Sh. Simran Singh Gambir, New Delhi V. DDIT, Noida

ITA 1423/DEL/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0238 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 15-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 11-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL
• Assessee Lawyers: DR RAKESH GUPTA
• Keywords: Principle of natural justice; Cost of acquisition; Initiation of penalty proceedings
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G, NEW DELHI) BEFORE SHRI J. S. REDDY, ACCOUNTANT MEMBER AND SHR I A. T. VARKEY, JUDICIAL MEMBER I.T.A. NO.1423 /DEL/2013 ASSESSMENT YEAR : 2008-09 SIMRAN SINGH GAMBHIR, VS. DDIT, INTERNATIONAL C/O M/S. RRA TAXINDIA, TAXATION, NOIDA D-28, SOUTH EXTENSION PART I, NEW DELHI. GIR / PAN:AHXPG5793L (APPELLANT) (RESPONDENT) APPELLANT BY : DR. RAKESH GUPTA, AND SHRI SOMIL AGGARWAL, CA RESPONDENT BY : SHRI K.K.JAISWAL, SR. DR DATE OF HEARING : 15.07.2015 DATE OF PRONOUNCEMENT : 21.07.2015 ORDER THIS IS AN APPEAL FILED BY ASSESSEE DIRECTED AGAIN ST THE ORDER OF LD. CIT(A) NOIDA, DATED 24.12.2012 FOR THE ASSESSMENT Y EAR 2008-09 ON THE FOLLOWING GROUNDS: 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. AO IN 1EVYING PENALTY OF RS.12,00,000/- AND THA T TOO WITHOUT ASSUMING JURISDICTION AS PER LAW AND THE IMPUGNED P ENALTY ORDER BEING ILLEGAL AND VOID AB-INITIO AND THE IMPUGNED P ENALTY ORDER HAS BEEN PASSED WITHOUT APPRECIATING THE FACTS AND CIRC UMSTANCES OF THE CASE. 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. AO IN PASSING THE IMPUGNED PENALTY 'ORDER BEING CONTRARY TO LAW AS THE ASSESSMENT ORDER FRAMED UNDER SECTION 143(3) DATED 25-10- 2010 WAS ALSO ILLEGAL, BEYOND JURISDICTION AND VOID AB-INITIO. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. AO IN LEVYING PENALTY U/S 271(1) (C) ON THE ADD ITION MADE IN THE ITA NO.1423/DEL/2013 2 ASSESSMENT ORDER U/S 143(3) DATED 25-10-2010 AS THE SE ADDITIONS/DISALLOWANCES ARE ALSO CONTRARY TO LAW AN D FACTS. 4. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. AO IN LEVYING PENALTY U/S 271(1) (C) IS BAD IN LAW BEING BEYOND JURISDICTION AND BARRED BY LIMITATION AND CONTRARY TO THE PRINCIPLES OF NATURAL JUSTICE AND HAS BEEN PASSED BY RECORDING IN CORRECT FACTS AND FINDINGS AND WITHOUT GIVING ADEQUATE OPPORTUNITY TO THE ASSESSEE AND THE SAME IS NOT SUSTAINABLE ON VARIOUS LEGAL AND FA CTUAL GROUNDS. 5. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. AO IN IMPOSING A PENALTY OF RS.12,00,000/- AND THAT TOO WITHOUT RECORDING MANDATORY 'SATISFACTION' AS PER LAW. 2. THE BRIEF FACTS OF THE CASE AS STATED IN ASSESSM ENT ORDER ARE AS UNDER: AS PER COMPUTATION OF INCOME FURNISHED BY THE ASSE SSEE HE HAS SHOWN INCOME FROM LONG TERM CAPITAL GAIN ON SALE OF NHB BONDS. HE HAS INVESTED RS. 2,00,00,000/- ON 10.08.2004, AN D RECEIVED RS. 2,32,86.842/- ON MATURITY, WHICH INTEREST AMOUNTIN G TO RS 3286842. AFTER ADOPTING INDEXATION COST METHOD HE HAS SHOWN INCOME FROM LONG TERM CAPITAL GAIN OF RS. 3,28,509/- . AS INTEREST I NCOME IS TO BE TAXED UNDER THE HEAD OF INCOME FROM OTHER SOURCES. THE AS SESSEE WAS ASKED TO FURNISH THE EXPLANATION VIDE ORDER SHEET ENTRY D ATED 26.11.2009. IN RESPONSE TO THIS ASSESSEE HAS FURNISHED WRITTEN REP LY AS UNDER 'THE GROSS MATURITY PROCEEDS OF THE SAID INVESTMENT AMOU NTING TO RS232,86,842/- INCLUDES LONG- TERM-CAPITAL GAIN OF RS32,86,842 WHICH WAS DECLARED IN THE 3ASSESSEE HAS NOT RECEIVE D ANY INTEREST OR ANY OTHER INCOME DURING THE HOLDING PERIOD OF THE S AID INVESTMENT IN BONDS AND SAID BONDS WERE LONG TERM SPECIFIED ASSET AS ALSO MENTIONED ON THE CERTIFICATE ISSUED BY NATIONAL HOU SING BANK'. AFTER THE PERUSAL OF RECORDS AND DETAILS FILED BY T HE ASSESSEE IT IS FOUND THAT THE REPLY FILED BY THE ASSESSEE CANNOT B E ACCEPTED AS NHB BONDS ARE SPECIFIED ASSETS IN TERMS OF SECTION 54-E C FOR CLAIMING EXEMPTION ON LONG TERM CAPITA) GAIN AND INTEREST ON 'THESE BONDS, IS TO BE TAXED UNDER THE HEAD OF INCOME FROM OTHER SOURCES. THE ASSESSEE HAS SHOWN COST OF PURCHASE COST OF NHB BON DS RS. 2,00,00,000/- AND THE MATURITY VALUE OF THE SAID BO ND IS RS. ITA NO.1423/DEL/2013 3 2,32,86,842/-. AFTER CONSIDERING RS. 3,28,509/- ALR EADY SHOWN BY THE ASSESSEE, ADDITION OF RS. 29,58,333/- IS MADE TO T HE INCOME OF THE ASSESSEE.' 3. PENALTY WAS LEVIED U/S 271(1)(C) BY THE A.O. AND CONFIRMED BY LD. CIT(A). BEFORE US, DR. RAKESH GUPTA, AND SHRI SOMI L AGGARWAL, CA, LD. COUNSELS FOR THE ASSESSEE AND SHRI K. K. JAISWAL, S R. DEPARTMENT REPRESENTATIVE WERE PRESENT AND SUBMITTED THEIR CON TENTIONS. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND ON CAREFUL C ONSIDERATION WE HOLD AS FOLLOWS:- IN THE PRESENT CASE, THE ASSESSEE OFF ERED TO TAX, THE INCOME FROM THE SALE / MATURITY OF NATIONAL HOUSING BOND UNDER THE HEAD LONG TERM CAPITAL GAIN. THE A.O. CHOOSES TO TAX THE SAME UND ER HT HEAD INCOME FROM OTHER SOURCES. THE INTEREST OF ALL THE THREE YEAR S WAS OFFERED TO TAX IN THE YEAR OF MATURITY AND NOT YEAR-WISE. IN MY VIEW, TH IS IS JUST CHANGE IN THE HEAD OF INCOME UNDER WHICH THE INCOME IS OFFERED TO TAX. THE TAXATION OF THE RECEIPT IS CHANGED TO THE HEAD OF INCOME OTHER SOURCES FROM THE HEAD OF INCOME CAPITAL GAIN. 5. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT UND ER SIMILAR CIRCUMSTANCES, THE PENALTY HAS BEEN CANCELLED AND H E RELIED UPON THE FOLLOWING CASE LAWS: I) CIT VS AURIC INVESTMENT AND SECURITIES LTD. 310 ITR 121 II) CIT VS BENNETT COLEMAN & CO. LTD. 87 DTR 368 III) CIT VS BHARTESH JAIN 235 CTR 220 6. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. AS WELL ALSO LD. CIT(A). THE LD. D .R. SUBMITTED THAT N.H.B. ISSUED A PROSPECTUS ALONG WITH THE APPLICATI ON FORM OF BOND AND THAT IN SUCH PROSPECTUS IT IS MENTIONED THAT INTEREST WO ULD BE PAID ON MATURITY. ITA NO.1423/DEL/2013 4 HE ALSO POINTED OUT THAT T.D.S., HAS BEEN MADE ON I NTEREST BY N.H.B. AND ARGUED THAT THE ASSESSEE WAS FULLY AWARE THAT INTER EST IS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND HAD CLAIMED T.D. S. CREDIT. HE PRAYED THAT THE PENALTY BE CONFIRMED. 7. WE CAREFULLY CONSIDERED THESE SUBMISSIONS AND TH E PROPOSITIONS LAID DOWN BY VARIOUS CASE LAW CITED. THE HON'BLE KARNATA KA HIGH COURT IN THE CASE OF CIT VS MANJUNATHA COTTON AND GINNING FACTOR Y AND OTHERS REPORTED IN 359 ITR 565 AFTER CONSIDERING A NUMBER OF JUDGEM ENTS ON THE ISSUE OF PENALTY U/S 271(1)(C) CULLED OUT THE PROPOSITION AS UNDER: 62 IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EMER GES IS AS UNDER : (A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIAB ILITY. (B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSI NG PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. (C) WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDI ENT FOR ATTRACTING CIVIL LIABILITY. (D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 2 71(1)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271. (E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISC ERNIBLE FROM THE ASSESSMENT ORDER OR THE ORDER OF THE APPELLATE AUTH ORITY OR THE REVISIONAL AUTHORITY, (F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(1)(C), AT LEAST THE FACTS SET OUT IN EXPLANATION L(A) AND L(B) IT SHOULD BE DISCERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUTE CONCEALME NT BECAUSE OF DEEMING PROVISION. (G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE AS SESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDIN GS UNDER SECTION 271 (1) (C) IS A SINE QUA NON FOR THE ASSESSING OFFICER TO INITIATE THE ITA NO.1423/DEL/2013 5 PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CONTAI NED IN SUB- SECTION (LB). (H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) AND THE COMMISSIONER. (I) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. J) THE IMPOSITION OF PENALTY EVEN IF THE TAX LIABIL ITY IS ADMITTED IS NOT AUTOMATIC. (K) EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORD ER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TAX AND INTER EST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERN IBLE FROM THE ASSESSMENT ORDER THAT, IT IS ON ACCOUNT OF SUCH UNE ARTHING OR ENQUIRY CONCLUDED BY THE AUTHORITIES IT HAS RESULTED IN PAY MENT OF SUCH TAX OR SUCH TAX LIABILITY CAME TO BE ADMITTED AND IF NOT I T WOULD HAVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. (L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPL ANATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PRO VE THAT THE EXPLANATION OFFERED IS NOT BONA FIDE, AN ORDER IMPO SING PENALTY COULD BE PASSED. (M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUB STANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONA FIDE AND ALL FACT S RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. (N) THE DIRECTION REFERRED TO IN EXPLANATION L(B) T O SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. (0) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY S ATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEE DINGS, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, THEN THE PENALTY ITA NO.1423/DEL/2013 6 PROCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE A UTHORITY AND NOT THE ASSESSING AUTHORITY, (P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPEC IFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I.E., WHETH ER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORREC T PARTICULARS OF INCOME (Q) SENDING PRINTED FORM WHERE ALL THE GROUNDS MENT IONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY THE REQUIREMENT OF LAW. (R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, THE PRINCIPLES OF NATURAL JUSTICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. (S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AN D FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. (T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE A SSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENA LTY THOUGH EMANATE FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEP ENDENT AND SEPARATE ASPECT OF THE PROCEEDINGS. (U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEED INGS IN SO FAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCORREC T PARTICULARS' WOULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PR OCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDING S ON THE MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESS MENT IN PURSUANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT M ATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED AS INVALID IN THE PENALTY PROCEEDINGS. 6. APPLYING THESE PROPOSITIONS TO THE FACTS OF THE PRESENT CASE, WE ARE OF THE CONSIDERED OPINION THAT THE EXPLANATION FILED B Y THE ASSESSEE IS BONA FIDE. THIS IS A CASE OF A BONA FIDE MISTAKE ON PART OF TH E ASSESSEE. ALL THE ITA NO.1423/DEL/2013 7 INFORMATION HAS BEEN DISCLOSED IN THE INCOME TAX RE TURN FILED BY THE ASSESSEE. INCOME HAD BEEN OFFERED UNDER THE HEAD CAPITAL GAI N T.D.S. UNDER THESE CIRCUMSTANCES, WE CANCEL THE PENALTY LEVIED U/S 271 (1)(C) OF THE ACT. 7. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. 8. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JULY, 2015. SD./- SD./- (A. T. VARKEY) (J. S. REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE:21 ST JULY, 2015 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 15/7 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 16,21, SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 21/7/15 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 21/7 SR. PS/PS 7 FILE SENT TO BENCH CLERK 21/7 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER