2016 (10) TMI 977 - HC - Income Tax

Penalty under Section 271(1)(c) - area of flat being sold in excess of 1000 sq.ft. being concealed - non entitled to the benefit of Section 80IB(10) - Held that - The Assessing Officer under the Act considered the Respondent-assessee s explanation in the context in which the penalty proceedings were initiated and did not rightly place any reliance upon the subsequent events. In an appeal from the order of the Assessing Officer the CIT(A) could not have imposed penalty on a new ground which was not the basis for initiation of penalty. The appeal before the CIT(A) was with regard to issue of penalty under Section 271(1)(c) of the Act only on the ground on which the penalty proceedings were initiated in the assessment order. Although the powers of CIT(A) are coterminus with that of the Assessing Officer the imposition of penalty could be only the ground on which it was initiated. This is not the case where the CIT(A) had independently initiated penalty proceedings on a new ground in an order in quantum proceedings in appeal from the Assessment Order. This alone could lead to the imposition of penalty under Section 271(1)(c) of the Act on the new ground. The ground on which the penalty was initiated and penalty imposed by the Assessing Officer namely that the flat had been sold in the project which was in excess of 1000 sq.ft. the Tribunal has recorded a finding of fact that the flats were sold individually by two separate agreements individually to the purchasers in joint names. However two flats were subsequently joined by the purchasers aggregating the size of two flats to 1000 sq.ft. built up purchased from the Respondent-assessee. This is finding of fact which has not been shown to be perverse or arbitrary.

Summary

Issues:
1. Challenge to order of Income Tax Appellate Tribunal under Section 260A of the Income Tax Act, 1961 for Assessment Year 2005-06.
2. Justification of deleting penalty under Section 271(1)(c) of the Act.
3. Imposition of penalty by Assessing Officer and confirmation by Commissioner of Income Tax (Appeals) on different grounds.
4. Appeal to Tribunal against penalty imposition and grounds considered for penalty.

Issue 1: Challenge to ITAT Order
The High Court addressed the challenge to the order of the Income Tax Appellate Tribunal (ITAT) under Section 260A of the Income Tax Act, 1961 for the Assessment Year 2005-06. The Revenue raised the question of law regarding the justification of deleting the penalty imposed under Section 271(1)(c) of the Act.

Issue 2: Justification of Penalty Deletion
The Respondent-assessee, engaged in Real Estate Development, filed its return of income for the Assessment Year 2005-06 claiming 100% deduction under Section 80IB(10) of the Act. The Assessing Officer disallowed the deduction and initiated penalty proceedings under Section 271(1)(c) for furnishing inaccurate information. The penalty was confirmed by the Commissioner of Income Tax (Appeals) on a different ground from the one initiated by the Assessing Officer.

Issue 3: Penalty Imposition on Different Grounds
The Assessing Officer imposed a penalty under Section 271(1)(c) based on selling flats exceeding 1000 sq.ft. to two family members. The Commissioner of Income Tax (Appeals) confirmed the penalty on a new ground related to the completion date of the project. The Tribunal held that the CIT(A) could not impose a penalty on a different ground than the one initiated by the Assessing Officer.

Issue 4: Tribunal's Decision
The Tribunal found that the penalty was initiated based on the sale of flats exceeding 1000 sq.ft., which was not proven by the Revenue. The Tribunal concluded that there was no inaccurate particulars or concealing of income justifying the penalty under Section 271(1)(c) of the Act. The Court emphasized that the CIT(A) could only impose a penalty on the ground it was initiated, and in this case, the penalty was not justified based on the facts presented.

In summary, the High Court dismissed the appeal, stating that the question raised did not give rise to any substantial legal issue. The Court upheld the Tribunal's decision, emphasizing the importance of imposing penalties based on the grounds for initiation and not introducing new grounds during the appeal process.