Income-tax Officer, V. Sunil Janardhan Dalvi, Pune

ITA 1101/PUN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1042 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 21-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B D SINGH
• Keywords: Bonafide belief; Bonafide mistake; Ignorance of law
• Section: 54F

Judgement Text

] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KSIQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . , , ' # BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1101/PN/2014 '% % / ASSESSMENT YEAR : 2009-10 ITO, WARD-9(1), PUNE . / APPELLANT V/S SHRI SUNIL JANARDHAN DALVI, 25/493, PRADHIKARAN, NIGDI, PUNE PAN NO. AAREPD2773Q . / RESPONDENT / ASSESSEE BY : SHRI PRAMOD SHINGTE / DEPARTMENT BY : SHRI B.D. SINGH / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 19-02-2014 OF THE CIT(A)-V, PUNE RELATING T O ASSESSMENT YEAR 2009-10. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND FILED HIS RETURN OF INCOME ON 31-07-2009 DECLAR ING TOTAL INCOME AT RS.2,18,230/-. DURING THE COURSE OF ASSESS MENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE HAS SOLD T HE FACTORY BUILDING SITUATED AT A-16, TALAWADE, PUNE FOR A CONSIDERATI ON OF / DATE OF HEARING :23.09.2015 / DATE OF PRONOUNCEMENT:23.09.2015 2 ITA NO.1101/PN/2014 RS.1,10,00,000/-. THE ASSESSEE HAS COMPUTED DEEMED SHOR T TERM CAPITAL GAIN AS PER SECTION 50 OF THE I.T. ACT AT RS.82,31,166/-. THE ASSESSEE HAS CLAIMED EXEMPTION U/S.54 F AMOUNTING TO RS.70,08,250/- TOWARDS INVESTMENT MADE FOR PURCHASE OF A NEW HOUSE PROPERTY AND THE BALANCE CAPIT AL GAIN OF RS.12,22,916/- WAS OFFERED FOR TAXATION. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE TOWARDS PURCHASE OF TH E HOUSE PROPERTY THE AO NOTED THAT THE SAME INCLUDES AN AMOUN T OF RS.2,78,250/- TOWARDS PURCHASE OF AIR CONDITIONERS, REFRIGERATORS AND NEW LCD TELEVISION. HE, THEREFORE, HELD TH AT THE EXPENDITURE OF RS.2,78,250/- IS NOT AN ELIGIBLE INVESTMENT FOR CLAIMING EXEMPTION U/S.54F OF THE I.T. ACT. 3. THE AO FURTHER NOTED THAT THE COST OF THE NEW RES IDENTIAL HOUSE PURCHASED IS LESS THAN THE AMOUNT OF NET CONSIDER ATION IN RESPECT OF THE ORIGINAL ASSET. THEREFORE, SO MUCH OF THE CAPITAL GAIN AS BEARS TO THE WHOLE OF THE CAPITAL GAIN THE SAME PR OPORTION AS THE COST OF THE NEW HOUSE PROPERTY BEARS TO THE N ET CONSIDERATION SHALL BE EXEMPT U/S.54F. HOWEVER, THE ASSE SSEE HAS CLAIMED FULL EXEMPTION OF THE AMOUNT OF INVESTMENT MADE WHICH IS INCORRECT. HE THEREFORE RECOMPUTED THE CAPITAL G AIN WHICH IS AS UNDER : SALE CONSIDERATION OF THE FACTORY BUILDING : 1,10,0 0,000 LESS : WDV OF THE ASSET SOLD : 27,68,834 ----------------- DEEMED SHORT TERM CAPITAL GAIN : 82,31,166 LESS : EXEMPTION U/S.54F 82,31,166 X 67,30,00/1,10,00,000 : 50,35,977 ------------------ NET SHORT TERM CAPITAL GAIN : 31,95,189 ------------------ 3 ITA NO.1101/PN/2014 4. SINCE THE ASSESSEE HAS OFFERED SHORT TERM CAPITAL GAIN OF RS.12,22,916/- ONLY FOR TAXATION, THE AO MADE ADDITION OF RS.19,72,273/- TO THE TOTAL INCOME OF THE ASSESSEE BEING T HE DIFFERENCE BETWEEN THE SHORT TERM CAPITAL GAIN CALCULATED B Y HIM AND THE SHORT TERM CAPITAL GAIN DECLARED BY THE ASSESSEE. 5. THE AO THEREAFTER INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T. ACT. DURING THE PENALTY PROCEEDINGS, ON BEING CONFRONTED BY THE AO, IT WAS SUBMITTED BY THE ASSE SSEE THAT HE HAS PURCHASED THE ITEMS SUCH AS AIR CONDITIONER S, REFRIGERATORS AND LCD TELEVISION AMOUNTING TO RS.2,78,250/- FOR THE PURPOSE OF HIS NEW HOUSE AND THERE IS NO DISPUTE FOR THE SAME. HE WAS UNDER BONAFIDE BELIEF THAT INVESTMENT IN THE RESIDENTIAL HOUSE WOULD NOT ONLY INCLUDE COST OF PURCHASE OF HOUSE BUT ALSO COST INCURRED FOR MAKING THE HOUSE HABIT ABLE. FURTHER, WHERE SUCH GOODS ARE ELIGIBLE FOR INVESTMENT OR N OT IS A DEBATABLE ISSUE AND THERE IS NO MALAFIDE INTENTION ON THE P ART OF THE ASSESSEE TO CONCEAL THE INCOME OR TO FURNISH INACCU RATE PARTICULARS OF INCOME. 6. AS REGARDS THE ADDITION OF RS.19,72,223/- IS CONCERNED, IT WAS ARGUED THAT THE SAME WAS AN ARITHMETICAL ERROR IN CALCULATING THE AMOUNT OF EXEMPTION. IT WAS ON THE PART OF THE PERSON MAKING THE COMPUTATION OF CAPITAL GAIN. IT WAS AR GUED THAT THE EXEMPTION U/S.54 AND 54F ARE VERY SIMILAR AND T HE PERSON PREPARING THE RETURN GOT CONFUSED AND COMMITTE D AN INADVERTENT MISTAKE AND MISCALCULATED THE QUANTUM OF CAPIT AL GAIN. VARIOUS DECISIONS WERE ALSO BROUGHT TO THE NOTICE O F THE AO TO THE PROPOSITION THAT NO PENALTY IS LEVIABLE WHERE THE A SSESSEE 4 ITA NO.1101/PN/2014 HAS DISCLOSED CAPITAL GAINS AND CLAIMED EXEMPTION INCORRECTL Y BECAUSE OF IGNORANCE OF LAW EVEN IF CLAIM IS DISALLOWED BY THE AO. 7. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. DISTINGUISHING THE VARIOUS DECISIONS CITED BEFORE HIM, THE AO LEVIED THE PENALTY OF RS.6,40,548/- BEING T HE MINIMUM PENALTY AT 100% OF TAX SOUGHT TO BE EVADED. 8. BEFORE CIT(A) THE ASSESSEE REITERATED THE SAME SUBMIS SIONS AS MADE BEFORE THE AO. IT WAS ARGUED THAT THE ASSESS EE HAS DISCLOSED ALL MATERIAL FACTS IN THE COMPUTATION OF TOTAL INCOME AS WELL AS OFFERED ALL POSSIBLE EXPLANATION DURING THE COURSE OF HEARING. VARIOUS DECISIONS WERE ALSO BROUGHT TO THE NOTIC E OF THE CIT(A) TO THE PROPOSITION THAT NO PENALTY UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE IS LEVIABLE. 9. BASED ON ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) CANCELLED THE PENALTY LEVIED U/S.271(1)(C) OF THE I.T. ACT. WHILE DOING SO, HE OBSERVED THAT THE ASSESSEE HAD ORIGIN ALLY MADE A CLAIM IN RESPECT OF ENTIRE INVESTMENT MADE IN THE N EW HOUSE WHILE EXEMPT U/S.54F PROVIDES WORKING OF EXEMPTION O N PROPORTIONATE BASIS. ALTHOUGH THE AO HAS RIGHTLY POINTE D OUT THIS ERROR IN COMPUTATION WHICH HAS BEEN ACCEPTED BY TH E ASSESSEE, HOWEVER, IT CANNOT BE SAID THAT THERE WAS E LEMENT OF CONCEALMENT OR FILING OF INACCURATE PARTICULARS OF INCOME WHE N ALL THE DETAILS RELATING TO THE TRANSACTION WERE DISCLOSED BEFO RE THE AO. THEREFORE, THE AO IS NOT JUSTIFIED IN LEVYING PENALTY U/S.271(1)(C) OF THE I.T. ACT IN RESPECT OF ARITHMETICAL MISTA KE IN COMPUTATION U/S.54 OF THE I.T. ACT. HE ACCORDINGLY DIRECT ED THE 5 ITA NO.1101/PN/2014 AO TO MODIFY THE QUANTUM OF PENALTY U/S.271(1)(C) OF THE ACT TO THAT EXTENT. 10. SO FAR AS THE PENALTY LEVIED ON ACCOUNT OF AIR CONDITIO NERS, REFRIGERATORS AND LCD TELEVISION AMOUNTING TO RS.2,78,250/- IN THE COST OF THE HOUSE PROPERTY IS CONCERNED HE UPHELD THE PENALTY LEVIED BY THE AO ON THIS ACCOUNT. 11. AGGRIEVED WITH SUCH PART RELIEF GIVEN BY THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 12. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY OBJEC TED TO THE ORDER PASSED BY THE LD.CIT(A). HE SUBMITTED THAT TH E LD.CIT(A) DELETED THE PENALTY ON ACCOUNT OF EXCESS CLAIM O F DEDUCTION BY THE ASSESSEE U/S.54F ON THE GROUND THAT THE SAME IS AN ARITHMETICAL ERROR AND THERE IS NO ELEMENT OF CONCE ALMENT OR FILING OF INACCURATE PARTICULARS OF INCOME. HOWEVER, THE LD.CIT(A) DELETED THE PENALTY WITHOUT PROPER APPRECIATION O F FACTS. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE A O LEVYING PENALTY U/S.271(1)(C) OF THE I.T. ACT SHOULD BE UPHELD. 13. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT IT WA S A BONAFIDE MISTAKE COMMITTED BY THE TAX CONSULTANT. THE ASSESSEE HAD DECLARED ALL THE PARTICULARS IN THE RETURN FILE D BY HIM AND THERE WAS NEITHER ANY CONCEALMENT NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. REFERRING TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. REPORTED IN 322 ITR 158 HE SUB MITTED THAT THE HONBLE SUPREME COURT IN THE SAID DECISION HAS HELD 6 ITA NO.1101/PN/2014 THAT A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW , BY ITSELF, WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS . REFERRING TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPER PVT. LTD. VS. CIT REPORTED IN 34 8 ITR 306 HE SUBMITTED THAT THE HONBLE SUPREME COURT IN THE SAID DECISION WHILE CANCELLING THE PENALTY LEVIED U/S.271(1)(C) OF THE I.T. ACT HELD THAT NOTWITHSTANDING THAT THE ASSESSEE WA S A REPUTED FIRM AND HAD GREAT EXPERTISE AVAILABLE WITH IT, IT WA S POSSIBLE THAT EVEN THE ASSESSEE COULD MAKE A SILLY MISTAK E. ALL THAT HAD HAPPENED WAS THAT THROUGH A BONAFIDE AND INAD VERTENT ERROR, THE ASSESSEE WHILE SUBMITTING ITS RETURN, FAILED TO AD D THE PROVISION FOR GRATUITY TO ITS TOTAL INCOME. THE ASSESSEE S HOULD HAVE BEEN CAREFUL BUT THE ABSENCE OF DUE CARE, DID NOT M EAN THAT THE ASSESSEE WAS GUILTY OF EITHER FURNISHING INACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. HE ACCOR DINGLY SUBMITTED THAT IN VIEW OF THE ABOVE 2 DECISIONS OF THE HON BLE APEX COURT NO PENALTY IS LEVIABLE IN THE INSTANT CASE. 14. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDER ED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND IN THE INSTANT CA SE THE ASSESSEE SOLD THE FACTORY BUILDING FOR A CONSIDERATION OF RS.1,10,00,000/- AND COMPUTED THE SHORT TERM CAPITAL GAIN U/S.50 AT RS.82,31,166/-. AFTER CLAIMING EXEMPTION U/S.54F TOWARDS INVESTMENT MADE FOR PURCHASE OF NEW HOUSE PRO PERTY AT RS.70,08,250/-, THE ASSESSEE OFFERED THE BALANCE CAPITAL GAIN 7 ITA NO.1101/PN/2014 OF RS.12,22,916/-. THE AMOUNT OF RS. 70,08,250/- INCLUDED AN AMOUNT OF RS.2,78,250/- TOWARDS PURCHASE OF AIR CONDITIONER S, REFRIGERATORS AND LCD TELEVISION WHICH WAS DISALLOWED BY THE AO. THE PENALTY LEVIED ON THIS AMOUNT HAS BEEN UPHELD BY THE CIT(A) AND THE ASSESSEE IS NOT IN APPEAL BEFORE US. THER EFORE, WE ARE NOT CONCERNED WITH THIS PART OF THE ADDITION ON WHICH PENALTY HAS BEEN LEVIED U/S.271(1)(C) OF THE I.T. ACT. 15. SO FAR AS EXCESS CLAIM OF EXEMPTION U/S.54F IS CONCE RNED, WE FIND INSTEAD OF PROPORTIONATE DEDUCTION TOWARDS INVESTM ENT IN THE HOUSE PROPERTY, THE ASSESEE HAD CLAIMED FULL EXEMPTION ON THE AMOUNT OF INVESTMENT MADE. THE AO, THEREFORE, RECOMP UTED THE SHORT TERM CAPITAL GAIN AT RS.31,95,189/- AS AGAINST RS.12,22,916/- COMPUTED BY THE ASSESSEE AND LEVIED PENALT Y ON THE DIFFERENCE AMOUNT OF RS.19,72,223/-. 16. WE FIND THE LD.CIT(A) DELETED THE PENALTY SO LEVIED BY THE AO ON THE GROUND THAT IT WAS AN INADVERTENT ERROR ON THE PART OF THE ASSESSEE AND IT CANNOT BE SAID THAT THERE WAS ELEM ENT OF CONCEALMENT OR FILING OF INACCURATE PARTICULARS OF INCOME SINC E ALL THE DETAILS RELEVANT TO THE TRANSACTION WERE DISCLOSED BEFORE THE AO. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CI T(A). ADMITTEDLY, ALL PARTICULARS WERE FURNISHED IN THE RETURN OF INCOME FILED BEFORE THE AO. THE MISTAKE ON THE PART OF TH E ASSESSEE WHILE CALCULATING THE EXEMPTION/DEDUCTION IN OUR OPINION IS A BONAFIDE MISTAKE AND CANNOT BE SAID TO BE A DELIBERATE ONE UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 8 ITA NO.1101/PN/2014 17. THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) HAS HELD THAT A MERE MAK ING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT A MOUNT TO FURNISHING INACCURATE PARTICULARS. THE HONBLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPER PVT. LTD. (SUPRA) WHILE DELETING THE PENALTY LEVIED ON IT ON ACCOUNT OF SHOWING PROVISION TOWARDS GRATUITY AS NOT ALLOWABLE BUT CLAIMED TH E DEDUCTION IN THE RETURN HELD THAT NOTWITHSTANDING THAT T HE ASSESSEE WAS A REPUTED FIRM AND HAD GREAT EXPERTISE AV AILABLE WITH IT, IT WAS POSSIBLE THAT EVEN THE ASSESSEE COULD MAK E A SILLY MISTAKE. IT WAS HELD THAT THE SAME HAD HAPPENED THROU GH A BONAFIDE AND INADVERTENT ERROR AND THE ASSESSEE WHILE SUBMITTING ITS RETURN FAILED TO ADD THE PROVISION FOR GRATUITY TO ITS TOTAL INCOME. THE ASSESSEE SHOULD HAVE BEEN CAREFUL BUT THE ABSENCE OF DUE CARE DID NOT MEAN THAT THE ASSESSEE WA S GUILTY OF EITHER FURNISHING INACCURATE PARTICULARS OR ATTEMPTING TO C ONCEAL ITS INCOME. IT WAS ACCORDINGLY HELD THAT ON THE PECULIAR FACTS OF THIS CASE THE IMPOSITION OF PENALTY ON THE ASSESSEE WAS N OT JUSTIFIED. 18. COMING TO THE FACTS OF THE PRESENT CASE, WE FIND ALL PARTICULARS WERE GIVEN BY THE ASSESSEE IN THE RETURN OF INCOME ITSELF. THE ERROR COMMITTED BY THE ASSESSEE WAS A BONAFID E ONE. THEREFORE, SUCH WRONG COMPUTATION IN THE INSTANT CASE, IN OUR OPINION, CANNOT BE TERMED AS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. THEREFORE, THE PENALTY U/S.271(1)(C) IS NOT LEVIABLE. IN THIS VIEW OF THE MATTER, WE 9 ITA NO.1101/PN/2014 UPHOLD THE ORDER OF THE CIT(A) AND THE GROUNDS RAISED B Y THE REVENUE ARE ACCORDINGLY DISMISSED. 19. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23-09-2015. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER IQ.KS PUNE ; # DATED : 23 RD SEPTEMBER, 2015. LRH'K ( )'+ , / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ( ) S / THE CIT(A)-V, PUNE 4. ( S / THE CIT- V , PUNE 5. 6. + ., ., IQ.KS / DR, ITAT, B PUNE; / GUARD FILE. / BY ORDER , + //TRUE COPY// + //TRUE COPY// + //TRUE COPY// 2 . / SR. PRIVATE SECRETARY ., IQ.KS / ITAT, PUNE