2019 (2) TMI 802 - AT - Income Tax

Penalty u/s. 271(1)(c) - AO has treated the income declared under capital gain as income from business which has resulted in the variation of amounts between returned and assessed income - Held that - We find that assessment in this case was completed u/s. 143(3) of the Act on 13.12.2011 wherein the AO treated the income arising out of sale of land declared by the assessee under the head capital gain as income from business. This change of head resulted in the levy of tax at higher rate on the appellant. CIT(A) has rightly observed that the basic premise i.e. the impugned income is to be taxed as business income and not as capital gain does not survive. Therefore, there is no ground for levy of penalty u/s. 271(1)(c) of the Act. Hence, Ld. CIT(A) correctly deleted the penalty of ₹ 6,35,91,247/-, which does not need any interference on our part, therefore, we uphold the action of the Ld. CIT(A) on the issue in dispute and reject the ground raised by the Revenue. - decided against revenue.

Summary

Issues:
- Penalty under section 271(1)(c) of the Income Tax Act, 1961 for wrongly declaring income as capital gain instead of business income.

Analysis:
1. Background: The Revenue filed an appeal against the Order of the Ld. CIT(A) concerning the assessment year 2009-10. The AO treated the income declared as capital gain as income from business, resulting in a penalty under section 271(1)(c) of the Act.

2. Penalty Proceedings: The penalty proceedings were initiated by the AO, alleging that the assessee tried to pay lesser tax by declaring income as capital gain instead of business income. The AO imposed a penalty of ?6,35,91,247 which was challenged by the assessee before the Ld. CIT(A).

3. Ld. CIT(A) Decision: The Ld. CIT(A) allowed the appeal of the assessee, stating that the income arising from the sale of land held as a capital asset should be assessed as long-term capital gain, not business income. This decision was based on the Tribunal's order and the High Court's decision.

4. Tribunal's Decision: The Tribunal upheld the Ld. CIT(A)'s decision, emphasizing that the income should be taxed as capital gain, not business income. The Tribunal referred to previous orders and held that there was no substantial question of law arising for consideration.

5. Conclusion: The Tribunal dismissed the Revenue's appeal, stating that the basic premise for taxing the income as business income did not hold after considering the Tribunal and High Court decisions. Therefore, the penalty under section 271(1)(c) was rightly deleted by the Ld. CIT(A), and the Tribunal upheld this decision, resulting in the dismissal of the Revenue's appeal.