2022 (7) TMI 117 - AT - Income Tax

Penalty u/s 271(1)(c) - allegation of concealment of income as assessee has not disclosed Capital Gain on sale of Land - assessee claimed that the penalty order has been passed beyond the statutory time limit mentioned in the Act - HELD THAT - Penalty Order was passed on 07/06/2018. The Assessment order u/s 143(3) was passed on 20/12/2017. The Penalty notice u/s 271(1)(c) was issued on 20/12/2017. There is no dispute on these dates. Thus, the penalty order was passed within Six(06) months of passing the assessment order. In the case under consideration Section 275(1)(c) will be applicable because there is no appeal against the additions made in the assessment order. The statutory time limit to pass the Penalty order is 6 months or end of the financial year whichever is later, if the assessee has not preferred any appeal against the additions made in the assessment order. It is observed that the Penalty Order was passed within Six(06) months of passing the assessment order. Hence it was passed withintime. Thus, the Ground No.1 of the appellant assessee is dismissed. Undisclosed LTCG - assessee submitted that the assessee has failed to offer the Capital gain under the bonafide belief that the land is outside the statutory limit of 8 kms hence the sale is not taxable as capital gain - As facts of the case as they exist at the time of penalty order, there is concealment of income by the assessee from sale of impugned land - assessee has now filed additional evidence to claim that the land is agricultural land and beyond 8 kms. Therefore, in the interest of justice, we set aside the Penalty levied on the issue of sale of impugned land to the file of the assessing officer with a direction to decide the issue afresh after giving opportunity to the assessee. Assessee is directed to file all the relevant documents before the AO - AO shall also verify from the returns and other documents whether the assessee had offered income from agricultural activity from the impugned land in earlier years. The Assessing Officer shall be at liberty to collect necessary evidence independently. We specifically mention here that we have gone through the Penalty notice issued by the AO, it was observed that the AO has struck off the appropriate words in the penalty notice. The Penalty Notice has been specifically issued for concealment of Income. AO has also levied the penalty for concealing the interest income of Rs.8414/-. We set aside this issue also to the file of the AO to decide a fresh after conducting necessary inquiries and after giving opportunity to the assessee. Thus, the Penalty Order under section 271(1)(c) of the Act is set aside and Assessee s Ground Nos.2 3 are allowed for statistical purpose.

Issues Involved:
1. Timeliness of the penalty order.
2. Bona fide belief regarding the non-taxability of capital gains.
3. Concealment of interest income.
4. Admission of additional evidence.

Detailed Analysis:

Issue 1: Timeliness of the Penalty Order
The appellant claimed that the penalty order was passed beyond the statutory time limit. The Penalty Order was passed on 07/06/2018, while the Assessment order under section 143(3) was passed on 20/12/2017, and the Penalty notice under section 271(1)(c) was issued on the same date. The relevant Section 275(1)(c) stipulates that the penalty order must be issued within six months or by the end of the financial year, whichever is later, if no appeal against the additions is made. The Tribunal found that the Penalty Order was passed within six months of the assessment order, thus within the statutory time limit. Consequently, Ground No.1 was dismissed.

Issue 2: Bona Fide Belief Regarding Non-Taxability of Capital Gains
The appellant argued that the capital gains were not disclosed under the bona fide belief that the land was situated beyond 8 km from the city limits and thus not taxable. The appellant also submitted additional documents to support this claim. However, the Tribunal noted that the appellant, being an experienced builder with expert support, should have been aware of the tax implications. The Tribunal found that the offer to disclose the capital gains was not voluntary but was made in response to the AO's notice. The Tribunal referenced the Supreme Court's decision in Dharmendra Textile Processor, emphasizing that wilful concealment is not necessary for penalty under section 271(1)(c). The Tribunal observed that the records indicated concealment of income. However, the Tribunal decided to set aside the penalty related to the sale of the land and remanded the issue back to the AO for fresh consideration, allowing the appellant to submit additional evidence.

Issue 3: Concealment of Interest Income
The AO also levied a penalty for concealing interest income of Rs. 8,414 received by the appellant. The Tribunal set aside this issue as well, directing the AO to conduct necessary inquiries and provide the appellant an opportunity to present their case.

Issue 4: Admission of Additional Evidence
The appellant submitted additional evidence to support the claim that the land was agricultural and beyond 8 km from the city limits. The Tribunal admitted this additional evidence and directed the AO to verify the appellant's claim, including whether income from agricultural activities was declared in previous years.

Conclusion:
The Tribunal dismissed Ground No.1, upheld the timeliness of the penalty order, and set aside the penalty related to the sale of the land and interest income for fresh consideration by the AO. Ground No.4 was dismissed as it was general in nature. The appeal was partly allowed for statistical purposes.

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