Validity of Penalty U/s 271(1)(c) where assessee treated land as Rural Agricultural Land and it was actually Urban Agricultural Land

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Validity of Penalty U/s 271(1)(c) where assessee treated land as Rural Agricultural Land and it was actually Urban Agricultural Land 

[2021] 124 taxmann.com 363 (Madras)

HIGH COURT OF MADRAS

Babuji Jacob       v.

Income Tax Officer, Chennai

Short Overview of the case:

 Section 271(1)(c), read with sections 45 and 68, of the Income-tax Act, 1961

  Penalty for concealment of income (Disallowance of claim, effect of)

 Assessment year 2013-14

 Assessee claimed to have sold an agricultural land – During assessment proceedings, Assessing Officer noted that land sold by assessee was actually a capital asset attracting tax

 Thus, he passed an assessment order making additions to income of assessee – He further initiated penalty proceedings under section 271(1)(c) against assessee – It was noted that assessee had mentioned about sale of its land in its return of income

 However, admittedly, only mistake done by assessee was to treat said land as an agricultural land

 Assessee had also produced all facts of transactions, namely, sale documents, materials, etc., before Assessing Officer

  Entire amount of sale consideration was received by assessee through banking channels

  Further, impugned notice under section 271(1)(c) did not specifically state as to whether assessee was guilty of concealing particulars of his income or had furnished inaccurate particulars of income

 Therefore, there was no specific finding regarding concealment of income against assessee

 Whether, on facts, impugned initiation of penalty proceedings under section 271(1)(c) against assessee was invalid and same was to be set aside

 Held, yes [Paras 21, 25, 30, 38 and 39] [In favour of assessee]

Conclusions :

Where Assessing Officer noting that a land sold by assessee claiming it to be agricultural land was actually a capital asset attracting tax made additions to income of assessee and further initiated penalty proceedings under section 271(1)(c), since assessee had mentioned about sale of its land in his return of income but only mistakenly claimed same as agricultural land and there was no specific finding regarding concealment of income against assessee, impugned penalty proceedings under section 271(1)(c) was to be set aside.

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