2017 (4) TMI 457 - HC - Income Tax

Penalty under section 271(1)(c) - exigibility to capital gains tax - Transfer exigible to tax by reference to Section 2(47)(v) of the Income Tax Act, 1961 read with Section 53-A of the Transfer of Property Act, 1882 - JDA entered by assessee - Held that - The matter is no longer res integra. In C.S.Atwal s case 2015 (7) TMI 878 - PUNJAB & HARYANA HIGH COURT concluded that Section 53A of 1882 Act, by incorporation, stood embodied in section 2(47)(v) of the Act and all the essential ingredients of Section 53A of 1882 Act were required to be fulfilled. In the absence of registration of JDA dated 25.02.2007 having been executed after 24.09.2001, the agreement does not fall under Section 53A of 1882 Act and consequently Section 2(47)(v) of the Act does not apply. In view of cancellation of JDA dated 25.02.2007, no further amount has been received and no action thereon has been taken. It was urged that as and when any amount is received capital gains tax shall be discharged thereon in accordance with law. In view of the aforesaid stand, while disposing of the appeals, we observe that the assessee appellants shall remain bound by their said stand. The issue of exigibility to capital gains tax having been decided in favour of the assessee, the question of exemption under Section 54F of the Act would not survive any longer and has been rendered academic. Thus as quantum proceedings have been adjudicated in favour of the assessee. Once that is so, no penalty under section 271(1)(c) of the Act would be exigible. - Decided in favour of assessee.

Summary

Issues:
Identical issues in ITA Nos. 41, 67, and 92 of 2016 regarding penalty deletion for undisclosed capital gain.

Analysis:
1. Facts and Background: The appellant-revenue filed ITA No.67 of 2016 under Section 260A of the Income Tax Act, 1961 against the ITAT's order for the assessment year 2007-08. The primary issue revolved around penalty deletion for undisclosed capital gain.

2. Assessment and Penalty Proceedings: The respondent-assessee, an individual, was a member of a Housing Society that entered into a Joint Development Agreement (JDA) for land development. The Assessing Officer computed capital gains based on the JDA terms, leading to penalty proceedings under section 271(1)(c) of the Act.

3. Appellate Proceedings: The CIT(A) and Tribunal upheld the penalty deletion, citing unresolved issues and delayed construction. The Tribunal relied on previous decisions and the interpretation of sale consideration for tax liability.

4. Judicial Precedents: The High Court referred to the C.S.Atwal case, emphasizing the applicability of Section 2(47)(v) and (vi) of the Act in determining taxable capital gains. The Court concluded that no further capital gains tax was due based on the cancellation of the JDA and non-receipt of additional amounts.

5. Decision and Ruling: The Court dismissed the revenue's appeals, affirming that penalty under section 271(1)(c) was not applicable due to the favorable quantum proceedings' outcome for the assessee. The judgment reiterated the binding nature of the assessee's stand on tax liability upon future receipt of amounts.

6. Conclusion: The Court's decision aligned with the previous rulings on the applicability of tax laws and the non-exigibility of penalty under the circumstances. The judgment provided a comprehensive analysis of the legal and factual aspects, ultimately upholding the penalty deletion and dismissing the revenue's appeals.