2019 (4) TMI 1508 - AT - Income Tax

Penalty u/s 271(1)(c) - Sale of land - nature of land sold - assessee disclosed all the true facts relating to the land - alleged that assessee concealed the income or filed inaccurate particulars of income - HELD THAT - It is an admitted fact that the assessee sold the agricultural land for a sum of ₹ 3 lacs. A.O. has taken market value/stamp duty value at ₹ 7 lacs and difference of ₹ 4 lacs was added to the income of the assessee under the provisions of clause (vii) of sub-section (2) of section 56. The said land was not an asset as per the definition provided u/s 2(14) which defines the capital asset. The provisions contained in sub-section (14) of section 2 of the Act clearly state that the agricultural land beyond the municipal area is not to be included in the definition of capital asset. In the present case, the A.O. added the notional value i.e. the difference in actual consideration and stamp duty value, in the hands of the assessee under the head income from other sources . In the instant case, the assessee disclosed all the true facts relating to the land and nothing was concealed, therefore, it may be a good case for making addition since there was difference between the actual consideration and the stamp duty value. It is well settled that the penalty proceedings are different and distinct from the assessment proceedings. In the present case, it cannot be said that the assessee had concealed income or furnished inaccurate particulars of his income. Considering the peculiar facts of this case, in my opinion, it is not a good case where penalty u/s 271(1)(c) of the Act may be levied - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act, 1961 for alleged difference in property valuation.

Analysis:
The appeal concerned the imposition of a penalty of ?1,23,600 under section 271(1)(c) of the Income Tax Act, 1961, related to the sustenance of a penalty by the Assessing Officer (A.O.) for a difference in valuation of a property purchased by the assessee. The A.O. added ?4,00,000 to the taxable income of the assessee under the head "Income from other sources" due to the variance between the stamp duty value and the purchase consideration of the land. The assessee contended that the property was agricultural land outside the municipal area and did not qualify as a capital asset under section 2(14) of the Act, hence the addition and subsequent penalty were incorrect.

The primary issue raised by the assessee was whether the addition under section 56 of the Act could have been made for the alleged difference in property valuation. The assessee argued that since the property was agricultural land outside the municipal limit, it did not fall under the definition of capital assets as per section 2(14) of the Act. The assessee maintained that the addition was erroneous and, therefore, challenging the penalty imposed under section 271(1)(c) was legally sustainable.

In the detailed submissions, the assessee emphasized that the disclosed facts were accurate and that no attempt to conceal income or provide inaccurate particulars was made. The assessee highlighted that the property was correctly classified as agricultural land and did not meet the criteria for capital assets. The contention was supported by legal interpretations and judgments to establish the correctness of the assessee's position.

The Commissioner of Income Tax (Appeals) (CIT(A)) upheld the penalty, asserting that the appellant had accepted the valuation of the property during the assessment proceedings and failed to declare the deemed income under section 56(2)(vii)(b)(ii) of the Act. However, the subsequent appeal argued that the property was not a capital asset and, therefore, the penalty was unjustified. The appellate authority acknowledged the factual discrepancies and ruled in favor of the assessee, concluding that the penalty under section 271(1)(c) was unwarranted in this case.

In the final judgment, the appellate tribunal concurred with the assessee's contentions, emphasizing that the property in question did not meet the definition of a capital asset under the Act. The tribunal noted that the penalty proceedings were distinct from the assessment proceedings and, based on the disclosed facts and legal interpretations, concluded that the penalty under section 271(1)(c) was not justified. Accordingly, the tribunal allowed the appeal, and the penalty imposed by the A.O. and sustained by the CIT(A) was deleted.