2018 (4) TMI 873 - AT - Income Tax

Penalty u/s 271(1)(c) - deduction u/s 54B claimed - as per AO payment was made after due date of filing of return - Held that - In order to show his bona fide the assessee has produced details of payment made to the vendors. The assessee has produced their identity, copy of sale deed and copies of receipts executed by the vendors. To our mind, a layman could easily habour a belief that since he has already invested total capital gain in purchase of new agriculture land, therefore, there might not be any liability of tax qua alleged capital gain. It is a different matter that he has not challenged additionas well as the ld.AO has adopted a different methodology for denying benefit to the assessee. But his explanation was not proved to be false by the Revenue. He has substantiated his explanation with the help of details of payments, copies of sale deed as well as receipts of payments executed by vendors. As far as case law referred by the ld.DR is concerned, it is altogether on different facts. The assessee had short term capital gain on sale of land which was wrongly claimed as long term capital gain by substituting year of acquisition as 1999 instead of 2004 and said mistake was not brought to the notice of AO suo moto. In this background penalty was confirmed. Here question was whether at the time of filing of return, the assessee could harbor a belief that there is no long term capital gain tax liability upon the assessee. Thus the assessee could easily harbor a belief that there was no long term tax liability upon him. It is a different matter that a belief did not meet approval of the AO. In view of the above discussion, we are of the view that assessee does not deserves to be visited with penalty. - Decided in favour of assessee

Summary

Issues Involved:
1. Whether the assessee deserves to be visited with penalty under section 271(1)(c) of the Income Tax Act, 1961 or not.

Detailed Analysis:

1. Penalty under Section 271(1)(c) of the Income Tax Act, 1961:

Facts of the Case:
The assessee filed a return of income declaring total income at ?31,30,820/-. The return was processed under section 143(1) of the Act. Upon scrutiny, it was revealed that the assessee sold agricultural land for ?3,53,48,750/- but did not disclose the long-term capital gain from the sale. The assessee claimed deductions under sections 54B and 54F, asserting investments in new agricultural land and a residential house. The AO accepted the claim under section 54F but partially disallowed the claim under section 54B, leading to a computed long-term capital gain of ?84,76,976/-. Consequently, the AO initiated penalty proceedings under section 271(1)(c) and imposed a penalty of ?17,45,845/-. The appeal to the CIT(A) did not bring any relief.

Assessee's Argument:
The assessee argued that section 54B allows investment in a capital asset within two years from the sale of agricultural land. The land was sold on 24.05.2012, and the assessee made investments in new agricultural land within the permissible period. The AO accepted payments made before the return filing due date but disallowed later payments. The assessee contended that the belief in no capital gain liability due to these investments was bona fide and supported by details of payments and vendor identities.

Revenue's Argument:
The Revenue argued that the assessee did not disclose the long-term capital gain in the return of income, and had the case not been scrutinized, no addition would have been made. Therefore, the penalty was justified. The Revenue relied on the ITAT, Pune Bench decision in ACIT Vs Vinay A Joneja, where a similar penalty was upheld.

Tribunal's Analysis:
The Tribunal examined section 271(1)(c) and its explanation, emphasizing the conditions for imposing a penalty for concealment or furnishing inaccurate particulars of income. The Tribunal noted that the assessee's belief in no capital gain liability due to investments in new agricultural land was bona fide, supported by payment details and vendor identities. The addition resulted from the AO not accepting payments made after the return filing due date. The Tribunal distinguished this case from the Vinay A Joneja case, where the facts were different.

Conclusion:
The Tribunal concluded that the assessee could harbor a bona fide belief that there was no long-term capital gain tax liability due to the investments made. The explanation provided by the assessee was substantiated with relevant details and was not proven false by the Revenue. Therefore, the penalty under section 271(1)(c) was not warranted. The Tribunal allowed the assessee's appeal and deleted the penalty.

Order:
The appeal of the assessee is allowed, and the penalty is deleted. The order was pronounced on 13th April 2018 at Ahmedabad.