2021 (12) TMI 1245 - AT - Income Tax

Penalty u/s 271(1)(c) - non disclosure of capital gain on sale of land in the income tax return - Land sold by co-owners - HELD THAT - Admittedly, the capital gain was not shown by the assessee in the income tax return. The land was sold by the assessee along with the co-owners. The impugned land was sold by the assessee along with the co-owners for ₹ 56 Lacs but the same was valued for the purpose of the stamp duty at ₹ 58.55 Lacs. The share of income of the assessee under the head capital gain was worked out by the authorities below taking the sale consideration of ₹ 58.55 Lacs under the provisions of section 50C of the Act which is a deeming provision. Thus the amount of profit worked out, as attributable to the assessee, was containing 2 elements. One of the element was the actual sale consideration as per the sale deed i.e. ₹ 14 Lacs (56 Lacs/4) and deemed sale consideration of ₹ 63750 (2.55 Lacs/4) only. It is an admitted fact that there cannot be any penalty on the profit calculated for the assessee based on deeming section/fiction. The land in dispute was acquired dated 25 April 1977 at ₹ 36,915.00 which was taken as the cost of acquisition for the purpose of computing the capital gain capital gain whereas the assessee was given option to take the fair market value of the impugned land as on 1 April 1981 as the cost of acquisition under the provisions of section 55(2)(b) of the Act. However we find that none of the authority below has pointed out in their respective orders whether the assessee was given the opportunity to take the value as on 1 April 1981 as the cost of requisition for the purpose of the capital gain. Generally, the rate of the land increases year after year. Thus, the value of the property in dispute, acquired in the year 1977, should have increased as on 1 April 1981 which should have been taken as the cost of acquisition. Thus, no prudent assessee will take the cost of requisition as applicable for the year 1977 when the property was acquired until and unless the facts and circumstances suggest otherwise. But nothing is available on record, neither the revenue has carried out any exercise to find out the actual value of the property as on 1st April 1981. Thus, the revenue is not expected to derive any benefit out of the ignorance of the assessee. We are of the view that there was no deliberate act on part of the assessee to conceal/furnish inaccurate particulars of income. Therefore, we are of the view that the penalty levied by the AO and sustained by the ld. CIT(A) is not maintainable. Hence we direct the AO to delete the penalty imposed u/s. 271(1)(c) - Decided in favour of assessee.

Issues Involved:

1. Confirmation of penalty levied under section 271(1)(c) of the Income Tax Act, 1961.
2. Non-disclosure of long-term capital gain on the sale of property.
3. Application of section 50C of the Income Tax Act.
4. Determination of deliberate concealment of income by the assessee.
5. Consideration of fair market value as on 1 April 1981 for cost of acquisition.

Issue-wise Detailed Analysis:

1. Confirmation of Penalty Levied Under Section 271(1)(c) of the Income Tax Act, 1961:
The primary issue raised by the assessee was the confirmation of the penalty levied by the Assessing Officer (AO) amounting to ?2,16,162 under section 271(1)(c) of the Act. The penalty was imposed on the grounds that the assessee concealed income related to the sale of land. The AO initiated penalty proceedings during the assessment and concluded that the assessee had not disclosed the capital gain in her return of income, which constituted concealment of income.

2. Non-disclosure of Long-term Capital Gain on the Sale of Property:
The assessee, an individual, had filed her return of income declaring ?1,82,320. She jointly owned a piece of land with three co-owners, which was sold for ?56 Lacs, valued for stamp duty at ?58,55,000. The assessee did not disclose any income under the head capital gain in her return. The AO added ?14,10,039 as long-term capital gain, later confirmed by the CIT(A) at ?9,52,775. The assessee argued that she disclosed all facts during assessment proceedings and did not conceal any information.

3. Application of Section 50C of the Income Tax Act:
The AO computed the long-term capital gain based on the sale consideration as per section 50C, a deeming provision, which considers the stamp duty value as the sale consideration. The assessee contended that the addition was made under section 50C, which is a deeming provision, and thus, no penalty should be levied.

4. Determination of Deliberate Concealment of Income by the Assessee:
The Tribunal examined whether the assessee had a deliberate intent to conceal income. It was noted that the assessee did not disclose the capital gain in her return, which implied concealment. However, the Tribunal referred to the Supreme Court’s judgment in Dilip N. Shroff vs. JCIT, which emphasized that concealment implies a deliberate act or omission with dishonest intent. The Tribunal found no evidence of mala fide intent or deliberate concealment by the assessee.

5. Consideration of Fair Market Value as on 1 April 1981 for Cost of Acquisition:
The Tribunal observed that the land was acquired on 25 April 1977 at ?36,915, taken as the cost of acquisition. The assessee had the option to consider the fair market value as on 1 April 1981 under section 55(2)(b) of the Act. The Tribunal noted that the authorities did not consider this option, which could have increased the cost of acquisition and reduced the capital gain. The Tribunal emphasized that the revenue should not benefit from the assessee’s ignorance.

Conclusion:
The Tribunal concluded that there was no deliberate act of concealment by the assessee. The penalty under section 271(1)(c) was deemed not maintainable, and the AO was directed to delete the penalty. The appeal of the assessee was allowed, and the order was pronounced in the Court on 20/12/2021 at Ahmedabad.

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