PRINCIPAL COMMISSIONER OF INCOME TAX 5 vs. ANILKUMAR KANAIYALAL PATEL

The Revenue is in appeal against the judgment of   the   Income   Tax   Appellate   Tribunal   dated 31.10.2017   raising   the   following   substantial question of law for our consideration; “(A) Whether   the   Appellate   Tribunal   is correct   in   law   and   fact   by   upholding   the decision   of   the   CIT(A)   and   deleting   the penalty of Rs.26,46,390/­ levied on account of not offering capital gain out of sale of agricultural land situated within 8 KM from municipal   limit   of   Ahmedabad   City   by considering that the assessee under bona fide belief and due to ignorance of law has not offered the same for taxation, applicability of section 271(1)(c) r/w. Section 274 of the Act arises or not ? C/TAXAP/471/2018 ORDER (B) Whether   the   Appellate   Tribunal   is correct in law and facts by relying its own decision   in   ITA   No.667/Ahd/2014   and   ITA No.1975/Ahd/2014 and deleting the penalty of Rs.26,46,390/­   levied   on   account   of   not offering   capital   gain   out   of   sale   of agricultural land situated within 8 KM from municipal   limit   of   Ahmedabad   City,   by considering   that   in   the   said   transaction three co­owners were involved and all these persons have not offered the said transaction for taxation due to bona fide intention and due to ignorance of law, the act of all the co­owners   including   assessee   should   be treated as same and said to be bona fide and due to ignorance of law or not ?”

The issue pertains to penalty imposed by the Assessing Officer u/s.271(1)(c) of the Income Tax Act,   1961,   which   was   deleted   by   the   Tribunal relying on its own order in case of a co­seller of   the   land.   Such   order   of   the   Tribunal   was carried by the Revenue before the High Court in Tax Appeal No.1051 of 2017, which was dismissed by making the following observations; “2. The   issue   pertains   to   penalty   under section  271(1)(c)  of  the  Act.  The  assessee had filed the return of income, in which, he had not offered to tax capital gain arising out of sale of agricultural land. When this was   noticed   by   the   Assessing   Officer,   the assessee   corrected   his   position   and unconditionally  offered  to  pay  tax  on  such income. Simultaneously, other coowners of the land   who   had   similarly   not   disclosed   the C/TAXAP/471/2018 ORDER income   in   their   returns,   also   paid   their taxes.

In the penalty proceedings, the defense of   the   assessee   was   that   he   was   under bonafide impression that such income was not assessable to capital gain since it was arose out of sale of agricultural land. He claimed that   he   was   guided   by   his   Chartered Accountant   and   carried   such   mistake   and belief.   This   defense   was   accepted   by   the Tribunal and penalty was dropped.

The explanation of the assessee was thus found reasonable and accepted by the Tribunal and   viewed   from   attendant   circumstances including  the  fact  that  the  other  coowners also promptly corrected their position vis­a­ vis taxability of income.

No question of law arises. Tax Appeal is dismissed.”

In the result, the Tax Appeal is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) PRAVIN KARUNAN