2022 (5) TMI 1336 - AT - Income Tax

Penalty levied u/s 271(1)(c) - addition of capital gain on account of transfer of land/acquisition of land - HELD THAT - The land transferred by individual assessee(s) does not falls in the Municipal Area. Hazira Notified area is not a Municipal area or deemed municipal area, therefore, the receipt/gain on transfer of land is not taxable under Income tax Act. Further, the assessees on their alternative pleas were also held eligible for exemption under section 10(37) of the Act as the land was compulsorily acquired by Government of Gujarat by completing statutory formalities under Land Acquisition Act, 1882. The land was used for agriculture purpose for two years prior to its acquisition. And the assessee(s) fulfilled all the requisite condition for seeking exemption under section 10(37) of the Act. The other addition made under the head capital gains against the cost of pucca structure, the assessee's were allowed 60% as cost of acquisition or cost of improvement, against the relief of 50% as allowed by Ld. CIT(A). Further, in some cases, the agricultural income offered by assessee(s) were treated as income from other sources has been held as income from agricultural activities . Thus, in quantum appeals all the assessee was granted substantial relief in deleting major part of additions and only part of capital gains only on account of cost of improvement on pucca structure was partly upheld on estimation basis. Therefore, all substantial additions were either deleted or upheld only on estimation basis. In our considered view no penalty under section 271(1)(c) of the Act is levieable on all the assessee(s). - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act, 1961 in Hazira Land Acquisition cases.

Analysis:

1. Background and Assessment Details:
The group of fifteen appeals pertained to penalty levied under section 271(1)(c) of the Income Tax Act, 1961 in Hazira Land Acquisition cases. The land of individual assessees was acquired by the Special Land Acquisition Officer for a company. The Assessing Officer made additions on account of Long Term Capital Gains, income from other sources, and agriculture income, leading to the imposition of penalties at 100% of tax sought to be evaded. The CIT(A) upheld the assessing officer's actions, prompting the appeals before the Tribunal.

2. Representation and Submissions:
While some appeals had no representation from the assessee, in others, the authorized representative argued that additions in the assessment were either deleted or sustained on an estimation basis. The representative highlighted that penalties in some cases had been deleted in earlier orders. The Departmental Representative supported the assessing officer and CIT(A)'s decisions.

3. Tribunal's Findings on Quantum Assessment:
Upon reviewing the submissions and lower authorities' orders, the Tribunal noted that the CIT(A) had upheld the addition of capital gains but reclassified income from other sources to income from capital gains. The Tribunal further analyzed the nature of the land transferred and found that it did not qualify as a 'capital asset' under the Income Tax Act. The Tribunal also recognized the assessees' eligibility for exemption under section 10(37) due to the land's compulsory acquisition for agricultural purposes.

4. Decision on Penalty Appeals:
The Tribunal concluded that no penalty under section 271(1)(c) should be levied on the assessees, as substantial relief had been granted in the quantum appeals. The additions were either deleted or upheld on an estimation basis. Consequently, the appeals against the penalty levied were allowed, and the order was placed in respective files.

5. Final Decision and Outcome:
On May 2, 2022, the Tribunal pronounced the order, granting relief to the assessees by allowing their appeals against the penalty under section 271(1)(c). The Tribunal's detailed analysis of the quantum assessment and penalty matters resulted in the decision to not impose penalties, considering the substantial relief granted in the case.

This comprehensive analysis of the judgment highlights the key issues, submissions, findings, and the final decision made by the Tribunal in the Hazira Land Acquisition cases regarding penalty under section 271(1)(c) of the Income Tax Act, 1961.