2016 (9) TMI 495 - AT - Income Tax

Assessee not penalized for income disclosure delay; intent not to conceal income shown

Om Developers Versus Dy. Commissioner of Income Tax, Circle – 3, Pune

The Tribunal held that the penalty under Section 271(1)(c) of the Income Tax Act was not justified. The assessee's disclosure of income in the subsequent ... Levy of penalty u/s. 271(1)(c) - income/profits from sale of flats in Wing A and C of project ‘Meghsparsha’ developed by the assessee - Held that:- The Hon'ble Supreme Court of India in the case of Commissioner of Income Tax and Another Vs. Anwar Ali [ 1970 (4) TMI 1 - SUPREME Court ] has observed that the findings in the assessment proceedings may constitute good evidence in the penalty proceedings but it does not follow that penalty for concealment u/s. 271(1)(c) is mandatory whenever a addition or disallowance is made. Penalty u/s. 271(1)(c) is to be imposed where the assessee has concealed the particulars of income or furnished inaccurate particulars. For levy of penalty one of the important factors to be considered is the bonafide of assessee. In the present case we find that the assessee had disclosed the income/profits from sale of flats in Wing A and C in the subsequent assessment year. The assessee had filed return of income for assessment year 2006-07 declaring income from sale of flats in Wing A and C almost one year prior to the completion of assessment for assessment year 2005-06. Thus, there was no intention on the part of the assessee to withhold such income and not to pay tax thereon, therefore bonafide of assessee is proved. In such circumstances we are of the considered view that no penalty u/s. 271(1)(c) is leviable. Accordingly, the impugned order is set aside - Decided in favour of assessee Issues Involved:1. Levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961.2. Year of taxability of income from sale of flats in Wing A and C of the project Meghsparsha.3. Bonafide belief and intention of the assessee regarding the declaration of income.Detailed Analysis:1. Levy of Penalty under Section 271(1)(c):The primary issue is whether the penalty under Section 271(1)(c) for furnishing inaccurate particulars of income or concealment of income is justified. The assessee, a partnership firm engaged in construction, followed the project completion method to account for revenue. The Assessing Officer (AO) added profits from the sale of flats in Wing A and C of the Meghsparsha project to the income for the assessment year 2005-06, which the assessee had declared in the subsequent year. The AO levied a penalty of Rs. 52,27,549/- for alleged concealment or inaccurate particulars of income. The Commissioner of Income Tax (Appeals) upheld this penalty, leading the assessee to appeal to the Tribunal.2. Year of Taxability of Income:The core dispute revolves around the year in which the income from the sale of flats in Wing A and C should be taxed. The AO included this income in the assessment year 2005-06, arguing that the project was complete and possession was given before 31-03-2005. The assessee contended that the actual possession and transfer of ownership occurred in the financial year 2005-06, thus relevant to the assessment year 2006-07. The Tribunal upheld the AO's findings but restricted the addition to profits from 20 flats where investigations were conducted.3. Bonafide Belief and Intention of the Assessee:The assessee argued that the income was declared in the subsequent year under a bonafide belief. The completion certificate for Wing A and C was received on 17-03-2005, and possession was given after April 2005, supported by affidavits from allottees. The Tribunal noted that the assessee had disclosed the income in the assessment year 2006-07 and filed the return before the assessment for 2005-06 was completed, indicating no intent to suppress income. The Tribunal found that the assessee's actions could be seen as a postponement of tax liability rather than concealment.Conclusion:The Tribunal concluded that the penalty under Section 271(1)(c) was not justified. The assessee had disclosed the income in the subsequent year and paid the tax liability, showing no intention to withhold income. The Tribunal referenced the Supreme Court's ruling in Commissioner of Income Tax Vs. Reliance Petroproducts Pvt. Ltd. and similar cases, emphasizing that mere differences in the year of taxability do not warrant a penalty for concealment. The Tribunal set aside the impugned order and allowed the appeal, deleting the penalty.Order:The appeal of the assessee is allowed, and the penalty under Section 271(1)(c) is deleted. The order was pronounced on 01st August 2016.