2024 (4) TMI 203 - HC - Income Tax

Penalty imposed by the Settlement Commission u/s 271(1) (c) - Power of Attorney holder executed the sale deed of immovable property but return of income filed by the petitioner did not include the capital gains arising therefrom to any extent - as submitted no element of mens rea was alleged or established as neither the petitioner was aware of the sale of his property nor he has received any consideration through any mode nor the Revenue has made any allegations in that regard. also there is no evidence whatsoever of any amount having been received in excess of disclosed consideration HELD THAT - In the first place the assessee may never have been charged of practising concealment of material particulars of his income qua the proposed revision of Stamp Duty beyond Rs. 24, 50, 000/-. That liability came to be settled at Rs. 80, 43, 000/-. Since those facts had not unfolded they were not known to the petitioner. Consequently he could not have been saddled with a penalty for non-disclosure of such facts. The petitioner may never have been saddled to perform an impossible duty. A fact that was not know known to the petitioner may never have been disclosed by him. Second as to imposition of penalty corresponding to Stamp Duty assessed on value of sale consideration suffice to note that assessee had furnished explanation with respect to the same. According to the assessee he was not aware of the sale deed executed by his Power of Attorney holder By observing conduct of the petitioner as contumacious and that he had clearly furnished inaccurate particulars the Settlement Commission may never have substituted the requirement of reasoning with adjectives or by recording simple conclusion not supported by reasoning or finding as may lead to such conclusions. It was legally permissible to the Settlement Commission to consider imposition of the penalty under Section 271(1) (c) of the Act yet in the facts of the present case element of concealment of income was not established. Merely because addition may be made on the quantum side by invoking Section 50 C of the Act it did not itself establish that such estimated consideration had actually passed on to the petitioner . Therefore no conclusion of concealment may have arisen solely occasioned by that estimation of income by way of capital gains made by the Settlement Commission. In absence of any independent evidence to establish receipt of extra consideration and in absence of any finding to reject the fact explanation furnished by the petitioner both as to ignorance of the sale deed executed by his Power of Attorney and also with respect to the actual consideration received element of concealment was not established in the present case. Accordingly the writ petition succeeds in part. The levy of penalty u/s 271(1)(c) of the Act under the order dated 27.10.2010 passed by the Income Tax Settlement Commission is set aside. Decided in favour of assessee.

Summary

Issues Involved:
1. Challenge to the penalty imposed by the Income Tax Settlement Commission u/s 271(1)(c) of the Income-Tax Act, 1961.
2. Determination of capital gains and valuation of the property under Section 50C of the Act.
3. Allegation of concealment of income and furnishing of inaccurate particulars by the petitioner.

Summary:

1. Challenge to Penalty u/s 271(1)(c):
The petitioner challenged the order dated 27.10.2010 by the Income Tax Settlement Commission, which imposed a penalty u/s 271(1)(c) of the Income-Tax Act, 1961. The petitioner argued that there was no element of mens rea alleged or established, and no evidence of any amount received in excess of the disclosed consideration of Rs. 7,10,000/- was presented by the Revenue Authority. The court recognized that while the Settlement Commission could impose penalties, it must be based on established "concealment" or "inaccurate" particulars of income.

2. Determination of Capital Gains and Valuation of Property:
The petitioner purchased agricultural land on 26.06.1983 and executed a Power of Attorney on 15.01.2007, which led to the sale of the property on 05.02.2007 for Rs. 7,10,000/-. The petitioner filed a return for the Assessment Year 2007-08, disclosing an income of Rs. 98,750/- without including capital gains from the sale, claiming ignorance of the sale deed. The Stamp Valuation Authority initially valued the property at Rs. 24,50,000/- and later revised it to Rs. 2,22,98,000/-, which was eventually reduced to Rs. 80,43,000/- by the Board of Revenue.

3. Allegation of Concealment of Income:
The Settlement Commission found that the petitioner had computed capital gains at Rs. 21,00,000/- in the Settlement application, less than the stamp duty value of Rs. 24,50,000/-. The Commission noted that the petitioner persisted in showing the value of the land as Rs. 21,00,000/- and attempted to confuse the issue by claiming the land as stock in trade and invoking section 45(2). The Commission concluded that the petitioner furnished inaccurate particulars of income and imposed a penalty u/s 271(1)(c).

Court's Analysis and Conclusion:
The court observed that the Revenue had no knowledge of the sale transaction before the petitioner filed its return. The petitioner disclosed the sale deed and the valuation for stamp duty purposes in the Settlement application. The court held that the petitioner could not be penalized for non-disclosure of facts unknown to him at the time of filing. The explanation provided by the petitioner regarding the sale deed and consideration was not investigated or disbelieved by the Settlement Commission. The court emphasized that penalty under Section 271(1)(c) requires established concealment, which was not proven in this case. The court cited similar approaches by other High Courts and concluded that the element of concealment was not established. Consequently, the levy of penalty was set aside, and the writ petition was allowed in part, with no order as to costs.