DADRA DEVELOPERS,SILVASSA V. ASSTT. COMMISSIONER OF INCOME TAX, VAPI CIRCLE, VAPI

ITA 634/SRT/2024

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The case involves Dadra Developers, a partnership firm engaged in real estate development, which appealed against the penalty confirmed by the Commissioner of Income Tax (Appeals) for the Assessment Year 2014-15. The penalty was initially levied by the Assessing Officer under Section 271(1)(c) for alleged concealment of income, as the sale consideration reported by the assessee for two properties was lower than the valuation by the Stamp Duty Authority. The Tribunal examined whether the penalty was justified, considering the assessee's compliance in declaring and paying tax on the capital gains before the notice under Section 148 was issued. The Tribunal referenced several precedents and legal provisions, ultimately deciding in favor of the assessee.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 33924 (ITAT-SURAT)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Next Hearing Date: 21-10-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 28-05-2024
• Other Referred Cases: CIT Vs Reliance Petro Products, Union of India vs Dharmendra Textile Processes, CIT Vs SAS Pharmaceuticals, Jupiter Distillery, Haresh Ghanshyamdas Makhija, Armoury International Pereira Compound Vs ACIT, Smt. Kavita Sachdev, Ajoy Sharma, MAK Data (P) Ltd Vs CIT, CIT Vs NG Technologies Ltd., Sunil Chand Gupta Vs CIT, Grass Filed Farms & Resorts (P) Ltd. Vs DCIT, Meka Ranganayakamma Vs ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revised return; Reassessment proceedings; Competent authority
• Section: 148; 271(1)(c); 153; 139; 274

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH (SMC), SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 634/Srt/2024 (Assessment Year 2014-15) (Hybrid hearing) Dadra Developers, Survey No. 400, 322/1, Main Road, Dadra N Nagar Haveli, Silvassa-396230. PAN No. AAGFD 3589 B Vs. A.C.I.T., Vapi Circle, Vapi. Appellant/ Assessee Respondent/ Revenue Assessee represented by Shri A. Gopalakrishnan Aiyer, C.A. Department represented by Shri Mukesh Jain, Sr. DR Appeal instituted on 28/05/2024 Date of hearing 21/10/2024 Date of pronouncement 22/10/2024 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of the National Faceless Appeal Centre (NFAC),Delhi/learned Commissioner of Income Tax (Appeals), [in short, the ld. CIT(A)] dated 24/04/2024 for the Assessment Year (AY) 2014-15. The ld CIT(A) confirmed the penalty levied under section 271(1)(c). The assessee has raised following grounds of appeal: “1. On appreciation of the facts and circumstances of the case and law, the learned Commissioner of Income Tax (Appeals) has erred in confirming the penalty U/s 271(1)(c) of the Act to the tune of Rs. 4,27,775/- levied by the learned Assessing Officer. The action of the Ld. CIT(A) is not in accordance with the facts of the case and law and deserves to be deleted. 2. The appellant craves leave to add, amend, modify or alter the above grounds of appeal at any stage of appellate proceedings. 3. The appellant humbly prays that the appeal be allowed in toto. 2. Brief facts of the case are that the case of assessee is a firm and was engaged in the development of real estate. The case of assessee was reopened on the basis of information that during the period under relevant financial year, the ITA No. 634/Srt/2024 Dadra Developers Vs ACIT 2 assessee sold immovable two properties i.e. one non-agricultural land out of survey No. 400 admeasuring 3900 square meters and other at survey No. 322/1 admeasuring 700 square meters in Dadra Nagar Haveli. The assessee has shown sale consideration of Rs. 49.00 lacs. However, the Stamp Duty Authority while registering the transaction, valued the aforesaid land at Rs. 55,22,000/-. On the basis of such information, the Assessing Officer was of the view that the income of assessee to the extent of difference in value determined by the Stamp Valuation Authority vis a vis the sale consideration shown by the assessee has escaped from assessment. The Assessing Officer after obtaining necessary approval from the competent authority, issued notice under Section 148 of the Income Tax Act, 1961 (in short, the Act) on 23/01/2018. In response to notice under Section 148, the assessee filed return of income on 13/04/2018 declaring income of Rs. 20,76,580/-. The assessment was completed in accepting the returned income wherein the assessee has shown income at Rs. 20,76,580/- which was accepted without any variation. 3. The Assessing Officer while passing the assessment order, initiated penalty under Section 271(1)(c) of the Act and issued show cause notice under section 274 rws 271(1)(c). In reply to show cause notice, the assessee filed his reply on 22/11/2018. In the reply, the assessee stated that the impugned property was sold in 2012. Such transaction was made by the partnership firm. There was dispute amongst the partners, thus return of income was not filed. The assessee further submitted that they have computed capital gain arising out of the sale and paid the tax before issuance of notice under section 148, by the department. The assessee was no intention to evade any tax. The assessment was completed ITA No. 634/Srt/2024 Dadra Developers Vs ACIT 3 on 23/10/2018 in accepting the returned income, thus there is no concealment of income within the meaning of Explanation-3 to Section 271(1)(c) of the Act. Reply of assessee was not accepted by Assessing Officer. The Assessing Officer was of the view that the assessee had paid tax only after deduction by the department of undisclosed long term capital gain. The Assessing Officer invoked the provision of Explaination-3 to section 271(1). The Assessing officer held that Explanation-3 to Section 271(1)(c) deals with deemed concealment of income in respect of any assessment year notwithstanding that it had furnished the return of income at any time after expiry of period in pursuance of notice under Section 148 of the Act. The Assessing Officer accordingly levied penalty @ 100% of tax sought to be evaded. The Assessing Officer worked out penalty at Rs. 4,27,775/- vide order dated 29/04/2019. 4. Aggrieved by the penalty levied under Section 271(1)(c) of the Act, the assessee filed appeal before the ld. CIT(A) on 29/05/2019. The assessee filed detailed written submission on various dates. Submissions of assessee are recorded in para 4 of order of ld. CIT(A). The assessee in its submission in sum and substance, submitted that notice under Section 148 was issued on 23/01/2018, however, the assessee has already paid due tax on its income on 30/10/2017. The assessee furnished copy of receipt of tax deposit. The assessee stated that the return of income was accepted by the Assessing Officer. The assessee also explained the scope of Explanation-3 and Clause (b) of Explanation-4 attached to Section 271(1)(c) of the Act. The assessee finally submitted that the assessee has not evaded any tax and thus there is no reason for concealment of particulars of income. The assessee also relied on various decisions of Tribunal including ITA No. 634/Srt/2024 Dadra Developers Vs ACIT 4 decision of Hon'ble Supreme Court in CIT Vs Reliance Petro Products 322 ITR 158 wherein it has been held that “unless the conditions under Section 271(1)(c) of the Act exist in a particular case, penalty cannot be imposed and it was further held that 271 of the Act being a penalty provision is required to be construed strictly.” The assessee prayed to delete the penalty. 5. The ld. CIT(A) after considering the submissions of the assessee held that the assessee firm was a partnership firm engaged in the business of construction activities and they had jointly purchased a property on 16.02.2006 for construction of residential flats/commercial spaces. The appellant firm sold the said property in the year 2012 for a consideration of Rs. 55,20,000/-. The appellant had paid the capital gain of Rs. 6,83,080/-on 30.10.2017 arising out of sale of said property, but had not filed ITR. Notice under Section 148 of the Act was issued and in response to said notice, the assessee firm had filed its return of income on 13.04.2018 declaring total income of Rs. 20,76,580/- under the head ‘capital gain’. The ld. CIT(A) further held that the assessee had paid the taxes only after detection by the department of its undisclosed Long term capital gain income i.e. after issuing verification letter on 27.6.2017. The ld. CIT(A) by relying on the decision of Hon'ble Supreme Court in the case of Union of India vs Dharmendra Textile Processes (2008) 166 Taxman 65 (SC) has confirmed the penalty levied by the Assessing Officer. Further aggrieved, the assessee has filed present appeal before this Tribunal. 6. I have heard the submissions of the learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for the revenue and have also gone through the orders of the lower authorities ITA No. 634/Srt/2024 Dadra Developers Vs ACIT 5 carefully. The ld. AR of the assessee has reiterated the same argument as raised before the lower authorities. The ld. AR of the assessee submits that the assessee filed his reply on 22/11/2018. In the reply, the assessee stated that the impugned property was sold in 2012. Such transaction was made by the partnership firm. There was dispute amongst the partners, thus return of income was not filed. The ld. AR of the assessee further submitted that they have computed capital gain arising out of the sale and paid the tax before issuance of notice by the department. The assessee has no intention to evade any tax. The assessment was completed on 23/10/2018 in accepting the returned income, thus there is no concealment of income within the meaning of Explanation-3 to Section 271(1)(c) of the Act. In support of the submissions, the ld. AR of the assessee relied on the following case laws:  CIT Vs SAS Pharmaceuticals (2011) 335 ITR 259 (Del)  Jupiter Distillery (2022) 23 taxmann.com 303 (Ahmedabad Tribunal)  Haresh Ghanshyamdas Makhija (2024) 160 taxmann.com 326 (Mum Trib)  Armoury International Pereira Compound Vs ACIT IT Appeal Nos. 3299 to 3301/Mum/2017 order dated 01/01/2019  Smt. Kavita Sachdev (2024) 162 taxmann.com 642 (Indore Trib)  Ajoy Sharma (2024) 114 ITR 702 (Jaipur Trib) 7. On the other hand, the ld. Sr. DR for the revenue has supported the orders of the lower authorities. The ld. Sr. DR for the revenue submits that the assessee offered long term capital gain when it was detected by income tax department and initiated reassessment proceedings. Surrender/offer of income was not voluntary rather on finding out the escapement of income by Assessing Officer. It is a fit case for levy of penalty. To support his submission, the ld. Sr. DR for the revenue relied on the following decisions: ITA No. 634/Srt/2024 Dadra Developers Vs ACIT 6  MAK Data (P) Ltd Vs CIT (2013) 38 taxmann.com 448 (SC)  CIT Vs NG Technologies Ltd. (2015) 57 taxmann.com 389 (Delhi)  Sunil Chand Gupta Vs CIT (2013) 35 taxmann.com 435 (Allahabad)  Grass Filed Farms & Resorts (P) Ltd. Vs DCIT (2016) 70 taxmann.com 176 (Jaipur Trib)  Meka Ranganayakamma Vs ITO (2024) 159 taxmann.com 1621 (Visakhapatnam Trib) 8. I have considered the rival submissions of both the parties and perused the orders of the lower authorities carefully. I have also deliberated on various case laws relied by both the parties. It is a matter of fact that notice under Section 148 of the Act was issued on 23/01/2018. In response to notice under Section 148, the assessee filed its return of income on 13/04/2018. In the return of income, the assessee has shown long term capital gain on sale of asset during the year. The assessment was completed on 23/10/2018 in accepting the returned income, thus, neither the return was treated invalid nor any variation in income was added. The assessee in response to show cause notice dated 23/10/2018 issued under section 274 rws 271(1)(c), filed its reply on 22/11/2018. In the reply, the assesse specifically stated that due tax on capital gain was already offered on 30/10/2017 i.e. much prior to issuance of notice under Section 148 of the Act. I find that the Assessing Officer not accepted the reply of assessee by taking view that such tax was paid by assessee only on issuing notice for verification on 27/06/2017. The Assessing Officer levied penalty by invoking provisions of Explanation-3 to Section 271(1)(c). Explanation-3 to Section 271(1)(c) deals with the deemed concealment of income. Explanation-3 of Section 271(1)(c) provides that where any person fails without reasonable cause, to furnish within the period specified in sub-section (1) of Section 153 a return of his income which he is required to furnish under section 139 in respect ITA No. 634/Srt/2024 Dadra Developers Vs ACIT 7 of any assessment year commencing on or after the 1/4/1989 and until the expiry of the period aforesaid, no notice has been issued to him under clause (1) of sub-section (1) of Section 142 or Section 148 and the assessing officer or the Commissioner (Appeals) is satisfied that in respect of such assessment year such person has taxable income, then, such person shall, for the purposes of clause (c) of this sub-section, be deemed to have concealed the particulars of his income in respect of such assessment year, notwithstanding that such person furnishes a return of his income at any time after the expiry of the period aforesaid in pursuance of a notice under Section 148. Further clause (c) of Explanation-4 to Section 271(1)(c) specified the amount of tax sought to be evaded which prescribes that in any case to which Explainiation-3 applies, the amount of tax sought to be evaded shall be tax on the total income assessed as reduced by the amount of advance tax, tax deducted at source, tax collected at source and self-assessment tax paid before issue of notice under section 148. Thus, on carful perusal of the aforesaid provision, and the assessment order, I find that there is no variation in the tax liability. Hence, no additional tax liability is fastened on the assessee means there is no evasion of tax by assessee. I find that Mumbai Bench of Tribunal in Haresh Ghanshaymdas Makhija Vs ITO (supra) held that when the return income and the assessed income are same, penalty under section 271(1)(c) cannot be levied. The coordinate bench relied on the decision of Delhi High Court in CIT Vs SAS Pharmaceuticals (supra). Further, in Armoury International Vs ACIT (supra) it was held that whether there is ‘concealment of income’ or ‘inaccurate particulars of income’ has to be determined with the reference to return income. In my view, there is no ITA No. 634/Srt/2024 Dadra Developers Vs ACIT 8 concealment of income so far as return income filed by the assessee is concerned. Thus, I do not find any justification in levying such penalty by by invoking Explaination-3 of section 271(1) (c). 9. The ratio of case laws relied by ld. Sr DR for the revenue are not applicable on the facts of present case. In Mak Data (P) Ltd Vs CIT(supra), the assessee surrendered additional income during assessment. In CIT Vs NG Technologies Ltd (supra) and in Grass feiled Farma & Resorts (P) ltd Vs DCVIT, the assessee revised return during assessment. In Sunil Chand Gupta Vs CIT (supra), and in Meka Ranganayakamma Vs ITO (supra) the assessee surrendered income on service of notice under section 148. However, in the case in hand the assessee deposited due tax mush prior to issuance of notice under section 148. In the result, the grounds of appeal raised by the assessee are allowed. 10. In the result, this appeal of assessee is allowed. Order announced in open court on 22nd October, 2024. Sd/- (PAWAN SINGH) JUDICIAL MEMBER Surat, Dated: 22/10/2024 *Ranjan Copy to: 1. Assessee 2. Revenue 3. CIT 4. DR 5. Guard File By order Sr. Private Secretary, ITAT, Surat "