2019 (9) TMI 1074 - AT - Income Tax

Penalty u/s 271(1)(c) - STCG in the hands of the assessee u/s 50 - HELD THAT - It is the claim of the assessee that as neither the block of asset of the gala had ceased to exist during the year under consideration, nor the full value of consideration received or accruing as a result of transfer of the aforesaid gala exceeded the modified actual cost of the assets falling within the said block of assets, therefore, no STCG on the sale of the said gala viz. Sadhana Industrial Estate did arise in the hands of the assessee as per the mandate of Sec.50 of the Act. We find that the aforesaid new line of argument which was for the very first time raised by the assessee while assailing the penalty imposed u/s 271(1)(c) before the CIT(A), was however rejected by the appellate authority for the reason that the said claim of the assessee was not discernible from the facts available on record. CIT(A) had categorically observed that the assessee had failed to file the balance sheet or the schedule of fixed the assets to support its aforesaid claim. CIT(A) declined to summarily accept the aforesaid unsubstantiated claim of the assessee and upheld the penalty imposed by the A.O u/s 271(1)(c) of the Act. We find that even before us the ld. A.R had adopted a similar approach and except for reiterating his aforesaid claim, had however, failed to place on record the requisite material which would irrefutably support the factual position so claimed by him. Admittedly, we are principally in agreement with the claim of the ld. A.R and are persuaded to subscribe to his claim that in the backdrop of the aforesaid facts as had been canvassed by him before us, no STCG would arise in the hands of the assessee under Sec. 50 of the Act. We cannot remain oblivious of the fact that the said claim of the assessee which is bereft of any supporting documentary evidence that would substantiate the veracity of its aforesaid claim, cannot be summarily accepted on the very face of it. We thus, in all fairness, are of the considered view that the matter requires to be revisited by the A.O. In case the aforesaid factual position as had been demonstrated by the assessee before us is found to be in order, then the penalty imposed by the A.O under Sec. 271(1)(c) shall stand vacated. We thus in terms of our aforesaid observations for the aforesaid limited purpose restore the matter to the file of the A.O for fresh adjudication. - Appeal of the assessee is allowed for statistical purposes

Summary

Issues:
1. Penalty under Sec. 271(1)(c) for suppressed Short Term Capital Gain (STCG) on sale of property.
2. Justification for not disclosing STCG and challenging penalty imposition.
3. Relevance of Sec. 50 of the Income Tax Act in determining STCG.
4. Lack of supporting evidence for the claim regarding STCG calculation.

Issue 1: Penalty under Sec. 271(1)(c) for suppressed STCG:
The appeal was against the order imposing a penalty under Sec. 271(1)(c) for concealing STCG of ?52,45,526 related to the sale of a gala. The AO imposed the penalty as the assessee did not disclose the sale transaction in the return of income. The CIT(A) upheld the penalty, leading to the appeal.

Issue 2: Justification for not disclosing STCG and challenging penalty imposition:
The appellant argued that no STCG arose from the sale of the gala as it did not exceed the aggregate WDV of the block of assets. Due to counsel's failure to substantiate this claim, the appellant faced a tax liability. The appellant contended that penalty proceedings are distinct from assessment proceedings and challenged the penalty imposition.

Issue 3: Relevance of Sec. 50 of the Income Tax Act in determining STCG:
The appellant relied on Sec. 50 of the Act to support the claim that no STCG arose from the sale of the gala. The appellant cited a High Court order to reinforce this argument. The Departmental Representative, however, supported the penalty imposition based on non-disclosure of the sale transaction.

Issue 4: Lack of supporting evidence for the claim regarding STCG calculation:
The appellant's claim regarding the non-existence of STCG was rejected by the CIT(A) due to insufficient evidence. The appellate authority noted the absence of supporting documentation, such as the balance sheet or fixed assets schedule. The absence of concrete evidence led to the penalty being upheld.

In the final judgment, the Tribunal allowed the appeal for statistical purposes, indicating that the matter required further review by the AO to ascertain the validity of the appellant's claim. If the factual position presented by the appellant is substantiated, the penalty under Sec. 271(1)(c) will be revoked. The case was restored to the AO for fresh adjudication based on the lack of supporting evidence for the claim made by the appellant.