ACIT, New Delhi V. Sh. Nikhil Mohan Rastogi, Delhi

ITA 14/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73988 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 11-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 02-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SRINIVAS KUMAR
• Assessee Lawyers: SHELLY MEHROTRA
• Keywords: Sale consideration of property below Jantri Value; Bonafide belief
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A .NO.-14/DEL/2013 (ASSESSMENT YEAR-2008-09) ACIT, CIRCLE-29(1), NEW DELHI. (APPELLANT) VS SH. NIKHIL MOHAN RASTOGI, 751, CHANDNI CHOWK, DELHI-110006. PAN-AADPR3495H (RESPONDENT) APPELLANT BY SH. B. SRINIVAS KUMAR, SR. DR RESPONDENT BY SH. SHELLY MEHROTRA, CA ORDER PER DIVA SINGH, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 19.10.2012 OF CIT(A)-XXV, NEW DELHI PERTAINING TO 2008-09 ASSE SSMENT YEAR ON THE FOLLOWING GROUND :- 1. THE LD. CIT(A)-XXV, NEW DELHI HAS ERRED IN LAW AS WELL AS FACT IN DELETING THE PENALTY OF RS.3,24,097/- BY IGNORING THE FACT THAT THE ASSESSEE SUPPRESSED CAPITAL GAIN, BY FURNISHING INACCURATE PARTICULARS OF ITS INCOME AND HENCE CONC EALING INCOME. 2. THE RELEVANT FACTS OF THE CASE AS FOUND DISCUSSE D IN THE PENALTY ORDER ARE THAT THE ASSESSEE DECLARED AN INCOME OF RS.49,34,18 2/- WHEREIN RS.11,69,778/- WAS MADE U/S 50C OF THE ACT AND THE COST OF ASSET O F RS.2,60,482/- WAS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE THERETO RESULTING IN THE ASSESSEE BEING CONCLUDED AT AN INCOME OF RS.63,64,4 40/-. CONSEQUENT TO THIS PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATED ON THE GROUND THAT THE ASSESSEE HAS FURNISHED AN INACCURATE PARTICULARS OF INCOME. THE ASSESSEE BEFORE THE AO I.T.A .NO.-14/DEL/2013 2 IN THE PENALTY PROCEEDINGS VIDE ITS LETTER DATED 13 .12.2012 MADE THE FOLLOWING SUBMISSIONS WHICH ARE EXTRACTED FROM PARA 2 OF THE PENALTY ORDER :- THAT THE RETURN OF INCOME IN THE ABOVE NOTED CASE WAS FILED DECALRING TOTAL INCOME OF RS.4934182/- ON 19.11.2008. THE ABOVE IN COME INCLUDED A SUM OF RS.3044682/- AS BEING THE NET LONG TERM CAPITAL GAI NS ON SALE OF IMMOVABLE PROPERTY AT VILLAGE PASONDA, GHAZIABAD, AND ONE FLA T AT WESTEND HEIGHT, GURGAON. THAT THE TOTAL SALE VALUE OF THE PROPERTY AS PER TH E SALE DEED FILED WAS RS.90000000/- OUT OF WHICH THE ASSESSEE HAD RECEIVE D A SUM OF RS.5600000/- FOR HIS SHARE OF PROPERTY. THE STAMP DUTY PAID AMO UNTED TO RS.10880000/-, THE CIRCLE RATE OF THE PROPERTY WAS RS.17000/-AS AS SUCH AS THE VALUE FOR 6386.23 SQ. MTS. AMOUNTED TO RS.108565910/-- AS PER YOUR CALCULATIONS IN THE SAID ORDER. THAT THE PROPERTY AT VILLAGE PASONDA, GHAZIABAD WAS SOLD FOR RS.90000000/- AS PER THE CURRENT MARKET VALUE OF THAT TIME AS AGA INST SECTOR RATE VALUE OF RS.108565910/-. THE ASSESSEE HAD JUSTIFIED THE SAL E VALUE OF RS.90000000/- VIDE HIS LETTER DATED 25.12.2010, WHICH IS REPRODUC ED AS UNDER :- THAT AS REGARDS YOUR QUERY REGARDING THE SALE PRICE BEING LOWER THAN THE SECTOR RATE, IF IS SUBMITTED THAT THE PROPERTY MARKET HAD SUFFERED GREAT SET BACK DUE TO FINANCIAL CRUNCH IN THE MARKET AND OVERALL F ALL IN THE PRICES DUE TO CRASH OF SHARE MARKET. THERE WAS INTERNATIONAL RECE SSION DUE TO CRISIS IN ALL MAJOR ECONOMICS WORLD WIDE. THE BANK RATES HAD RISEN AND THUS THE DEMAND OF PROPERTIES SUFFERED HUGE SETBACK. THE PRICES OF ALL PROPERTIES HAD FALLEN DURING THIS PERIOD AND THUS THE ASSESSEE WAS COMPEL LED TO SELL AT THE PREVALENT MARKET PRICE OF THE PROPERTY WHICH WAS SLIGHTLY LOW ER THAN THE SECTOR RATE VALUE. THE SECTOR RATE HAD BEEN FIXED EARLIER WHEN THE PROPERTY MARKET WAS FLOURISHING AND THUS IT WAS HIGHER THAN THE ACTUAL MARKET RATES AT WHICH THE ASSESSEE SOLD ITS SHARE IN PROPERTY. IRRESPECTIVE O F OUR FOREGOING CONTENTION THE ASSESSEE IN ORDER TO BUY PEACE WITH THE DEPARTM ENT AND TO AVOID UNDUE LITIGATIONS, VOLUNTARILY AGREES TO CONDITIONALLY SU RRENDER THE DIFFERENCE OF RS. 1169777/-,AS PER THE WORKING GIVEN BELOW, BETWEEN T HE ACTUAL SALE PRICE AND THE SECTOR RATE PROVIDED FULL IMMUNITY IS GRANTED A GAINST ALL PENALTY PROCEEDINGS. THE TAX WORKED OUT MAY BE ADJUSTED FRO M THE REFUND DUE TO THE ASSESSEE DURING THIS YEAR AS PER THE COMPUTATION OF INCOME FILED AND THE CHALLAN FOR THE BALANCE MAY BE GIVEN SO AS TO ENABL E THE ASSESSEE TO MAKE PROMPT PAYMENT OF BALANCE TAX DUE. FROM THE ABOVE FACTS AND CIRCUMSTANCES. IT IS SUBMI TTED THAT THE ABOVE AMOUNT OF RS. 1169777/- WAS OFFERED FOR TAXATION CO NDITIONALLY ONLY TO AVOID UNDUE LITIGATION WITH THE DEPARTMENT. IN CHANDRA PA L BAGGA VS . ITAT (2003) 261 ITR 67 (RAJ), IT WAS HELD THAT WHERE THE ASSESS EE HAS DISCLOSED THE BASIC FACTS OF THE TRANSACTION, THEN THERE THE PENALTY U/ S 271(I)(C) CANNOT BE LEVIED. IN YET ANOTHER DECISION IN THE CASE OF CIT VS. HARS HAVARDHAN CHEMICALS & MINERALS LTD., (2003) 259ITR 212 (RAJ) IT HAS BEEN HELD THAT IF THE CLAIM OF A DEDUCTION OR AN EXPENDITURE IS EITHER DEBATABLE OR CONTROVERSIAL OR EVEN ARGUABLE, IN SUCH CASES, IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED ANY INCOME OR FURNISHED INACCURATE PARTICULARS FOR EVAS ION OF TAX AND HENCE PENALTY CANNOT BE LEVIED UNDER SECTION 271(L)(C). Y OUR ATTENTION IS DRAWN TO I.T.A .NO.-14/DEL/2013 3 THE CASE OF HINDUSTAN STEEL LTD. VS. STATE OF ORISSA (1970) 25 STC 211 (S C), IT WAS HELD THAT THE PENALTY WILL NOT BE IMPOSED MEREL Y BECAUSE IT IS LAWFUL TO DO SO. EVEN IF, A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMP ETENT TO IMPOSE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY WHEN THERE IS A TECHNICAL OR VENI AL BREACH OF THE PROVISIONS OF THE ACT OR WHERE A BREACH FLOWS FROM A BONAFIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE S TATUTE. YOU KIND ATTENTION IS ALSO DRAWN TO THE FOLLOWING D ECISIONS IN WHICH IT HAS BEEN SETTLED THAT NO PENALTY CAN BE LEVIED IN C ASE WHERE THE ASSESSEE CONDITIONALLY SURRENDERS TO BE TAXED ON DISPUTED AM OUNTS. IN THE CASE OF SIR SHADILAL SUGAR & GENERAL MILLS LTD. VS. CIT (1987) 168 ITR 705 (SC), IT WAS HELD THAT IF THERE IS NO SPECIFIED AND UNAMBIGUOUS ADMISSION TO CONCEALMENT, MERE AGREEMENT TO BE TAXED ON CERTAIN AMOUNT CANNOT GIVE RISE TO PRESUMPTION OF CONCEALMENT. SIMILARLY, IN THE CASES OF AKSHAY BHANDAR VS. C1T (1996 280 ITR325(GAU)IT WAS HELD THAT WHERE THE ASSESSEE AGREES TO CERTAIN ADDITIONS WITH A VIEW TO BUY PEACE OR AVOID HARASSMENT OR LITIGATION OR AGREEMENT AS REQUIRED BY THE ITO, PENALTY CANNOT BE LEVIED. IN THE CASE OF CIT VS ADAMKHAN (1997) 223 ITR 264 (MAD) IT WAS HEL D THAT PENALTY CANNOT BE LEVIED IF THE SURRENDER IS MADE SPECIFICALLY ON THE CONDITIONS THAT NO PENALTY WOULD BE LEVIED. AS REGARDS THE ADDITION OF RS.140206/- ON ACCOUNT O F IBMS AND RS.111630/- BEING PREPAYMENT CHARGES, IT IS SUBMITTED THAT BOTH THESE EXPENSES WERE INCIDENTAL TO SALE OF THE PROPERTY AND LEGALLY ALLO WABLE UNDER THE ACT. THE PREPAYMENT CHARGES WERE PAID TO THE BANK FOR REMOVI NG THE HYPOTHECATION CHARGE ON THE PROPERTY BY REPAYING THE HOME LOAN TA KEN FOR PURCHASE OF THE PROPERTY. SIMILARLY, THE IBMS IS A DEPOSIT INCURRE D WHILE PURCHASING THE PROPERTY. THE INTEREST ON THE SAID DEPOSIT IS TAXA BLE AS AND WHEN RECEIVED. THUS THIS AMOUNT PAID IS PART OF THE COST. HOWEVER , THIS AMOUNT WAS OFFERED FOR TAX ONLY IF IT WAS NOT ALLOWABLE UNDER THE ACT. THE ALLOWABILITY HAS NOT BEEN REBUTTED IN THE ORDER AND AS SUCH THE ADDITION IS ARBITRARY AND AGAINST THE LAW. THUS, THERE IS QUESTION OF LEVY OF PENALT Y ON THE BASIS OF DISALLOWED EXPENSES. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, IT IS SUBMITTED THAT NO PENALTY U/S 271(1)(C) IS LEVIABLE UNDER THE ACT. IT IS THE REFORE REQUESTED THAT THE PENALTY PROCEEDINGS INITIATED MAY PLEASE BE DROPPED . 3. APART FROM THAT RELIANCE WAS PLACED UPON THE JUD GEMENT OF THE HONBLE APEX COURT IN THE CASE OF CIT VS RELIANCE PETROPROD UCTS PVT. LTD. (2010) 322 ITR 158 (SC). HOWEVER NOT CONVINCED THE AO IMPOSED MINIMUM PENALTY OF RS.3,24,097/-. 3.1. IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY THE FACTS WERE FURTHER ELABORATED WHICH ARE FOUND ADDRESSED IN PARA 3.2 OF THE IMPUGNED ORDER REPRODUCED HEREUNDER :- I.T.A .NO.-14/DEL/2013 4 3.2. THE ASSESSEE IS IN APPEAL AGAINST THE PENALTY ORDER U/S 271(1)(C) PASSED BY THE AO AND IT IS SUBMITTED THAT THE AO IS NOT JUSTIFIED TO LEVY THE PENALTY AS THERE WAS NO CONCEALMENT OF INCOME AND T HERE WAS NO FURNISHING OF INACCURATE PARTICULARS OF INCOME. IT IS SUBMITT ED THAT THE ASSESSEE HAS SOLD THE PROPERTY FOR RS.9 CRORES AND THE ASSESSEE S SHARE IS OF RS.56,00,000/- AND THE ASSESSEE HAS DECLARED THE LT CG OF RS.30,44,682/-. THE AO HAS TAKEN THE CIRCLE RATE OF THE PROPERTY WH ICH IS RS.10,85,65,910/- AND ACCORDINGLY HAS WORKED OUT THE ADDITION OF RS.1 1,69,778/- U/S 50C. IT IS SUBMITTED THAT THE ADDITION MADE BY THE AO IS A NOT IONAL ADDITION AND NO PENALTY CAN BE LEVIED ON NOTIONAL ADDITION OR ON NO TIONAL INCOME. IT IS SUBMITTED THAT THE ASSESSEE HAS ACCEPTED THE ADDITI ON WITH A VIEW TO BUY PEACE WITH THE DEPARTMENT AND ALSO TO AVOID THE LIT IGATION AND THE ASSESSEE ALSO RELIED ON THE VARIOUS CASE LAWS TO SUPPORT HIS CLAIM THAT NO PENALTY CAN BE LEVIED ON SURRENDERED INCOME AND THE CASE LAWS ARE AS UNDER:- (I) CIT VS HARSHVADHAN CHEMICALS & MINERALS LTD. 25 9 ITR 212 (2003) (RAJ.); (II) CIT VS ADAMKHAN 223 ITR 264 (1997) {MAD}; (III) AKSHAY BHANDER VS CIT 220 ITR 325 [1996] (GA U) 3.2. CONSIDERING THE SAME THE CIT(A) QUASHED THE PE NALTY. AGGRIEVED BY WHICH THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. SR. DR PLACED RELIANCE UPON THE PENALTY ORDER. LD. AR, SH. SHELL Y MEHROTRA, RELIES UPON THE IMPUGNED ORDER. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSMENT ORDER DATED 30.11.2012 A VAILABLE ON FILE HAS ALSO BEEN TAKEN INTO CONSIDERATION. A PERUSAL OF THE SA ME SHOWS THAT THE ASSESSEE PLEADED BEFORE THE AO IN THE PENALTY PROCEEDINGS TH AT THE SALE PRICE OF THE PROPERTY UNDER CONSIDERATION WAS LOWER THAN THE CIR CLE RATE DUE TO A FINANCIAL CRUNCH IN THE PROPERTY MARKET WHICH RESULTED IN THE OVERALL FALL. THE RECORD FURTHER SHOWS THAT IT HAD ALSO BEEN EXPLAINED THAT THE ASSESSEE WAS COMPELLED TO SELL AT THE PREVALENT MARKET OF PRICE AND THE CIRCL E RATE HAVING BEEN FIXED EARLIER WHEN THE PROPERTY MARKET WAS FLOURISHING CONSEQUEN TLY WAS HIGHER THEN THE ACTUAL PREVALENT MARKET RATE. THE ADDITION BY WAY O F THE APPLICATION OF SECTION 50C WAS AGREED TO BY THE ASSESSEE FOR BUYING PEACE. IT IS A SETTLED LEGAL POSITION THAT PENALTY PROCEEDINGS AND ASSESSMENT PR OCEEDINGS ARE SEPARATE AND DISTINCT. THE EXPLANATION OFFERED BY THE ASSESSEE IN THE QUANTUM MAY NOT BE I.T.A .NO.-14/DEL/2013 5 ACCEPTABLE HOWEVER IN THE PENALTY PROCEEDINGS THE S AME HAS TO BE VIEWED INDEPENDENTLY WHICH THE LD. CIT(A) HAS DONE. IN TH ESE PECULIAR FACTS AND CIRCUMSTANCES WE ARE SATISFIED BY THE REASONING AND FINDING OF THE CIT(A) IN QUASHING THE PENALTY PROCEEDINGS DERIVING SUPPORT F ROM THE JUDICIAL PRECEDENT CITED BEFORE THE AO AND ALSO CONSIDERED BY THE CIT( A) NAMELY RELIANCE PETROPRODUCTS PVT. LTD. WE ARE OF THE VIEW THAT T HE PENALTY HAS RIGHTLY BEEN QUASHED, THE DEPARTMENTAL APPEAL IS ACCORDINGLY DIS MISSED. 5. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMI SSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 03 RD OF JANUARY 2014. SD/- SD/- (SHAMIM YAHYA) (DIVA SINGH) ACCOUNTANT MEMBER JUDI CIAL MEMBER DATED:- 03/01/2014 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI