INCOME TAX ACT, 1961

Section 271(1)(c)

Penalty under section 271(1)(c) - Leviability - No concealment of income - Bona fide belief

Assessee along with three other co-owners sold an inherited land on 17-8-2010 and received cheques. He, however, did not disclose any income from the sale of the said plot with a belief that the sale was not complete since the payment was not realized in the year under consideration and the same was realized only in July, 2014. It was submitted that the plot was sold on 17-8-2010 but it was mutually agreed between the buyers and the seller to present those cheques in October, 2010 and in the meantime, in September, 2010, RBI put restrictions on the entire functioning of the Pen Co-operative Urban Bank Ltd., with effect from 24-9-2010. As a result of which, the cheques could not be deposited in the bank for clearance. He further submitted that he had not received any consideration from the buyer till date of assessment. However, the said explanation of the assessee was not accepted by the AO and he therefore, by invoking provisions of section 50C, computed long-term capital gains and made the addition. He further levied penalty under section 271(1)(c) on account of concealment of income. Held: During year under consideration, no payment was realized by assessee on account of sale of land and it was only realized in the year 2014. Therefore, the assessee was under the bona fide belief that since he had not received any consideration during the relevant year, the sale was not complete and no profits accrued to him. Further, the Revenue also could not place on record any evidence of actual receipt of any amount by the assessee during the year under consideration. In instant case, when the charge was of concealment of income, the facts did not suggest even on a remote basis that the assessee concealed his income, rather he acted under bona fide belief and even the Revenue could not place on record any evidence of receipt of income regarding sale of the property by the assessee in the relevant year. Thus, neither there was mens rea nor actus reus on the part of the assessee. Hence, the penalty levied under section 271(1)(c) was deleted.

REFERRED : KC Builders & Anr. v. Asstt. CIT [Crl. Appeal No. 212-213, dt. 28-1-2004] : 2004 TaxPub(DT) 1323 (SC) CIT v. Mohan Lal Sharma 2006 TaxPub(DT) 0411 (All-HC)

FAVOUR : In assessee's favour

A.Y. : 2011-12

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