2015 (2) TMI 285 - AT - Income Tax

Penalty u/s 271(1)(c) - profits from sale and purchase of agricultural land shown as capital gain instead of profits and gains from business - CIT(A) deleted levy - Held that - If complete details of transaction has been revealed by the assessee in its return of income, then penalty u/s 271(1)(c) of the Act will not be imposable just because the claims of the assessee are found to be legally not allowable. In the instant case, the assessee furnished all particulars of purchase and sale of agricultural land which brought profit to the assessee. During the quantum proceedings, the AO treated the profit as business profit instead of capital gains as claimed by the assessee, therefore, by any stretch of imagination, it cannot be held that the assessee has furnished inaccurate particulars of its income or has concealed particulars of its income. We further hold that merely because the assessee proposed the impugned profits from sale and purchase of agricultural land as capital gain but the AO assessed the same under the head of profits and gains from business and profession, in this situation, penalty u/s 271(1)(c) of the Act is not imposable as in any case, it cannot be said that the assessee has furnished inaccurate particulars of its income or has concealed particulars of its income before the AO during quantum proceedings. Thus, the CIT(A) was right in deleting the penalty imposed by the AO and we are unable to see any valid reason to interfere with the impugned order of the CIT(A) in this regard. - Decided in favour of assessee.

Summary

Issues:
- Appeal against order of CIT(A) deleting penalty under section 271(1)(c) of the Income Tax Act.
- Assessment of income treating agricultural income as business income.
- Justification for penalty imposition under section 271(1)(c).
- Comparison of judicial decisions on penalty imposition.
- Disclosure of all particulars of transactions by the assessee.

Analysis:
1. The appeals were filed by the revenue challenging the order of CIT(A) deleting the penalty under section 271(1)(c) of the Income Tax Act for the assessment year 2006-07. The revenue contended that the penalty was erroneously deleted by the CIT(A) in both appeals.

2. The core issue revolved around the treatment of agricultural income by the Assessing Officer as business income rather than capital gains as claimed by the assessee. The penalty proceedings were initiated under section 271(1)(c) based on the Assessing Officer's view that the assessee had concealed income particulars by claiming the land transaction as exempt from tax under section 2(14) of the Act.

3. The CIT(A) relied on various judicial precedents to conclude that the assessee had not concealed any particulars of income or furnished inaccurate particulars of income with a mala fide intention to evade tax. The CIT(A) found that the assessee had disclosed all relevant details in their income tax returns, and the penalty under section 271(1)(c) was not justified.

4. The Tribunal upheld the CIT(A)'s decision, emphasizing that the mere rejection of the assessee's claim does not amount to concealment of income particulars. The Tribunal highlighted that if the assessee had disclosed complete transaction details in the return of income, the penalty under section 271(1)(c) would not be applicable even if the claims were legally not allowable.

5. The Tribunal further noted that the Assessing Officer's treatment of the profits as business income instead of capital gains, as claimed by the assessee, did not warrant penalty imposition under section 271(1)(c). The Tribunal concurred with the CIT(A)'s decision to delete the penalty, stating that there was no evidence of the assessee furnishing inaccurate particulars of income or concealing income details.

6. Ultimately, the Tribunal dismissed the revenue's appeals, affirming the CIT(A)'s order to delete the penalty under section 271(1)(c) in favor of the assessee. The decision was based on the principle that the assessee had provided all necessary transaction details, and the penalty could not be imposed solely based on the rejection of the assessee's claims during the assessment proceedings.