Shri Yatinbhai P. Patel, HUF, Ahmedabad V. The Income Tax Officer, Ward-7(2), Ahmedabad

ITA 1402/AHD/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1158 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 18-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R P MAURYA
• Assessee Lawyers: RAHUL PATEL
• Keywords: Bonafide belief; Cost of acquisition; Fair market value; Ignorance of law

Judgement Text

, SMC IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO. 1402/AHD/2015 ( ASSESSMENT YEAR : 2009-10) YATINBHAI P. PATEL HUF 2, PARIVAR SOCIETY PART-2, OPP. PREMCHAND NAGAR ROAD, SATELLITE, JODHPUR TEKRA, AHMEDABAD 380015 / VS. INCOME TAX OFFICER WARD 7(2), 5 TH FLOOR, PRATYAKSHKAR BHAWAN, AMBAWADI, AHMEDABAD ./ ./ PAN/GIR NO. : AAAHY1418A ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI RAHUL PATEL, A.R. / RESPONDENT BY : SHRI R. P. MAURYA, SR. D.R. DATE OF HEARING 18/07/2018 !'# / DATE OF PRONOUNCEMENT 18/09/2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-3, AHMEDABAD (CIT(A) IN SHORT), DATED 3 0.01.2015 ARISING IN THE PENALTY ORDER DATED 15.06.2012 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING ASSESSMENT YEAR 2009-10. ITA NO. 1402/AHD/15 [YATINBHAI P. PATEL HUF VS. ITO] AY 2009-10 - 2 - 2. AS PER GROUNDS OF APPEAL, THE ASSESSEE HAS IMPUG NED THE ACTION OF THE CIT(A) IN CONFIRMING THE PENALTY OF RS.6,46, 986/- IMPOSED BY THE AO UNDER S.271(1)(C) OF THE ACT ON THE LONG TER M CAPITAL GAIN ARISING ON TRANSFER OF IMMOVABLE PROPERTY. 3. BRIEFLY STATED, THE ASSESSEE, A HINDU UNDIVIDED FAMILY, DERIVES INCOME FROM HOUSE PROPERTY AND INTEREST. THE ASSES SEE FILED RETURN OF INCOME FOR AY 2009-10 DECLARING TOTAL INCOME OF RS. 2,18,800/-. THE RETURN FILED BY THE ASSESSEE WAS SUBJECTED TO SCRUT INY ASSESSMENT. ON THE BASIS OF AIR INFORMATION, IT WAS LEARNT BY THE AO THAT THE ASSESSEE HAD SOLD ONE IMMOVABLE PROPERTY FOR CONSIDERATION O F RS.1,26,92,150/-, THE PROFITS ARISING WHEREFROM WER E NOT DISCLOSED IN THE RETURN OF INCOME. ON INQUIRY IN THIS REGARD, T HE ASSESSEE SUBMITTED THAT THE PROPERTY UNDER SALE WAS PURCHASE D ON 23.03.1980 AND ACCORDINGLY THE COST OF ACQUISITION IS REQUIRED TO BE SUBSTITUTED AT FAIR MARKET VALUE AS ON 01.04.1981. THE ASSESSEE F URTHER POINTED OUT THAT THE LAPSE IN NOT DECLARING THE INCOME ARISING ON SALE OF PROPERTY WAS ON ACCOUNT OF THE BONAFIDE BELIEF THAT NO CAPIT AL GAIN HAS ACCRUED TO THE ASSESSEE. THE ASSESSEE SUBMITTED THAT THE P ROPERTY WAS TRANSFERRED FROM HUF TO A PRIVATE LIMITED COMPANY W HEREIN THE FAMILY HOLDS 50% OF THE SHARE OF THE COMPANY. OWIN G TO THIS BACKGROUND OF THE PROPERTY TRANSACTION, THE ASSESSE E WAS UNDER ERRONEOUS IMPRESSION THAT NO TAX IS APPLICABLE ON S UCH TRANSACTION SINCE IT IS A MERE TRANSFER FROM HUF TO FAMILY OWNE D PRIVATE LIMITED COMPANY. ENTERTAINING SUCH BONAFIDE PLEA OF NON-TA XABILITY, THE ASSESSEE DID NOT APPRAISE THESE FACTS TO HIS ADVISI NG CHARTERED ACCOUNTANT. BASED ON THE FACTS TRANSPIRED IN THE C OURSE OF HEARING, THE AO COMPUTED LONG TERM CAPITAL GAIN OF RS.28,52, 058/- AFTER GRANTING ALLOWANCE FOR COST OF ACQUISITION AND COST IMPROVEMENT AGAINST THE SALE CONSIDERATION AND INITIATED PENALT Y PROCEEDINGS FOR SUCH NON-INCLUSION OF CAPITAL GAINS. IN THE COURSE OF THE PENALTY ITA NO. 1402/AHD/15 [YATINBHAI P. PATEL HUF VS. ITO] AY 2009-10 - 3 - PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAS REMAINED A NON- COMPLAINT OF THE STATUTORY NOTICES. THE AO FURTHER OBSERVED THAT UNDISCLOSED LONG TERM CAPITAL GAIN WAS UNEARTHED DU RING THE ASSESSMENT PROCEEDINGS, WHICH WAS NOT OFFERED AS IN COME BY THE ASSESSEE VOLUNTARILY. THE AO ALSO OBSERVED THAT EV EN AFTER THE ISSUANCE OF NOTICE UNDER S.143(2) OF THE ACT, THE A SSESSEE DID NOT COME FORWARD WITH THE TRUE FACTS BY FILING REVISED RETUR N OF INCOME. THE AO ALSO OBSERVED THAT IT TOOK ALMOST 18 MONTHS FOR THE ASSESSEE TO ADMIT OMISSION OF INCOME FROM THE PROPERTY TRANSACTION AN D BUT FOR THE SCRUTINY ASSESSMENT, INCOME ARISING ON THE PROPERTY TRANSACTION WOULD HAVE ESCAPED ASSESSMENT ALTOGETHER. THE AO ACCORDI NGLY OBSERVED THAT A MALAFIDE INTENTION OF THE ASSESSEE IN THE DE LIBERATE ATTEMPT TO CONCEAL INCOME IS OBVIOUS. THE AO ALSO DID NOT ACC EPT THE NARRATIVE OF THE ASSESSEE THAT THE OMISSION TO INCLUDE INCOME FROM PROPERTY TRANSACTION WAS ON ACCOUNT OF THE MISTAKE ON THE PA RT OF THE ACCOUNTANT OF THE ASSESSEE. THE AO ACCORDINGLY HEL D THAT THE ASSESSEE HAS WILLFULLY, KNOWINGLY AND WITHOUT REASO NABLE CAUSE FURNISHED INACCURATE PARTICULARS OF ITS INCOME AND CONCEALED INCOME ARISING FROM PROPERTY TRANSACTION. THE AO ACCORDIN GLY IMPOSED PENALTY OF RS.6,46,986/- ON THE INCOME DETECTED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. 4. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 5. THE CIT(A) HOWEVER WAS NOT IMPRESSED WITH THE SU BMISSIONS OF THE ASSESSEE. AFTER TAKING NOTE OF THE AFFIDAVIT O F THE ACCOUNTANT SHRI R. K. JOSHI, THE CIT(A) DISCARDED THE CONTENTION OF THE ASSESSEE ON MERITS HAVING REGARD TO VARIOUS JUDICIAL PRONOUNCEM ENTS HOLDING THE FIELD. THE CIT(A) ACCORDINGLY DECLINED TO INTERFER E WITH THE ORDER OF THE AO AND SUSTAINED THE PENALTY. ITA NO. 1402/AHD/15 [YATINBHAI P. PATEL HUF VS. ITO] AY 2009-10 - 4 - 6. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 7. THE LEARNED AR FOR THE ASSESSEE APPEARED AND BRO ADLY REITERATED THE WRITTEN SUBMISSIONS TO JUSTIFY THE CANCELLATION OF PENALTY. 8. THE LEARNED DR RELIED UPON THE ORDER OF THE CIT( A). 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE MATERIAL PLACED ON RECORD. THE SHORT CONTROVER SY IS MAINTAINABILITY OF PENALTY UNDER S.271(1)(C) OF THE ACT ON THE LONG TERM CAPITAL GAIN NOT DISCLOSED IN THE RETURN OF IN COME. THE PECULIAR FACTS OF THE CASE AS NOTED ABOVE ARE THAT THE ASSES SEE ALONGWITH TWO OTHER PERSONS OWNING THE ADJOINING TWO PLOTS FORMED A PRIVATE LIMITED COMPANY NAMELY SHREE HOSPITALITY PVT. LTD. TO RUN A HOSPITAL. CONSEQUENTLY, ALL THE THREE OWNERS TRANSFERRED THEI R RESPECTIVE PROPERTIES TO THE PRIVATE LIMITED COMPANY BY WAY OF SALE DEEDS. IT IS THE CASE OF THE REVENUE THAT SALE DEED WAS EXECUTED AND CAPITAL GAIN ATTRACTED ON TRANSFER WAS NOT SHOWN IN THE RETURN F ILED. IT IS THE CASE OF THE ASSESSEE ON THE OTHER HAND THAT ONE MR. JOSH I WHO WAS TRUSTWORTHY AND EXPERIENCED ACCOUNTANT OF THE FAMIL Y USED TO MANAGE FILE OF THE FAMILY MEMBERS WITH THE HELP OF THE CHA RTERED ACCOUNTANT. AS THE HUF DOES NOT HAVE INCOME UNDER THE HEAD BUS INESS NO REGULAR BOOKS WERE MAINTAINED OF THE HUF. THE ERROR OF OMI SSION OCCURRED OWING TO THE BELIEF THAT SALE DEED MADE BETWEEN ASS ESSEE HUF AND PRIVATE LIMITED COMPANY IS A TRANSFER TO SELF AND N O CAPITAL GAIN PER SE ARISES ON SUCH SYMBOLIC TRANSFER WHERE THE HUF HOLD S 50% OF THE PRIVATE LIMITED COMPANY. 10. IT IS THUS ADMITTED POSITION THAT THE ASSESSEE OMITTED TO DISCLOSE TRUE INCOME. AS BORNE OUT FROM RECORDS, THE KARTA OF THE ASSESSEE IS AN EDUCATED PERSON AND IS A CHARTERED ENGINEER BY Q UALIFICATION. ITA NO. 1402/AHD/15 [YATINBHAI P. PATEL HUF VS. ITO] AY 2009-10 - 5 - THUS, THE ORDINARY INFERENCE FOR SUCH GROSS OMISSIO N TO INCLUDE CAPITAL GAINS IS EITHER OUT OF FRAUD OR WILLFUL NEGLECT. TH E ASSESSEE HAS SOUGHT TO SHIFT THE RESPONSIBILITY OF ALL MIS-DEED OF NON- DISCLOSURE OF THE CAPITAL GAINS ON THE ACCOUNTANT WHO WAS NOT AVAILAB LE BEFORE THE AO TO SUPPORT THE PURPORTED AFFIDAVIT. THUS, SUCH AFF IDAVIT WITHOUT CROSS EXAMINATION HAS NO RATIONAL PROBATIVE VALUE. NEEDL ESS TO SAY, IN VIEW OF EXPLANATION 1 TO SECTION 271(1)(C), THE BURDEN O F PROVING THAT IT IS A CASE OF BONAFIDE OMISSION IS ON THE ASSESSEE. TH E ASSESSEE IN OUR VIEW HAS FAILED TO DISCHARGE THIS BURDEN. AS NOTED BY THE AO, THE CONDUCT OF THE ASSESSEE WAS ALSO NON-RESPONSIVE. T HE ASSESSEE DESPITE NOTICE OF SCRUTINY TOOK 18 MONTHS TO ADMIT THE OMIS SION OF THIS MAGNITUDE. THE EXPLANATION GIVEN BY THE ASSESSEE I S CURSORY AND DOES NOT INSPIRE CONFIDENCE. THE FACTUM OF CONCEALMENT IS OSTENSIBLE. THERE IS NOTHING ON RECORD TO SUPPORT THE PLEA OF B ONAFIDES TAKEN FOR SUCH OMISSION. THE ASSESSEE HAS NOT COME FORWARD V OLUNTARILY EITHER BUT HAS MERELY ADMITTED THE LIABILITY OWING TO THE TRANSACTIONS COMING TO THE NOTICE OF THE REVENUE AS PER THE ANNUAL INFO RMATION REPORT. THUS, THE ASSESSEE, IN ESSENCE, HAS NOT OFFERED ANY EXPLANATION ACCEPT IGNORANCE OF LAW IN THIS REGARD. SUCH PLEA IS OF N O AVAIL IN THESE CIRCUMSTANCES UNLESS THERE IS SOME SUBSTANTIATION T HEREOF. IN THE ABSENCE OF DISCLOSURE OF MATERIAL FACTS CONCERNING THE TRANSACTIONS AT THE TIME OF FILING OF RETURN OF INCOME, THE BURDEN FASTENED ON THE ASSESSEE UNDER EXPLANATION 1 IS NOT DISCHARGED. TH E ASSESSEE SIMPLY RESTED ITS PLEA FOR EXONERATION OF PENALTY ON UNSUP PORTED ASSERTIONS TOWARDS ITS BONAFIDES. SECTION 271(1)(C) INDICATES THE ELEMENT OF STRICT LIABILITY ON THE ASSESSEE FOR THE CONCEALMEN T OR FOR GIVING INACCURATE PARTICULARS WHILE FILING RETURN OF INCOM E. THE NECESSITY OF MENS REA IS ABSENT. THE HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILES PROCESSORS & ORS. [2007] 295 ITR 244 (SC) HAS OBSERVED THAT THE SAID SECTION HAS BEE N ENACTED TO PROVIDE FOR A REMEDY TO THE DEPARTMENT FOR LOSS OF REVENUE. THE ITA NO. 1402/AHD/15 [YATINBHAI P. PATEL HUF VS. ITO] AY 2009-10 - 6 - PENALTY UNDER THE PROVISIONS IS A CIVIL LIABILITY. WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING THE C IVIL LIABILITY UNLIKE IN THE MATTER OF PROSECUTION UNDER S.276C OF THE ACT. THE STATUTORY PROVISION OF TAXABILITY ON TRANSFER OF PROPERTY IS CRYSTAL CLEAR. IT WILL BE FARFETCHED TO ACCEPT THE ABSTRACT PLEA THAT HUF AND PRIVATE LIMITED COMPANY AS COMMON WHERE EVEN OUTSIDERS WERE INVOLVE D. THE OMISSION TO DECLARE THE CAPITAL GAIN CANNOT BE REGA RDED AS BONAFIDE ERROR. THE MITIGATING CIRCUMSTANCES COULD NOT BE S UCCESSFULLY DEMONSTRATED. THUS, WE DECLINE TO INTERFERE WITH T HE ACTION OF THE CIT(A). 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. SD/- SD/- (RAJPAL YADAV) (PRADIP K UMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 18/09/2018 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 18/09/ 2018