SRI. S KANNAN, CHENNAI V. ITO NON CORPORATE WARD 14 (1), CHENNAI

ITA 1712/CHNY/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5019 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 21-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SRINIVASA RAO IRS
• Keywords: Unexplained investment; Capital asset converted into stock in trade; Capital asset; Business income; Cost of acquisition; Date of conversion; Capital Gains
• Section: 271(1)(c); 45(2); 2(14); 201; 69

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH : CHENNAI . . . , , [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ] ./I.T.A. NOS. 1712 & 1713/CHNY/2018 ! / ASSESSMENT YEARS : 2008-09 AND 2009-10. S. KANNAN, PLOT NO.6, NO.28/32, NEW COLONY, 1 ST STREET, ADAMBAKKAM, CHENNAI 600 088. VS. THE INCOME TAX OFFICER, NON CORPORATE WARD 14(1) CHENNAI. [PAN AZTPS 1188B] ./I.T.A. NOS. 1714, 1715, 1716 & 1717/CHNY/2018 ! / ASSESSMENT YEARS : 2008-09, 2010-11, 2011-1 2 AND 2014-2015. N. SEETHAPATHY, PLOT NO.6, NO.28/32, NEW COLONY, 1 ST STREET, ADAMBAKKAM, CHENNAI 600 088. VS. THE INCOME TAX OFFICER, NON CORPORATE WARD 14(1) CHENNAI. [PAN ADPPN 9457J] ( / APPELLANT) ( /RESPONDENT) '# $ % / APPELLANT BY : SHRI. M. KARUNAKARAN, ADV. &' '# $ % /RESPONDENT BY : SHRI. M. SRINIVASA RAO, IRS, CIT. ( ) $ * /DATE OF HEARING : 13-03-2019 +,! $ * /DATE OF PRONOUNCEMENT : 27-05-2019 ITA NOS.1712 TO 1717 /2018 :- 2 -: / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THESE SIX APPEALS ARE FILED BY THE ASSESSEES ARE DIRECTED AGAINST THE DIFFERENT ORDERS OF THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS)-14, CHENNAI (HEREINAFTER CALLED AS C IT(A)) DATED 28.02.2018, 28.02.2018, 31.01.2018, 31.01.2018, 2 5.01.2018 AND 31.01.2018 FOR THE ASSESSMENT YEARS (AY) 2008-09, 2009-10, 2008- 09, 2010-11, 2011-12 AND 2014-15. 2. SINCE, THE IDENTICAL FACTS AND ISSUES ARE INVOLVED IN THESE APPEALS, WE PROCEED TO DISPOSE THE SAME VIDE THIS C OMMON ORDER. 3. FOR THE SAKE OF CONVENIENCE AND CLARITY, THE FACTS RELEVANT FOR THE AY 2008-09 IN ITA NO.1714/CHNY/2018 OF SHRI. N. SEETHAPATHY ARE STATED HEREIN. 4. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN HOLDING THAT THE SUM OF RS. 97,75,000 (CORRECT AMOU NT RS.93,68,000) REPRESENTING THE PROFIT ON SALE OF AG RICULTURAL IAND IS LIABLE TO BE TAXED AS SHORT TERM CAPITAL GA INS. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HA VING FOUND THAT THE LAND HAS BEEN CLASSIFIED AS AGRICULT URAL LANDS IN THE REVENUE RECORDS SUPPORTED BY ADANGAL CHITTA, EC ETC. OUGHT TO HAVE TREATED THE LAND AS AGRICULTURAL LAND IN THE LIGHT OF THE D ECISION OF THE JURISDICTIONAL MADRAS HIGH COURT IN THE CASE OF MR . SAKUNTHALA VEDACHALAM VS. CIT (369 ITR 558). ITA NOS.1712 TO 1717 /2018 :- 3 -: 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN HOLDING THAT THE LAND IS CLASSIFIED AS AGRICULTU RAL LAND IN THE SALE DEED IS ONLY A SELF-DECLARATION OF THE SELLER AND THEREFORE IT CANNOT BE ACCEPTED AS A PROOF FOR AGRICULTURAL A CTIVITY. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) SHOULD HAVE SEEN THAT NOT ONLY THE SELLER HAS TREATED THE LAND AS AGRICULTURAL LAND BUT ALSO THE REGISTERING AUTHORIT Y HAS TREATED THE LAND AS AGRICULTURAL LAND ONLY AND COLLECTED TH E STAMP DUTY ON THE VALUE OF THE PROPERTY SOLD AS AGRICULTU RAL LAND ONLY. 4. THE APPELLANT HAS SUBMITTED DOCUMENTARY EVIDENCE BY WAY OF ADANGAL, CHITTA, PHOTOGRAPH TO PROVE THAT THE LA ND SOLD WAS AGRICULTURAL LAND ONLY ON THE DATE OF TRANSFER AND THEREFORE THE LEVY OF SHORT TERM CAPITAL GAINS TAX BY TREATING TH E AGRICULTURAL LAND AS CAPITAL ASSET IS NOT JUSTIFIED IN LAW AND I S LIABLE TO BE DELETED. 5. THE APPELLANT SUBMITS THAT THE CHARACTER OF THE LAN D SHOULD BE CONSIDERED AS ON THE DATE OF SALE AND THE INTENT ION OF THE BUYER ON USE OF THE LAND HAS NO RELEVANCE TO DECIDE THE NATURE OF THE LAND ON THE D ATE OF TRANSFER. 6. THE ASSESSING OFFICER ERRED IN TREATING THE AGRICUL TURAL INCOME OF 2,80,000/- SHOWN AS INCOME FROM OTHER SOURCES. 7. THE AUTHORITIES SHOULD HAVE APPRECIATED THE FACT TH AT THE APPELLANT HAD SUBSTANTIAL EXTENT OF AGRICULTURAL LA NDS WHICH ARE ADMITTEDLY SUPPORTED BY ADANGAL AND CHITTA AND THEREFORE THEY SHOULD NOT HAVE DOUBTED THE EARNING OF AGRICULTURAL INCOME BY THE APPELLANT. 8. THE APPELLANT SUBMITS THAT THE AGRICULTURAL INCOME SHOWN WAS QUITE REASONABLE HAVING REGARD TO THE EXTENT OF THE AGRICULTURAL LAND HELD BY THE APPELLANT AND THE ASS ESSING OFFICER SHOULD NOT HAVE TREATED THE SAME AS INCOME FROM OTHER SOURCE. 9. THE APPELLANT THEREFORE PAYS FOR DELETION OF THE AD DITION OF RS. 97,75,000/- UNDER SHORT TERM CAPITAL GAINS ON S ALE OF AGRICULTURAL LAND AND ALSO TO TREAT THE SUM OF RS. 2,80,000 OFFERED AS AGRICULTURAL INCOME INSTEAD OF INCOME FR OM OTHER SOURCES AND RENDER JUSTICE. ITA NOS.1712 TO 1717 /2018 :- 4 -: 5. THE BRIEF FACTS OF THE CASE ARE AS UNDER:- THE APPELLANT IS AN INDIVIDUAL DERIVING INCOME UND ER THE HEADS HOUSE PROPERTY AND BUSINESS INCOME. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-2009 WAS FILED ON 12.0 4.2010 DISCLOSING A TOTAL INCOME OF RS.9,86,380/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY INCOME TAX OFFICER, NON CORPORATE WARD 14(1), CHENNAI VIDE ORDER DATED 31.03.2016 PA SSED U/S.143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AT TOTAL INCOME OF RS.1,18,20,870/-, WHILE DOING SO, THE LD . ASSESSING OFFICER BROUGHT TO TAX SHORT TERM CAPITAL GAINS OF E97,75, 500/- ON THE PROFIT ARISING ON SALE OF AGRICULTURAL LANDS AT PADAPPAI. THE FACTUAL BACKGROUND LEADING TO THE ADDITION IS AS UNDER:- CONSEQUENT TO THE SURVEY OPERATIONS CONDUCTED IN T HE BUSINESS PREMISES OF THE APPELLANT, LD. ASSESSING O FFICER FOUND THAT APPELLANT ALONGWITH HIS SON SHRI. S. KANNAN SOLD CE RTAIN LAND SITUATED AT KADAMBATHUR DURING THE FINANCIAL YEAR 2013-2014 . HOWEVER, NO CAPITAL GAINS WAS RETURNED. IT WAS FURTHER FOUND T HE POST SURVEY OPERATIONS THAT APPELLANT ALONGWITH HIS SON SOLD LA RGE EXTENT OF LAND SITUATED AT PADAPPAI TO M/S. KGS DEVELOPERS (P) LTD FOR A CONSIDERATION OF RS.4,23,25,000/- RELEVANT TO THE A SSESSMENT YEAR 2008-2009. HENCE BASED ON THESE INFORMATION, A NOT ICE U/S.148 OF THE ITA NOS.1712 TO 1717 /2018 :- 5 -: ACT WAS ISSUED CALLING UPON THE APPELLANT TO FILE RETURN OF INCOME. IN RESPONSE TO THE SAID NOTICE, THE APPELLANT SUBMITTE D VIDE LETTER DATED 15.07.2015 THAT THE RETURN OF INCOME FILED ON 12.04 .2010 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE ISSU ED U/S.148 OF THE ACT. THUS THE ASSESSMENT PROCEEDINGS WAS REOPENED. DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS FOUND THAT THE APPEL LANT HAD PURCHASED 5.88 ACRES OF LAND SITUATED AT PADAPPAI F OR A CONSIDERATION OF RS.9,22,000/- IN THE EARLIER YEARS AND THE SAME WAS SHOWN AS FIXED ASSETS IN THE BOOKS OF THE ACCOUNTS OF THE APPELLAN T. AS ON 01.04.2007, THESE AGRICULTURAL LANDS WERE CONVERTE D INTO STOCK IN TRADE AT A MARKET VALUE OF RS.1,02,90,000/-. THIS WAS TAKEN AS A OPENING STOCK FOR THE PURPOSE OF COMPUTING BUSINESS PROFITS. IT IS FURTHER CLAIMED THAT PROFITS ARISING ON SALE OF LAN D CANNOT BE ASSESSED TO TAX UNDER THE HEAD CAPITAL GAINS AS THE LAND S WERE CLAIMED TO BE AGRICULTURAL LAND. IT WAS FURTHER SUBMITTED THAT THE LANDS WERE CLASSIFIED AS AGRICULTURAL LANDS IN THE REVENUE R ECORDS OF THE STATE GOVERNMENT AND AGRICULTURAL OPERATIONS WERE ACTUAL LY CARRIED OUT BY THE APPELLANT, RETURNED AGRICULTURAL INCOME OF R S.2,80,000/-. AGAINST THIS FACTUAL BACKGROUND, ASSESSEE CLAIMED AS EXEMPT FROM TAX, PLACING RELIANCE ON THE DECISIONS OF HONBLE JURISDICTIONA L HIGH COURT IN THE CASE OF MRS. SAKUNTHALA VEDACHALAM VS. CIT, 369 ITR 558 AN D M.S. SRINIVASA NAICKER VS. ITO, 292 ITR 481 . BUT LD. ASSESSING OFFICER HAD ITA NOS.1712 TO 1717 /2018 :- 6 -: NOT ACCEPTED THE ABOVE CONTENTION BY HOLDING THAT WHEN FIXED ASSETS WERE CONVERTED INTO STOCK IN TRADE, PROFITS ARISING ON THE SALE IN THE YEAR OF SALE OF LAND, THE PROFIT ARE LIABLE TO BE T AXED UNDER SECTION 45(2) OF THE ACT AND ACCORDINGLY, COMPUTED SHORT TE RM CAPITAL GAINS OF RS.97,75,500/- BY DEDUCTING THE COST OF LAND OF RS .5,14,500/- FROM THE MARKET VALUE AS ON THE DATE OF CONVERSION OF R S.1,02,90,000/-. THUS ARRIVED SHORT TERM CAPITAL GAINS OF E97,75,500 /-. FURTHER, THE. ASSESSING OFFICER HELD THAT THE APPELLANT HAD FAILE D TO SUBSTANTIATE THAT AGRICULTURAL ACTIVITIES WERE ACTUALLY CARRIED OUT IN THE SAID LANDS AND THE LANDS WERE PURCHASED WITH INTENTION OF SELLING THE LANDS FOR PROFITS AND THE LANDS WERE SOLD AFTER A SHORT SPAN OF TIME FROM THE DATE OF PURCHASE AND THEREFORE BROUGHT TO TAX SHORT TERM CAPITAL GAINS OF RS.97,75,500/- AND MADE ADDITION ON ACCOUNT OF A GRICULTURAL INCOME OF E2,80,000/-. 6. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE LD . COMMISSIONER OF INCOME TAX (APPEALS) WHO VIDE IMPUG NED ORDER UPHELD THE ASSESSING OFFICER VIEW THAT SUBJECT LAND SOLD WAS NOT AGRICULTURAL LAND SINCE LAND WAS CONVERTED INTO ST OCK IN TRADE WITHIN A PERIOD OF FIFTEEN MONTHS AND ACCORDINGLY UPHELD THE ACTION OF THE ASSESSING OFFICER TO BRING TO TAX THE CAPITAL GAINS OF E93,68,000/-. 7. BEING AGGRIEVED, THE APPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. IT IS SUBMITTED THAT THE APPELLANT HAD PURCHASED ITA NOS.1712 TO 1717 /2018 :- 7 -: AGRICULTURAL LANDS OF 12.66 ACRES IN THE YEAR 2005 WITH AN INTENTION OF CARRYING ON AGRICULTURAL ACTIVITIES. THOUGH THE LANDS WERE CONVERTED INTO STOCK IN TRADE IN THE BOOKS OF ACCOUNTS, THIS FACT HAS NO RELEVANCE, IN AS MUCH AS, THE LANDS WERE SOLD WERE AGRICULTURAL LANDS. IT IS FURTHER SUBMITTED THAT THE APPELLANT HAD CARR IED ON AGRICULTURAL ACTIVITIES ON THE SUBJECT LANDS AND THE LANDS ARE C LASSIFIED AS AGRICULTURAL IN THE REVENUE RECORDS AND THEREFORE PROFITS ARISING ON SALE OF AGRICULTURAL LAND CANNOT BE BROUGHT TO TAX . 8. ON THE OTHER HAND, THE LD. SR. DEPARTMENTAL REPRESE NTATIVE PLACED RELIANCE ON THE ORDERS OF LOWER AUTHORITIES. 9. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE ISSUE IN THE PRESENT APPEAL REVOLVES A ROUND WHETHER LAND SOLD WAS AGRICULTURAL LAND SO AS TO BE ELIGIBLE FO R EXEMPTION ON SALE OF SUCH LAND. UNDISPUTEDLY, THE SUBJECT LAND WAS CLASS IFIED AS AGRICULTURAL IN THE REVENUE RECORDS OF TAMIL NADU GOVERNMENT AND THE LANDS WERE ALSO SOLD AS AGRICULTURAL LANDS. THE APPELLANT BRO UGHT 5.88 ACRES OF LAND AT PADAPPAI IN SEPTEMBER, 2006 FOR A CONSIDER ATION OF E5,14,500/- AND THIS LANDS WERE SOLD TO M/S. KGS DE VELOPERS (P) LTD DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YE AR 2008-09 FOR A CONSIDERATION OF RS.1,06,75,000/- AFTER A GAP OF NE ARLY ONE AND HALF YEARS FROM THE DATE OF PURCHASE. THERE IS NO DISPU TE THAT THE LANDS WERE SOLD AS AGRICULTURAL LAND AND APPELLANT HAD N OT TAKEN ANY STEPS ITA NOS.1712 TO 1717 /2018 :- 8 -: FOR CONVERSION OF AGRICULTURAL LAND INTO NON AGRIC ULTURAL PURPOSE. THE ASSESSING OFFICER HAD INFERRED THAT IT IS AN ADVENT URE NATURE OF TRADE TAKING INTO CONSIDERATION THE FACT THAT THE TIME GA P INVOLVED FROM THE DATE OF PURCHASE OF LAND AND SALE OF LAND IS ONLY O NE AND HALF YEAR AND APPELLANT HAD MADE A HUGE PROFITS AND FINALLY LANDS WERE CONVERTED INTO STOCK IN TRADE AS ON 1 ST APRIL, 2007 IN THE BOOKS OF ACCOUNTS. THEREFORE THE QUESTION THAT ARISES FOR DETERMINATI ON IS WHETHER THE LAND IS AN ADVENTURE TRADE OR MERE A CASE OF REALIZ ATION OF APPRECIATION IN THE PRICE OF THE LAND. THIS ISSUE CAN BE DETERM INED BY FINDING OUT THE INTENTION OF THE PARTY AT THE TIME OF ORIGINAL PURCHASE OF LAND. IN THIS CONNECTION, RELIANCE CAN BE PLACED ON THE DECI SIONS OF HONBLE SUPREME COURT IN THE CASES OF G. VENKATASWAMI NAIDU & CO VS. CIT, 35 ITR 594, NARAIN SWADESHI WEAVING MILLS VS. COM MISSIONER OF EXCESS PROFITS TAX, 26 ITR 765 AND DALMIA CEMENT LT D VS. CIT, 105 ITR 633 . THERE IS NO MATERIAL ON RECORD TO SHOW THE INTENT ION ON THE PART OF THE ASSESSEE IS TO RESELL THE LANDS FOR PRO FITS AND THEREFORE THE TRANSACTION CANNOT BE TREATED AS ADVENTURE IN THE NATURE OF TRADE. THEN THE ISSUE TO BE EXAMINED IS WHETHER THE PROFIT ARISING ON SALE OF LAND CAN BE TAXED UNDER THE HEAD CAPITAL GAINS. UNDISPUTEDLY LAND CONTINUOUS TO BE AGRICULTURAL IN THE REVENUE RECOR DS. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MRS. SAKUNTHALA VEDACHALAM VS. ACIT, 369 ITR 558 HAD HELD THAT THE CLASSIFICATION OF LAND IN THE ITA NOS.1712 TO 1717 /2018 :- 9 -: REVENUE RECORDS OF THE GOVERNMENT AS AGRICULTURAL LAND IS A PRIME FACIE PROOF THAT LANDS ARE AGRICULTURAL LAND AND T HE ASSESSING OFFICER HAD NOT BROUGHT ANY MATERIAL TO REBUT THIS PRIME FA CIE EVIDENCE. THE FACT THAT ADJACENT LANDS ARE PUT TO COMMERCIAL USE IS NO GROUND TO COME TO A CONCLUSION THAT LANDS SOLD WERE NOT AGRIC ULTURAL LAND AS HELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF MRS. SAKUNTHALA VEDACHALAM (SUPRA) . THE TREATMENT OF TRANSACTION IN THE BOOKS OF ACCOUNT IS NOT CONCLUSIVE AS TO NATURE OF TRANSACTI ON. THEREFORE THE SUBJECT LANDS CANNOT BE CONSIDERED AS CAPITAL ASSET WITHIN THE MEANING OF AMBIT OF SECTION 2(14) OF THE ACT AND THEREFORE PROFIT ARISING ON THE SALE OF SUCH LAND CANNOT BE BROUGHT TO TAX. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO.1714/CHNY/2018 FOR ASSESSMENT YEAR 2008-2009 IS ALL OWED. ITA NOS.1712 & 1713/CHNY/2018 FOR ASSESSMENT YEARS 2008-2009 & 2009-2010 SHRI. S. KANNAN . 11. SINCE, THE FACTS IN THE PRESENT APPEALS ARE IDENTIC AL TO THE FACTS IN ITA NO.1714/CHNY/2018, FOR THE REASONS MEN TIONED THEREIN, WE ALLOW THE APPEALS FILED BY THE ASSESSEE ON THE L INES INDICATED IN APPEAL ITA NO.1714/CHNY/2018 (SUPRA). HENCE, THE AB OVE CAPTIONED APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ITA NOS.1712 TO 1717 /2018 :- 10 -: 12. IN THE RESULT, APPEALS OF THE ASSESSEE IN ITA NOS.1 712 AND 1713/CHNY/2018 FOR ASSESSMENT YEARS 2008-2009 AND 2009-2010 ARE ALLOWED. ITA NO.1715/ CHNY/2018 FOR ASSESSMENT YEAR 2010-201 1 SHRI. N. SEETHAPATHY . 13. THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1 4, CHENNAI (CIT(A) FOR SHORT) DATED 31.01.2018 FOR THE ASSES SMENT YEAR (AY) 2010-11. 14. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE AUTHORITIES BELOW ERRED IN TREATING THE SUM OF 25,00,000/- AS UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE ACT. 2. THE AUTHORITIES BELOW ERRED IN NOT APPRECIATING THE FACT THAT THE SALE TRANSACTION WAS DONE BY THE APPELLANT AS A POWER OF ATTORNEY AND HE ACTED AS TH E AGENT FOR THE PRINCIPAL AND THEREFORE NO AMOUNT COULD BE ASSESSED IN HIS HANDS AS CAPITAL GAIN. 3. THE APPELLANT SUBMIT THAT HE HAS ALREADY OFFERED A SUM OF RS.75,000/- AS THE COMMISSION FOR THE TRANSACTION IN THE ASSESSMENT YEAR 2011-12 WHICH THE ASSESSING OFFICER TREATED IT AS SHORT TERM CAPI TAL GAINS. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDING THAT THE APPELLANT PAID CASH 0 RS. 25 LAKHS FOR OBTAINING POA TO MRS. SUJA THERASA WHEN THE POWER OF ATTORNEY CLEARLY INDICATED THAT N O CONSIDERATION WAS PAID FOR EXECUTING THE POWER OF ATTORNEY. ITA NOS.1712 TO 1717 /2018 :- 11 -: 5. THE APPELLANT FURTHER SUBMITS THAT AS PER BALANCE SHEET, HE HAS PAID ADVANCES OF RS. 2 CRORES AND THEREFORE THE SUM OF RS. 25 LAKHS PAID TO MRS. SUJA THERASA WOULD AISO WAS LYING IN THE ADVANCES ACCOUNT AND THEREFORE THERE IS NO UNEXPLAINED ADVANCE FOR PURCHASE OF PROPERTY TO TREAT THE SAME AS UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE ACT. 6. THE ASSESSING OFFICER ERRED IN TREATING THE AGRICUL TURAL INCOME OF RS.3,00,000/- SHOWN AS INCOME FROM OTHER SOURCES. 7. THE AUTHORITIES SHOULD HAVE APPRECIATED THE FACT TH AT THE APPELLANT HAD SUBSTANTIAL EXTENT OF AGRICULTURA L LANDS WHICH ARE ADMITTEDLY SUPPORTED BY ADANGAL AND CHITTA AND THEREFORE THEY SHOULD NOT HAVE DOUBTED THE EARNING OF AGRICULTURAL INCOME BY THE APPELLANT. 8. THE APPELLANT SUBMITS THAT THE AGRICULTURAL INCOME SHOWN WAS QUITE REASONABLE HAVING REGARD TO THE EXTENT OF THE AGRICULTURAL LAND HELD BY THE APPELLANT AND THE ASSESSING OFFICER SHOULD NOT HAVE TREATED THE SAME AS INCOME FROM OTHER SOURCES. 9. THE APPELLANT THEREFORE RAYS FOR DELETION OF THE ADDITION OF RS. 25,00,000/-- MADE UNDER SECTION 69 OF THE ACT AND ALSO TO TREAT THE SUM OF RS. 3,00,00 0 OFFERED AS AGRICULTURAL INCOME INSTEAD OF INCOME FROM OTHER SOURCES AND RENDER JUSTICE. 15. THE BRIEF FACTS OF THE CASE ARE AS UNDER:- THE APPELLANT IS AN INDIVIDUAL ENGAGED IN THE BUSI NESS OF REAL ESTATE AND TRANSPORT. THE RETURN OF INCOME FOR TH E ASSESSMENT YEAR 2010-2011 WAS FILED ON 02.11.2010 DISCLOSING TOTAL INCOME OF E4,95,184/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE INCOME TAX OFFICER, NON CORPORATE WARD 14(1) CHENNAI VIDE ORDER 31.03.2006 PASSED U/S.143(3) R. W.S 147 OF THE ITA NOS.1712 TO 1717 /2018 :- 12 -: INCOME TAX ACT, 1961 (IN SHORT THE ACT) DECLARING TOTAL INCOME OF E36,45,184/-. SUBSEQUENTLY BASED ON THE INFORMATION OBTAINED FROM THE INCOME TAX OFFICER, WARD I(7), TAMBARAM THAT AS SESSEE PURCHASED HOUSE PROPERTY AT ADAMBAKKAM VILLAGE, SAI DAPET TALUK, (AT PRESENT TAMBARAM TALUK) ALANDUR SUB-REGISTRATION DI STRICT, KANCHEEPURAM DIST, SOUTH CHENNAI REGISTRATION DISTR ICT T.S.NO. 111, OLD S.NO.171/1, WARD NO.G, BLOCK NO.21 TO AN EXTENT OF 1147 SFT AND 760 SFT BEARING DOOR NO.15A IN TS NO.110, OLD S.NO .170/1, WARD NO.G, BLOCK NO.21 FOR A CONSIDERATION OF E25,00,00 0/- FROM ONE MRS. J. SUJA THERASA AND HER HUSBAND, A SURVEY OPERATION S U/S.133A OF THE ACT WAS CONDUCTED IN THE BUSINESS PREMISES OF THE APPELLANT. BASED ON THESE INFORMATION, THE ASSESSING OFFICER HAD INF ERRED THAT THESE TRANSACTIONS WERE NOT REFLECTED IN THE RETURN OF IN COME ORIGINALLY FILED. HENCE, ISSUED NOTICE U/S.148 OF THE ACT ON 30.03. 2015. IN RESPONSE TO THIS, ASSESSEE FILED LETTER DATED 15.07.2015 STA TING THAT ORIGINAL RETURN OF INCOME FILED MAY BE TREATED AS RETURN FIL ED IN RESPONSE TO NOTICE U/S.148 OF THE ACT. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, WHEN THE APPELLANT WAS CALLED UPON TO EXPLAIN THE SOURCE OF MONEY FOR MAKING ADVANCE PAYMENT OF RS.25,00,00 0/- AS PER POWER OF ATTORNEY DOCUMENT TO PURCHASE THE ABOVE SA ID PROPERTY, IT WAS EXPLAINED THAT THIS AMOUNT WAS INCLUDED IN THE LAND ADVANCE OF E2,00,00,000/- SHOWN IN THE BALANCE SHEET. HOWEVE R, THE ASSESSING ITA NOS.1712 TO 1717 /2018 :- 13 -: OFFICER HAD NOT ACCEPTED THE ABOVE EXPLANATION BY S TATING THAT THE TRANSACTION WAS BY CASH AND THEREFORE INFERRED THAT IT WAS NOT INCLUDED IN THE ADVANCE AMOUNT OF E2,00,00,000/- REFLECTED I N THE BALANCE SHEET AND ACCORDINGLY BROUGHT TO TAX E25,00,000/- A S UNEXPLAINED INVESTMENTS. FURTHER, LD. ASSESSING OFFICER ALSO M ADE AN ADDITION OF RS.3,00,000/- DISBELIEVING AGRICULTURAL INCOME. 16. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE LD . COMMISSIONER OF INCOME TAX (APPEALS) WHO VIDE IMPUG NED ORDER DISMISSED THE APPEAL. 17. BEING AGGRIEVED, THE APPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. LD. COUNSEL CONTENDED THAT TRANSAC TION OF ADVANCE PAYMENT TO MRS. J. SUJA THERASA WAS REFLECTED UNDER THE ACCOUNT LAND ADVANCE OF RS.2,00,00,000/- AND THE SAME WAS REFLEC TED IN THE BALANCE SHEET AND THEREFORE IT CANNOT BE TREATED AS UNEXPLAINED INVESTMENTS. HE FURTHER DRAWN OUR ATTENTION TO POWE R OF ATTORNEY PLACED AT PAPER BOOK PAGE NOS.8 TO 16 TO SHOW THAT NO ADVANCE WAS PAID IN TERMS OF SAID POWER OF ATTORNEY AND HE FU RTHER SUBMITTED THAT APPELLANT HAD DISCHARGED THE ONUS OF PROVING AGRICU LTURAL INCOME BY FILING COPIES OF CHITTA AND ADANGAL RECORDS AND H AVING REGARDED TO THE EXTENT OF LAND HOLDINGS. THUS, THE AGRICULTURAL I NCOME OF RS.3,00,000/- CANNOT BE DISBELIEVED. ITA NOS.1712 TO 1717 /2018 :- 14 -: 18. ON THE OTHER HAND, THE LD. SR. DEPARTMENTAL REPRESE NTATIVE PLACED RELIANCE ON THE ORDERS OF LOWER AUTHORITIES. 19. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE GROUNDS OF APPEAL NO.1 TO 5 CHALLENGES ADDITION OF E25,00,000/- AS UNEXPLAINED INVESTMENTS. DURING THE COURSE OF RE- ASSESSMENT PROCEEDINGS, ASSESSEE HAS UNEARTHERED ON E POWER OF ATTORNEY GIVEN IN FAVOUR OF THE ASSESSEE BY ONE MR S. SUJA THERASA AND HER HUSBAND IN RESPECT OF PROPERTY SITUATED AT ADAMBAKKAM VILLAGE, SAIDAPET TALUK, (AT PRESENT TAMBARAM TALU K) ALANDUR SUB- REGISTRATION DISTRICT, KANCHEEPURAM DIST, SOUTH CHE NNAI REGISTRATION DISTRICT T.S.NO. 111, OLD S.NO.171/1, WARD NO.G, BL OCK NO.21 TO AN EXTENT OF 1147 SFT AND 760 SFT BEARING DOOR NO.15A IN TS NO.110, OLD S.NO.170/1, WARD NO.G, BLOCK NO.21 FOR A CONSIDERA TION OF E25,00,000/-. THIS POWER OF ATTORNEY WAS REGISTERED VIDE DOCUMENT NO.1098/2009, DATED 04.12.2009. THE CASE OF THE A SSESSING OFFICER APPEARS TO BE THAT THE ASSESSEE MADE AN ADVANCE OF E25,00,000/- TOWARDS PURCHASE OF PROPERTY IN TERMS OF SAID POWER OF ATTORNEY AND THESE AMOUNTS WERE NOT RECORDED, WHICH REMAINED UNA CCOUNTED IN THE BOOKS OF ACCOUNTS. THE EXPLANATION OF THE ASSESSEE WAS THAT THIS ADVANCE AMOUNT WAS PART OF THE LAND ADVANCE GIVEN O F E2,00,00,000/- REFLECTED IN THE ASSET SIDE OF THE BALANCE SHEET W AS NOT ACCEPTED BY THE LD. ASSESSING OFFICER ON THE GROUND THAT THE AD VANCE WAS MADE IN ITA NOS.1712 TO 1717 /2018 :- 15 -: CASH. IT IS ONLY DURING THE COURSE OF HEARING BEFOR E US, THE APPELLANT TOOK A PLEA THAT NO ADVANCE WAS MADE IN TERMS OF TH E POWER OF ATTORNEY ENTERED INTO. FROM THE PERUSAL OF THE PO WER OF ATTORNEY WHICH IS PLACED AT PAPER BOOK PAGES 8 TO 16, IT IS CLEAR THAT NO CONSIDERATION WAS PAID TOWARDS GRANTING OF POWER OF ATTORNEY AND THE CLAUSES OF POWER OF ATTORNEY ONLY EMPOWERS THE APPE LLANT TO NEGOTIATE AND TO ENTER INTO AGREEMENT FOR SALE FOR THE SCHEDU LED PROPERTY AND TO RECEIVE CONSIDERATION FROM THE PURCHASER. THERE IS NOTHING IN POWER OF ATTORNEY INDICATING TRANSFER OF PROPERTY IN FAVO UR OF THE APPELLANT. HOWEVER, THE ASSESSING OFFICER CAME TO A CONCLUSION THAT APPELLANT PAID THE ADVANCE MONEY OF E25,00,000/- TO MRS. SUJA THERASA TOWARDS PURCHASE OF THE PROPERTY. ON THE OTHER HAND, THERE IS A SALE DEED EXECUTED ON 16 TH APRIL, 2010 BY SHRI. C. PREM RAJA SINGH AND MRS. J . SUJA THERESA IN FAVOUR OF ONE SHRI. P. SUYAMBU CONV EYING THE TITLE IN THE SAID PROPERTY FOR A CONSIDERATION OF E25,75,000 /- AND THE CONSIDERATION WAS PAID BY THE SAID BUYER TOWARDS PU RCHASE OF THE PROPERTY. THUS, THERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE HAD ACQUIRED ANY TITLE IN THE SAID PROPERTY AND PAI D ANY CONSIDERATION. MOREOVER THE EXPLANATION OFFERED BY THE APPELLANT B EFORE THE LD. ASSESSING OFFICER THAT THE ADVANCE PAYMENT OF RS.25 ,00,000/- WAS INCLUDED IN THE LAND ADVANCE OF RS.2,00,00,000/- CA NNOT BE REJECTED ON THE GROUND THAT CONSIDERATION WAS PAID IN CASH. TH E DETAILS OF ITA NOS.1712 TO 1717 /2018 :- 16 -: ADVANCE OF RS.2,00,00,000/- APPEARING IN THE ASSET SIDE OF THE BALANCE SHEET WAS NOT EXAMINED BY THE LD. ASSESSING OFFICER AND THEREFORE EXPLANATION OFFERED CANNOT BE REJECTED I N THE ABSENCE OF ANY EVIDENCE ON RECORD TO THE CONTRARY. THEREFORE I N THE ABSENCE OF ANY MATERIAL ON RECORD INDICATING THAT ASSESSEE HA D PAID ADVANCE OF RS.25,00,000/- IN CASH TOWARDS PURCHASE OF PROPERT Y, THE ADDITION OF AMOUNT OF E25,00,000/- AS UNEXPLAINED INVESTMENTS C ANNOT BE SUSTAINED. THUS, GROUNDS OF APPEAL 1 TO 5 OF THE A SSESSEE ARE ALLOWED. 20. THE GROUNDS OF APPEAL NO.6 TO 8 CHALLENGES ADDITION OF AGRICULTURAL INCOME OF E3,00,000/-. ASSESSEE HAD FILED PRIMARY DETAILS LIKES CHITTA AND ADANGAL INDICATING THE EXTENT OF LAND AND CROPS GROWN ETC. THE APPELLANT RETURNED AGRICULTURAL INCOME OF E3,00,000/- AND THERE IS NO MATERIAL TO DISBELIEVE THE AGRICULTURAL INCOME, THEREFORE THE ADDITION OF RS.3,00,000/- BELIEVING AGRICULTURA L INCOME CANNOT BE SUSTAINED. HENCE, GROUND NOS. 6 TO 8 RAISED BY THE ASSESSEE ARE ALLOWED. 21. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO.1715/CHNY/2018 FOR ASSESSMENT YEAR 2010-2011 IS ALLOWED. ITA NO.1716/ CHNY/2018 FOR ASSESSMENT YEAR 2011-201 2 SHRI. N. SEETHAPATHY . ITA NOS.1712 TO 1717 /2018 :- 17 -: 22. THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1 4, CHENNAI (CIT(A) FOR SHORT) DATED 25.01.2018 CONFIRMING TH E PENALTY OF RS.25,60,435/- LEVIED U/S.271 (1) (C) OF THE ACT FO R THE ASSESSMENT YEAR (AY) 2011-12. 23. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE LEARNED COMMISSIONER OF INCOME-TA X (APPEALS) ERRED IN CONFIRMING THE LEVY OF PENALTY OF RS 25, 60,435/- LEVIED U/S 271 (1)(C) IN THE APPELLANT'S CASE FOR THE ASSE SSMENT YEAR 2011-12. 2. THE APPELLANT SUBMITS THAT HE HAS NOT CONCEALED ANY INCOME NOR FURNISHED ANY INACCURATE PARTICULARS OF INCOME TO WARRANT LEVY OF PENALTY AND THEREFORE LEVY OF PENAL TY IN THE APPELLANT'S CASE IS NOT JUSTIFIED. 3. THE ASSESSING OFFICE HAS NOT INDICATED IN THE PE NALTY NOTICE AS TO WHICH LIMB OF THE PROVISIONS OF SECTIO N 271 (1 )(C) ARE APPLICABLE TO THE APPELLANTS CASE VIZ. WHETHER THE APPELLANT HAD CONCEALED INCOME OR FURNISHED INACCURATE PARTIC ULARS OF INCOME. IN THE ABSENCE THEREFORE THE ENTIRE PENALTY PROCEEDINGS STAND VITIATED IN LAW AS HELD BY VARIOUS TRIBUNALS AND HIGH COURTS. THE APPELLANT THEREFORE PRAYS FOR CANCELLAT ION OF PENALTY LEVIED ON THIS GROUND IN LIMINE. 4. THE APPELLANT SUBMITS THAT THE ADDITIONS MADE TO THE TOTAL INCOME WAS MAINLY DUE TO REJECTION OF THE EXPLANATI ON OF THE APPELLANT AND THEREFORE NO PENALTY COULD BE LEVIED AS THE ITA NOS.1712 TO 1717 /2018 :- 18 -: ADDITIONS WERE MADE BASED ON THE MATERIALS ALREADY AVAILABLE IN THE RE URN OF INCOME AND DISCLOSED DURING THE COURS E OF ASSESSMENT PROCEEDINGS. 5. THE APPELLANT SUBMITS THAT THE ADDITION OF RS. 22,60,000/-- WAS DUE TO DISALLOWANCE OF DEVELOPMENT EXPENDITURE CLAI MED. THE APPELLANT SUBMITS THAT THE DISALLOWANCE OF AN EXPEN DITURE CLAIMED CANNOT BE CONSIDERED AS CONCEALED INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME AS HELD BY THE VAR IOUS COURTS AND THEREFORE NO PENALTY COULD BE LEVIED ON SUCH DISALL OWANCE. 6.THE APPELLANT SUBMITS THAT THE ADDITION OF RS. 55 ,00,000 REPRESENTING THE ADDITION IN THE CAPITAL ACCOUNT WA S DUE TO THE MISTAKE COMMITTED BY THE ERSTWHILE AUDITOR IN CREDI TING THE SALE CONSIDERATION AS PROFIT IN THE CAPITAL ACCOUNT INST EAD OF T E PROFIT AND THE APPELLANT HAD ACCEPTED FOR THE ADDITION WHEN TH E MISTAKE WAS NOTED VOLUNTARILY AFTER RECTIFYING THE MISTAKES COM MITTED BY THE ERSTWHILE AUDITOR THROUGH ANOTHER AUDITOR. 7. .THE APPELLANT SUBMITS THAT WHEN THE APPELLANT HAD SURRENDERED THE INCOME, THERE WAS NO SCOPE FOR LEVY OF PENALTY U/S 271 (1 )(C) AS HELD IN VARIOUS DECISIONS. 8. THE APPELLANT SUBMITS THAT MERE CHANGE OF HEAD OF I NCOME FROM AGRICULTURAL INCOME TO INCOME FROM OTHER SOURCES WO ULD NOT WARRANT LEVY OF PENALTY AS HELD BY VARIOUS COURTS. 9. THE APPELLANT SUBMITS THAT HE HAS GIVEN A DETAILED REPLY TO THE PENALTY NOTICE INDICATING THAT PENAL Y PROCEEDINGS WOULD NOT APPLY FOR EACH OF THE ADDITIONS MADE TO THE TOTAL INCOME RETURNED WHICH MAY BE READ AS PART AND PARCEL OF THIS GROUNDS OF A PPEAL. 10. THE APPELLANT SUBMITS THAT HE HAS AGREED FOR CERTAI N ADDITIONS TO AVOID PROTRACTED LITIGATION AND TO SETTLE THE IS SUES AND NO ITA NOS.1712 TO 1717 /2018 :- 19 -: PENALTY COULD BE LEVIED ON SUCH ADDITIONS AGREE TO BE MADE. 11. THE APPELLANT THEREFORE PRAYS THAT THE PENALTY PROC EEDINGS MAY BE CANCELLED AS NOT VALIDLY INITIATED AND ALSO DELE TE THE LEVY OF PENALTY AS THERE WAS NO CONCEALMENT OF INCOME OR FU RNISHING OF ANY INACCURATE PARTICULARS OF INCOME IN THE APPELLA NT'S CASE. 24. THE BRIEF FACTS OF THE CASE ARE AS UNDER:- THE APPELLANT IS AN INDIVIDUAL ENGAGED IN THE BUS INESS OF REAL ESTATE AND TRANSPORT IN THE NAME AND STYLE O F LAKSHMI ESTATES AND TRANSPORT. THE RETURN OF INCOME FOR THE AS SESSMENT YEAR 2011- 2012 WAS FILED ON 27.07.2012 DISCLOSING TOTAL INCOM E OF E19,54,352/-. SUBSEQUENTLY, SURVEY OPERATIONS U/S.133A OF THE ACT WAS CONDUCTED IN THE BUSINESS PREMISES OF THE APPELLANT ON 19.09.20 14. BASED ON THE INFORMATION OBTAINED DURING THE COURSE OF SURVEY OPERATIONS, ASSESSMENT WAS REOPENED BY ISSUING NOTICE U/S.148 OF THE ACT ON 02.02.2015 AND RE-ASSESSMENT WAS COMPLETED VIDE OR DER DATED 31.03.2016 PASSED U/S.143(3) R.W.S.147 OF THE ACT A T TOTAL INCOME OF RS.1,03,40,552/-, WHILE DOING SO, LD. ASSESSING OFF ICER MADE THE FOLLOWING DISALLOWANCES. (I) DISALLOWANCE OF DEVELOPMENT EXPENDITURE OF E22,60, 000/- FOR WANT OF EVIDENCE. ITA NOS.1712 TO 1717 /2018 :- 20 -: (II) ADDITION ON ACCOUNT OF UNDISCLOSED INCOME OF E1,51 ,200/-. (III) ADDITION ON ACCOUNT OF UNDISCLOSED SHORT TERM CAPIT AL GAINS OF E75,000/-. (IV) ADDITION ON ACCOUNT OF AGRICULTURAL INCOME OF E3, 00,000/-. THE ABOVE ADDITIONS WERE ACCEPTED BY THE APPELLANT. THUS, ASSESSMENT ORDER REACHED FINALITY. HOWEVER, THE AS SESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S. 271(1) (C) OF T HE ACT BY ISSUING SHOW CAUSE NOTICE U/S.274 R.W.S. 271(1) (C) OF TH E ACT ON 31.03.2016. IN RESPONSE TO SHOW CAUSE NOTICE, IT IS SUBMITTED THAT THE ADDITIONS WERE MADE FOR MERE INABILITY TO SUBSTANTI ATE THE CLAIM, WHICH DOES NOT MEAN CONCEALMENT OF PARTICULARS OF I NCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND THE SAID EXPLANATION WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND PROC EEDED WITH LEVY PENALTY OF E25,60,435/- VIDE ORDER DATED 28.09.201 6 PASSED U/S.271(1) (C) OF THE ACT. 25. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS), WHO VIDE IMP UGNED ORDER CONFIRMED THE LEVY OF PENALTY BY HOLDING THAT ASSES SEE HAD AGREED TO THE ADDITIONS CONSEQUENT TO THE MATERIALS FOUND DUR ING THE COURSE OF SURVEY PROCEEDINGS. ITA NOS.1712 TO 1717 /2018 :- 21 -: 26. BEING AGGRIEVED, THE APPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. 27. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL ON RECORD. THE ONLY ISSUE INVOLVED IN THE PRESENT APP EAL RELATES TO LEVY OF PENALTY U/S.271 (1) (C) OF THE ACT. ADMITTEDLY, AD DITIONS IN RESPECT OF WHICH PENALTY U/S. 271 (1)(C) OF THE ACT WAS LEVIED BY THE LD. ASSESSING OFFICER WERE AGREED BY THE APPELLANT DURING THE COU RSE OF RE- ASSESSMENT PROCEEDINGS. THE MERE FACT THAT THE ASS ESSEE HIMSELF AGREED TO THE ADDITIONS DOES NOT WARRANT THE IMPOSI TION OF PENALTY U/S.271(1) (C) OF THE ACT AS HELD BY HONBLE JURISD ICTIONAL HIGH COURT IN THE CASE OF KHAMDELWOOD STEELS AND TUBE TRADERS VS. ITO, 95 TAXMANN.COM 1. NOW EXAMINING EACH ITEM OF ADDITIONS , FROM THE PERUSAL OF THE ASSESSMENT ORDER, IT IS CLEAR THAT DEVELOPMENT EXPENDITURE OF E22,60,000/- WAS DISALLOWED BY THE A SSESSING OFFICER ON THE GROUND THAT APPELLANT HAD FAILED TO SUBSTANT IATE THE CLAIM. THERE IS NO FINDING BY ASSESSING OFFICER INDICATIN G THAT THE APPELLANT HAD CONCEALED THE PARTICULARS OF INCOME WARRANTING LEVY OF PENALTY. MERE DISALLOWANCE OF CLAIM OF EXPENDITURE DOES NOT TANTAMOUNT TO CONCEALMENT OF INCOME, WARRANTING LEVY OF PENALTY AS HELD BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. HONEYWELL DACE (INDIA) LTD, 292 ITR 169 . ITA NOS.1712 TO 1717 /2018 :- 22 -: 28. AS REGARDS TO THE ADDITION OF E55,00,000/-, THERE IS NO FINDING BY THE LD. ASSESSING OFFICER THAT THE APPEL LANT HAD INTRODUCED CASH AS CAPITAL AND IT WAS SHOWN AS APPLICATION O F INCOME IN THE CURRENT YEAR. THERE IS NOTHING ON RECORD SUGGESTI NG THIS CAPITAL WAS USED FOR ACQUISITION OF ASSETS. MERE WRONG ENTRY IN THE BOOKS OF ACCOUNTS DOES NOT ESTABLISH THAT IT IS AN ATTEMPT T O CONCEAL PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF I NCOME. IT IS NOT AN DELIBERATE ACT INTENDED TO CONCEAL PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. A MERE OMISSIONS OR NEGLIGENCE COULD NOT CONSTITUTE CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME AS HELD BY HONBLE SUPREME CO URT IN THE CASE OF PRICE WATERHOUSE COOPERS PVT. LTD. V. CIT (348 ITR 306). HOWEVER AS REGARDS TO THE ADDITION OF E1,51,200/-, IT IS B ASED ON THE MATERIAL FOUND DURING THE COURSE OF SURVEY OPERATIONS AND T HIS IN OUR CONSIDERED OPINION ATTEMPTED TO CONCEAL THE PARTICU LARS OF INCOME. THEREFORE WE SUSTAIN THE PENALTY REPRESENTING ON TH E ADDITION ON ACCOUNT OF RENT RECEIPT OF E1,51,200/-. AS REGARD S TO THE ADDITION OF E75,000/- UNDER THE HEAD SHORT TERM CAPITAL GAINS ON ACCOUNT OF SALE OF PROPERTY BELONGING TO ONE MRS. J. SUJA THERASA A ND HER HUSBAND. THERE IS NO MATERIAL ON RECORD SUGGESTING THAT THE APPELLANT BROUGHT THIS PROPERTY AND SOLD THE PROPERTY FOR A GAIN OF E 75,000/-. THE MERE FACT THAT THE APPELLANT AGREED TO THE ADDITION OF E 75,000/- DOES NOT ITA NOS.1712 TO 1717 /2018 :- 23 -: AMOUNT TO CONCEALMENT OF PARTICULARS OF INCOME WARR ANTY LEVY OF PENALTY. AS REGARDS TO AGRICULTURAL INCOME, AN A DDITION OF E3,00,000/- WAS MADE, SINCE THE APPELLANT WAS UNABL E TO SUBSTANTIATE AGRICULTURAL INCOME. MERE INABILITY TO SUBSTANTIA TE THE CLAIM DOES NOT WARRANT LEVY OF PENALTY. IN THIS REGARD, RELIANCE W AS PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD, 322 ITR 158 . THUS, IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NOS.1717/CHNY/2018 FOR ASSESSMENT YEARS 2014-20 15- SHRI. N. SEETHAPATHY . 29. THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1 4, CHENNAI (CIT(A) FOR SHORT) DATED 31.01.2018, CONFIRMING P ENALTY OF RS.54,40,964/- LEVIED U/S.271 (1) (C) OF THE ACT FO R THE ASSESSMENT YEAR (AY) 2014-15. 30. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE LEVY OF PENALTY OF RS. 4,40 ,964/- LEVIED U/S 271(1)(C) IN THE APPELLANT'S CASE FOR TH E ASSESSMENT YEAR 2014-15. 2. THE APPELLANT SUBMITS THAT HE HAS NOT CONCEALED ANY INCOME NOR FURNISHED ANY INACCURATE PARTICULARS OF INCOME TO WARRANT LEVY OF PENALTY AND THEREFORE LEV Y OF PENALTY IN THE APPELLANT'S CASE IS NOT JUSTIFIED. 3. THE ASSESSING OFFICER AS NOT INDICATED IN THE PENAL TY NOTICE AS TO WHICH LIMB OF THE PROVISIONS OF SECTIO N 271 ITA NOS.1712 TO 1717 /2018 :- 24 -: (1)(C) ARE APPLICABLE TO THE APPELLANTS CASE VIZ. WHETHER THE APPELLANT HAD CONCEALED INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME IN THE ABSENCE THE REFORE THE ENTIRE PENALTY PROCEEDINGS STAND VITIATED IN LAW AS HELD BY VARIOUS TRIBUNALS AND HIGH COURTS. THE APPELLANT THEREFORE PRAYS FOR CANCELLATION OF PENALTY LEVIED ON THIS GROUND IN LI MINE. 4. THE APPELLANT SUBMITS HAT THE ADDITIONS MADE TO THE TOTAL INCOME WAS MAINLY DUE TO REJECTION OF THE EXPLANATION OF THE APPELLANT AND THEREFORE NO PENAL TY COULD BE LEVIED AS THE ADDITIONS WERE MADE BASED ON THE MATERIALS ALREADY AVAILABLE IN THE RETURN OF INCOME AND DISCLOSED DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS. 5. THE APPELLANT SUBMIT THAT THE MAIN ADDITION TO THE INCOME RETURNED WAS ASSESSMENT OF LONG TERM CAPITAL GAINS OF RS. 2,06,91,340/- BY DENYING THE CLAIM OF THE APPELLANT THAT THE PROFIT IS ATTRIBUTABLE TO SALE O F AGRICULTURAL LAND AND NOT LIABLE TO TAX. 6. THE APPELLANT SUBMITS THAT MERE CHANGE OF HEAD OF INCOME FROM AGRICULTURAL INCOME TO CAPITAL GAIN WOU LD NOT WARRANT LEVY OF PENALTY AS HELD BY VARIOUS COURTS. 7. THE APPELLANT SUBMITS THAT HE HAS GIVEN A DETAILED REPLY TO THE PENALTY NOTICE INDICATING THAT PENALTY PROCEEDINGS WOULD NOT APPLY FOR EACH OF THE ADDITIO NS MADE TO THE TOTAL INCOME RETURNED WHICH MAY BE READ AS PART AND PARCEL OF THIS GROUNDS OF APPEAL. 8. THE APPELLANT SUBMITS THAT HE HAS AGREED FOR CERTAI N ADDITIONS TO AVOID , PROTRACTED LITIGATION AND TO SETTLE THE ISSUES AND NO PENALTY COULD BE LEVIED ON SUCH ADDIT IONS AGREED TO BE MADE. 9. THE APPELLANT THEREFORE PRAYS THAT THE PENALTY PROCEEDINGS MAY BE CANCELLED AS NOT VALIDLY INITIAT ED AND ALSO DELETE THE LEVY OF PENALTY AS THERE WAS NO CONCEALMENT OF INCOME OR FURNISHING OF ANY INACCURATE PARTICULARS OF INCOME IN THE APPELLANT'S CASE. 31. THE BRIEF FACTS OF THE CASE ARE AS UNDER:- ITA NOS.1712 TO 1717 /2018 :- 25 -: THE APPELLANT IS AN INDIVIDUAL ENGAGED IN THE BUSI NESS OF REAL ESTATE IN THE NAME AND STYLE OF LAKSHMI ESTATES AND TRANSPORT. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2014-2015 WAS FILED ON 13.01.2016 DISCLOSING TOTAL INCOME OF E3,60,000/-. SUBSEQUENTLY, BASED ON THE INFORMATION OBTAINED DURING THE COURSE OF SURVEY OPERATIONS CONDUCTED IN THE BUSINESS PREMISES ON 19 .09.2014, ASSESSMENT WAS REOPENED BY ISSUE OF NOTICE U/S.148 DATED 15.12.2014 AND FINALLY THE REASSESSMENT WAS COMPLETED AT A TOT AL INCOME OF E2,35,50,582/- AFTER MAKING FOLLOWING ADDITIONS VID E ORDER DATED 31.03.2016. (I) LONG TERM CAPITAL GAINS RS.2,06,91,340 (II) REAL ESTATE COMMISSION RS.23,62,876 (III) UNEXPLAINED INVESTMENT RS.10,00,000 (IV) HOUSE PROPERTY RS.1,51,200 (V) AGRICULTURAL INCOME TREATED AS OTHER INCOME RS.3,00,000 THE ADDITIONS WERE NOT CONTESTED IN THE APPEAL AND THE LD. ASSESSING OFFICER ISSUED A SHOW CAUSE NOTICE DATED 31.03.20 16 U/S.274 R.W.S. 271 (1) (C) OF THE ACT CALLING UPON THE APPELLANT W HY PENALTY SHOULD NOT BE LEVIED. THE APPELLANT HAD FILED AN EXPLANAT ION IN RESPONSE TO SHOW CAUSE NOTICE STATING THAT THE ADDITIONS WERE A CCEPTED WITH A VIEW TO BUY PIECE WITH THE DEPARTMENT AND MERE ADDITIONS IPSO FACTO DOES NOT LEAD TO LEVY OF PENALTY. HOWEVER, LD. ASSESSIN G OFFICER REJECTED THE ITA NOS.1712 TO 1717 /2018 :- 26 -: SAID EXPLANATION AND LEVIED PENALTY OF E54,40,964/- UNDER SECTION 271 (1) (C) OF THE ACT VIDE ORDER DATED 28.09.2016. 32. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDER DISMISSED THE APPEAL. 33. BEING AGGRIEVED, THE APPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. 34. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL ON RECORD. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS LEVY OF PENALTY U/S.271 (1) (C) OF THE ACT. THE MAJOR ADDITION IN R ESPECT OF PENALTY WAS LEVIED IS IN RESPECT OF ADDITION ON ACCOUNT OF LON G TERM CAPITAL GAIN OF E2,06,91,340/- DUE TO SALE OF LAND AT KADAMBATTUR. THE CAPITAL GAINS HAD ARISEN ON ACCOUNT OF APPLYING DEEMING PROVISION S CONTAINED U/S.45(2) OF THE ACT. ADMITTEDLY, THE LAND WAS HE LD AS CAPITAL ASSET CONVERTED INTO STOCK IN TRADE, WHICH WAS SOLD DURIN G THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. T HE APPELLANT HAD OFFERED PROFIT ARISING ON ACCOUNT OF SALE OF PROPER TY UNDER THE HEAD INCOME FROM BUSINESS, HOWEVER APPELLANT HAD FA ILED TO OFFER CAPITAL GAINS ARISING BETWEEN MARKET VALUE AS ON DATE OF C ONVERSION INTO STOCK IN TRADE AND THE COST OF ACQUISITION. WHEN I T WAS POINTED OUT TO THE ASSESSEE, IT WAS READILY AGREED BY THE ASSESSEE . THIS CONDUCT WOULD GO TO SHOW THAT THE FAILURE TO SHOW CAPITAL G AIN IS NOT A ITA NOS.1712 TO 1717 /2018 :- 27 -: DELIBERATE ACT TO CONCEAL PARTICULARS OF INCOME. F URTHER THE FACT THAT CAPITAL ASSET WAS CONVERTED INTO STOCK IN TRADE IS ALSO APPARENT IN THE BOOKS OF ACCOUNTS MAINTAINED. THE HONBLE SUPREME COURT IN THE CASE OF T. ASHOK PAI VS. CIT, 161 TAXMAN 340 HAD HELD THAT IN THE ABSENCE OF DELIBERATE ACT TO CONCEAL PARTICULARS OF INCOME, PENALTY IS NOT LEVIABLE. ACCORDINGLY WE DO NOT UPHOLD LEVY OF PEN ALTY ON THE ADDITION OF RS.2,06,91,340/-. AS REGARDS TO LEVY OF PENALTY ON ACCOUNT OF UNDISCLOSED BUSINESS OF E23,62,876/-, WE UPHOLD THE PENALTY AS ADDITION WAS MADE BASED ON MATERIALS FOUND AS A RES ULT OF SURVEY OPERATIONS WHICH CLEARLY ESTABLISHED THAT ASSESSEE HAD DELIBERATELY CONCEALED PARTICULARS OF INCOME. AS REGARDS TO ADDI TION OF E10,00,000/- ON LEVY OF PENALTY ON ACCOUNT OF UNEXPLAINED INVEST MENTS IN PURCHASE OF PROPERTY AT PLOT NO.112, ADANNOR VILLAGE, JAYA LAKSHMI NAGAR PART I. THE ADDITION WAS MADE ON ACCOUNT OF INABILITY T O EXPLAIN THE SOURCE OF INCOME, WHILE DOES NOT IPSO FACTO LEADS TO LEVY OF PENALTY AND THERE IS NO FINDINGS BY THE LD. ASSESSING OFFICER THAT TH E PARTICULARS FILED BY THE ASSESSEE ARE FOUND TO BE INCORRECT. THUS, LEVY OF PENALTY IN THE ABOVE CASE CANNOT BE UPHELD. AS REGARDS TO LEVY O F PENALTY ON ACCOUNT OF AGRICULTURAL INCOME OF E3,00,000/-, MER E ADDITION ON ACCOUNT OF INABILITY TO SUBSTANTIATE THE CLAIM DOE S NOT WARRANT LEVY OF PENALTY AS HELD BY HONBLE SUPREME COURT IN THE CAS E OF CIT VS. ITA NOS.1712 TO 1717 /2018 :- 28 -: RELIANCE PETROPRODUCTS PVT LTD 322 ITR 158 . THUS, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 35. IN THE RESULT, APPEALS OF THE ASSESSEE OF SHRI. S. KANNAN IN ITA NOS. 1712 & 1713/CHNY/2018, FOR ASSESSMENT YEAR S 2008-09 AND 2009-2010 ARE ALLOWED. APPEALS OF THE ASSESSEE SHR I. N. SEETHAPATHY, IN ITA NOS. 1714 & 1715/CHNY/2018 FOR ASSESSMENT YE ARS 2008-09 AND 2010-2011 ARE ALLOWED, WHEREAS ITA NOS. 1716 & 1717/CHNY/2018 FOR ASSESSMENT YEARS 2011-12 AND 201 4-15 ARE PARTLY ALLOWED. ORDER PRONOUNCED ON 27TH DAY OF MAY, 2019, AT CHE NNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER . ) / CHENNAI / / DATED: 27 TH MAY, 2019. KV $ &*01 21!* / COPY TO: 1 . '# / APPELLANT 3. ( 3* () / CIT(A) 5. 16 &*7 / DR 2. &' '# / RESPONDENT 4. ( 3* / CIT 6. 8 9) / GF