Sh. Majorjit Singh, Ludhiana V. ACIT, Ludhiana

ITA 1108/CHANDI/2011

• Counselvise Citation: 110821514 RSA 2011
• Duration Of Justice: 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 15-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Keywords: Bonafide belief; Cost of acquisition; Bonafide mistake; Ignorance of law
• Section: 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI D.K. SRIVASTAVA, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.1108 /CHD/2011 (ASSESSMENT YEAR: 2006-07) SH.MAJORJIT SINGH VS. THE A.C.I.T., PROP.M/S NEW KULDIP GOODS CARRIER, CIRCLE-V, IAB, LUDHIANA. LUDHIANA. PAN: ABTPS5435L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHOK GOYAL RESPONDENT BY : SHRI N.K.SAINI, DR DATE OF HEARING : 03.01.2012 DATE OF PRONOUNCEMENT : 20.01.2012 O R D E R PER SUSHMA CHOWLA, J.M. : THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS)-II, LUDHIANA D ATED 06.06.2011 RELATING TO ASSESSMENT YEAR 2008-09 AGAINST THE PEN ALTY LEVIED U/S 271(1)(C) OF INCOME TAX ACT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A)-II, LUDHIANA HAS ERRED IN CONFIRMING THE PENALTY AMOUNTING TO RS.61,614/- IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE INCOME TAX ACT,1961. 2. THAT THE PENALTY U/S 271(1)(C) HAS BEEN CONFIRME D BY THE LD. CIT(A) AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND SUBMISSIONS MADE BY THE APPELLANT HAS NOT BEEN CONSIDERED PROPERLY. 3. THAT THE LD. CIT(A) HAS ALSO NOT CONSIDERED THE FACT THAT DEDUCTION U/S 54F WAS CLAIMED ON THE BASIS OF COMPUTATION WORKED OUT BY THE ASSESSEES COUNSEL AND ASSESSEE CANNOT BE PENALIZED FOR THE MISTAKE OF THE COUNSEL, ESPECIALLY WHEN FULL PARTICULARS OF TH E 2 INCOME/CAPITAL GAIN WERE GIVEN IN THE RETURN AND NOTHING WAS CONCEALED. 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS A GAINST THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. 4. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD DECLARED INCOME FROM SALE OF PLOT OF LAND IN LUDHIANA. THE TOTAL SALE CONSIDERATION RECEIVED ON SALE OF PLOT WAS RS.12.50 LACS AND LONG TERM CAPITAL GAINS WAS DECLA RED AT RS.9,75,020/-. THEREAFTER THE ASSESSEE CLAIMED EXEMPTION UNDER SEC TION 54F OF THE ACT ON ACCOUNT OF THE INVESTMENT IN NEW ASSET BEING RES IDENTIAL HOUSE FOR RS.10,25,000/-. THE TOTAL CAPITAL GAIN DECLARED BY THE ASSESSEE WAS SET OFF AGAINST THE SAID INVESTMENT AND THE INCOME WAS SHOWN AT NIL. THE ASSESSING OFFICER IN VIEW OF THE PROVISIONS OF SECT ION 54F OF THE INCOME TAX ACT FOUND THAT THE INVESTMENT IN THE NEW ASSET AT RS.10,25,000/- WAS LESS THAN THE AMOUNT OF NET CONSIDERATION REALIZED ON SALE OF OLD ASSET I.E. RS.12.50 LACS. THE EXEMPTION UNDER SECTION 54 F OF THE ACT ON PRORATA BASIS WORKED TO RS.7,99,516/-, AS AGAINST T HE CLAIM OF THE ASSESSEE AT RS.9,75,020. THE EXPLANATION OF THE AS SESSEE BEFORE THE ASSESSING OFFICER IN THIS REGARD WAS THAT THE SAID DEDUCTION WAS CLAIMED ON THE ADVICE OF HIS COUNSEL AND THE COUNSEL ATTEND ED THE PROCEEDINGS STATING THAT THE EXEMPTION UNDER SECTION 54F CLAIME D AT RS.9,75,020/- WAS CLAIMED WRONGLY DUE TO OVERSIGHT. THE ASSESSIN G OFFICER ACCORDINGLY RE-WORKED THE INCOME UNDER THE HEAD IN COME FROM LONG TERM CAPITAL GAINS AND INCLUDED RS.1,75,504/- AS I NCOME OF THE ASSESSEE. THE ASSESSING OFFICER ALSO INITIATED PENALTY PROCEE DINGS U/S 271(1)(C) OF THE ACT. DURING THE PENALTY PROCEEDINGS THE EXPLAN ATION OF THE ASSESSEE WAS THAT HE WAS NOT AWARE OF THE INCOME-TAX LAW AND HAD ACTED ON THE ADVICE OF HIS COUNSEL IN CLAIMING THE SAID DEDUCTIO N UNDER SECTION 54F OF 3 THE ACT. THE ASSESSING OFFICER REJECTING THE EXPLA NATION OF THE ASSESSEE LEVIED PENALTY OF RS.61,614/- U/S 271(1)(C) OF THE ACT. 5. THE CIT (APPEALS) UPHELD THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. 6. THE ASSESSEE IS IN APPEAL AGAINST THE AFORESAID LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THE LEARNED A.R. FOR THE ASS ESSEE REITERATED ITS SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER DURI NG THE ASSESSMENT PROCEEDINGS AND POINTED OUT THAT THE COMPLETE PARTI CULARS IN RESPECT OF ITS CLAIM OF DEDUCTION UNDER SECTION 54F OF THE ACT WERE GIVEN TO THE ASSESSING OFFICER AND THE ONLY MISTAKE WAS THAT THE SAID DEDUCTION WAS CLAIMED ON THE NET CAPITAL GAINS AMOUNT AND NOT ON PRORATE BASIS ON ACCOUNT OF THE NET CONSIDERATION INVESTED IN THE NE W ASSET. THE LEARNED A.R. FOR THE ASSESSEE STRESSED THAT IT HAD MADE THE AFORESAID INVESTMENT ON THE ADVICE OF HIS COUNSEL AND THEREAFTER AFTER A SSESSMENT HAD PAID THE ADDITIONAL TAXES. THE MISTAKE OF THE ASSESSEE WAS CLAIMED TO BE BONAFIDE AND IT WAS SUBMITTED THAT THE PENALTY IN T HE CASE MAY BE DELETED. 7. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF THE CIT (APPEALS). 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT CASE IS IN RELATION TO THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD FURNISHED ITS RETURN OF INCOME IN WHICH IT HAD DECLARED INCOME FROM LONG TERM CAPITAL GAIN ON SALE OF PLOT AND HAD CLAI MED SET OFF OF THE SAID GAIN AGAINST INVESTMENT IN NEW RESIDENTIAL HOUSE UN DER THE PROVISIONS OF SECTION 54F OF THE ACT. THE TOTAL CONSIDERATION RE CEIVED BY THE ASSESSEE 4 ON SALE OF OLD ASSET WAS RS.12.50 LACS AND AFTER CL AIMING THE DEDUCTION ON ACCOUNT OF COST OF ACQUISITION, THE ASSESSEE HAD COMPUTED LONG TERM CAPITAL GAIN AT RS.9,75,020/-. DURING THE YEAR UND ER CONSIDERATION, THE ASSESSEE HAD PURCHASED A NEW RESIDENTIAL HOUSE FOR RS.10,25,000/- AND IN VIEW OF THE EXEMPTION PROVIDED UNDER SECTION 54F OF THE ACT CLAIMED THE EXEMPTION TO THE EXTENT OF RS.9,75,020/- I.E. THE L ONG TERM CAPITAL GAIN COMPUTED IN THE CASE AND DECLARED THE INCOME UNDER THE SAID HEAD AT NIL. HOWEVER, EXEMPTION UNDER SECTION 54F OF THE ACT IS IN RELATION TO THE COST OF NET CONSIDERATION REALIZED ON SALE OF OLD A SSET AND SINCE THE COST OF NEW ASSET BEING THE RESIDENTIAL HOUSE WAS LESSER THAN THE SAME, THE ASSESSEE WAS ENTITLED TO PRORATA DEDUCTION TOTALING RS.7,99,516/-. CONSEQUENTLY, THE ADDITION OF RS.1,75,484/- IN THE PRESENT CASE WAS MADE BY THE ASSESSING OFFICER. 9. THE CLAIM OF THE ASSESSEE IS THAT IT HAD BONAFID ELY ACTED ON THE ADVICE OF HIS COUNSEL AND MADE THE AFORESAID INVEST MENT, UNDER THE BONAFIDE BELIEF THAT THE INVESTMENT HAS TO BE MADE TO THE EXTENT OF LONG TERM CAPITAL GAIN. THOUGH IT IS AN ESTABLISHED RUL E THAT IGNORANCE OF LAW IS NOT AN EXCUSE, BUT IN THE FACTS OF THE PRESENT C ASE, WHERE THE ASSESSEE HAD BONAFIDELY ACTED ON THE ADVICE OF HIS COUNSEL I N RESPECT OF ISSUE OF CLAIM OF EXEMPTION UNDER PARTICULAR PROVISIONS OF T HE ACT AND WHICH ARE AT VARIANCE EVEN UNDER THE SAME CHAPTER, WHERE THE ASSESSEE HAD SO ACTED, THE CLAIM OF THE ASSESSEE CAN AT BEST BE CAL LED A BONAFIDE MISTAKE. THERE IS NO MERIT IN LEVY OF PENALTY U/S 271(1)(C) OF THE ACT IN RESPECT OF SUCH BONAFIDE MISTAKE MADE BY THE ASSESSEE, WHICH W AS NOT MALAFIDE. ACCORDINGLY, WE HOLD THAT THE ASSESSEE IS NOT EXIGI BLE TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. ACCORDINGLY, WE DIRECT T HE ASSESSING OFFICER 5 TO DELETE THE AFORESAID PENALTY LEVIED U/S 271(1)(C ) OF THE ACT. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS A LLOWED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF JANUARY, 2012. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOW LA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 20 TH JANUARY, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH