Soldier Scholars Study Circle, Hyderabad, Hyderabad V. ITO, Ward-6(3), Hyderabad, Hyderabad

ITA 1217/HYD/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6309 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-08-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 16-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Assessee Lawyers: LAXMINIWAS SHAR MA
• Keywords: Fair market value; Wrong claim
• Section: 143(3); 54B; 27; 11

Judgement Text

ITA NO. PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P.MADHAVI DEVI, JUDICIA L MEMBER & SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.1217/HYD/2015 (ASSESSMENT YEAR: 2009-10) M/S. SOLDIER SCHOLARS ST UDY CIRCLE HYDERABAD PAN: AAITS 6048 Q VS. INCOME TAX OFFICER WARD 6(3) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI LAXMINIWAS SHARMA FOR REVENUE : SMT. U. MINICHANDRAN, DR DATE OF HEARING : 22.08.2016 DATE OF PRONOU NCEMENT : 26 .08.2016 O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2009-10 AGAIN ST THE CONFIRMATION OF THE PENALTY LEVIED BY THE AO U/S 27 1(1)(C) BY THE CIT (A). THE ASSESSEE HAS RAISED THE FOLLOWING GROU NDS: 1. THE LEARNED CIT (A)-VI ERRED IN FACTS AND LAW WHILE PASSING ORDER UNDER SECTION 271(1)(C) R.W.S 274 OF THE INCOME TAX ACT, 1961. 2. THE LEARNED CIT (A)-VI ERRED IN PASSING PENALTY ORDER ON THE BASIS OF CONCEALMENTWHERE AS THE ASSESSEE HAS DISCLOSED ALL FACTS IN RETURN OF INCOM E FILED. 3. THE LEARNED CIT (A)-VI ERRED IN NOT CONSIDERING THA T CLAIM NOT TENABLE UNDER THE INCOME TAX ACT 1961 WILL NOT AMOUNT TO CONCEALMENT OF INCOME. ITA NO. PAGE 2 OF 8 4. THE LEARNED CIT (A)-VI ERRED IN CONCLUDING THAT THE CLAIM FOR DEDUCTION U/S 54B WAS MADE BY FILING INACCURATE PARTICULARS IGNORING THE MEANING OF THE WORD 'ASSESSEE' PRIOR TO AMENDMENT MADE BY THE FINANCE ACT 2012 W.E.F 01-04-2013. 5. THE LEARNED CIT (A)-VI ERRED IN NOT CONSIDERING THA T THE ISSUE WAS DEBATABLE, HENCE NO PENALTY CANNOT BE LEVIED. 6. THE LEARNED CIT (A)-VI ERRED IN STATING THAT INVESTMENT WAS MADE PRIOR TO SALE OF THE LAND WHEREAS THE PURCHASE WAS MADE ONLY OUT OF THE SALE PROCEEDS. 7. FOR THESE & OTHER GROUND WHICH MAY BE RAISED DURING OR BEFORE THE APPEAL IS HEARD. IT IS PRAYED THAT THE RELIEF BE GRANTED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT. IT FILED ITS RETURN OF INCOME FOR THE A.Y 2009-10 ON 9.9.2009 DECLARING AN INCOME OF RS.44,19,890. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE AO OBSERVED THAT THE ASSESSEE HAS S HOWN LONG TERM CAPITAL GAIN (LTCG) AT RS.44,19,890. FOR VERIF YING THE ASSESSEES CLAIM, THE AO REQUESTED THE ASSESSEE TO FURNISH COPIES OF THE SALE DEED IN RESPECT OF PURCHASE OF AGRICULT URAL LAND ON WHICH THE CAPITAL GAIN HAD ARISEN. IN RESPONSE, THE ASSESSEE FURNISHED COPIES OF THE SALE DEEDS. ON VERIFICATION OF THE SAME, THE AO OBSERVED THAT THE SALE CONSIDERATION ADMITTE D BY THE ASSESSEE IS LESS THAN THE MARKET VALUE OF THE PROPE RTY AS PER THE SRO. HE, THEREFORE, REQUIRED THE ASSESSEE TO EXPLAI N AS TO WHY THE PROPERTY SHOULD NOT BE VALUED AT RS.5,16,67,000 AS PER THE STAMP VALUATION OFFICER AS FULL VALUE OF THE CONSID ERATION FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN INSTEAD OF R S.3.00 CRORES ITA NO. PAGE 3 OF 8 SHOWN BY THE ASSESSEE. ASSESSEE EXPLAINED THAT THE LAND WAS AGREED TO BE SOLD PRIOR TO THE DATE OF SALE AT THE MARKET PRICE AND THEREAFTER THE MARKET PRICE HAS GONE UP, BUT SINCE THE AGREED PRICE WAS IN FINANCIAL YEAR 2005-06, THE SALE CONSI DERATION RECORDED IN THE SALE DEEDS HAS TO BE ACCEPTED. AO H OWEVER, WAS NOT CONVINCED WITH THE ASSESSEES CONTENTION. FURTH ER, ON PERUSAL OF THE CLAIM OF DEDUCTION U/S 54B OF THE AC T, THE AO OBSERVED THAT THE ASSESSEE HAD GIVEN ADVANCE FOR PU RCHASE OF AGRICULTURAL LAND IN THE A.Y 2007-08 AND THE BALANC E OF CAPITAL GAIN AMOUNT HAS BEEN DEPOSITED WITH ONE MR.SUDHIR R EDDY WHO OWNS AGRICULTURAL LAND WHICH HE PROPOSED TO TRANSFE R TO THE SOCIETY. FROM THE RECITALS IN THE SALE DEED, AO OBS ERVED THAT THE LANDS WERE PURCHASED PRIOR TO THE SALE OF THE ORIGI NAL ASSET AND THAT THE ASSESSEE, BEING A SOCIETY, IS NOT ELIGIBLE FOR DEDUCTION U/S 54B OF THE ACT. THEREFORE, ASSESSEES EXPLANAT ION WAS CALLED FOR. IN RESPONSE, THE ASSESSEE SUBMITTED THAT AS PE R SECTION 54B, THE DEDUCTION IS AVAILABLE TO AN ASSESSEE AND SINCE THE SOCIETY IS ALSO AN ASSESSEE AS PER THE INCOME TAX ACT, IT IS E LIGIBLE FOR EXEMPTION U/S 54B OF THE ACT. AO, HOWEVER, OBSERVED THAT THE WORDS USED IN SECTION 54B ARE ASSESSEE OR A PARENT OF HIS AND SINCE THE ASSESSEE IS A SOCIETY, IT CANNOT HAVE A P ARENT AND THEREFORE, THE PROVISIONS OF SECTION 54B ARE NOT AP PLICABLE TO THE ASSESSEE. FURTHER HE ALSO OBSERVED THAT THE ASSESSE E HAS INVESTED IN ACQUISITION OF AGRICULTURAL LAND BEFORE THE SALE OF THE ORIGINAL ASSET AND HAS ALSO FAILED TO PROVE THAT TH E AGRICULTURAL ACTIVITY WAS CARRIED OUT IN THE SAID LANDS SUBSEQUE NT TO PURCHASE. THEREFORE, HE DISALLOWED THE CLAIM OF EX EMPTION UNDER SECTION 54B OF THE ACT AND RECOMPUTED THE LTC G AND BROUGHT THE DIFFERENCE TO TAX. AGGRIEVED, THE ASSES SEE PREFERRED ITA NO. PAGE 4 OF 8 AN APPEAL BEFORE THE CIT (A) WHO CONFIRMED THE DISA LLOWANCE U/S 54B, BUT GRANTED RELIEF AS REGARDS VALUATION OF THE PROPERTY AND THE AO HAS ALSO PASSED THE CONSEQUENTIAL ORDER ON 1 3.2.2013 GIVING RELIEF TO THE ASSESSEE BY TAKING THE REVISED FAIR MARKET VALUE INTO CONSIDERATION. 3. MEANWHILE, THE AO HAS ALSO INITIATED PENALTY PRO CEEDINGS U/S 271(1)(C) OF THE ACT FOR CONCEALMENT OF INCOME. ASSESSEE FILED ITS REPLY. BUT TAKING INTO CONSIDERATION THE DETAIL ED OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER, THE AO CONCLUDED THAT THE CLAIM OF EXEMPTION U/S 54B OF THE ACT REPRESENTS TH E AMOUNTS OF INCOME SOUGHT TO BE EVADED BY CONCEALMENT OF PARTIC ULARS OF HIS INCOME AND THEREFORE, THE PROVISIONS U/S 271(1)(C) ARE APPLICABLE. THE AO ALSO REJECTED THE ASSESSEES CON TENTION THAT THE ASSESSEE HAS DISCLOSED ALL THE DETAILS OF THE S ALE AND PURCHASE OF LAND IN HIS RETURN OF INCOME AND THEREF ORE, IT IS NOT A CASE OF CONCEALMENT OF INCOME OR FURNISHING OF INAC CURATE PARTICULARS. HOLDING THAT EVERY ASSESSEE SHOULD KEE P IN VIEW THE APPLICABILITY OF LAW AT THE TIME OF FILING OF THE R ETURN OF INCOME AND THAT THE ASSESSEE BEING AWARE AND BEING APPRAIS ED OF THE FACT THAT THE CLAIM OF SECTION 54B WAS NOT APPLICAB LE TO THE ASSESSEES SOCIETY EVEN BEFORE FILING OF THE RETURN OF INCOME, THE AO HELD THAT THE ASSESSEE HAS SUPPRESSED THE INCOME TO THE TUNE OF RS.5,10,18,594 U/S 54B OF THE ACT. HE ACCOR DINGLY, LEVIED THE MINIMUM PENALTY U/S 271(1)(C) OF THE ACT. AGGRI EVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO CONFIRMED THE ORDER OF THE AO HOLDING THAT THE ASSESSEE HAS F URNISHED INACCURATE PARTICULARS OF INCOME. AGGRIEVED BY THE ORDER OF THE CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO. PAGE 5 OF 8 4. THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI LAXMI NIWAS SHARMA, SUBMITTED THAT THE ASSESSEE WAS AN EDUCATIO NAL SOCIETY WHOSE INCOME WAS EXEMPT FROM TAX. HOWEVER, THE ASSE SSEE HAD FILED ITS RETURN OF INCOME DECLARING LTCG ON SALE O F IMMOVABLE PROPERTY AND HAS CLAIMED DEDUCTION U/S 54B OF THE A CT ON ACCOUNT OF INVESTMENT OF LONG TERM CAPITAL GAINS IN PURCHASE OF AGRICULTURAL LAND. IT WAS SUBMITTED THAT THE ASSESS EE HAD DISCLOSED ALL THE RELEVANT FACTS IN THE RETURN OF I NCOME FILED BY THE ASSESSEE AND THEREFORE, IT IS CLEARLY NOT THE C ASE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. HE SUBMITTED THAT THE DISALLOWANCE OF CLAIM MADE BY THE ASSESSEE WILL NOT AMOUNT TO FURNISHING OF INACCURAT E PARTICULARS OR CONCEALMENT OF INCOME ATTRACTING LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THE LEARNED COUNSEL ALSO FILED BEFORE U S A COPY OF THE RETURN OF INCOME FILED BY THE ASSESSEE AND HAS DRAW N OUR ATTENTION TO FORM ITR-7 FILED BY THE ASSESSEE. ACCO RDING TO HIM, ITR-7 IS A FORM FOR CHARITABLE ORGANIZATIONS ONLY. HE HAS ALSO DRAWN OUR ATTENTION TO THE SCHEDULE-C THERETO WHERE IN THE ASSESSEE HAS REFLECTED THE PARTICULARS OF THE ASSET TRANSFERRED AND HAS SHOWN THE LTCG OF RS.2,90,84,037 AND ALSO T O SCHEDULE-E WHICH IS THE STATEMENT OF SET OFF OF THE CURRENT YEARS LOSS U/S 71 WHEREIN THE LTCG OF RS. 44,19,890 IS RE FLECTED WHICH ACCORDING TO HIM IS AFTER SET OFF OF THE EXEMPTION U/S 54B OF THE ACT. THEREFORE, ACCORDING TO HIM, THE ASSESSEE HAS DISCLOSED ALL THE RELEVANT FACTS BEFORE THE AUTHORITIES BELOW. IN SUPPORT OF HIS CONTENTION THAT PENALTY IS NOT LEVIABLE IN THE FACT S AND CIRCUMSTANCES OF THE CASE, HE PLACED RELIANCE UPON THE FOLLOWING DECISIONS: ITA NO. PAGE 6 OF 8 I) HON'BLE SUPREME COURT IN THE CASE OF CIT VS. REL IANCE PETRO PRODUCTS LTD, 322 ITR 158 II) HON'BLE SUPREME COURT IN THE CASE OF BHAVANA TH ANAWALA VS. ITO IN ITA NO.1171/MUM/2009 III) HON'BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. JAKSON LTD IN ITA NO.48/2013 & 49/2013 IV) HON'BLE PUNBAJ & HARYANA HIGH COURT IN THE CASE OF CIT VS. SHAHBAD COOPERATIVE SUGAR MILLS LTD, 322 ITR 73 V) HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SIDHARTHA ENTERPRISES, 322 ITR 80 VI) HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS . NALIN P. SHAH (HUF), INCOME TAX APPEAL (LOD) NO.49 OF 2013 VII) ITAT BANGALORE IN THE CASE OF ITO VS.SHRI M. NARAYANASWAMY IN ITA NO.723/BANG/2010 VIII) ITAT MUMBAI IN SUPER PRECAST PVT. LTD VS. ITO IN ITA NO.2614/MUM/2012 IX) HON'BLE DELHI HIGH COURT IN CIT VS. SOCIETEX (2 012-ITRV- HC-DEL-163) X) HON'BLE MUMBAI HIGH COURT IN THE CASE OF CIT VS. HANS CHRISTIAN GASS (2012-ITRV-HC MUM-167) XI) HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS . BENNET COLEMAN & CO. LTD (2013-ITRV-HCMUM 030) 5. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESS EE WAS VERY WELL AWARE OF THE LEGAL POSITION THAT TO BE ELIGIBL E TO CLAIM EXEMPTION OF LTCG FROM TAXATION U/S 54B OF THE ACT, THE AGRICULTURAL LAND WAS TO BE PURCHASED SUBSEQUENT TO THE TRANSFER OF ORIGINAL ASSET, BUT IN THE CASE BEFORE US, THE A SSESSEE HAD ITA NO. PAGE 7 OF 8 PURCHASED THE AGRICULTURAL LAND PRIOR TO THE SALE O F ORIGINAL ASSET AND THEREFORE, IT IS THE CASE OF THE CONCEALMENT/FU RNISHING OF INACCURATE PARTICULARS OF INCOME. FURTHER, HE ALSO SUBMITTED THAT THE ASSESSEE BEING A SOCIETY IS NOT ELIGIBLE FOR DE DUCTION U/S 54B OF THE ACT AND BECAUSE OF THE WRONG CLAIM, THE ASSE SSEE IS LIABLE FOR PENALTY U/S 271(1)(C) OF THE ACT. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS FURNISHED ALL THE INFORMATION RELATING TO THE SALE OF THE LAND AND AL SO PURCHASE OF AGRICULTURAL LAND IN ITS RETURN OF INCOME FILED BY WAY OF FORM ITR- 7. ASSESSEE IS ALSO ELIGIBLE FOR DEDUCTION U/S 11 O F THE ACT AS IT IS CARRYING ON ACTIVITIES OF IMPARTING EDUCATION. THE ONLY INCOME OF THE ASSESSEE WHICH IS CHARGEABLE TO TAX IS THE LONG TERM CAPITAL GAIN. THE ASSESSEE HAS DECLARED THE LTCG, BUT HAS C LAIMED DEDUCTION U/S 54B OF THE ACT. THE ASSESSEE HAS NOT CHALLENGED THE FINDINGS OF THE AUTHORITIES BELOW THAT THE ASSE SSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 54B OF THE ACT AND HAS A CCEPTED THE TAXABILITY OF THE SAME. THE AO HAS INITIATED THE PE NALTY PROCEEDINGS FOR CONCEALMENT OF INCOME, WHEREAS THE CIT (A) HAS CONFIRMED THE PENALTY ON THE GROUND OF FURNISHING O F INACCURATE PARTICULARS OF INCOME. THEREFORE, IT IS SEEN THAT T HE AO AND THE CIT (A) ARE NOT ON THE SAME PAGE FOR LEVY OF PENALT Y U/S 271 (1)(C) OF THE ACT. FURTHER, MERE DISALLOWANCE OF A CLAIM W ILL NOT AUTOMATICALLY ATTRACT THE LEVY OF PENALTY. HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD, 322 ITR 158 (S.C) (CITED SUPRA) HAS HELD THAT A MERE MAKING OF THE CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NO T AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ITA NO. PAGE 8 OF 8 ASSESSEE. SIMILAR VIEW HAS BEEN EXPRESSED BY VARIOU S HIGH COURTS AND THE TRIBUNAL IN THE DECISIONS CITED SUPR A BY THE LEARNED COUNSEL FOR THE ASSESSEE. IN VIEW OF THE S AME, WE DELETE THE PENALTY LEVIED BY THE AO AND CONFIRMED BY THE C IT (A). 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH AUGUST, 2016. SD/ - SD/ - (B.RAMAKOTAIAH) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 26 TH AUGUST, 2016. VNODAN/SPS COPY TO: 1. M/S. SOLDIER SCHOLARS STUDY CIRCLE, FLAT NO.501, SH ANTI SOUDHA APARTMENTS, ERRAMANZIL COLONY, SOMAJIGUDA, HYDERABAD 2. INCOME TAX OFFICER WARD 6(3) HYDERABAD 3. CIT(A) -6 HYDERABAD 4. PR. CIT 6 HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER