2019 (5) TMI 745 - AT - Income Tax

Penalty u/s 271(1)(c) - capital gain addition - Transfer of land through JDA - reopening of assessment - HELD THAT - Reopening was done on the basis of information on particular issue of transfer of land through JDA, it was incumbent upon the assessee to come with clean hands and disclose the entire transaction in the return of income and voluntarily offer the capital gain tax on the amount actually received by the assessee as consideration for the sale of part of the land through registered deed. As rightly observed by the CIT(A) that in this case bonafide credentials of the assessee have not been established. Even after reopening of the assessment, assessee did not choose to declare the income actually received by the assessee on the amount of ₹ 15,00,000/- received as sale consideration. Hence, the penalty in respect of concealment of income on the capital gains earned by the assessee on the amount of ₹ 15,00,000/- received as sale consideration is liable to be confirmed. However, the penalty in respect of the remaining amount levied by the Assessing Officer by way of computing the capital gain on accrual basis is liable to be deleted - Appeal of the assessee is partly allowed.

Summary

Issues:
Confirmation of penalty under Section 271(1)(c) of the Income Tax Act, 1961 by the ld. CIT(A) based on the Assessing Officer's levy.

Analysis:
The appellant contested the penalty of ?39,84,065 imposed by the Assessing Officer under Section 271(1)(c) of the Income Tax Act, 1961, which was upheld by the ld. CIT(A). The case involved the appellant's membership in a Housing Society, which entered into a joint development agreement with developers. The total consideration for the transfer of land was disputed, leading to the computation of capital gains income at ?1,77,47,197 by the Assessing Officer, who then initiated penalty proceedings. The appellant argued that the quantum addition on accrual basis was deleted by the Hon'ble Punjab and Haryana High Court and further confirmed by the Supreme Court, making the penalty inapplicable to the hypothetical income. However, the penalty was deemed applicable to the ?15,00,000 actually received by the appellant as sale consideration for part of the land transferred through a registered deed.

The appellant's contention that the issue of when to report the income was debatable and that there was no concealment was dismissed. It was emphasized that upon the reopening of assessment, the appellant should have disclosed the entire transaction and voluntarily offered capital gains tax on the amount received. Failure to do so, especially regarding the ?15,00,000 received as sale consideration, indicated a lack of bona fide intentions. Consequently, the penalty for concealing income related to the capital gains earned on the ?15,00,000 sale consideration was upheld, while the penalty for the remaining amount based on accrual basis was deleted.

In conclusion, the appeal was partly allowed, with the penalty upheld for the actual sale consideration received by the appellant but deleted for the remaining amount calculated on accrual basis.