2019 (7) TMI 359 - AT - Income Tax

LTCG - period of holding - possession of property taken earlier after payment of consideration - registration of property made subsequently - HELD THAT - Registration of the property which was acquired by the assessee in the F.Y. 1994-95 though executed in the Year 2005 by way of a registered deed is of no significance. Under Section 53A of the Transfer of Property Act, when the possession of the said immovable property has been taken over by the assessee in part performance of a contract, the transfer is complete. The assessee ultimately sold out the property on 04.10.2008. The assessee is thus holding the property for more than 36 months before selling out the same to third party in the Year 2008. Thus, working out of the capital gain as Short Term Capital Gain considering the acquisition of the property in the previous year of its registration rather than the same in the previous year i.e. 1994-95 when the agreement was executed and the appellant paid the consideration for such acquiring of all right title and interest over the property as done by the Learned AO rightly found not justified by the Learned CIT(A). - ground of revenue dismissed Deduction u/s 54 - HELD THAT - The case made out by the assessee towards Long Term Capital Gain on the ground of holding the property for more than 36 months before the sale of the same in the year 2008 and the plea taken by the assessee regarding wrong claim u/s 54D instead of 54 as well as the mistake towards description of the property and registering the deed of rectification with the office of the Sub-registrar from land to residential house with land appurtenant thereto and after careful consideration of the remand report and the reply filed by the assessee thereto particularly the deed of rectification which was taken into consideration by Learned CIT(A) u/s 46A we find no infirmity in allowing the prayer of the appellant by the Learned CIT(A) which, according to us clear and specific and without any ambiguity so as to warrant interference.Thus the same is hereby upheld. Consequently, the appeal fails and is accordingly dismissed. Agriculture income - AO treated undisclosed business - assessee is in possession of 568.87 bighas of land - HELD THAT - In the absence of the detail and/or evidences regarding the agricultural expenditure the reasonable expenditure of 40% of the value of crop has been estimated and determined by the Learned CIT(A) resulting to agricultural expenditure of ₹ 9,43,324/- being 40% of ₹ 23,58,310/- seems to be rational and thus acceptable. Therefore the difference of ₹ 3,08,014/- (17,23,000 14,14,986) i.e. around 3,00,000/- as has been treated as income of the appellant on undisclosed source and not from agricultural activities found to be acceptable and without any ambiguity. Hence we decline to interfere with the order impugned and the same is hereby upheld. In the result, Revenue s appeal is dismissed. Penalty u/s. 271(1)(c) -agriculture income of ₹ 17,23,000/- treated as unaccounted business income - subsequently reduced by CIT(A) at ₹ 3 lakhs - HELD THAT - We find no merit in imposing penalty in the present facts and circumstances of the case when the quantum order has been passed restricting the disallowance to the tune of ₹ 3,00,000/- only on estimated basis. Further that in the absence of any conclusive evidence to establish concealment of particular of income penalty on estimated basis is not permissible in the eye of law. In that view of the matter, we are of the considered opinion that this is not a fit case for levy of concealment penalty. Penalty on such estimated disallowance is this, liable to be quashed. We, therefore, direct to delete the same. Assessee s appeal is, thus, allowed.

Summary

Issues Involved:

1. Classification of capital gain as long-term or short-term.
2. Eligibility for deduction under Section 54 of the Income Tax Act.
3. Treatment of agricultural income.
4. Imposition of penalty under Section 271(1)(c) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Classification of Capital Gain:
The primary issue was whether the income from the sale of a property should be treated as long-term capital gain (LTCG) or short-term capital gain (STCG). The assessee acquired rights and possession of the property in January 1995 and registered the sale deed in November 2005. The property was sold in October 2008. The Assessing Officer (AO) treated the gain as STCG, arguing that the holding period was less than 36 months from the date of registration. However, the CIT(A) and the Tribunal concluded that the property was held for more than 36 months from the date of acquisition of rights in 1995, thus qualifying the gain as LTCG. The Tribunal upheld the CIT(A)'s decision, emphasizing the expanded definition of "transfer" under Section 2(47)(v) of the Income Tax Act and Section 53A of the Transfer of Property Act.

2. Eligibility for Deduction under Section 54:
The second issue was whether the assessee was eligible for a deduction under Section 54 of the Act. Initially, the assessee claimed a deduction under Section 54D, which was rejected by the AO. The CIT(A) allowed the deduction under Section 54 after the assessee rectified the mistake and registered a rectification deed changing the property description from "land" to "residential house with land appurtenant thereto." The Tribunal upheld the CIT(A)'s decision, noting that the rectification was a bona fide mistake and the legitimate claim for deduction should not be treated as a colorable device.

3. Treatment of Agricultural Income:
The third issue involved the treatment of agricultural income. The assessee declared agricultural income of ?17,23,000, which the AO treated as business income due to a lack of supporting evidence. The CIT(A) partially accepted the assessee's claim, treating ?3,00,000 as business income and the balance ?14,23,000 as agricultural income. The Tribunal upheld this decision, finding the estimation of agricultural expenditure at 40% of the crop value reasonable and in line with the principle of consistency.

4. Imposition of Penalty under Section 271(1)(c):
The final issue was the imposition of a penalty under Section 271(1)(c) for furnishing inaccurate particulars of income. The AO imposed a penalty of ?16,86,851, which was confirmed by the CIT(A). However, the Tribunal found no justification for the penalty, noting that the addition was made on an estimated basis and there was no conclusive evidence of concealment of income. The Tribunal referred to the jurisdictional High Court's decision in a similar case, where penalty on estimated additions was not upheld. Consequently, the Tribunal directed the deletion of the penalty, allowing the assessee's appeal.

Conclusion:
In conclusion, the Tribunal upheld the CIT(A)'s decisions on the classification of capital gain as LTCG, eligibility for deduction under Section 54, and partial acceptance of agricultural income. The Tribunal also quashed the penalty imposed under Section 271(1)(c), emphasizing the lack of conclusive evidence for concealment of income. The revenue's appeal was dismissed, and the assessee's appeal was allowed.