2019 (3) TMI 1061 - AT - Income Tax

ITAT cancels penalty under Income Tax Act, emphasizing need for evidence of deliberate inaccuracies

Suresh Dutt Malhotra Versus Asstt. Commissioner of Income Tax, Panipat.

The Income Tax Appellate Tribunal (ITAT) set aside the penalty imposed under Section 271(1)(c) of the Income Tax Act, amounting to Rs. 93,97,840/-, as the ... Penalty u/s 271(1)(c) - sale proceeds of the agricultural land - capital gain tax - land sold by the assessee was a ‘capital asset’ within the meaning of section 2(14)(ii) and, therefore, the assessee was liable to capital gain tax - HELD THAT:- An identical issue had come up in the case of CIT vs. Rajeev Bhatara [2014 (2) TMI 71 - PUNJAB AND HARYANA HIGH COURT] wherein it was the assessee’s plea before the AO that no capital gain tax was imposable in his case as the property which he had sold was situated beyond 8 Kms from the municipal limits of Panipat. After collecting information regarding the distance from various authorities, the Assessing Officer came to the conclusion that the property was situated within 8 Kms of municipal limits of Panipat. Consequently, the Assessing Officer rejected the assessee’s claim and brought capital gain to tax and also levied penalty. While allowing the claim of the assessee, the ITAT noted that the assessee had furnished a certificate from the Sub Divisional Engineer wherein it was specified that the distance from the Panipat Municipal Board to the village where the impugned land was situated was 8.2 Kms. It was also noted by the Tribunal that there were various certificates wherein different distances had been mentioned. After considering the matter, the ITAT came to the conclusion that there was no intention on the part of the assessee to furnish inaccurate particulars of income. - Decided in favour of assessee. Issues Involved1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961.2. Determination of whether the land sold by the assessee qualifies as a 'capital asset' under Section 2(14) of the Income Tax Act.3. Validity of the certificates issued by the Tehsildar and the District Town Planning Officer regarding the distance of the land from municipal limits.4. Whether the assessee furnished inaccurate particulars of income.Issue-Wise Detailed Analysis1. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act, 1961The core issue revolves around the imposition of a penalty amounting to Rs. 93,97,840/- under Section 271(1)(c) for allegedly furnishing inaccurate particulars of income. The penalty was initially imposed by the Assessing Officer and subsequently upheld by the Commissioner of Income Tax (Appeals). The ITAT was approached to contest this penalty. The tribunal emphasized that penalty proceedings are distinct from assessment proceedings and require a fresh evaluation of evidence. Citing the Supreme Court's rulings in Hindustan Steel Ltd. v. State of Orissa and CIT v. Reliance Petroproducts (P.) Ltd., the tribunal noted that penalty cannot be automatically imposed based on findings in assessment proceedings and must be supported by primary evidence of concealment or furnishing inaccurate particulars.2. Determination of Whether the Land Sold Qualifies as a 'Capital Asset' Under Section 2(14)The assessee claimed that the land sold did not qualify as a 'capital asset' as it was situated beyond 8 Kms from the municipal limits of Panipat, based on a certificate from the Tehsildar. The Assessing Officer, however, relied on a certificate from the District Town Planning Officer, which stated that the land was 1.8 Kms from the extended municipal boundary, thus qualifying it as a 'capital asset' subject to capital gains tax. The tribunal highlighted that the discrepancy between the certificates indicated a difference of opinion rather than an attempt to furnish inaccurate particulars.3. Validity of Certificates Issued by the Tehsildar and the District Town Planning OfficerThe tribunal examined the conflicting certificates regarding the distance of the land from the municipal limits. The Tehsildar's certificate supported the assessee's claim, while the District Town Planning Officer's certificate contradicted it. The tribunal noted that such discrepancies do not necessarily imply that the assessee furnished inaccurate particulars. The reliance on the Tehsildar's certificate by the assessee was deemed reasonable, and the tribunal emphasized that the penalty proceedings should consider this context.4. Whether the Assessee Furnished Inaccurate Particulars of IncomeThe tribunal concluded that the assessee did not furnish inaccurate particulars of income. The details provided by the assessee were based on the Tehsildar's certificate, which was a legitimate document. The tribunal referenced the Supreme Court's decision in CIT v. Reliance Petroproducts (P.) Ltd., which held that making an incorrect claim in law does not amount to furnishing inaccurate particulars of income. The tribunal found that the assessee's claim was not accepted due to differing certificates but did not constitute furnishing inaccurate particulars.ConclusionThe ITAT set aside the order of the Commissioner of Income Tax (Appeals) and directed the Assessing Officer to delete the penalty of Rs. 93,97,840/- imposed under Section 271(1)(c). The tribunal emphasized that the penalty was not justified as the assessee had not furnished inaccurate particulars of income. The appeal of the assessee was allowed, and the order was pronounced in the open court on 09.01.2019.