SMT. PREMA DHATRI RAO,CHENNAI vs. JCIT, CHENNAI

All the income tax appeal and wealth tax appeals filed by the assessee are directed against the common order of the ld. Commissioner of Income Tax/Wealth Tax (Appeals) 12, Chennai dated 27.07.2016 relevant to 2 & W.T.A. Nos. 41 to 46/M/16 the assessment years 2001-02, 2002-03, 2003-04, 2004-05, 2005-06 and 2006-07 passed under section 271(1)(c) of the Income Tax Act as well as under section 18(1)(c) of the Wealth Tax Act levying penalty.

During the financial year 2003-04, the assessee sold a piece of land measuring 1 Acre and 33.5 cents, which has been used for agricultural purposes and the same had been duly mentioned in the tax return filed and claimed exemption. Subsequently, the case was selected for scrutiny and from the documents and details provided by the assessee during the assessment proceedings, the Assessing Officer has concluded that the land was situated within the stipulated limits of municipal limits and therefore, the sale transaction has been treated as sale of a capital asset and the capital gain tax has been imposed on the assessee. Since, the assessee has been carrying out the agricultural operations, she has considered the same as agricultural land and has been filing the Income tax return and Wealth tax return accordingly. Since, the appeals filed by the assessee before the CIT(A) and the Tribunal were decided against her, the Assessing Officer has initiated penalty proceedings and levied penalty under section 271(1)(c) of the Act as well as under section 18(1)(c) of the Wealth Tax Act for all the assessment years under consideration.

The assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee, the ld. CIT(A) was of the 3 & W.T.A. Nos. 41 to 46/M/16 opinion that since the assessee has not filed wealth tax return for the assessment years 2001-02 onwards voluntarily and only after service of notice under section 17 of the Act, she came forward to file her wealth tax return, the penalty levied by the Assessing Officer was confirmed.

On being aggrieved, the assessee is in appeal before the Tribunal for all the assessment years. The main contention advanced by the ld. Counsel for the assessee is that the assessee was not aware of the provisions of statute, she could not file the return. By filing copy of the CBDT Circular No. 3/2014 dated 24.01.2014, the ld. Counsel for the assessee has further submitted that the assessee is not liable for wealth tax and therefore, levy of penalty under both Income Tax Act as well as Wealth Tax Act does not arise and prayed that the penalty levied under both provisions should be deleted. On the other hand, the ld. DR fairly conceded the submissions of the AR.

We have heard both sides, perused the materials available on record and gone through the orders of authorities below. With regard to levy of penalty under section 18(1)(c) of Wealth Tax Act, admittedly, the assessee sold a piece of land measuring 1 Acre and 33.5 cents, which has been used for agricultural purposes located in urban agglomeration. The wealth tax to agricultural land situated in urban area is exempted as per amendment to the provisions of the Finance Act, 2013 and the amendment takes effect retrospectively from 1st April, 1993, which reads as under:

In this case, the land in question was classified as agricultural land in the records of the Government and moreover the assessee used the land for agricultural purposes, which are not disputed by the Department. In view of the above amended provisions to Wealth Tax Act retrospectively, we are of the considered opinion that the assessee was not even liable for paying tax and therefore, the question of levy of penalty does not arise. Accordingly, the penalty levied under section 18(1)(c) of the Wealth Tax Act for all the

Before us, the ld. Counsel for the assessee has vehemently argued that the assessee was not aware of the provisions of statute that if the property is situated within the municipal limit, it is not to be treated as agricultural land. He further argued that during the time limit permitted to make investment in 54EC Bond, the assessee was not residing in India and for the investment purpose, she came to India and deposited, thereby there was delay. He further argued that the assessee has no malafide intention, besides not aware of the legal consequences, which is very much evidence that the assessee has voluntarily offered for wealth tax, even though she was not liable to pay wealth tax. Hence, the ld. Counsel for the assessee has prayed that the penalty levied under section should be deleted. We find force in the argument of the assessee. There is no dispute that the assessee 6 & W.T.A. Nos. 41 to 46/M/16 was carrying on agricultural operation in the above land and moreover, she has offered wealth tax to the above property. It is an admitted fact that even though the assessee was not liable for wealth tax, as per the amended provisions as reproduced hereinabove, she has offered the wealth tax. Therefore, we are of the considered opinion that the assessee had no malafide intention to conceal the income/particulars and it is very clear that the assessee was not aware of the provisions of the statute. In this case, the wealth tax assessed and quantum addition made and paid by the assessee was much more than the penalty levied by the Assessing Officer and confirmed by the ld. CIT(A), which the assessee was not even liable to be pay. Under the above facts and circumstances, we are of the considered opinion that it is not a fit case to levy penalty under section 271(1)(c) of the Act. Hence, the penalty levied under section 271(1)(c) of the Act is deleted.

In the result, the all appeals filed by the assessee are allowed.