COMMISSIONER OF INCOME TAX, GANDHINAGAR vs. BABUBHAI ISHWARBHAI PATEL

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TAXAP/392/2018HC GujaratGJHC24011251201825 April 2018Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA3 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal deleted the penalty of Rs. 29,64,948 levied under Section 271(1)(c) of the Act. The assessee had initially not offered capital gains from the sale of agricultural land but later filed a revised return and surrendered the income. The assessee's defense was based on a bona fide belief that such income was not taxable as capital gains, a belief he claimed was formed under the guidance of his Chartered Accountant. The Tribunal, in accepting this defense, relied on the Supreme Court judgment in CIT vs. Reliance Petroproducts reported in 322 ITR 158. The reasoning was that the assessee's explanation was found reasonable and accepted in light of attendant circumstances, including the fact that other co-owners of the land also promptly corrected their tax positions. The High Court found no substantial question of law arising from the Tribunal's order. The appeal was dismissed.

What were the facts?

The Revenue is in appeal against the Income Tax Appellate Tribunal's order dated 20.06.2017. The appeal concerns a penalty of Rs. 29,64,948 levied by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961. For assessment year 2009-10, the assessee sold agricultural lands but initially did not offer the proceeds to capital gains tax in his return. However, during the assessment proceedings, the assessee filed a revised return, surrendered the income as capital gains, and claimed a bona fide belief that such income was not taxable as capital gains, stating he was guided by his Chartered Accountant. The Commissioner of Income Tax (Appeals) and the Tribunal deleted the penalty.

What were the issues?

1. Whether the Appellate Tribunal has erred in law and on facts of the case in deleting the penalty of Rs. 29,64,948 levied by the AO under Section 271(1)(c) of the Act? Assessee's Contention: The assessee contended that he was under a bona fide belief that the income from the sale of agricultural land was not taxable as capital gains. He claimed to have been guided by his Chartered Accountant in this regard. This belief led to the initial omission to offer the income to tax. Revenue's Contention: The Revenue's appeal implies a disagreement with the deletion of the penalty, suggesting that the assessee's explanation was not sufficient to warrant the deletion. The Revenue likely argued that the omission constituted concealment or furnishing of inaccurate particulars, attracting the penalty under Section 271(1)(c).

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/TAXAP/392/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 392 of 2018 ========================================================== COMMISSIONER OF INCOME TAX, GANDHINAGAR Versus BABUBHAI ISHWARBHAI PATEL ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 25/04/2018

ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI)

1.

Revenue is in appeal against the judgment of the Income   Tax   Appellate   Tribunal   dated   20.06.2017 raising   following   substantial   question   for   our consideration. “Whether the Appellate Tribunal has erred in law and on facts of the case in deleting the penalty of Rs.29,64,948/­ levied by the A.O. u/s.271(1) (c) of the Act?”

2.

The   issue   pertains   to   penalty   under   section 271(1)(c) of the Income Tax Act, 1961 ('the Act' for short) imposed by the Assessing Officer but, deleted by the  Commissioner of Income Tax (Appeals)  and the Tribunal.

3.

The   record   would   show   that   during   the   period C/TAXAP/392/2018 ORDER relevant to assessment year 2009­10, the assessee had sold   certain   agricultural   lands   but   in   the   return filed,   had   not   offered   the   proceeds   thereof   to capital gain.  However, during the assessment itself, he   filed   the   revised   return   and   surrendered   such income to capital gain and also contended that he was under the  bona­fide  belief that such income was not In   case   of   co­owner,   while   rejecting   the Revenue's   appeal   against   the   deletion   of   penalty, under   similar   circumstances,   following   observations were made:

“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 C/TAXAP/392/2018 ORDER the land who had similarly not disclosed the income   in   their   returns,   also   paid   their taxes.

3.

In the penalty proceedings, the defense of the assessee was that he was under bona­ fide  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.

4.

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   vis­a­vis   taxability   of income.

5.

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

5.

In   the   result,   present   Tax   Appeal   is   also dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH

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