2021 (8) TMI 78 - AT - Income Tax

Penalty u/s 271(l)(c) - Capital gain on sale of land - nature of land sold - capital asset or agricultural land - HELD THAT - Reading the words inaccurate and particulars in conjunction they must mean the details supplied in the return which are not accurate not exact or correct not according to truth or erroneous. In this case there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case there would be no question of inviting the penalty under s. 271(l)(c). A mere making of the claim which is not sustainable in law by itself will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. The assessee had furnished all the details of its expenditure as well as income in its return which details in themselves were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure which claim was not accepted or was not acceptable to the Revenue that by itself would not attract the penalty u/s 271(l)(c). If the contention of the Revenue is accepted then in case of every return where the claim made is not accepted by AO for any reason the assessee will invite penalty u/s 271(l)(c). That is clearly not the intendment of the legislature.- Decided in favour of assessee.

Summary

Issues involved:
1. Confirmation of penalty under section 271(1)(C) of the Income Tax Act.
2. Determining whether the sold land qualifies as a capital asset under the Income Tax Act.
3. Assessment of the appellant's bona fide belief regarding the taxability of capital gains.

Analysis:

Issue 1: Confirmation of penalty under section 271(1)(C) of the Income Tax Act
The appellant contested the penalty imposed under section 271(1)(C) by the Assessing Officer, arguing that the case was not covered by Explanation 3 to section 271(1)(C) as the appellant genuinely believed that the capital gain from the sale of agricultural land was not taxable. The appellant provided authentic evidence and case laws to support this belief. The Commissioner of Income Tax (Appeals) upheld the penalty, leading to the appeal before the ITAT. The ITAT considered the appellant's contention and analyzed whether the penalty was justified based on the appellant's bona fide belief regarding the taxability of the sold land.

Issue 2: Determining whether the sold land qualifies as a capital asset
The appellant, an agriculturist, argued that the land sold was not a capital asset as it was situated in an agricultural zone, supported by certificates from the Urban Development Department, Gram Sabha, and the Revenue Department. The appellant highlighted that the land did not fall under the definition of a capital asset as per section 2(14)(iii) of the Income Tax Act. The ITAT referred to precedents such as Chand Prabha Jain vs. ACIT and ITO Vs. H.A. Sodhan to assess whether the appellant had adequately proven that the land was not a capital asset. The ITAT considered the evidence presented by the appellant and evaluated the applicability of the capital gains tax in this context.

Issue 3: Assessment of the appellant's bona fide belief
The ITAT examined whether the appellant's belief that the sold land was not a capital asset was genuinely held and supported by reasonable evidence. Citing the case of CIT vs. Reliance Petro Products Pvt. Ltd., the ITAT emphasized that the mere making of a claim not sustainable in law does not amount to furnishing inaccurate particulars regarding income. The ITAT analyzed the appellant's submissions, including the certificates and letters provided, to determine the validity of the appellant's belief and whether the penalty under section 271(1)(C) should be upheld. Ultimately, the ITAT allowed the appeal, directing the Assessing Officer to delete the penalty based on the appellant's bona fide belief regarding the taxability of the capital gains.

This detailed analysis of the judgment addresses the issues involved comprehensively, outlining the legal arguments, evidence presented, and the ITAT's decision in each aspect of the case.