Sripad Deshpande, Hyderabad V. Income Tax Officer, Hyderabad

ITA 1228/HYD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6505 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 28-08-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: S RAMA RAO
• Keywords: Revised return
• Section: 143(3)

Judgement Text

ITA NO 1228 OF 2013 SRIPAD DESHPANDE HYDERABAD PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI P.MADHAVI DEVI, JUDICIAL MEMBER & SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1228/HYD/2013 A.Y 2007-08 SHRI SRIPAD DESHPANDE HYDERABAD PAN: ADPPD 2286 F VS. INCOME TAX OFFICER WARD 7(1) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. RAMA RAO FOR REVENUE : SHRI M. SITARAM, DR DATE OF HEARING : 18.05.2016 DATE OF PRONOUNCEMENT : 31 .05.2016 O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2007-08 AGAIN ST THE PENALTY LEVIED BY THE AO AND CONFIRMED BY THE CIT ( A). 2. AT THE OUTSET, IT IS SEEN THAT THERE IS A DELAY OF 19 DAYS IN FILING OF THE APPEAL BY THE ASSESSEE. THE ASSESSEE HAS FILED AN APPLICATION ALONGWITH AN AFFIDAVIT EXPLAINING THE R EASONS FOR THE DELAY. IT IS STATED THAT THE ADVOCATE/CHARTERED ACC OUNTANT LOOKING AFTER THE ASSESSEES CASE WAS NOT AVAILABLE DUE TO PRE- OCCUPATION AND HENCE COULD NOT GIVE TIME TO THE ASS ESSEE AND SINCE THE ISSUES PERTAINING TO INCOME TAX ARE NOT UNDERSTANDABLE TO THE ASSESSEE, HE HAD TO WAIT FOR THEIR TIME AND HENCE THE DELAY. THE LEARNED DR HOWEVER, OPPOSED TH E CONTENTIONS OF THE ASSESSEE FOR CONDONATION OF THE DELAY. TAKING THE CONTENTIONS OF THE ASSESSEE INTO CONSIDERATION, WE ARE SATISFIED THAT THE ASSESSEE WAS PREVENTED BY REASON ABLE CAUSE IN ITA NO 1228 OF 2013 SRIPAD DESHPANDE HYDERABAD PAGE 2 OF 6 FILING OF THE APPEAL WITH A DELAY OF 19 DAYS. THE D ELAY IS THUS CONDONED. 3. AS REGARDS THE MERITS OF THE CASE, BRIEF FACTS A RE THAT THE ASSESSEE, WHO IS ENGAGED IN REAL ESTATE AND CONSTRU CTION WORK, FILED HIS RETURN OF INCOME FOR THE A.Y 2007-08 ON 3 0.06.2008 DECLARING NIL INCOME AND CLAIMING REFUND OF RS.18,5 7,750. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE AO OBSERVED THAT THE DEPARTMENT HAS FURNISHED INFORMAT ION ABOUT THE ASSESSEE HAVING REGISTERED 2939.58 SFT OF AREA IN 3 RD FLOOR OF HIS BUILDING TO SHRI VASANTH KUMAR GOUD FOR A CONSI DERATION OF RS.50.00 LAKHS VIDE REGISTERED DOCUMENT NO.202/2007 DATED 25.01.2007. THE AO OBSERVED THAT NEITHER THIS TRANS ACTION, NOR THE RESULTANT PROFIT ON THIS TRANSACTION WAS REFLEC TED IN THE COMPUTATION FILED BY THE ASSESSEE. WHEN THE ASSESSE E WAS QUESTIONED, HE IMMEDIATELY CAME FORWARD ADMITTING A SUM OF RS.11,78,546 AS PROFIT ON SALE OF SHOP NO.1 IN THIR D FLOOR OF THE PROJECT. FOR ARRIVING AT THE ABOVE INCOME, THE ASS ESSEE ADOPTED THE COST OF CONSTRUCTION AT RS.1300 PER SFT. THE AO HOWEVER, ADOPTED THE COST OF CONSTRUCTION AT RS.1200 PER SFT AND COMPUTED THE LONG TERM CAPITAL GAIN AT RS.14,72,504 AND BROUGHT IT TO TAX. CONSEQUENTLY THE AO ALSO INITIAT ED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT. ASSESSEE FILED HIS SUBMISSIONS STATING THAT THE ASSESSEE HAD TAKEN A L OAN OF RS.20.00 LAKHS FROM MR. VASANTH KUMAR GOUD IN THE F INANCIAL YEAR 2002-03 AND AS THE ASSESSEE WAS NOT ABLE TO RE PAY THE AMOUNT ALONG WITH INTEREST, THE PROPERTY WAS REGIST ERED IN HIS NAME. IT WAS SUBMITTED THAT SINCE THE ASSESSEE HAS NOT RECEIVED ANY CONSIDERATION IN CASH FOR THE TRANSACTION DURIN G THE RELEVANT A.Y, THE ASSESSEE HAD NOT MADE ANY ENTRY IN THE CAS H BOOK MAINTAINED BY HIM WHICH HAS RESULTED IN NON REFLECT ING THE SAME IN THE COMPUTATION OF INCOME. IT WAS THEREFORE, SUB MITTED THAT IT ITA NO 1228 OF 2013 SRIPAD DESHPANDE HYDERABAD PAGE 3 OF 6 WAS A GENUINE MISTAKE ON THE PART OF THE ASSESSEE A ND ACCEPTED THE CAPITAL GAIN OF RS.14,72,504. THE AO, WAS HOWEV ER, NOT CONVINCED WITH THE ASSESSEES CONTENTION AND LEVIED MINIMUM PENALTY OF RS.14,72,504 ON THIS TRANSACTION. AGGRIE VED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO CONFIRME D THE PENALTY AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED HIS SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND H AS DRAWN OUR ATTENTION TO THE REVISED COMPUTATION OF INCOME FILED AT PAGES 17 & 18 OF THE PAPER BOOK AND ALSO THE ASSESSEES E XPLANATION DURING THE PENALTY PROCEEDINGS WHICH IS PLACED AT P AGE 36 OF THE PAPER BOOK. FOR THE PROPOSITION THAT WHERE A GENUIN E MISTAKE HAS BEEN MADE BY THE ASSESSEE IN REPORTING THE INCO ME AND THE ASSESSEE IMMEDIATELY ACCEPTED HIS LIABILITY TO TAX AND PAID THE TAX, THE PENALTY IS NOT TO BE LEVIED, HE PLACED REL IANCE ON THE FOLLOWING DECISIONS: I) K. DEEDAR AHMED V. INCOME-TAX OFFICER, WARD-1, ADONI (97 ITD 240)HYD. II) CIT V. SURESH CHANDRA MITTAL (2001) 251 ITR 1 0 ( SC), THUS, THE LEARNED COUNSEL FOR THE ASSESSEE PRAYED T HAT THE PENALTY BE DELETED. 5. THE LEARNED DR, ON THE OTHER HAND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESS EE IS IN THE BUSINESS OF REAL ESTATE AND IS WELL AWARE OF THE LE GAL PROVISIONS WHERE THE CAPITAL GAIN ARISE AND HAVING REGISTERED A SALE DEED ON 25.01.2007, ASSESSEE HAD CONSCIOUSLY NOT RETURNED T HE CAPITAL GAIN AND THEREFORE, THE PENALTY PROCEEDINGS U/S 271 (1)(C) ARE CLEARLY APPLICABLE. IT WAS SUBMITTED THAT BUT FOR T HE INFORMATION AVAILABLE WITH THE AO, THE ASSESSEE WOULD NOT HAVE RETURNED THE ITA NO 1228 OF 2013 SRIPAD DESHPANDE HYDERABAD PAGE 4 OF 6 CAPITAL GAIN INCOME AND HENCE THE ASSESSEES CONTEN TION LACKS BONAFIDES. IN SUPPORT OF HIS CONTENTION, HE PLACED RELIANCE UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF MAK DATA (P) LTD VS. CIT REPORTED IN 358 ITR 0593 (SC). 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THERE IS NO DISPUTE THAT THE A SSESSEE HAS NOT RETURNED THE LONG TERM CAPITAL GAIN IN HIS ORIGINAL RETURN OF INCOME AND HAS RETURNED THE SAME ONLY ON BEING QUES TIONED BY THE DEPARTMENT. FROM THE PERUSAL OF THE SALE DEED D OCUMENT NO.202/2007 DATED 25.01.2007, WE FIND THAT THE ASSE SSEE HAD HANDED OVER THE POSSESSION OF THE PROPERTY ON 28.10 .2006 ON EXECUTION OF THE AGREEEMENT OF SALE AND WITH REGARD TO THE CONSIDERATION, IT IS MENTIONED THAT THE SUM OF RS.5 0.00 LAKHS HAS ALREADY BEEN PAID TO THE VENDOR. IN THE CASES R ELIED UPON BY THE ASSESSEE, WE FIND THAT THE HON'BLE SUPREME COUR T IN THE CASE OF SURESH CHANDRA MITTAL (CITED SUPRA) HAS HELD THA T WHERE THE ASSESSEE FILES A REVISED RETURN OF INCOME AFTER SEA RCH AND NOTICES FOR REOPENING THE ASSESSMENT, TO PURCHASE PEACE, PE NALTY U/S 271(1)(C) IS NOT LEVIABLE. IN THE CASE OF K. DEEDAN AHMED, THE COORDINATE BENCH OF THIS TRIBUNAL HAS CONSIDERED TH E FACT THAT THE ASSESSEE THEREIN, WHILE FILING THE RETURN HAD N OT FURNISHED TRUE AND CORRECT PARTICULARS OF INCOME AND SUBSEQUE NTLY, BUT BEFORE DETECTION OF INCOME BY DEPARTMENT ADMITTED H IS MISTAKE AND VOLUNTARILY FILED REVISED RETURN OF INCOME OFFE RING HIS ADDITIONAL INCOME TO TAX AND IN SUCH CIRCUMSTANCES, HELD THAT PENALTY U/S 271(1)(C) OF THE ACT IS NOT LEVIABLE. T HE FACTS IN THESE CASES ARE DISTINGUISHABLE FROM THE FACTS OF THE CAS E BEFORE US. IN THE CASE BEFORE US, THE ASSESSEE DID NOT FILE THE R EVISED RETURN BUT FILED REVISED COMPUTATION OF INCOME AND THAT TO O AFTER DETECTION OF INCOME BY THE DEPARTMENT. IN THE CASE OF MAK DATA (CITED SUPRA) RELIED UPON BY THE LEARNED DR, WE FIN D THAT THE ITA NO 1228 OF 2013 SRIPAD DESHPANDE HYDERABAD PAGE 5 OF 6 HON'BLE SUPREME COURT, IN SIMILAR CIRCUMSTANCES HAS HELD AS UNDER: ASSESSEE HAS ONLY STATED THAT HE HAD SURRENDERED T HE ADDITIONAL SUM OF RS.40,74,000 WITH A VIEW TO AVOID LITIGATION, BUY PEACE AND TO CHANNELIZE THE ENERGY AND RESOURCES TOWARDS PRODUCTIVE WORK AND TO MAKE AMICABLE SETTLEMENT WITH THE INCOME TAX DEPARTMENT. STATUTE DOES NOT RECOGNIZE THOSE TYPES OF DEFENCES UNDER THE EXPLANATION1 TO SECTION 271(1)(C) OF THE ACT. I T IS TRITE LAW THAT THE VOLUNTARY DISCLOSURE DOES NOT RELEASE THE APPELLANT-ASSESSEE FROM THE MISCHIEF OF PENAL PROCEEDINGS. THE LAW DOES NOT PROVIDE THAT WHEN AN ASSESSEE MAKES A VOLUNTARY DISCLOSURE OF HIS CONCEA LED INCOME, HE HAD TO BE ABSOLVED FROM PENALTY. THEREFORE, IT IS CLEAR THAT THE ASSESSEE HAD ENTERE D INTO THE TRANSACTION AND THE ASSESSEE, BEING IN THE BUSINESS OF REAL ESTATE AND CONSTRUCTION, IS AWARE OF THE LIABILITY TO PAY CAPITAL GAINS TAXES. IN THE CASE BEFORE US ASSESSEE HAS FAILED T O RETURN THE CAPITAL GAINS TAX AND THE EXPLANATION OF THE ASSESS EE APPEARS TO BE ONLY AN AFTER THOUGHT. THE LEARNED CIT (A) AT PA RA 5.4 OF HIS ORDER HAS CONFIRMED THE LEVY OF PENALTY BY OBSERVIN G AS UNDER: 5.4 REGARDING THE ADDITION OF RS.14,72,504 ON AC COUNT OF CAPITAL GAINS ON SALE OF COMMERCIAL SPACE OF 239 3.58 SFT, THERE IS NO DISPUTE THAT THE ASSESSEE/APPELLAN T FAILED TO OFFER THE SAME FOR TAXATION, IN FURNISHIN G THE RETURN OF INCOME. HOWEVER, THE ASSESSEE FILED REVIS ED COMPUTATION CALCULATING AND OFFERING THE CAPITAL GA INS AT RS.11,78,546, WHICH HAVE BEEN COMPUTED AS UNDER: CONSIDERATION RECEIVED - RS.50,00,000 LESS: COST OF CONSTRUCTION - RS.38,21,454 @ RS.1300/SFT (2393.58 ASSESSEE 1300) ------------------- ---------- - RS.11,78,546 ======================= HOWEVER, THE AO HAS COMPUTED THE CAPITAL GAINS AT RS.14,72,504 BY PUTTING THE COST OF CONSTRUCTION AT RS.1200 PER SFT AS AGAINST RS.1300 PER SFT ADOPTED BY THE APPELLANT. IN BOTH THE CASES, IT WAS THE ESTIMA TION, INVOLVED IN ASCERTAINING THE COST OF CONSTRUCTION A ND THE DIFFERENCE IN THE RATE ADOPTED BY THE AO AND THE ASSESSEE IS MINIMAL. THUS, IN THE ABSENCE OF THE RE LEVANT ITA NO 1228 OF 2013 SRIPAD DESHPANDE HYDERABAD PAGE 6 OF 6 FACTS ON THE COST OF CONSTRUCTION, I AM OF THE VIEW THAT THE COMPUTATION MADE BY THE AO IS REASONABLE AND THERE IS NO DISPUTE THAT THE INCOME CONCEALED AND ACCEPTED B Y THE ASSESSEE WAS PUT AT RS.11,78,546. THERE IS NO V ALID EXPLANATION FOR THE ASSESSEE TO EXCLUDE THE CAPITAL GAINS FROM THE TOTAL INCOME, WHILE FURNISHING THE RETURN OF INCOME. FILING THE REVISED COMPUTATION MAY NOT HELP THE ASSESSEE IN EXPLAINING THE INCOME OMITTED TO BE OFF ERED FOR TAXATION, AS PER THE EXPLANATIONS TO THE SECTIO N 271(1)(C). HENCE, THE PENALTY ON THE ADDITION OF RS.14,72,504 IS SUSTAINABLE. ACCORDINGLY, THE AO IS DIRECTED TO RECOMPUTE THE PENALTY U/S 271(1)(C) OF THE I.T. ACT FOR THE YEAR UNDER REFERENCE, BY TREATING THE A MOUNT OF RS.14,72,504 AS CONCEALED INCOME, AS AGAINST THE TOTAL ADDITION OF RS.56,11,870 ADOPTED IN THE PENAL TY ORDER DATED 24.01.2013. ACCORDINGLY, THIS GROUND OF APPEAL IS TREATED AS PARTLY ALLOWED, BASED ON THE F ACTS OF THE CASE. 7. FOR THE REASONS STATED ABOVE, WE AGREE WITH THE FINDINGS OF THE CIT (A) AND DO NOT SEE ANY REASON TO INTERFERE WITH THE SAME. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MAY, 2016. S D/ - S D/ - (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 31 ST MAY, 2016. VNODAN/SPS COPY TO: 1. SHRI SRIPAD DESHPANDE, 4-1-1001, BESIDES TAJMAHAL H OTEL, ABIDS, HYDERABAD 500001 2. INCOME TAX OFFICER WARD 7(1) HYDERABAD 3. CIT(A) VI HYDERABAD 4. CIT VI HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER