ITO, CHENNAI V. Ranjana Fernandes, CHENNAI

ITA 2141/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90715 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 27-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 14-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K S B ALAKRISHNAN
• Assessee Lawyers: DR B NISCHAL
• Keywords: Search and seizure; Salary income; Source of fund; Ignorance of law
• Section: 234B; 148; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . . , ' # , $ & BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NOS. ASSESSMENT YEAR APPELLANT RESPONDENT 2140/MDS/2014 2008-09 INCOME TAX OFFICER, COMPANY WARD-II(I) 515, NEW BLOCK, CHENNAI-34. MR. LEANDER FERNANDES ARNOLD FLAT 4G, BLOCK L-OPERA VGN NAGAR PHASE-I, NOLUMBUR,MOGAPPAIR WEST, CHENNAI-600 037. PAN:AAAPF 5324J 2141/MDS/2014 2008-09 INCOME TAX OFFICER, COMPANY WARD-II(I) 515, NEW BLOCK, CHENNAI-34. SMT. RANJANA FERNANDES, FLAT 4G, BLOCK L-OPERA VGN NAGAR PHASE-I, NOLUMBUR,MOGAPPAIR WEST, CHENNAI-600 037. PAN:AAMPF2921P / APPELLANT BY : MR. K.S.BALAKRISHNAN, ADVOCATE /RESPONDENT BY : DR.B.NISCHAL, JCIT /DATE OF HEARING : 27 TH MAY, 2015 /DATE OF PRONOUNCEMENT : 29 TH JULY, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: BOTH THESE APPEALS ARE FILED BY THE REVENUE AGAINS T THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)- II, CHENNAI DATED 18.03.2014 IN DELETING PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 2. IN BOTH THESE CASES, THE ASSESSING OFFICER LEVIE D PENALTY UNDER SECTION 271(1)(C) OF THE ACT FOR THE REASON THAT ASSESSEE HAS NOT DISCLOSED SHORT TERM CAPITAL GAINS ON SALE 2 ITA NO.2140 & 2141/MDS/2014 OF FLAT SITUATED IN R.A.PURAM BY THE ASSESSEE. THE ASSESSEE ALONG WITH HIS WIFE PURCHASED FLAT IN R.A.PURAM ON 13.4.2006 AND THIS FLAT WAS SOLD ON 15.10.2007 FOR A CONSIDER ATION OF ` 1,41,00,000/-. FROM OUT OF THE SALE CONSIDERATION, THE ASSESSEE AND HIS WIFE PURCHASED TWO FLATS BEARING N OS. 4G & 4H AT VGN NAGAR PHASE I, BLOCK II, L-OPERA, NOLUMBU R, WEST MOGAPPAIR , CHENNAI FOR A CONSIDERATION OF ` 89,58,560/- IN APRIL, 2008. WHEN THERE WAS A SEARCH IN THE CASE OF VGN ENTERPRISES AND GROUP CASES, THE DEPARTMENT NOTICED THAT ASSESSEE AND HIS WIFE PURCHASED TWO FLATS FROM VGN ENTERPRISES. WHEN QUESTIONED ABOUT THE SOURCE BY TH E INVESTIGATION WING, THE ASSESSEES HAVE EXPLAINED TH AT THEY HAVE SOLD THE FLAT IN R.A.PURAM AND PURCHASED THES E FLATS AND THEREFORE SINCE THEY HAVE INVESTED THE SALE CON SIDERATION IN PURCHASING OF THE FLATS THEY WERE ADVISED THAT N O CAPITAL GAIN ARISES AND THUS THEY HAVE NOT DECLARED CAPITA L GAINS ON SUCH SALE OF FLAT IN R.A.PURAM. THE DEPARTMENT ISSU ED NOTICE UNDER SECTION 148 AND THE ASSESSEES FILED RETURNS DECLARING CAPITAL GAINS WHEN IT WAS BROUGHT TO THE NOTICE OF THE ASSESSEES BY THE REVENUE THAT TRANSACTION ATTRACTS CAPITAL GAINS AND ASSESSEES PAID TAXES AND CO-OPERATED WITH THE 3 ITA NO.2140 & 2141/MDS/2014 DEPARTMENT. THE ASSESSING OFFICER LEVIED PENALTY UN DER SECTION 271(1)(C) OF THE ACT ON THE GROUND THAT ASS ESSEES HAVE NOT REPORTED CAPITAL GAINS ON SALE OF FLAT AND THEY HAVE NOT OFFERED INTEREST ON FDS AND INCOME ON SALE OF F URNITURE OF FLAT. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEAL S) DELETED THE PENALTIES LEVIED ACCEPTING THE EXPLANAT ION FURNISHED BY THE ASSESSEE AS BONAFIDE IN VIEW OF TH E FACT THAT ASSESSEES LEFT INDIA IN THE YEAR 1987 AND CAME BACK ONLY IN 2006 AND THEY WERE NOT CONVERSANT WITH THE INDIAN TAX LAWS AND THE ASSESSEE HAD STARTED BUSINESS IN THE YEAR 2 006 AND MADE LOSSES, IN VIEW OF THE WRONG ADVICES GIVEN TO THE ASSESSEES THAT NO CAPITAL GAIN ARISES IN CASE GAIN S ARE FULLY INVESTED IN REPURCHASE OF FLATS. THE COMMISSIONER O F INCOME TAX (APPEALS) DELETED THE PENALTY AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE US. 3. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF ASSESSING OFFICER IN LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND SUBMITS THAT THERE IS CON CEALMENT OF INCOME AS THE ASSESSEE CAME FORWARD AND ACCEPTED TH E LIABILITY ONLY WHEN NOTICE UNDER SECTION 148 WAS IS SUED. 4 ITA NO.2140 & 2141/MDS/2014 4. COUNSEL FOR THE ASSESSEE VEHEMENTLY SUPPORTS THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS) AND SUBMITS THAT ASSESSEES EXPLANATION WAS BONAFIDE AN D THEY WERE NOT AWARE OF TAX LAWS IN INDIA AND THEY ARE NR IS FOR MORE THAN 20 YEARS AND THE ASSESSEE ACCEPTED THE LI ABILITY ONCE THE REVENUE EXPLAINED THE POSITION OF LAW. THE REFORE, HE SUBMITS THAT IN VIEW OF THE BONAFIDE EXPLANATION GIVEN BY THE ASSESSEE ON A TRANSACTION WHICH WAS HAPPENED ON WRONG ADVICE HE PAID TAXES AND CO-OPERATED WITH THE DEPAR TMENT AND THEREFORE, SUBMITS THAT PENALTY IS NOT ATTRACTE D. 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. THE ISSUE IN BOTH THE APPEALS HAS BEEN ELABORATELY CONSIDERED BY THE COMMISSIONER OF INCOME TAX (APPEA LS) IN HIS ORDER WITH REFERENCE TO THE SUBMISSIONS OF THE ASSESSEE AND THE CONTENTIONS OF THE ASSESSING OFFICER IN LEV YING PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE COM MISSIONER OF INCOME TAX (APPEALS) DELETED THE PENALTY HOLDING THAT THERE IS A BONAFIDE EXPLANATION IN NOT REPORTING TH E CAPITAL GAINS OBSERVING AS UNDER:- 5 ITA NO.2140 & 2141/MDS/2014 4.DECISION : THE ASSESSEE IS A DIRECTOR IN M/S. KEENWIN APPARELS P LTD. THERE WAS A SEARCH AND SEIZURE ACTION U/S.132 OF THE ACT IN THE CASE OF VGN ENTERPRISES GROUP OF CASES, BY THE INVESTIGATION WING. DURING THE COURSE OF THE SAID SEARCH PROCEEDINGS OF VGN ENTERPRISES GROUP, IT WAS NOTICED THAT THE ASSESSEE (MR FERNANDES) AND HIS WIFE SMT RANJANA FERNANDES PURCHASED FLATS BEARING NOS.4G & 4H AT VGN NAGAR PHASE-I, BLOCK II, L- OPERA, NOLUMBUR, WEST MOGAPPAIR, CHENNAI FOR A PURCHASE CONSIDERATION OF RS.89,58,560/- IN APRIL 2008. WHEN ASKED FOR THE DETAILS, THE ASSESSEE AND HIS WIFE, BEFORE THE INVESTIGATION WING, HAVE EXPLAINED THAT THEY HAVE SOLD THEIR JOINTLY OWNED FLAT AT B-203, 2ND FLOOR, BLOCK B, GRAY SHOTT, DOOR NO.4, BISHOP GARDEN EXTENSION, R.A.PURAM, CHENNAI FOR RS.1,41,00,000/- AND PART OF THE SALE PROCEEDS WERE UTILIZED FOR THE ABOVE PURCHASE OF FLATS AT VGN NAGAR PHASE-I, BLOCK II, L-OPERA, NOLUMBUR. THE FLAT AT B-203, 2ND FLOOR, BLOCK B, GRAY SHOTT WAS PURCHASED ON 13.04.2006 AND SOLD ON 15.10.2007, THE HENCE SALE WAS LIABLE FOR SHORT TERM CAPITAL GAINS. THE WING ACCORDINGLY PREPARED A REPORT AND FORWARDED TO THE PRESENT ASSESSING OFFICER, UNDER WHOSE JURISDICTION SHRI FERNANDES AND HIS WIFE ARE ASSESSED TO TAX. THE ASSESSING OFFICER, ON RECEIPT OF THE SAID REPORT, REOPENED THE ASSESSMENTS OF SHRI FERNANDES AND HIS WIFE U/ S.147 OF THE ACT. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT U/S.143(3) R.W.S. 147 OF THE ACT ASSESSED THE INCOME AT ` 38,60,555/- BY MAKING THE FOLLOWING ADDITIONS: I) SHORT TERM CAPITAL GAINS OF : ` 30,89,403 II) PROFIT ON SALE OF FURNITURE OF ` 49,500 III) INTEREST FROM BANKS OF ` 1,00,812 SHORT TERM CAPITAL GAINS OF ` 32,39,715 THE ASSESSING OFFICER ALSO TREATED THE ABOVE ADDITIONS OF RS.32,39,715/-, AS CONCEALMENT I FURNISHING OF INACCURATE PARTICULARS OF INCOME AND LEVIED A MINIMUM PENALTY OF RS.L1,15,112/- U/S. 271(1)(C), BEING THE 100% OF THE TAX SOUGHT TO EVADED. THE RELEVANT PORTION OF THE PENALTY ORDER IS AS UNDER: THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE AY 2008.-09 ON 8.5.2009 6 ITA NO.2140 & 2141/MDS/2014 RETURNING A TOTAL INCOME OF RS.6,20,840/- UNDER THE HEAD 'INCOME FROM SALARY'. THE ASSESSEE IS A DIRECTOR OF M/ S. KEENWIN APPARELS PVT LTD. CHENNAI (PAN AACCK6449E) WHICH IS BEING ASSESSED IN THIS CIRCLE. A SEARCH & SEIZURE ACTION U/ S 132 OF THE IT ACT WAS CONDUCTED BY THE INVESTIGATION WING, CHENNAI IN THE CASE OF 'VGN ENTERPRISES' GROUP OF CASES. DURING THE COURSE OF ENQUIRY BY THE INVESTIGATION WING IN THE CASE OF VGN ENTERPRISES GROUP OF CASES, IT WAS REVEALED THAT THE ASSESSEE'S WIFE SMT. RANJANA FERNANDES HAD PURCHASED TWO FLATS BEARING FLAT 4G AND 4H AT VGN NAGAR PHASE I, BLOCK II, L-OPERA, NOLUMBUR, MOQAPPAIR WEST, CHENNAI 600 037 FOR A PURCHASE CONSIDERATION OF RS. 89,58,560/- DURING APRIL, 2008. WHEN ASKED ABOUT THE SOURCE OF FUNDS FOR PURCHASE OF THESE FLATS, THE ASSESSEE CAME OUT WITH AN EXPLANATION BEFORE THE INVESTIGATION WING THAT THE ABOVE FLATS WERE PURCHASED OUT OF SALE PROCEEDS OF A FLAT AT B-203, 2 FLOOR, BLOCK B, GRAY SHOTT, DOOR NO.4, BISHOP GARDEN EXTENSION, RA PURAM, CHENNAI - 600 028. THE SAID FLAT WAS OWNED IN THE JOINT NAME OF THE ASSESSEE AND HIS WIFE SMT. RANJANA FERNANDES. THE FLAT WAS SOLD FOR A SALE CONSIDERATION OF RS.L,41,00,000/-. THE SAID FLAT WAS PURCHASED ON 13,4.2006 AND SOLD ON 15.10.2007 THEREBY INVOLVING SHORT TERM CAPITAL GAIN. IN THIS REGARD, A REPORT WAS RECEIVED FROM DDIT (INV), UNIT IV(2}, CHENNAI VIDE HIS LETTER DATED 30.11.2009. THE CASE WAS REOPENED U/ S 147 AND A NOTICE U/ S 148 WAS ISSUED ON 1, 7,2010. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD ADMITTED THAT THOUGH HE WAS LIABLE FOR SHORT TERM CAPITAL GAIN, THE SAME WAS NOT ADMITTED DUE TO INCORRECT ADVICE GIVEN TO HIM BY SOMEONE. APART FROM SHORT TERM CAPITAL GAIN, THE ASSESSEE HAD ALSO INCOME FROM SALE OF FURNITURE AND INTEREST INCOME FROM BANK DEPOSITS WHICH WERE ALSO NOT ADMITTED. THE INCOME CONCEALED IS RS.30,89,403/- ON ACCOUNT OF SHORT TERM CAPITAL GAINS, RS.49,500/- ON ACCOUNT OF INCOME FROM SALE OF FURNITURE AND RS. 1,00,812/ - ON ACCOUNT OF INTEREST INCOME FROM BANK DEPOSITS (AGGREGATING TO RS.32,39, 715/-, HAD THIS ISSUE NOT BEEN BROUGHT TO THE NOTICE OF THE DEPARTMENT BY THE INVESTIGATION WING, THE WHOLE TRANSACTION WOULD HAVE GONE UNNOTICED. 7 ITA NO.2140 & 2141/MDS/2014 SINCE THE ASSESSEE HAD CONCEALED THE PARTICULARS OF INCOME TO THE EXTENT OF RS. 32,39,715/-, A NOTICE U/ S.271(1}(C} WAS ISSUED ASKING THE ASSESSEE AS TO WHY PENALTY SHOULD NOT BE LEVIED ON THE CONCEALED INCOME. THE ASSESSEE VIDE HIS LETTER DATED 7.4,2012 HAS SUBMITTED THAT HE WAS UNDER THE IMPRESSION THAT THERE WERE NO CAPITAL GAINS AS HE HAD REINVESTED THE ENTIRE GAIN IN THE PURCHASE OF PROPERTY AT YGN NAGAR AND THE NON DECLARATION WAS COMPLETELY UNINTENTIONAL. HE HAS ALSO PLEADED THAT HE WAS INCORRECTLY ADVISED BY SOMEONE THAT THERE IS NO CAPITAL GAIN IN THIS TRANSACTION SINCE HE HAD INVESTED IN A NEW PROPERTY. IGNORANCE OF LAW CANNOT BE ACCEPTED AS THE GENUINE REASON FOR NON-PAYMENT OF CAPITAL GAINS TAX. THE MINIMUM PENALTY OF 100% LEVIABLE ON THE CONCEALED INCOME OF RS.32,39, 715/ - WORKS OUT TO ` LL,15,112/- AND THE MAXIMUM PENALTY OF 300% LEVIABLE WORKS OUT TO RS.33,45,336/- I THEREFORE HOLD THAT IT IS ONE OF THE FIT CASE FOR LEVY OF PENALTY U/ S. 271(1 }(C) OF THE IT ACT, 1961 AND I LEVY A PENALTY OF ` LL, 15,112/- (RUPEES ELEVEN LAKHS FIFTEEN THOUSAND ONE HUNDRED AND TWELVE ONLY) BEING 100% OF THE TAX FOR CONCEALING THE PARTICULARS OF HIS INCOME BEFORE THE UNDERSIGNED, THE ASSESSEE SUBMITTED THAT HE WAS ADVISED THAT ONCE THE GAINS OF THE SALE OF RESIDENTIAL HOUSES ARE INVESTED IN NEW RESIDENTIAL HOUSES, THE SAME WILL NOT BE LIABLE FOR INCOME TAX. SINCE HE AND HIS WIFE HAVE FULLY INVESTED THE GAINS OF THE SALE OF OLD FLAT IN PURCHASE OF THE NEW FLATS, THERE WAS NO TAX LIABILITIES IN THEIR CASE AND ACCORDINGL Y NOT SHOWED ANY CAPITAL GAINS IN THEIR RETURNS OF INCOME . HOWEVER, WHEN IT WAS BROUGHT TO THEIR NOTICE BY THE INVESTIGATION WING AND THE ASSESSING OFFICER, THEY HAVE READILY ACCEPTED THE LIABILITY OF THE SALE PROCEEDS TO SHORT TERM CAPITAL GAINS TAX AND ALSO PAID THE TAXE S. THE ASSESSEE ALSO EXPLAINED THAT AFTER COMPLETING GRADUATION, HE LEFT FOR GULF COUNTRIES IN 1987 AND REMAINED (STAYED) THERE AS NON-RESIDENT INDIAN FOR MORE THAN 20 YEARS. ONLY IN JULY 2006, HE HAD RETUR NED TO INDIA AND STARTED HIS OWN BUSINESS IN APPARELS. THE ASSESSEE FURTHER EXPLAINED THAT SINCE HE SPENT HIS ENTIRE ACTIVE LIFE IN THE GULF COUNTRIES, WHERE THE INCOME TAX PROCEDURES ARE NOT IN EXISTENCE, HE COUL D NOT PROPERLY UNDERSTAND THE INDIAN INCOME TAX LAWS. 8 ITA NO.2140 & 2141/MDS/2014 UNDER THESE CONFUSIONS AND THE WRONG ADVICE BY OTHERS, THE ASSESSEE CLAIMED THAT HE WAS UNDER THE IMPRESSION THAT THERE WERE NO TAXABLE CAPITAL GAINS IN HIS CASE AS HE FULLY INVESTED THE GAINS IN THE PURC HASE OF NEW FLATS. THE ASSESSEE ALSO EXPLAINED THAT ONCE IT WAS POINTED OUT TO HIM, HE READILY ACCEPTED THE MISTAKE AND OFFERED THE AMOUNT TO TAX AND ALSO PAID THE DUE TAXES AND COOPERATED WITH THE DEPARTMENT AND HENCE A LENIENT VIEW MAY BE TAKEN IN HIS CASE AND PENALTY IMPOSED MAY BE DROPPED. THE RELEVANT PORTION OF THE ASSESSEE'S SUBMISSIONS DATE D 22.0L.2014 ARE AS UNDER: WITH REFERENCE TO OUR MEETING IN YOUR OFFICE ON 17/01/14 GIVEN BELOW ARE THE POINTS DISCUSSED FOR YOUR REFERENCE. A) IN OCT 2005 I HAD BOOKED THE SAID PROPERTY FLAT NUMBER B203, 2 ND FL OOR, GRAY SHOTT, RA PURAM, HOWEVER SINCE I WAS AN NRI AT THAT TIME I COULD NOT COME IN AND DO THE REGISTRATION OF THE PROPERTY AT THAT TIME, FINALLY THE REGISTRATION WAS DONE VIDE DOCUMENT # 1199/2006 DATED 13.4.2006. THE TOTAL COST OF THE APPARTMENT INCLUDING UNDIVIDED SHARE OF LAND, COST OF CONSTRUCTION, SERVICE CHARGES STAMP DUTY AND REGISTRATION WAS FOR RUPEES 79,21,195/- THE APARTMENT WAS FINALLY SOLD VIDE DOCUMENT # 2 502/2007 ON 15.10.2007 FOR (I) 141,00,000 --- FOR THE APARTMENT (II) 15,00,000 --- FOR ALL FURNITURE AND FIXTURES TOTAL 156 LACS I WAS ABLE TO PRODUCE BILLS FOR FURNITURE/ KITCHEN/FITTINGS ETC TO THE TUNE OF 14.01 LACS ONLY, HENCE THAT WAS THE FIGURE TAKEN IN THE ASSESSMENT, HOWEVER IN ACTUALITY I HAD SPENT MUCH MORE, MOREOVER ALL THE FURNITURE AND FITTING WERE ALL MADE TO ORDER BASED ON THE SIZE OF THE APARTMENT ROOMS AND HENCE I WAS NOT ABLE TO REMOVE THE SAME, AS A RESULT EVEN THOUGH THE VALUE AND THE AMOUNT SPENT WAS MUCH MORE, I STILL HAD TO SELL THE SAME AT A VERY LESS DISCOUNTED PRICE. B) AS EXPLAINED, I HAVE BEEN AND NRI FROM 1987 TO JULY 2006, HENCE THIS 9 ITA NO.2140 & 2141/MDS/2014 IS THE FIRST FINANCIAL YEAR I HAVE DECLARED INCOME TAX, UNFORTUNATELY THE BUSINESS WHICH WAS PUT UP IN IRUNGATTUKOTTAI IN 2007 SUFFERED MAJOR LOSSES AND HENCE I WENT INTO MAJOR FINANCIAL STRESS. THE SAID APARTMENT WAS UNDER BANK COLLATERAL FOR THE VARIOUS BUSINESS LOANS TAKEN BY THE COMPANY, SUBSEQUENTLY THE BANK ALLOWED ME TO SELL THE APARTMENT ON CONDITION THAT ALL THE PROCEEDS OF THE SALE THAT IS 156 LACS COME DIRECTLY TO THE BANK AS A FIXED EPOSIT AND THIS FIXED DEPOSIT WOULD STAY AS LIEN AGAINST THE VARIOUS LOANS. THE BANK FACILITATED THE ENTIRE SALE DIRECTLY WITH THE PURCHASER AS THE PURCHASER MR NIRANJARI ALSO HAD AN LOB BANK ACCOUNT, HENCE ALL PARTIAL CHEQUES WENT DIRECTLY FROM THE PURCHASERS ACCOUNT FROM LOB TN NAGAR BRANCH TO LOB C&IC BRANCH. C) AT THIS STAGE I WAS ADVISED BY WELL WISHERS AND FRIENDS THAT THE GAIN AMOUNT OF APPROX 62 LACS MUST BE INVESTED IN PURCHASE OF NEW PROPERTY SO AS TO AVOID ANY CAPITAL GAIN TAX, ON GETTING THIS ADVISE I WENT TO THE BANK IN NOV2007 AND PLEADED WITH THEM TO RELEASE THE FUNDS TO PURCHASE PROPERTY BEFORE MARCH 2008, THIS WAS THEN REFFERED TO INDIAN OVERSEAS BANK REGIONAL OFFICE FOR PERMISSION FOR PURCHASE WHICH CAME IN BY JAN 2008, I SUBSEQUENTLY IDENTIFIED AND PURCHASED A PROPERTY IN VGN LA PARISIENNE FOR RUPEES 89,58,5601- IN MARCH 2008, THE BANK RELEASED THE ENTIRE FUNDS DIRECTLY TO VGN ENTERPRISES AND STILL HAS THE ORIGINAL PAPERS AS COLLATERAL FOR THE VARIOUS COMPANY LOANS. D) IN JULY 2010 1 GOT A NOTICE FROM THE INCOME TAX DEPARTMENT WITH REGARD TO CAPITAL GAIN TAX WHICH CAME AS A SHOCK TO ME AS I HAD MORE THAN INVESTED THE GAIN AMOUNT OF APPROX 62 LACS, SIMPLY BECAUSE I HAD ALREADY INVESTED IN MARCH 08 AN AMOUNT OF APPROX 90 LACS, ONLY AFTER MEETING THE RELEVANT ITO DID I UNDERSTAND THE GRAVITY OF THE SITUATION, I DID PUT 10 ITA NO.2140 & 2141/MDS/2014 FORTH MY SIDE OF THE EXPLANATIONS AND ATTENDED EACH AND EVERY HEARING PERSONALLY OVER 2 YEARS, ACCORDINGLY I DID AGREE TO PAY THE GAIN AMOUNT AND THE INTEREST OVER A PERIOD OF TIME, IN THE YEAR 2011/12 THE ECONOMY WAS VERY BAD AND IT WAS DIFFICULT, HOWEVER I PERSONALLY SOLD MY APARTMENT WHICH I HAD IN NOLUMBUR IN ORDER TO PAY THE CAPITAL GAIN PORTION FOR BOTH MYSELF AND MY WIFE. INSTEAD I DID FALL SHORT OF COMPLETELY PAYING THE -CAPITAL GAIN PORTION AS THIS PARTICULAR FLAT IN NOLUMBUR WAS UNDER BANK LOAN AND HENCE THE BANK LOAN HAD TO BE COMPLETED SETTLED AND ALL THE REMAINING PORTION WAS USED TO SETTLE THE TAX. E) SINCE THE SAID APARTMENT WAS ON JOINT NAMES OF MRS RANJANA FERNANDES (MY WIFE) AND MYSELF, THE TOTAL TAX DUE WAS DIVIDED BETWEEN MRS RANJANA AND MYSELF. AS PER ASSESSMENT TOTAL PAYABLE BY ME ARE (I) CAPITAL TAX AMOUNT - 11,15,1151 - (COMPLETELY PAID DETAILS BELOW) (II) INTEREST U/ S 234A --- 1,11,512 (COMPLETELY PAID DETAILS BELOW) (III) INTEREST U/ S 234B - 4,90,650 ( PART PAYMENT DONE DETAILS BELOW) TOTAL PAYABLE --- 1 7, 1 7,2771 - FROM THE ABOVE THE FOLLOWING AMOUNTS HAVE BEEN PAID. (IV) RUPEES 715115/- ON 31.03.2012 VIDE CHALLAN IDENTIFICATION #02029763103201217096 (V) RUPEES 400000/- ON 17.12.2012 VIDE CHALLAN IDENTIFICATION #02029761712201240960 (VI) RUPEES 111512/- ON 17.10.2013 VIDE CHALLAN IDENTIFICATION #69103331710201310434 (VII) RUPEES 40650/- ON 17.102013 VIDE CHALLAN IDENTIFICATION #69103331710201310435 TOTAL PAID TILL DATE RUPEES 12, 67,2771 - TOTAL BALANCE PAYABLE - RUPEES 450,0001- IN MY LETTER TO THE CONCERNED ITO DATED 1 ST AUG 2013 I HAD MENTIONED THAT I HAVE COMPLETELY SETTLED THE GAIN PORTION + COMPLETE INTEREST UNDER U/ S 234A WOULD PAY THE BALANCE INTEREST PORTION WITHIN A SPAN OF 1 YEAR AS I WAS NOT ABLE TO COME UP WITH THE SUM OF RUPEES 6021021 - AT ONE TIME. J) I SINCERELY REQUEST YOU TO PLEASE DROP 11 ITA NO.2140 & 2141/MDS/2014 THE PENALTY PROCEEDINGS BECAUSE AS ADVISED 1 WAS AN NRI WHO WAS NOT WELL VERSED WITH THE PREVALENT LAWS REGARDING SHORT TERM CAPITAL GAIN, I WAS ADVISED INCORRECTLY THAT IF THE CAPITAL GAIN PORTION IS INVESTED BACK IN PROPERTY THEN CAPITAL GAIN TAX WOULD NOT BE APPLICABLE, THAT IS EXACTLY WHAT I DID. I HUMBLY REQUEST YOUR HELP IN DROPPING THE PENALTY CHARGES. THE CONTENTIONS OF THE ASSESSEE ARE EXAMINED CAREFULLY. I HAVE ALSO PERUSED THE CONTENTS OF PENALTY ORDER. AS COULD BE SEEN FROM THE DETAILS FURNISHED BY THE ASSESSEE, SHRI L.A. FERNANDES, IMMEDIATELY AFTER COMPLETING HIS GRADUATION, LEFT FOR GULF COUNTRIES IN 1987 AND REMAINED THERE, AS NON-RESIDENT INDIAN, FOR ABOUT 20 YEARS. BEFORE LEAVING THE COUNTRY, IN 1987, THE ASSESSEE WAS ONLY A STUDENT AND WAS NOT ASSESSED TO TAX AS HE WAS NOT HAVING ANY TAXABLE INCOMES. IT WAS ONLY IN JULY 2006 THE ASSESSEE RETURNED TO INDIA AND STARTED HIS OWN BUSINESS IN APPARELS. THE ONLY SOURCE OF INCOME FOR THE ASSESSEE DURING THE YEAR 2007-08 IS THE SALARY INCOME FROM THE COMPANY WHERE HE IS THE DIRECTOR (OTHER DIRECTOR IS HIS WIFE). APPARENTLY, A.Y.2008-09 IS THE FIRST YEAR (OR THE SECOND YEAR) OF FILING THE RETURN OF INCOME IN INDIA. SINCE THE ASSESSEE'S BUSINESS IN THE NAME OF M/S. KEENWIN APPARELS P LTD IS ON A SMALL SCALE, HE COULD NOT HAVE AVAILED THE SERVICES OF QUALIFIED AUDITORS FOR HIS INDIVIDUAL CASES. FURTHER SINCE THE ASSESSEE WAS IN GULF COUNTRIES FOR ABOUT 20 YEARS (I.E. FROM THE ENTIRE PERIOD AFTER THE COMPLETION OF GRADUATION), WHERE THE INCOME TAX LAWS ARE NOT KNOWN, IT MAY NOT POSSIBLE FOR THE ASSESSEE TO COMPREHEND THE COMPLICATED AND THE MINUTE DETAILS OF THE INDIAN INCOME TAX ACT, ON HIS ARRIVAL IN INDIA. FURTHER, THERE WAS AN APPARENT TRUTH IN THE ASSESSEE'S EXPLANATIONS. THE OLD FLAT IN GRASSY SHOTT, RA PURAM WAS PURCHASED FOR RS.79,21,195/- (IN 2006) AND THE SAME WAS SOLD IN OCTOBER 2007 FOR A TOTAL CONSIDERATION OF RS.L,41,00,000/-. THE TOTAL GAINS ARE ` 61,78,805/-. THE ASSESSEE UTILIZED RS.89,58,560/- IN PURCHASING THE NEW FLATS IN VGA NAGAR IN 2008. THUS, THE ASSESSEE'S CLAIMS, THAT SINCE THE ENTIRE 12 ITA NO.2140 & 2141/MDS/2014 GAIN ON THE SALE OF THE OLD FLAT WAS REINVESTED IN THE PURCHASE OF NEW FLATS, THERE WILL NOT BE ANY TAX LIABILITIES AND HENCE NOT SHOWED ANY CAPITAL GAINS IN HIS RETURN OF A.Y.2008-09, HAVE SOME REASONS AND MERITS.: RATHER, WHEN IT WAS BROUGHT TO THE NOTICE OF THE ASSESSEE THAT THE SALE OF HIS JOINTLY HELD FLAT DO RESULT IN TAXABLE SHORT TERM CAPITAL GAINS, THE ASSESSEE, BEFORE THE ASSESSING OFFICER, PROMPTLY AGREED FOR THE SAME AND PAID THE TAXES. THEREFORE, THE ABOVE EXPLANATIONS, COUPLED WITH THE FACT THAT THE ASSESSEE SPENT HIS ENTIRE ACTIVE LIFE IN GULF COUNTRIES ONLY, WHERE THE INCOME TAX LAWS ARE NOT IN EXISTENCE, SEEMS TO BE GENUINE REASONS IN THE ASSESSEE'S CASE FOR NOT REFLECTING THE CAPITAL GAINS IN HIS RETURN OF INCOME FLIED. IT IS TRUE THAT IGNORANCE OF LAW IS NOT AN EXCUSE TO ESCAPE FROM THE CLUTCHES OF THE LAW. BUT THIS PRINCIPLE (RULE) IS WITH RESPECT TO THE COMMON LAWS AND GENERAL PROVISIONS. THERE ARE CERTAIN PROVISIONS AND LAWS WHICH ARE VERY DIFFICULT TO UNDERSTAND BY THE COMMON PEOPLE. WHEN IT COMES TO SUCH COMPLICATED AND EVER CHANGING PROVISIONS, IT MAY NOT BE APPROPRIATE TO APPLY THE ABOVE GENERAL PRINCIPLE (RULE) THAT 'IGNORANCE OF LAW IS NOT AN EXCUSE'. IT MUST BE REMEMBERED THAT THERE IS NO PRESUMPTION THAT EVERY PERSON KNOWS THE LAW. IT IS OFTEN SAID THAT EVERYONE IS PRESUMED TO KNOW THE LAW, BUT THAT IS NOT THE CORRECT STATEMENT THERE IS NO SUCH MAXIM KNOWN TO THE LAW, AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF M/S. MOTILAL PADAMPAT SUGAR MILLS CO. LTD V. STATE OF UTTAR PRADESH (118 ITR 326)(SC).IN THIS CASE, THE APEX COURT HAD OBSERVED- '... ... THE FACT THAT THERE IS NOT AND NEVER HAS BEEN A PRESUMPTION THAT EVERYONE KNOWS THE LAW . THERE IS THE RULE THAT IGNORANCE OF THE LAW DOES NOT EXCUSE, A MAXIM OF VERY DIFFERENT SCOPE AND APPLICATION.' [EMPHASIS SUPPLIED] THEREFORE, IN VIEW OF THE ABOVE DISCUSSIONS AND THE DECISION OF THE HON'BLE SUPREME COURT IN THE 13 ITA NO.2140 & 2141/MDS/2014 CASE OF MIS. MOTILAL PADAMPAT SUGAR MILLS CO. LTD V. STATE OF UTTAR PRADESH (118 ITR 326)(SC), I AM OF THE OPINION THAT THE ABOVE FAILURE OF THE ASSESSEE IN NOT RECOGNIZING (COMPUTING) AND OFFERING THE SHORT TERM CAPITAL GAINS ON THE SALE OF THE JOINTLY HELD FLAT (INCLUDING THE FURNITURE ETC), WILL NOT AMOUNT TO CONCEALMENT OF INCOME I FURNISHING OF INACCURATE PARTICULARS OF INCOME FOR THE PURPOSE OF LEVYING PENALTY U/S.271(1)(C) OF THE ACT. THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN IMPOSING THE PRESENT PENALTY' OF ` 11,15,112/- U/S.271(1)(C) OF THE ACT. THE PENALTY IS DELETED. 6. ON GOING THROUGH THE ORDER OF THE COMMISSIONER O F INCOME TAX (APPEALS), WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED IN DELETING THE PENALTY. THE COMMISSIO NER OF INCOME TAX (APPEALS) ACCEPTED THE EXPLANATION OF TH E ASSESSEE AS BONA FIDE THAT ASSESSEE COULD NOT BE R EPORTED CAPITAL GAINS DUE TO WRONG ADVICE THAT GAINS ON SAL E OF FLAT IF REINVESTED IN FLATS, NO CAPITAL GAINS ARISE. THE AS SESSEE IS A NRI FOR MORE THAN 20 YEARS AND HE IS NOT FULLY CONV ERSANT WITH INDIAN TAX LAWS. THE COMMISSIONER OF INCOME TA X (APPEALS) FOR THE ELABORATE REASONS AND FINDINGS IN HIS ORDER ACCEPTED THE BONAFIDE EXPLANATION OF THE ASSESSEE A ND DELETED THE PENALTY. THEREFORE, WE SUSTAIN THE ORDE R OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN BOTH THESE APPEALS, AS THE FACTS IN THE CASE OF ASSESSEES WIF E ARE 14 ITA NO.2140 & 2141/MDS/2014 IDENTICAL TO THE FACTS OF THE ASSESSEE . THEREFORE , WE AFFIRM THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPE ALS) IN BOTH THE CASES AND DELETE THE PENALTIES LEVIED UNDE R SECTION 271(1)(C) OF THE ACT. 7. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JULY, 2015. SD/- SD/- ( . ) ( ! #$ ) (D.KARUNAKARA RAO) (CHALLA NAGENDR A PRASAD ) & / ACCOUNTANT MEMBER #' & / JUDICIAL MEMBER # /CHENNAI, ) /DATED 29 TH JULY, 2015 SOMU '-. /. /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 0 () /CIT(A) 4. 0 /CIT 5. . ''4 /DR 6. 6 /GF .