2015 (11) TMI 1378 - HC - Income Tax

Penalty under Sections 271(1)(b) and 27(1)(c) - undisclosed capital gain - when the petitioner being one of the co-sharer of the properties and when the proceedings initiated by the Income Tax Officer, Ward - I(1), Thanjavur was dropped as against the co-sharers, it is not justifiable on the part of the respondent to initiate action against the petitioner in respect of capital gains from the same properties - Held that - When the properties sold are being one and the same and the sellers are also one and the same, two different yardsticks cannot be adopted. That apart, since the issue, as far as the other owners are concerned, is one and the same, the petitioner s claim alone cannot be rejected. Without considering the said aspects, the respondent has passed the impugned orders. Hence, to give a quietus to this issue, in the interest of justice, the impugned assessment orders challenged in these writ petitions are liable to be interfered with. Accordingly, the impugned orders are quashed and the matters are remitted back to the respondent for passing orders afresh on merits and in accordance with law. The said exercise shall be completed within a period of six weeks from the date of receipt of a copy of this order. The petitioner is directed to forthwith file necessary income tax returns if not filed earlier before the respondent along with the necessary documents so as to substantiate her claim.

Issues involved:
Challenge to impugned order under Sections 271(1)(b) and 27(1)(c) of the Income Tax Act, disparity in treatment of co-sharers in penalty imposition, lack of counter affidavit by respondent.

Analysis:

Issue 1: Challenge to impugned order under Sections 271(1)(b) and 27(1)(c) of the Income Tax Act
The petitioner sought to quash the impugned order passed by the respondent under Sections 271(1)(b) and 27(1)(c) of the Income Tax Act. The petitioner's father had received notices from the Income Tax Officer regarding capital gains from the sale of properties belonging to multiple legal heirs. The Income Tax Officer accepted the explanation provided by the petitioner's father and dropped the proposal. However, the respondent proceeded to levy penalties against the petitioner, leading to the challenge before the court.

Issue 2: Disparity in treatment of co-sharers in penalty imposition
The main contention raised by the petitioner was the disparate treatment in penalty imposition. The petitioner, being one of the co-sharers of the properties, argued that it was unjustifiable for the respondent to initiate action against the petitioner when proceedings against other co-sharers had been dropped. The court noted that since the properties sold were the same and the sellers were also the same, consistent treatment should have been applied. The court found it unjust for the respondent to penalize the petitioner while granting relief to other legal heirs for the same set of facts.

Issue 3: Lack of counter affidavit by respondent
It is important to note that the respondent did not file any counter affidavit in response to the petitioner's claims. This lack of response may have influenced the court's decision to quash the impugned orders and remit the matters back to the respondent for fresh assessment. The court emphasized the need for a fair and thorough consideration of all aspects before passing orders, especially in cases involving multiple legal heirs and shared properties.

In conclusion, the High Court of Madras quashed the impugned orders and directed the matters to be remitted back to the respondent for a fresh assessment within six weeks. The petitioner was instructed to file necessary income tax returns and documents to substantiate her claim. The court disposed of the writ petitions without costs, highlighting the importance of fair and consistent treatment in tax assessments involving multiple legal heirs and shared properties.

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