M.SRINIVASAMURTHY,CHENNAI vs. ACIT, CHENNAI

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 2, Chennai dated 30.10.2015 relevant to the assessment year 2005-06 passed under section 271(1)(c) of the Income Tax Act, 1961 [“Act” in short].

Brief facts of the case are that the assessee has not filed his return of income for the assessment year 2005-06. Based on the AIR information with regard to assessee’s transaction during the relevant financial year, the Assessing Officer issued notice under section 148 of the Act dated 30.03.2012. In response thereto, the assessee filed his return of income on 21.11.2012 admitting income at ₹.36,050/-. 2.1 During the course of assessment proceedings, the Assessing Officer has noticed in the statement of income filed along with the return of income that the assessee had appended a foot note stating that during the previous year, the assessee sold two properties at Paruthipattu village [3.60 acres and 3.49 acres of agricultural land] and claimed that the transaction is outside the purview of capital gain, since agricultural land is not a capital asset. After considering the submissions of the assessee and making various disallowances, the assessment under section 143(3) r.w.s. 147 of the Act was completed assessing the total income at ₹.97,04,990/-. The Assessing Officer has also initiated penalty proceedings under section 271(1)(c) of the Act. Against the penalty notice, the assessee has submitted before the Assessing Officer that the agricultural land sold was not a capital asset as it was situated beyond 8 kms from the Avadi Municipality and moreover, by way of foot note in the statement of total income filed, the assessee has given the particulars of agricultural land sold and therefore, he prayed that penalty proceedings should be dropped. By not accepting the submissions of the assessee, the Assessing Officer levied penalty of ₹.20,00,000/- under section 271(1)(c) of the Act.

The assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee and following the decision of the Hon’ble Allahabad High Court in the case of Hakam Singh v. CIT 124 ITR 228, the ld. CIT(A) confirmed the penalty levied under section 271(1)(c) of the Act.

On being aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for the vehemently argued that the assessee has fully disclosed all particulars while filing the return of income and no new material has been discovered by the Department to say that the assessee has concealed the particulars in terms of provisions of section 271(1)(c) of Act warranting penalty. Despite giving all particulars, the assessee was under bonafide belief that on sale of agricultural lands situated in remote village will come under the purview of capital gain and therefore, the ld. Counsel for the assessee has prayed that the penalty levied should be deleted. 5. On the other hand, the ld. DR supported the orders of authorities below. 6. We have heard both sides, perused the materials available on record and gone through the orders of authorities below. Admittedly, the assessee has filed the return of income against service of notice under section 148 of the Act. It was not disputed that by way of foot note in the statement of total income filed, the assessee has given the particulars of agricultural land sold by him. It was not the case of the Department that there was any search or survey operation under the Income Tax Act and unearthed any particulars, which was not disclosed by the assessee, to levy the penalty under section 271(1)(c) of the Act. Even though the assessee was under bonafide belief that the sale of agricultural land is outside the purview of the capital gain, since the agricultural land is not a capital asset, the assessee himself brought to the notice of assessing authority about the transaction in the return of income. During the course of penalty proceedings, the Assessing Officer has observed from official website of the Avadi Municipality that Paruthipatty village formed part of the Avadi Municipality and moreover, the assessee has also not carried out any agricultural operation. Just because the assessee has not carried out any agricultural operation, the title as agricultural land cannot be changed until the Revenue Department makes any changes of that particular land as non-agricultural land. The sale of agricultural land was not discovered by the Department and based on the particulars furnished by the assessee in his return of income only, the Assessing Officer has initiated the penalty proceedings and as such, we are of the considered opinion that no new material having detected by the Department either during the course of assessment proceedings or penalty proceedings, leading to levy of penalty. To sustain the penalty, the ld. CIT(A) has relied on the decision in the case of Hakam Singh v. CIT(supra), wherein, the Hon’ble Allahabad High Court has observed that for any kind of leniency to be shown by way of reduction or waiver of penalty, the assessee should have voluntarily disclosed his income, before such concealment or furnishing of wrong particulars is actually detected. Admittedly, in this case, in the return of income filed, the assessee has, by way of foot note in the statement of total income filed, gave the particulars of agricultural land sold and therefore, it cannot be held that the assessee has concealed the particulars of income. Thus, the case relied on by the ld. CIT(A) has no application to the facts of the present case. Under the above facts and circumstances and in the absence of any material concealed by the assessee, in our considered opinion, levy of penalty is not legally sustainable. Hence, the penalty levied under section 271(1)(c) of the Act is deleted and allowed the ground raised by the assessee.

In the result, the appeal filed by the assessee is allowed. Order pronounced on the 03rd March, 2017 at Chennai.