ACIT, Pune V. Rahul Himmatlal Shah, Pune

ITA 1300/PUN/2013

• Counselvise Citation: 130024514 RSA 2013
• Duration Of Justice: 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 17-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Capital asset; Business income; Date of conversion; Fair market value; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1300/PN/2013 (ASSESSMENT YEAR 2006-07) ACIT, CIRCLE-5, PUNE .. APPELLANT VS. RAHUL HIMMATLAL SHAH, 125, NEW TIMBER MARKET, BHAWANI PETH, PUNE 411042 PAN NO.AEGPS3131Q .. RESPONDENT ASSESSEE BY : SHRI M.K.KULKARNI REVENUE BY : SHRI S.P. WALIMBE DATE OF HEARING : 27-05-2014 DATE OF PRONOUNCEMENT : 30-05-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 05-11-2012 OF THE CIT(A)-III, PUNE RELATING T O ASSESSMENT YEAR 2006-07. 2. DELETION OF PENALTY OF RS.10,61,000/- LEVIED BY THE ASSESSING OFFICER U/S.271(1)(C) OF THE I.T. ACT IS THE ONLY I SSUE RAISED BY THE REVENUE IN THE GROUNDS OF APPEAL. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A BUILDER AND ALSO TRADING IN BUILDING MATERIALS. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE AS SESSEE HAS SHOWN LONG TERM CAPITAL GAIN OF RS.93,98,795/- ON ACCOUNT OF CLAIMED CONVERSION OF THE CAPITAL ASSET, I.E. LAND AT BUND GARDEN ROAD INTO STOCK 2 IN TRADE ON 07-06-2001. AFTER CLAIMING DEDUCTION U /S.54F OF RS.53,41,107/- AGAINST THE SAID CAPITAL GAIN, THE ASSESSEE HAD DECLARED NET CAPITAL GAIN OF RS.40,57,688/-. THE ASSESSING OFFICER NOTED THAT THE PROPERTY WAS IN THE NAME OF THE FATHER OF THE ASSES SEE AT BUND GARDEN ROAD ACQUIRED ON 24-10-1986. AFTER THE DEATH OF HI S FATHER, THE ASSESSEE ALONG WITH HIS BROTHER SHRI MANOJ H. SHAH BECAME TH E OWNER OF THE PROPERTY. THE ASSESSEE HAD IN HIS POSSESSION THE V ALUATION REPORT BY AN APPROVED VALUER SHOWING THE COST OF PROPERTY AS ON 07-06-2001 AT RS.1,97,73,000/-. THE PROPERTY WAS CLAIMED TO BE C ONVERTED INTO STOCK IN TRADE ON THE SAID DATE. THE ASSESSEE FURNISHED VALUATION BY TAKING THE RATE OF RS.2,350/- PER SQ.FT. IN THE YEAR 2001 WITH OUT CITING ANY COMPARABLE CONTEMPORARY TRANSACTION ON THE SAID RAT E. THE ASSESSING OFFICER, THEREFORE, PROCEEDED BY TAKING THE VALUATI ON OF THE PROPERTY AT RS.678/- PER SQ.FT. ON THE BASIS OF READY RECKONER OF PUNE CITY REGION AND ESTIMATED THE COST OF THE PROPERTY AS ON 07-06- 2001 AT RS.80,73,983/- AS AGAINST RS.1,97,73,000/- ADOPTED BY THE ASSESSEE. ACCORDINGLY, THE ASSESSING OFFICER TAXED THE SAME A T RS.1,25,94,211/- AS BUSINESS INCOME FROM SALE OF FLAT IN PLACE OF RS.30 ,37,804/- SHOWN BY THE ASSESSEE. ACCORDINGLY, THE CAPITAL GAIN SHOWN BY THE ASSESSEE AT RS.40,57,680/- WAS REDUCED TO RS. NIL. THE ASSESSI NG OFFICER, THEREAFTER, ISSUED PENALTY NOTICE U/S.271(1)(C) OF THE I.T. ACT. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE ASSESSING OFFICER LEVIED PENALTY OF RS.10,61,000/- BEING MINIMUM PENA LTY U/S.271(1)(C) OF THE I.T. ACT. 3 4. IN APPEAL, THE LD.CIT(A) DELETED THE PENALTY SO LEVIED BY THE ASSESSING OFFICER U/S.271(1)(C) OF THE I.T. ACT BY HOLDING AS UNDER : 5. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE LEARNED COUNSEL FOR THE APPELLANT WITH REFERENCE TO THE FACT S OF THE CASE AND MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, T HE APPELLANT HAD SHOWN BUSINESS INCOME FROM SALE OF FLATS IN A CONSTRUCTION PROJECT UNDERTAKEN BY HIM ON THE LAND SITUATED AT BUND GARDE N ROAD, PUNE. BESIDES, THE APPELLANT HAD SHOWN LONG TERM CAPITAL GAI NS BY CLAIMING CONVERSION OF CAPITAL ASSETS (LAND) INTO STOCK IN TRADE ON WHICH THE PROJECT WAS CONSTRUCTED. HOWEVER, THIS CLAIM OF THE A PPELLANT WAS HELD TO BE NOT BONA FIDE BY THE ASSESSING OFFICER AND CONSEQU ENTLY, THE CLAIM OF HAVING DERIVED LONG TERM CAPITAL GAINS AS ALSO CLAI M OF DEDUCTION U/S.54F WERE REJECTED BY THE ASSESSING OFFICER AND THE E NTIRE PROFITS FROM THE PROJECT WERE TREATED AS BUSINESS INCOME. WHIL E DOING SO, THOUGH THE ASSESSING OFFICER ALLOWED DEDUCTION FOR COST OF LAND, THE VALUE ADOPTED BY THE APPELLANT AT RS.2,350/- PER SQ. FT. WA S HELD TO BE EXORBITANTLY HIGH IN CONTRAST TO THE READY RECKONER VALUATION FOR THE AREA AT RS.678/- PER SQ. FT. NOTIFIED BY THE STATE GOVERNM ENT, WHICH WAS ADOPTED BY THE ASSESSING OFFICER FOR COMPUTING THE FAIR MARKET VALUE. IN THE APPELLATE PROCEEDINGS, THE CIT(A), THE UPHELD TH E CLAIM OF THE APPELLANT OF CONVERSION OF CAPITAL ASSET INTO STOCK-IN -TRADE AND DERIVING CAPITAL GAINS THERE-FROM, HOWEVER, SUSTAINED THE ACTIO N OF THE ASSESSING OFFICER IN COMPUTING THE FAIR MARKET VALUE BY ADOPT ING THE READY RECKONER RATE NOTIFIED BY THE REGISTRATION AUTHORITI ES FOR STAMP DUTY PURPOSES. PENALTY WAS IMPOSED BY THE ASSESSING OFFICER ON T HE ADDITION TO THE BUSINESS INCOME AS A RESULT OF THE REDUCTION IN T HE VALUATION OF LAND ON THE GROUND THAT THE APPELLANT DELIBERATELY INFLATED THE COST OF LAND AS ON THE DATE OF VALUATION FOR CONVERSION OF TH E LAND INTO STOCK-IN- TRADE. ON THE CONTRARY, THE APPELLANT VEHEMENTLY AR GUES THAT NO PARTICULARS OF INCOME WERE CONCEALED OR FURNISHED INA CCURATELY AND THAT THE VALUE ADOPTED AS ON THE DATE OF CONVERSION WAS ON THE BASIS OF THE REPORT OF THE REGISTERED VALUER AND THEREFORE, NO PE NALTY IS EXIGIBLE. 5.1 THE SCHEME OF SEC. 271(1)(C) VISUALIZES IMPOSITION OF PENALTY WHEN THE ASSESSEE HAS CONCEALED INCOME OR WHEN THE ASSESSE E HAS FURNISHED INACCURATE PARTICULARS OF INCOME. IN ADDITI ON TO THESE TWO SITUATIONS, PENALTY CAN ALSO BE IMPOSED, INTER ALIA, WHEN ASSESSEE IS DEEMED TO HAVE CONCEALED PARTICULARS OF INCOME UNDE R EXPLANATION 1 TO SEC. 271(1)(C). A DEEMING FICTION UNDER EXPLANATION 1 TO SEC. 271(1)(C) ENVISAGES TWO SITUATIONS (A) FIRST, WHERE IN RESPECT OF A NY FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISI ONS OF THE ACT, THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATIO N OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE AO OR THE CIT(A), AN D, (B) SECOND, WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTA TION OF TOTAL INCOME UNDER THE PROVISIONS OF THIS ACT, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND THE ASSESSEE FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. THUS, THE PENALTY UNDER SEC.271(1)(C) IS A PENALTY FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS, O R, UNDER THE EXTENDED DEFINITION BY THE VIRTUE OF EXPLN.1 TO S.271(1)(C), FOR A DEEMED CONCEALMENT OF INCOME. 5.2 THE FACTS OF THE PRESENT CASE ARE NOW TESTED VIS-A -VIS THE ABOVE LEGAL POSITION TO EXAMINE WHETHER THE PRESENT CASE IS C OVERED UNDER THE MAIN PART OF THE PROVISIONS OR UNDER THE DEEMING PROV ISIONS OF 4 EXPLANATION; 1 OF SECTION 271(1)(C) OR NOT. IN THE C ASE OF THE APPELLANT, AS ALREADY MENTIONED, THE PENALTY HAS BEEN IMPOSED BY TH E ASSESSING OFFICER IN RESPECT OF ADDITION MADE ON ACCOUNT OF RE DUCTION IN THE VALUATION OF LAND AS ON THE DATE OF CONVERSION INTO ST OCK-IN-TRADE. THE NECESSARY PRECONDITION FOR IMPOSITION OF PENALTY UNDER THE MAIN PROVISIONS OF SEC. 271(1)(C) IS THAT THE A.O. SHOULD SATI SFY HIMSELF THAT THE APPELLANT CONCEALED ITS INCOME OR FURNISHED INACCURAT E PARTICULARS OF INCOME. THE EXPRESSION 'CONCEALMENT OF INCOME' HAS NOT BEEN DEFINED IN THE ACT, BUT THE NATURAL MEANING OF THE EXPRESSION 'C ONCEALMENT' IS 'TO KEEP FROM BEING SEEN, FOUND, OBSERVED, OR DISCOVERED' . IT WOULD, THEREFORE, FOLLOW THAT THE EXPRESSION CONCEALMENT OF INCOME, IN ITS NATURAL SENSE AND GRAMMATICAL MEANING, IMPLIES AN INCO ME IS BEING HIDDEN, CAMOUFLAGED OR COVERED UP SO THAT IT CANNOT BE SEEN, FOUND, OBSERVED OR DISCOVERED. SIMILARLY, THE EXPRESSION 'FURN ISHING OF INACCURATE PARTICULARS OF INCOME' HAS ALSO NOT BEEN DE FINED IN THE ACT. IN THE CONTEXT OF 'FURNISHING OF INACCURATE PARTICULARS' , THE EXPRESSION 'INACCURATE' REFERS TO 'NOT IN CONFORMITY WITH THE F ACT OR TRUTH'. THE EXPRESSION 'PARTICULARS' REFERS TO 'FACTS, DETAILS, SPECIF ICS, OR INFORMATION ABOUT SOMEONE OR SOMETHING'. THEREFORE, THE PLAIN MEA NING OF THE EXPRESSION FURNISHING OF INACCURATE PARTICULARS OF INCO ME IMPLIES FURNISHING OF DETAILS OR INFORMATION ABOUT INCOME WHI CH ARE NOT IN CONFORMITY WITH THE FACTS OR TRUTH. IN THE PRESENT CASE, THE APPELLANT HAS MADE DISCLOSURE OF ALL THE PARTICULARS OF ITS INCOME AN D DETAILS OF EXPENDITURE. THE AREA OF DISPUTE IS CONFINED TO THE VALUATION OF THE LAND AS ON THE DATE OF CONVERSION INTO STOCK IN TRADE, WHIC H WAS ADOPTED BY THE APPELLANT AT RS.2,350/- WHICH THE ASSESSING OFFICER HAD REJECTED ON THE GROUND THAT THE VALUE SO ADOPTED BY THE APPELLAN T WAS HIGHLY EXCESSIVE AND NOT SUPPORTED BY ANY COMPARABLE INSTANCE S AND HE ADOPTED THE READY RECKONER RATES NOTIFIED BY THE STA TE GOVT. FOR THE PURPOSE OF STAMP DUTY FOR COMPUTING THE VALUATION OF LAND. HOWEVER, IT IS NOT IN DISPUTE THAT THE VALUE ADOPTED BY THE APPEL LANT WAS ON THE BASIS OF REPORT FURNISHED BY A GOVT. APPROVED VALUER, WHIC H WAS ATTACHED ALONG WITH THE RETURN OF INCOME FILED. SIMILARLY, ALL OTHER DETAILS OF RELATING TO THE CLAIM WERE ALSO FURNISHED ALONG WITH THE RETURN OF INCOME. THIS IS NOT A CASE WHERE THE APPELLANT WAS FOUND TO HAV E CONCEALED ANY PARTICULARS OF ITS INCOME OR ANY PARTICULARS FURNISHED BY THE APPELLANT WAS FOUND TO BE INACCURATE AS SUCH. ALL THE MATERIAL F ACTS WERE DULY DISCLOSED IN THE RETURN OF INCOME FURNISHED BY THE APP ELLANT AND ONLY THE BASIS OF VALUATION ADOPTED BY THE ASSESSING OFFICER WAS FO UND TO BE NOT ACCEPTABLE BY THE ASSESSING OFFICER. THOUGH THE VALUE A DOPTED BY THE APPELLANT AT RS.2,350/- ON THE BASIS OF THE VALUER'S RE PORT WAS NOT SUPPORTED BY ANY COMPARABLE INSTANCES, THERE WERE NO COMPARABLE SALE INSTANCES TO SUPPORT THE VALUE ADOPTED BY THE ASSESSING OF FICER OF RS.678/- EITHER, SANS THE READY RECKONER RATES. THE REA DY RECKONER RATES NOTIFIED BY THE STATE GOVT. ARE BASICALLY FOR THE PU RPOSE OF LEVYING STAMP DUTY WHICH CAN AT BEST, SERVE AS A GUIDELINE FOR DETE RMINATION OF THE MARKET VALUE BUT THE SAME CANNOT BE CONSIDERED CONCLU SIVELY AS REPRESENTING THE FAIR MARKET VALUE. THESE RATES ARE FI XED FOR A PARTICULAR AREA IN GENERAL AND DO NOT TAKE INTO COGNIZANCE INT O FEATURES ASSOCIATED WITH INDIVIDUAL PROPERTIES WHICH DIFFER FROM PROPERT Y TO PROPERTY DUE TO VARIOUS PARAMETERS. THUS, MERELY BECAUSE THE FACT THAT THE READY RECKONER RATE NOTIFIED BY THE GOVT. WAS LESS THAN THE VALUE ADOPTED BY THE APPELLANT AS ON THE DATE OF CONVERSION, IT CANNOT BE SAID CONCLUSIVELY THAT THE PARTICULARS FURNISHED BY THE APPELLANT WERE INACCURATE OR THAT HE CONCEALED ANY PARTICULARS OF HIS INCOME. THE ASPECT OF VALUATION OF PROPERTIES IS HIGHLY SUBJECTIVE AND DEPENDENT ON VARI OUS PARAMETERS. IN THE CIRCUMSTANCES, IT WOULD NOT BE CORRECT TO HOLD TH AT THE APPELLANT CONCEALED ANY PARTICULARS OF HIS INCOME OR FURNISHED I NACCURATE PARTICULARS OF HIS INCOME. 5 5.3 NOW THE CASE OF THE APPELLANT IS EXAMINED UNDER T HE DEEMING PROVISIONS OF EXPLANATION 1 TO SECTION 271(1)(C). THI S DEEMING FICTION, AS MENTIONED EARLIER IN THIS ORDER, COMES INTO PLAY WHER E IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOM E OF ANY PERSON UNDER THIS ACT, (I) WHEN THE ASSESSEE FAILS TO PROVIDE AN EXPLA NATION, (II) WHEN THE ASSESSEE PROVIDES AN EXPLANATION WHICH IS FOUND TO BE FALSE AND (III) WHEN THE ASSESSEE PROVIDES AN EXPLANATION WHICH HE FAILS TO PROVE THAT THE EXPLANATION WAS BONA FIDE AND THAT ALL THE FACTS NECESSARY FOR THE SAME AND MATERIAL FOR COMPUTATION OF INCOME HAVE BEE N DULY DISCLOSED BY THE ASSESSEE. 5.4 IN THE INSTANT CASE, CONDITION (I) IS HOT SAT ISFIED AS THE APPELLANT HAS OFFERED AN EXPLANATION THAT THE VALUE ADOPTED BY HIM WAS ON THE BASIS OF THE REPORT OF GOVT. APPROVED VALUER WHO, A FTER TAKING INTO ACCOUNT THE DIFFERENT ASPECTS ASSOCIATED WITH THE PROPE RTY IN QUESTION, DETERMINED ITS VALUE. SUCH AN EXPLANATION FILED BY T HE APPELLANT WAS NOT FOUND TO BE FACTUALLY INCORRECT AS THE REPORT OF THE VALUER WAS ATTACHED WITH THE RETURN OF INCOME. THUS, THE CONDITION (II) IS ALSO NOT SATISFIED. AS FAR AS CONDITIONS IN (III) IS CONCERNED, IT WOULD NOT BE SAID THAT THE EXPLANATION FURNISHED BY THE APPELLANT WAS NOT BONAFI DE AND THAT ALL THE FACTS NECESSARY FOR THE SAME AND NECESSARY FOR COMPUTATIO N OF INCOME WERE NOT DISCLOSED IN THE RETURN OF INCOME FILED. AS A LREADY MENTIONED, IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THERE WAS F AILURE ION THE PART OF THE APPELLANT TO DISCLOSE FULLY AND TRULY ALL MATE RIAL FACTS NECESSARY FOR ITS ASSESSMENT. 5.5 IN VIEW OF THE REASONS SET OUT ABOVE, THE CASE OF THE ASSESSEE IS NOT EVEN HIT BY THE MISCHIEF OF ANY OF THE THREE SITU ATIONS ENVISAGED BY THE DEEMING FICTION UNDER EXPLANATION 1 TO S. 271(1) (C). AS ALREADY OBSERVED EARLIER, ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, THE APPELLANT COULD NOT BE SAID TO HAVE CONCEALED THE PA RTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. SUCH C ONCLUSIONS AND INFERENCE, THOUGH MAY BE RELEVANT FOR THE QUANTUM P ROCEEDINGS, ARE NOT SUFFICIENT TO INVOKE THE RIGORS OF A PENAL PROVISIONS L IKE SEC.271(1)(C). IT IS THE SETTLED LAW THAT PENALTY PROCEEDINGS ARE DISTINC T FROM THE ASSESSMENT PROCEEDINGS AND, THEREFORE, IF ANY ADDITION I S MADE IN THE ASSESSMENT ORDER, IT DOES NOT MEAN THAT THE PENALTY WILL AUTOMATICALLY BE LEVIED. IN THE PENALTY PROCEEDINGS THE ASSESSEE IS GIVE N AN OPPORTUNITY TO EXPLAIN HIS CASE. IF HE SUCCESSFULLY EXPLAINS HIS POSIT ION AND IS NOT TRAPPED WITHIN THE PARAMETERS OF S.271(1)(C) AND THE EXPLANATIONS THERETO, PENALTY CANNOT BE IMPOSED. IN THIS REGARD, REFERENCE CAN BE MADE TO THE DECISION OF ITAT, MUMBAI IN THE CASE OF A SST. CIT V. VIP INDUSTRIES LTD. REPORTED IN 122 TTJ (MUMBAI) 289 WHER EIN THE TRIBUNAL HAS DISCUSSED THE APPLICABILITY OF THE DECISION OF THE H ONBLE SUPREME COURT IN THE CASE OF DHARAMENDRA TEXTILE PROCESSORS (SUP RA), IN THE FOLLOWING MANNER : 11....... THE HON'BLE SUPREME COURT HAS NOT HELD TH AT IN ALL CASES WHERE ADDITION IS CONFIRMED, THE PENALTY SHALL MECHANICALLY FOLLOW. THE RATIO DECIDENDI OF THE JUDGMENT IS CONFINED TO TREATING TH E WILLFUL CONCEALMENT AS NOT VITAL FOR IMPOSING PENALTY UNDER S. 271(1)(C). IT IS AUSTERE FROM THE LANGUAGE OF S. 271(1)(C) THAT THE PENALTY IS IMPOSABLE FOR THE CONCEALMENT OF THE PARTICULARS OF INCOME OR FURNISHI NG OF INACCURATE PARTICULARS OF SUCH INCOME. THE LITERAL MEANING OF TH E WORD 'CONCEAL' IS 'TO HIDE'. BE THAT AS IT MAY IN ORDER TO BE COVERED WITHIN THE MISCHIEF OF THIS SECTION, THE ACT (INTENTIONAL OR UNINTENTIONAL) OF THE ASSESSEE SHOULD RESULT INTO THE CONCEALMENT OF INCOME. WHERE AN ASSESSEE GENUINELY 6 MAKES CLAIM FOR A PARTICULAR DEDUCTION BY DISCLOSING ALL THE NECESSARY FACTS RELATING TO THE SAME THAT WILL NOT AMOUNT TO CO NCEALMENT EVEN IF THE ASSESSEE 'S CLAIM IS REJECTED. THERE MAY BE A SITUATION I N WHICH THE ASSESSEE EQ.RNS INCOME BUT UNINTENTIONALLY FAILS TO DISCLO SE THE SAME IN THE RETURN. SUCH TYPES OF CASES ARE COVERED BY THE JUD GMENT IN UNION OF INDIA V. DHARAMENDRA TEXTILE PROCESSORS [2008] 306 TTR 277(SC). SO THE SCOPE OF THIS JUDGMENT EXTENDS TO RAPING; IN THE C ASES OF CONCEALMENT OF INCOME EVEN IF THE ASSESSEE DID NOT HAVE THE GUILTY MIND BUT STILL THERE IS FAILURE TO DISCLOSE THE INCOME. FOR EXAMPLE AN ASSESSEE MAY HAVE TEN BANK ACCOUNTS FROM WHICH INTEREST INCOME IS RECEIVED. THE ASSESSEE FILES A RETURN BY DECLARING INTEREST INCOME FROM NINE BANK ACCOUNTS BUT OMITS TO INCLUDE SUCH INTEREST INCOME FROM THE TENTH BANK A CCOUNT AND FURTHER THIS OMISSION IS AND NOT WILLFUL. SUCH WOULD BE THE CAS ES TAUGHT WITHIN THE SWEEP OF THE RATIO LAID DOWN IN THE CASE OF DHARA MENDRA TEXTILE PROCESSORS (SUPRA). IN THIS CASE THE CONCEALMENT OF INCOM E BY NOT OFFERING THE INTEREST INCOME FOR TAXATION FROM THE T ENTH BANK ACCOUNT IS THERE, EVEN THOUGH INADVERTENTLY, AND THE PENALTY W ILL FOLLOW NOTWITHSTANDING THE FACT THAT THE ASSESSEE WAS NOT AWARE OF HAVING EARNED INTEREST INCOME FROM THE TENTH BANK ACCOUNT. BUT IN A CASE WHERE A GENUINE CLAIM IS MADE FOR DEDUCTION WHICH IS NOT AC CEPTED BY THE REVENUE BUT ALL THE NECESSARY PARTICULARS ARE DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME, IT CANNOT BE SAID BY ANY STRETC H OF IMAGINATION THAT THE ASSESSEE HAS CONCEALED HIS INCOME OR FURNISHED INACCUR ATE PARTICULARS OF INCOME IN RESPECT OF THE CLAIM OF DEDU CTION WHICH STANDS REPLIED BY THE AUTHORITIES. IF PENALTY IS IMPOSED UND ER SUCH CIRCUMSTANCES ALSO THEN PROBABLY THERE WILL REMAIN NO COURSE OPEN TO THE ASSESSEE FOR GENUINELY CLAIMING A DEDUCTION WHICH I N HIS OPINION IS ADMISSIBLE, BECAUSE THE FEAR OF SUCH CLAIM BEING REJECT ED IN EVENTUALITY WILL EXPOSE HIM TO THE RIGOUR OF PENALTY. OBVIOUSLY SU CH A PROPOSITION IS BEYOND ANY RECOGNIZED CANON OF LAW. 5.6 FURTHER, THE ITAT, PUNE IN THE CASE OF KANBAY SO FTWARE INDIA PVT. LTD. [122 TTJ 0721] WHILE DEALING WITH SIMILAR PLEA HELD THAT THE VIEWS EXPRESSED BY THEIR LORDSHIPS IN DHARAMENDRA TEXTILE PRO CESSORS CASE (SUPRA) CANNOT BE VIEWED AS AN AUTHORITY FOR THE PROP OSITION THAT A PENALTY UNDER S. 271(1)(C) IS AN AUTOMATIC CONSEQUENCE OF AN ADDITION BEING MADE TO INCOME OF THE TAXPAYER, FOR THE REASON THAT WHETHER IT IS A CIVIL LIABILITY OR A CRIMINAL LIABILITY, PENALTY UN DER S. 271(1)(C) CAN ONLY COME INTO PLAY WHEN THE CONDITIONS LAID DOWN UNDER T HAT SECTION ARE SATISFIED. 5.7 THE HON'BLE SUPREME COURT IN ITS DECISION IN THE CONTEXT OF SEC. 271(1)(C) OF THE INCOME TAX ACT IN CIT V. ATUL MOHA N BINDAL AS REPORTED IN 317 ITR 1, OBSERVED AS BELOW: '11. A CLOSE LOOK AT SECTION 271(1) (C) AND EXPLANA TION (1) APPENDED THERETO WOULD SHOW THAT IN THE COURSE OF ANY PROCEEDI NGS UNDER THE ACT, INTER ALIA, IF THE ASSESSING OFFICER IS SATISFIED THAT A PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, SUCH PERSON MAY BE DIRECTED TO PAY PENALTY. T HE QUANTUM OF PENALTY IS PRESCRIBED IN CLAUSE (III) EXPLANATION 1, A PPENDED TO SECTION 271(1) PROVIDES THAT IF THAT PERSON FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY SUCH PERSON IS FOUND TO BE FALSE OR THE EXPLANATION OFFERED BY HIM IS NOT SUBSTANTIATED AND HE FAILS TO PRO VE THAT SUCH EXPLANATION IS BONAFIDE AND THAT ALL THE FACTS RELAT ING THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAS B EEN DISCLOSED BY HIM, FOR THE PURPOSES OF SECTION 271(1)(C), THE AMOUN T ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME IS DEEMED T O REPRESENT THE CONCEALED INCOME. THE PENALTY SPOKEN OF IN SECTION 271(1)(C) IS NEITHER 7 CRIMINAL NOR QUASI CRIMINAL BUT A CIVIL LIABILITY; A LBEIT A STRICT LIABILITY. SUCH LIABILITY BEING CIVIL IN NATURE, MENS REA IS NOT ESSENTIAL. 14. IT GOES WITHOUT SAYING THAT FOR APPLICABILITY OF SECTION 271(1)(C), CONDITIONS STATED THEREIN MUST EXIST [EMPHASIS SUPPLIED] . 5.8 THE HON'BLE SUPREME COURT IN THE AFOREMENTION ED JUDGMENTS, HAS CLEARLY OBSERVED THAT MERELY BECAUSE AN ADDITION IS MA DE TO THE INCOME DECLARED BY THE ASSESSEE, PENALTY U/S.271(1)(C) CANNOT BE IMPOSED. WHAT NEEDS TO BE SEEN IS THAT WHETHER THE APPELLANTS C ASE FIR INTO THE MAIN PROVISIONS OF SEC.271(1)(C) OR UNDER THE DEEMING PROVISION UNDER EXPLANATION 1. IN THE PRESENT CASE, HAVING CONSIDERED THE FACTUAL CIRCUMSTANCES AND THE SUBSEQUENT EVENTS, I AM OF THE CON SIDERED VIEW THAT THE ASSESSING OFFICER FAILED TO ESTABLISH THAT THE A PPELLANT FURNISHED ANY INACCURATE PARTICULARS OR CONCEALED THE PARTICUL ARS OF ITS INCOME. THE PRESUMPTION OF CONCEALMENT AS CONTAINED IN EXPLANATIO N 1 TO SEC.271(1)(C) IS ALSO NOT ATTRACTED IN THIS CASE SINCE IT IS NOT ESTABLISHED BY THE ASSESSING OFFICER THAT THE EXPLANATION FURNISHED BY THE APPELLANT IS FALSE OR THAT HE FAILED TO DISCLOSE ALL THE PARTICUL ARS MATERIAL TO THE COMPUTATION OF INCOME. 5.9 IN VIEW OF THE FOREGOING DISCUSSION AND LOOKING I NTO THE FACTUAL MATRIX OF THE CASE, I AM OF CONSIDERED OPINION THAT T HIS IS NOT A FIT CASE FOR THE IMPOSITION OF PENALTY U/S. 271(1)(C) OF THE I.T. ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME. ACCORDINGLY, PENAL TY LEVIED BY THE ASSESSING OFFICER OF RS.10,61,000/- IS HEREBY DELETED. 4.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 5. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAV E ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND IN THE INSTANT CASE THE ASSESSING OFFICER TREATED THE LONG TERM CAPITAL GAI N SHOWN BY THE ASSESSEE BY CLAIMING CONVERSION OF CAPITAL ASSET (L AND) INTO STOCK IN TRADE AS BUSINESS INCOME. THE CIT(A) HAD ACCEPTED THE CL AIM OF SUCH CONVERSION OF CAPITAL ASSET INTO STOCK IN TRADE WHI CH HAS BEEN UPHELD BY THE TRIBUNAL VIDE ITA NO.261/PN/2010 ORDER DATED 23 -09-2011. SO FAR AS THE VALUATION OF COST OF LAND ADOPTED BY THE ASS ESSEE AT RS.2,350/- PER SQ.FT. WE FIND THE SAME HAS BEEN DETERMINED BY THE ASSESSING OFFICER AT 8 RS.678/- PER SQ.FT. AND THIS ACTION OF THE ASSESSIN G OFFICER HAS BEEN UPHELD BY THE CIT(A) AND ON FURTHER APPEAL THE TRIB UNAL HAS ALSO DISMISSED THE CO FILED BY THE ASSESSEE. IN OTHER W ORDS, THE DETERMINATION OF VALUATION OF LAND AT RS.678/- PER SQ.FT. HAS BEEN UPHELD BY THE TRIBUNAL. WE FIND THE ASSESSING OFFICER IN THE INSTANT CASE HAS LEVIED PENALTY OF RS.10,60,073/- WHICH IS THE SUBJE CT MATTER OF APPEAL. THE PENALTY SO LEVIED IS DUE TO THE ADOPTION OF COS T OF LAND AT RS.2,350/- PER SQ.FT. AS AGAINST RS.678/- PER SQ.FT. DECLARED BY THE ASSESSEE FOR CALCULATION OF CAPITAL GAIN. WE FIND THE ASSESSEE CLAIMED SUCH VALUE ON THE BASIS OF A REPORT FURNISHED BY A GOVERNMENT VAL UER WHICH WAS REJECTED BY THE ASSESSING OFFICER ON THE GROUND THA T NO COMPARATIVE SALE INSTANCES WERE GIVEN BY THE VALUER. AT THE SAME TI ME, WE FIND THE ASSESSING OFFICER ALSO ADOPTED THE VALUE @ RS.678/- PER SQ.FT. ON THE BASIS OF THE REPORT OF THE DVO WHO HAS ADOPTED THE VALUE ON THE BASIS OF THE READY RECKONER RATES AND THE VALUER HAS ALSO NO T GIVEN ANY COMPARATIVE SALE INSTANCE. 5.1 WE FIND THE ASSESSEE IN THE INSTANT CASE HAS FU RNISHED THE FULL PARTICULARS OF HIS INCOME. MERELY BECAUSE THE ASSE SSING OFFICER DOES NOT AGREE WITH THE VALUATION ADOPTED BY THE ASSESSI NG OFFICER, THAT IN OUR OPINION MAY BE JUSTIFIED FOR MAKING THE ADDITION, B UT THE SAME IN OUR OPINION DOES NOT CALL FOR LEVY OF PENALTY U/S.271(1 )(C) OF THE I.T. ACT. SINCE THE ASSESSEE HAS ADOPTED THE RATE ON THE BASI S OF THE VALUATION REPORT GIVEN BY A GOVERNMENT VALUER WHICH HAS NOT B EEN ACCEPTED BY THE ASSESSING OFFICER WHO RELIED ON THE VALUATION REPOR T BY THE DVO, WHO IN TURN HAS VALUED THE PROPERTY ON THE BASIS OF READY RECKONER RATE, THEREFORE, IN OUR OPINION, IT CANNOT BE SAID THAT THE PARTICULARS OF INCOME 9 FURNISHED BY THE ASSESSEE WERE INACCURATE OR THAT H E CONCEALED THE PARTICULARS OF HIS INCOME. UNDER THESE CIRCUMSTANC ES, WE ARE OF THE CONSIDERED OPINION THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALTY U/S.271(1)(C) OF THE I.T. ACT. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE LD.CIT(A) ON TH IS ISSUE INCLUDING THE VARIOUS DECISIONS RELIED ON BY HIM WE FIND NO INFIR MITY IN THE SAME. ACCORDINGLY WE UPHOLD THE ORDER OF THE CIT(A) CANCE LLING THE PENALTY. THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON 30-05-2014. SD/- SD/- (R.S. PADVEKAR) (R.K. PAND A) JUDICIAL MEMBER ACCOUN TANT MEMBER PUNE DATED: 30 TH MAY, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-III, PUNE 4. THE CIT-III, PUNE 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE