation and the investment in NABARD bonds, amidst legal uncertainties and pending litigation. The Tribunal found no fault in the ld. CIT (A)'s decision, dismissing the Revenue's appeal and the Cross Objection as the penalty deletion was deemed justified and the issue became academic.