2020 (1) TMI 609 - AT - Income Tax

Tribunal upholds penalty for concealed income, remands land asset classification for further review

Mukesh Ramchandra Patel Versus Deputy Commissioner of Income-tax, Circle 1 (2), Ahmedabad

Mukesh Ramchandra Patel Versus Deputy Commissioner of Income-tax, Circle 1 (2), Ahmedabad - TMI Issues Involved:1. Legitimacy of penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961.2. Applicability of Explanation 5A to Section 271(1)(c).3. Consideration of agricultural land as a capital asset under Section 2(14) of the Income-tax Act.Issue-wise Detailed Analysis:1. Legitimacy of Penalty Imposed under Section 271(1)(c):The primary issue revolves around the penalty of Rs. 23,47,735 imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income-tax Act, 1961. The penalty was based on the assessee's undisclosed income of Rs. 1,13,96,770, which was admitted during a search operation conducted under Section 132. The AO concluded that the assessee had concealed particulars of income, invoking Explanation 5A to Section 271(1)(c).2. Applicability of Explanation 5A to Section 271(1)(c):The assessee argued that Explanation 5A could not be invoked merely on the basis of a statement under Section 132(4) admitting undisclosed income. The assessee contended that no money, bullion, jewellery, or assets representing the undisclosed income were found during the search. However, the Tribunal noted that loose papers indicating the sale of land and receipt of cash were found, which constituted direct evidence of undisclosed income. The Tribunal referenced a similar case (ITA No. 2662/Ahd/2017) and upheld the AO's decision, stating that the case fell within the scope of Explanation 5A. Thus, the assessee was deemed to have concealed particulars of income.3. Consideration of Agricultural Land as a Capital Asset:The assessee claimed that the land sold was agricultural and not a capital asset under Section 2(14) of the Income-tax Act, implying no capital gains tax was applicable. This contention was raised in the note appended to the return and during submissions before the CIT(A). The Tribunal acknowledged that penalty proceedings are independent and the assessee could argue against the imposition of penalty on legal or factual grounds. The Tribunal directed the AO to verify whether the land in question was an agricultural land not falling within the definition of a capital asset. If found to be agricultural, no penalty would be imposed. The AO was instructed to decide the issue in accordance with the law, ensuring no prejudice to either party.Conclusion:The Tribunal upheld the penalty under Section 271(1)(c) concerning the applicability of Explanation 5A, rejecting the assessee's first contention. However, it allowed the second contention for statistical purposes, remanding the issue of whether the land was a capital asset to the AO for further examination. The appeal was thus partly allowed for statistical purposes.