2019 (2) TMI 809 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - debatable issue - taxability of income and the year in which the income is to be taxed also in dispute - capital gain - Held that - The assessee has taken a different view and under the impression that the receipt is not taxable at all and even if it is taxable it is to be taxed in the subsequent assessment years i.e. 2011- 12 and the entire information was placed before the AO. AO did not make out a case of furnishing inaccurate particulars or concealment of income and the CIT(A) relied on the decision of Reliance Petro Chemicals, wherein, Hon ble Supreme Court held that merely because, the assessee had claimed the expenditure, the claim was acceptable or not acceptable to the revenue that by itself would not in our opinion attract the penalty 271(1)(c) of the Act. As relying on the decision of Hon ble High Court of Bombay in the case of Metal Rolling Works Limited Vs. CIT 2011 (10) TMI 29 - BOMBAY HIGH COURT , wherein held that once the receipt is disclosed, the assessee cannot be said to have concealed the particulars of income In the instant case, it is undisputed fact that the Hon ble High Court has admitted the appeal of the assessee with regard to quantum and the entire information is furnished by the assessee in the return of income. In view of the foregoing facts and circumstances of the case , we hold that in the instant case, the assessee has neither concealed the income nor furnished the inaccurate particulars of income, hence, there is no case for penalty u/s 271(1)(c). - Decided in favour of assessee

Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act.
2. Determination of the nature of the transaction (business income vs. capital gains).
3. Year of taxability of the income.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):
The primary issue revolves around whether the assessee concealed income or furnished inaccurate particulars, warranting the imposition of a penalty under Section 271(1)(c) of the Income Tax Act. The Assessing Officer (AO) imposed penalties of ?98,77,719 and ?1,14,72,375 on the assessees, arguing that they knowingly engaged in a transaction involving disputed property with the intent to profit, thus treating it as a business transaction. The AO concluded that the assessee's actions constituted concealment of income and furnishing inaccurate particulars.

However, the Commissioner of Income Tax (Appeals) [CIT(A)] and the Income Tax Appellate Tribunal (ITAT) found that the assessee had disclosed all relevant information and had a bona fide belief that the transaction was not taxable in the year under consideration. The CIT(A) and ITAT relied on the decisions in Reliance Petro Products Private Limited and other cases, concluding that the assessee neither concealed income nor furnished inaccurate particulars. Therefore, the penalty under Section 271(1)(c) was not justified.

2. Determination of the Nature of the Transaction:
The AO treated the transaction as an adventure in the nature of trade, thereby classifying the income under the head "business income." The AO's reasoning was based on the assessee's awareness of the litigation surrounding the property and the intention to profit from the transaction. The AO rejected the assessee's contention that it was a solitary transaction and not a business activity.

The CIT(A) upheld the AO's view, confirming that the transaction was an adventure in the nature of trade and taxable as business income. The ITAT also agreed with this classification, noting that the assessee's actions indicated a profit motive, which is characteristic of business transactions.

3. Year of Taxability of the Income:
The AO determined that the income was taxable in the assessment year 2008-09, as the assessee had received a substantial amount during the relevant previous year. The AO argued that the transaction reached finality in the previous year, making the income taxable in that year.

The assessee contended that the income should be taxed in the assessment year 2011-12, as the disputes regarding the property were not settled until then. The assessee believed that the income accrued only upon the settlement of disputes and the supplementary agreement in 2010. The CIT(A) and ITAT, however, upheld the AO's view, concluding that the income was taxable in the assessment year 2008-09, as the transaction was effectively completed in the previous year.

Conclusion:
The ITAT dismissed the revenue's appeals, affirming the CIT(A)'s decision to delete the penalties under Section 271(1)(c). The ITAT held that the assessee had disclosed all relevant information and had a bona fide belief regarding the non-taxability of the transaction in the year under consideration. The ITAT also confirmed the classification of the transaction as business income and its taxability in the assessment year 2008-09.

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