2016 (12) TMI 243 - AT - Income Tax

Penalty u/s. 271(1)(c) - non declearion of short term capital gain on sale of land - assessee has claimed that the assessee has sold agricultural land - Held that - The plea of the assessee that the land is an agricultural land lacks merit and is not borne out of the records and the assessee during assessment accepted that the land is not agricultural land but an industrial land. Thus, this explanation offered by the assessee that the said land was an agricultural land and hence not exigible to tax could not be held to be a bonafide explanation as the facts narrates a totally different story that the said land being under MIDC and a barren land having no source of water is not under cultivation , to take it out of ambit from the penalty provisions u/s 271(1)(c) of the Act. The plea of the assessee that the assessee has reduced the sale consideration of the said land from the Block of the asset is again and hence capital gains were not declared is again devoid of merits. The assessee held industrial land which was sold during the impugned assessment year and the land is not eligible for depreciation as per scheme of the Act . Thus, the contention of the assessee that the assessee reduced the sale consideration from the Block of asset is also not borne out from the records as on perusal of the financial statement of the financial year ended 31-03-2008 reveals that there was not block of asset created by the assessee for the land held by the assessee and this land was shown as separately under the schedule of investment(page 45/pb). The assessee has sold the said land vide sale deed executed in the previous year relevant to the impugned assessment year and also even during the succeeding assessment year, the assessee did not declare the said capital gain in the return of income filed with the Revenue. While on the other hand we order deletion of penalty levied by the authorities below on the allegation of tax sought to be evaded by the assessee on difference between full value of consideration as determined by DVO of ₹ 35.75 lacs and the actual sales consideration of ₹ 31.20 lacs as the same was brought to tax owing to deeming fiction created by Section 50-C of the Act and no evidence has been brought on record by the Revenue that any onmoney in excess of actual sale consideration of ₹ 31.20 lacs was actually received by the assessee which was not declared and disclosed to the Revenue in the return of income filed with the Revenue by the assessee.

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Application of Section 50C regarding the valuation of the sold property.
3. Determination of whether the land sold was agricultural or industrial.
4. Assessment of concealment of income and furnishing inaccurate particulars.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c):
The primary issue in this case is whether the penalty under Section 271(1)(c) of the Income Tax Act, 1961, was rightly imposed on the assessee. The Assessing Officer (AO) levied a penalty of ?4,50,368/- on the grounds that the assessee had concealed income and furnished inaccurate particulars by not disclosing short-term capital gains on the sale of land. The CIT(A) upheld this penalty, noting that the assessee failed to disclose the capital gains in both the original and revised returns of income. The Tribunal confirmed the penalty to the extent of the tax sought to be evaded on the difference between the actual sale consideration and the purchase price of the land, as the assessee could not provide a bona fide explanation for not declaring the capital gains.

2. Application of Section 50C:
Section 50C is a deeming provision that considers the stamp duty value as the full value of consideration for computing capital gains. In this case, the AO adopted the valuation determined by the District Valuation Officer (DVO) at ?35.75 lacs instead of the actual sale consideration of ?31.20 lacs. The Tribunal agreed with the assessee that penalty cannot be levied on the difference between the DVO valuation and the actual sale consideration unless it is shown that the assessee received an on-money in excess of the actual sale consideration. The Tribunal ordered the deletion of the penalty on the difference brought to tax owing to the deeming fiction created by Section 50C.

3. Determination of Whether the Land Sold was Agricultural or Industrial:
The assessee claimed that the land sold was agricultural and thus exempt from capital gains tax under Section 54B. However, the development agreement and other records indicated that the land was industrial, barren, and not under cultivation. The Tribunal found that the land was indeed industrial and within the Poona Municipality, thus not eligible for exemption under Section 54B. The explanation offered by the assessee was not considered bona fide, as the facts clearly showed that the land was industrial.

4. Assessment of Concealment of Income and Furnishing Inaccurate Particulars:
The AO noted that the assessee had not disclosed the capital gains from the sale of the land in the return of income. The CIT(A) and the Tribunal both observed that the assessee failed to disclose the transaction of purchase and sale of land and the capital gains earned thereon, which amounted to concealment of income. The Tribunal confirmed the penalty for concealment of income to the extent of the difference between the actual sale consideration and the purchase price. However, it ordered the deletion of the penalty on the difference between the DVO valuation and the actual sale consideration, as the addition was made due to the deeming fiction of Section 50C.

Conclusion:
The Tribunal partly allowed the appeal, confirming the penalty for concealment of income on the actual sale consideration but deleting the penalty on the difference due to the deeming fiction of Section 50C. The order was pronounced on 17th November, 2016.

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