PRINCIPAL COMMISSIONER OF INCOME TAX 2 vs. SANJAY SUVALAL JAISWAL

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TAXAP/284/2018HC GujaratGJHC24019819201804 April 2018Bench: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no question of law arose from the ITAT's order. The Tribunal had confirmed the deletion of the penalty by the Commissioner (Appeals) based on the facts presented. The assessee had initially claimed exemption under Section 54F based on a registered agreement to purchase land. However, the deal did not materialize as the vendor failed to clear encumbrances. The assessee had voluntarily withdrawn this claim during the assessment proceedings. The Tribunal found that since the assessee withdrew the claim during the assessment proceedings itself, the deletion of the penalty by the CIT(A) was justified. The High Court found no reason to interfere with the ITAT's decision and dismissed the appeal. The ratio decidendi is that if an assessee voluntarily withdraws an exemption claim during assessment proceedings before any adverse findings, the imposition of penalty under Section 271(1)(c) may not be sustainable.

What were the facts?

The Revenue, Principal Commissioner of Income Tax 2, is in appeal against an order of the Income Tax Appellate Tribunal (ITAT) dated October 9, 2017. The appeal concerns a penalty of Rs. 63,47,000 levied by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was deleted by the Commissioner (Appeals) and this deletion was upheld by the ITAT. The assessee, Sanjay Suvalal Jaiswal, had reported long-term capital gain of Rs. 8.58 crores from the sale of four plots of land. He initially claimed exemption of Rs. 4.70 crores under Sections 54F and 54B of the Act, based on a registered agreement to purchase land for Rs. 2.81 crores on September 25, 2009, with the intention to construct a bungalow. However, the land acquisition deal failed because the vendor could not clear encumbrances. The assessee withdrew his claim for exemption during the assessment proceedings.

What were the issues?

1. Whether the Appellate Tribunal has erred in law and on facts in holding that the CIT(A) rightly deleted the penalty levied by the Assessing Officer under Section 271(1)(c) of the Act amounting to Rs. 63,47,000? Assessee's contentions: The assessee argued that he had made a claim for exemption under Section 54F based on a registered agreement to purchase land. However, the deal subsequently fell through due to the vendor's failure to clear encumbrances. Consequently, the assessee voluntarily withdrew the exemption claim during the assessment proceedings. The penalty was therefore unjustified. Revenue's contentions: The Revenue contended that the ITAT erred in confirming the deletion of the penalty. The penalty was levied for concealment of income or furnishing inaccurate particulars, and the Revenue likely argued that the initial claim for exemption, even if withdrawn, constituted an attempt to claim undue benefit, warranting the penalty.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 54F,Section 54B

AI-generated summary — verify with the full judgment below

C/TAXAP/284/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 284 of 2018 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX 2 Versus SANJAY SUVALAL JAISWAL ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA

Date : 04/04/2018 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Revenue is in appeal against the judgement of the Income Tax Appellate Tribunal dated 09.10.2017 raising following question for our consideration: “Whether the Appellate Tribunal has erred in law and on facts in holding that CIT(A) has rightly deleted the penalty levied by the Assessing Officer u/s. 271(1)(c) of the Act amounting to Rs. 63,47,000?” 2. The issue pertains to penalty imposed by the Assessing Officer under section 271(1)(c) of the Act which was deleted by the Commissioner (Appeals) and such appellate order was confirmed by the Tribunal. 3. The Tribunal, in the impugned judgement, noted that the assessee had sold four pieces of land which resulted into long Page 1 of 2

C/TAXAP/284/2018 ORDER term capital gain of Rs. 8.58 crores (rounded off). Out of this amount, the assessee had claimed exemption for an amount of Rs. 4.70 crores (rounded off) under section 54F and B of the Act. During the assessment proceedings, the assessee withdrew such claim. He pointed out that after selling the land for Rs. 8.70 crores, he proposed to construct a bungalow out of such funds. For such purpose, he had executed a registered agreement to sale dated 25.09.2009 with the land owners to purchase a land for a sale consideration of Rs. 2.81 crores. Six cheques totaling to Rs. 2.81 crores were handed over. The agreement provided that after presenting the first cheque for a sum of Rs. 11 lacs, the vendor would get the land acquired of all encumbrances. However, since the vendor failed to do so, the entire deal fell through. The assessee pointed out that since the registered agreement to sale was executed on 25.09.2009, he had made a claim under section 54F of the Act. Subsequently, however, as the events developed, the deal did not go through. The assessee therefore, had withdrawn the claim during the assessment proceedings itself. It was in view of such facts the Tribunal confirmed the order of Commissioner of Appeals deleting the penalty. 4. We find no reason. No question of law arises. Tax Appeal is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) JYOTI V. JANI Page 2 of 2

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