2009 (4) TMI 206 - AT - Income Tax

Summary

Issues Involved:
1. Penalty under section 271(1)(c) of the IT Act for concealment of income and furnishing inaccurate particulars of income.
2. Long-term capital gain on surrender of rights.
3. Long-term capital gain on sale of flats.
4. Income from interest.
5. Claim of deduction under section 54.

Detailed Analysis:

1. Penalty under Section 271(1)(c) of the IT Act:
The assessee filed a return declaring a loss of Rs. 48,240 for the assessment year 1995-96. However, the Assessing Officer (AO) made additions totaling Rs. 9,47,99,851 for long-term capital gains (LTCG) on the sale of flats, surrender of rights, and income from interest. The AO initiated penalty proceedings under section 271(1)(c) for concealment of income and issued a notice under section 274 read with section 271(1)(c). The assessee argued that all disclosures were made and that the matter was sub-judice. The CIT(A) confirmed the additions and the penalty. The Tribunal also dismissed the assessee's appeal.

2. Long-term Capital Gain on Surrender of Rights:
The assessee entered into an agreement on 29th September 1986 for acquiring rights in a property called Divya Prabha. Later, the assessee sold his 50% undivided share in the joint venture for Rs. 1.73 crores plus Rs. 1.65 crores towards expenses incurred. However, the assessee terminated this agreement due to the lack of consent from the co-owner. Subsequently, the assessee entered into an MoU with Gaurav Overseas (P) Ltd. (GOPL) for transferring the rights in Divya Prabha for Rs. 9.44 crores. The assessee did not treat this amount as income due to a pending suit for specific performance filed by Shri Tejraj Gowani. The Bombay High Court rejected Gowani's plea for specific performance, confirming that the assessee transferred his rights to GOPL in the relevant year, making the capital gains taxable in the assessment year 1995-96. The AO, CIT(A), and Tribunal held that the assessee concealed income by not offering the capital gains for tax.

3. Long-term Capital Gain on Sale of Flats:
The assessee claimed deduction under section 54 for Rs. 88,22,250, asserting that he entered into an agreement to purchase a new flat. However, the possession of the flat was not given within the stipulated period. The CIT(A) and Tribunal found that the assessee did not purchase a new residential house within two years as required under section 54 and thus furnished inaccurate particulars to evade tax. The penalty on this amount was confirmed.

4. Income from Interest:
The assessee did not disclose interest income of Rs. 10,57,601 earned from fixed deposits made out of the sale proceeds of the capital assets. The AO rejected the assessee's explanation that the principal amount did not belong to him, and thus the interest also did not belong to him. The CIT(A) and Tribunal upheld the AO's decision, confirming that the assessee concealed the interest income.

5. Claim of Deduction under Section 54:
The assessee claimed a deduction under section 54 for Rs. 88,22,250 without furnishing evidence of acquiring a new residential house. The CIT(A) and Tribunal found that the assessee did not purchase a new house within the two-year period required under section 54 and thus made a false claim to evade tax. The penalty on this amount was upheld.

Conclusion:
The Tribunal confirmed the penalty levied by the AO under section 271(1)(c) for concealment of income and furnishing inaccurate particulars of income. The assessee's appeal was dismissed, and the penalties on long-term capital gains from the sale of flats and surrender of rights, as well as on the undisclosed interest income, were upheld. The Tribunal emphasized that the assessee failed to discharge the onus of proving that his case did not fall within the mischief of section 271(1)(c).