The court established that no capital gains on unrealized amount would accrue or arise to the assessee, and therefore, no penalty under Section 271(1)(c) of the Act would be exigible.

Ajay Kumar Mittal, J.

1. The appellant-revenue has filed the present appeal under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 02.12.2016, Annexure-3, passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (in short, “the Tribunal”) in ITA No. 602(ASR)/2015, for the assessment year 2007-08, claiming following substantial questions of law:-

(i) “Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT was right in deleting the penalty when the assessee had not fully disclosed the accrued capital gain and addition on this account had been upheld by ITAT and the Hon’ble High Court and the appeal was pending before the Hon’ble Supreme Court?

(ii) Whether on the facts of the case and in law, the Hon’ble ITAT was right in deleting the penalty when the assessee had not fully disclosed the accrued capital gain and thereby furnishing inaccurate particulars of income?

(iii) Whether on the facts of the case and in law, the Hon’ble ITAT was right in deleting the whole amount of penalty of Rs. 35,85,888/- levied by the AO in respect of addition made on account of Long Term Capital Gain by relying on the order of Hon’ble Punjab and Haryana High Court dated 22.07.2015 in the case of C.S. Atwal Vs. Commissioner of Income Tax whereas the Hon’ble High Court has held that the sale consideration to the extent of amount received are exigible to tax in the instant year and the assessee is bound to pay tax on receipt of further amounts?

2. Briefly, the facts as narrated in the appeal, necessary for adjudication of the controversy involved may be noticed. Return declaring income of Rs. 95,100/- was filed by the assessee on 31.03.2008. The assessee being Member of Punjabi Co-operative House Building Society owned one plot of land measuring 500 square yards in that society. The society entered into Tripartite Joint Development Agreement dated 25.02.2007, with M/s Harsh Builders Private Limited, Chandigarh (HASH) and M/s Tata Housing Development Company Limited, Mumbai (THDC). Through irrevocable Special Power of Attorney dated 26.02.2007, the society transferred the entire land, measuring 21.2 acres to the purchaser/developer party. As per the agreement, the assessee was to be given one flat measuring 2250 square yards each, valued at Rs. 1,01,25,000/- and monetary consideration of Rs. 82,50,000/-. The total consideration for transfer of his share in the capital asset of the society was to the tune of Rs. 1,83,75,000/-. As the Joint development agreement was dated 25.02.2007 and transfer of capital asset under Section 2(47) of the Act, had taken place in the assessment year 2007-08, the entire amount of Rs. 1,83,75,000/- accruing on account of transfer of asset was chargeable to long term capital gain tax under Section 45 of the Act. In the return filed by the assessee, capital gain was declared only in respect of the sale consideration of Rs. 17,65,000/-. The Assessing Officer calculated capital gain on total consideration of Rs. 1,60,79,890/- and made addition of Rs. 1,59,82,147/- vide order dated 27.12.2010 under Section 143(3)/147 of the Act holding that the case fell within the ambit of Section 2(47) of the Act. Total consideration of Rs. 1,60,79,890/- was held to have accrued to the assessee during the assessment year 2007-08 and chargeable to long term capital gain as provided under Section 45 of the Act read with Section 48 of the Act. Aggrieved by the order, the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], but the same was dismissed. The assessee challenged the order passed by the CIT(A) as well as Assessing Officer before the Tribunal. This appeal was also dismissed. Vide order dated 27.03.2014, the Assessing Officer imposed penalty of Rs. 35,85,888/- upon the assessee under Section 271(1)(c) of the Act. Against the penalty order, the assessee filed appeal before the CIT(A). Vide order dated 18.08.2015, the CIT(A) del