The ACIT, Circle-7, Ahmedabad V. M/s. Parshwanath Farm, Ahmedabad

ITA 2556/AHD/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9814 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 09-12-2016
• Assessment Year: 2000-2001
• Appeal Filed On: 30-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M G PATEL
• Assessee Lawyers: JAYANT JAVERI
• Keywords: Deduction for capital gain; Capital asset; Cost of acquisition; Wrong claim
• Section: 143(3); 6; 139

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD . . , , BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.2556/AHD/2013 ( / ASSESSMENT YEAR : 2000-01 ) ACIT CICLE- 7, AHMEDABAD / VS. M/S. PARSHWANATH FARM, DHORIBHAI PARK, SOLA ROAD, NARANPURA, AHMEDABAD. ./ ./ PAN/GIR NO. : AABFP 9058 J ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI M.G. PATEL, A.R. / RESPONDENT BY : SHRI JAYANT JAVERI, SR. D.R. / DATE OF HEARING 09/12/2016 / DATE OF PRONOUNCEMENT 14/12/2016 / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE DEPARTMENT AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-XI, AHMEDABAD, DATED 12/08/2013 FOR THE ASSESSMENT YEAR (AY) 2000-01 AND FOLLOWING GROUND HAS BEEN TAKEN: THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE PENALTY OF RS.19,79,435/- U/S.271(1)(C) OF THE ACT, WITHOUT APPRECIATING THE FACTS OF THE CASE, IN RESPECT OF THE ADDITIONS OF RS.89,97,430/- MADE BY THE A.O . 2. THE FACTS OF THE CASE ARE - THE ASSESSEE HAS FILED RETURN OF INCOME U/S. 139(1) OF THE I.T. ACT, 1961 ON 31/09/2001 WITH THE I.T.O, WARD - ITA NO.2556/AHD/2013 ACIT VS. M/S.PARSHWANATH FARM ASST.YEAR 2000-01 - 2 - 2(1), GANDHINAGAR DECLARING LOSS OF RS.31,28,922/-UNDER THE HEAD LONG TERM CAPITAL GAIN. THEREAFTER, WHILE DISPOSING RECTIFICATION APPLICATION FOR A.Y.2004-05 IT WAS NOTICED THAT IN THE COMPUTATION OF LONG TERM CAPITAL GAIN THE ASSESSEE HAS CLAIMED RS.38,08,333/- AS DEDUCTION ON ACCOUNT OF INTEREST PAID TO PARTNERS AND DEPOSITORS, IN ADDITION TO DEDUCTION OF INDEXED COST OF ACQUISITION AND INDEXED COST OF IMPROVEMENT UNDER THE HEAD CAPITAL GAIN DEDUCTION OF INTEREST PAID TO PARTNERS AND DEPOSITORS IS NOT AN ALLOWABLE DEDUCTION. AS PER SECTION 48 ONE CAN DEDUCT INDEXED COST OF ACQUISITION AND INDEXED COST OF IMPROVEMENT FROM THE SALE CONSIDERATION TO ARRIVE AT CAPITAL GAIN. 3. IN VIEW OF THE ABOVE FACTS NOTICE U/S.148 DTD.26/03/2007 WAS ISSUED AND DULY SERVED UPON THE ASSESSEE ON 27/03/2007. IN RESPONSE TO THE THIS NOTICE THE ASSESSEE FILED RETURN OF INCOME DECLARING LOSS OF RS.31,28,922/-AS DECLARED IN THE RETURN OF INCOME FILED U/S. 139 OF THE ACT. THEREAFTER, ORDER U/S.143(3) R.W.S. 147 OF THE I.T. ACT, 1961 WAS PASSED ON 31/12/2007 DETERMINING TAXABLE CAPITAL GAIN AT RS.89,97,430/-. PENALTY PROCEEDINGS U/S.271(L)(C) OF THE ACT WAS SIMULTANEOUSLY INITIATED IN THE ASSESSMENT ORDER ITSELF FOR CONCEALMENT OF INCOME AS WELL AS FURNISHING INACCURATE PARTICULARS OF INCOME IN RESPECT OF THE SAID ADDITION. 4. IN THE ASSESSMENT ORDER, THE A.O. HAS OBSERVED AS UNDER: IN THIS CASE, IT IS VERY RELEVANT THAT THE ASSESSEE HAS NOT DONE ANY BUSINESS DURING THE YEAR OTHER THAN AGRICULTURAL ACTIVITIES. THE SALE OF LAND EFFECTED BY THE ASSESSEE IS ALSO OF THE VERY SAME AGRICULTURAL LANDS. ON ONE HAND, THE ITA NO.2556/AHD/2013 ACIT VS. M/S.PARSHWANATH FARM ASST.YEAR 2000-01 - 3 - ASSESSEE IS CLAIMING INTEREST ON CAPITAL AS AN EXPENDITURE (THOUGH NOT AS CONCEIVED U/S. 40(B)(IV) OR 36(L)(III) AND ON THE OTHER HAND, THE ASSESSEE WANTS THE INTEREST TO BE DEDUCTED FROM THE CAPITAL GAINS, WHICH IS NOT ALLOWABLE DEDUCTION U/S. 48 OF THE I. T. ACT. FURTHER, IF THE ASSESSEE IS EARNING ONLY AGRICULTURAL INCOME, ANY LOSS INCURRED IN THAT ACTIVITY IS NOT ALLOWABLE TO BE CARRIED FORWARD. HENCE, THE RESULTANT LOSS IN THE AGRICULTURAL ACTIVITY WILL BE ASSESSED AT NIL. WHILE COMPUTING THE CAPITAL GAINS, IT IS FURTHER NOTICED THAT THE ASSESSEE HAS CLAIMED INDEXED COST OF IMPROVEMENT OF RS.83,42,425/-AS A DEDUCTION. ON AN ANALYSIS, IT IS SEEN THAT THIS HAS BEEN ARRIVED BY INCORPORATING AN AMOUNT OF RS.75,22,000/- AS COST OF IMPROVEMENT'. OUT OF THIS AMOUNT OF RS.75,22,000/-, A SUM OF RS.75,00,000/- HAS BEEN CLAIMED AS 'BANAKHAT CANCELLATION CHARGES' PAID TO THREE HOUSING SOCIETIES AS UNDER :- HARSIDHI CO-OP. HO. SOCIETY RS. 25,00,000/- MAHAVIRKRUPA CO-OP. HO. SOCIETY RS. 35,00,000/- -DO- RS. 15,00,000/- RS. 75,00,000/- SINCE THE EXPENSES WERE NOT AT ALL A PART OF THE SALE DEED, EXPLANATION OF THE ASSESSEE, WAS SOUGHT FOR REGARDING THE VERACITY AND ADMISSIBILITY OF THE CLAIM. IN THIS CONNECTION, SHRI N. A. JAPEE, ID. AR OF THE ASSESSEE, PUT FORTH THE SAME ARGUMENTS AS MADE IN A.Y.2004-05. HOWEVER, IT IS PERTINENT TO NOTE THAT SUCH A WRONG CLAIM OF RS.6,77,029/- IN RESPECT OF BANAKHAT CANCELLATION CHARGES WAS NOTICED IN THE RETURN OF INCOME FOR A. Y. 2004-05 AND THE SAME HAD BEEN DISALLOWED. THE DISALLOWANCE HAD BEEN CONTESTED BY THE ASSESSEE IN APPEAL AND THE HON'BLE CIT(A) HAS VIDE HIS ORDER DT 16-10-2007 CONFIRMED THE DISALLOWANCE. DURING THE YEAR, THE ASSESSEE HAS GONE ONE STEP FURTHER BY TAKING ADVANTAGE OF INDEXATION IN RESPECT OF THE ABOVE IMPUGNED PAYMENT. HENCE, THE CLAIM MADE IS NOT LIMITED TO RS.75,00,000/- BUT AT AN INDEXED FIGURE OF RS.83,18,021/- (RS.83,42,421/- + RS.75,22,000/- X RS.75,00,000/-). SINCE THE ASSESSEE HAS NOT PROVED SUBSTANTIALLY THAT THE PAYMENT, SO CLAIMED TO HAVE BEEN MADE, IS IN RELATIONSHIP WITH THE ACQUISITION / IMPROVEMENT / TRANSFER OF THE CAPITAL ASSET, THE CLAIM IS TREATED AS NON GENUINE AND IS DISALLOWED. AS DISCUSSED IN DETAIL IN PARAGRAPH 3.1 AND 3.2 ABOVE, THE INTEREST CLAIMED TO HAVE BEEN PAID TO PARTNERS IS NOT ALLOWED TO BE DEDUCTED FROM THE SALES CONSIDERATION TO ARRIVE AT THE CAPITAL GAINS.' ITA NO.2556/AHD/2013 ACIT VS. M/S.PARSHWANATH FARM ASST.YEAR 2000-01 - 4 - 5. THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE CIT(A) AND THE HON'BLE CIT(A)-XI, AHMEDABAD VIDE ORDER NO.CIT(A)- XVI/ACIT/CIR.7/606/2007-08 DATED 01/09/2010 DISMISSED THE APPEAL FILED BY THE ASSESSEE. 6. ACCORDINGLY A LETTER WAS ISSUED TO THE ASSESSEE ON 09/03/2012 TO SHOW CAUSE AS TO WHY PENALTY SHOULD NOT BE LEVIED IN THIS CASE. TILL DATE THE ASSESSEE HAS NOT FILED ANY REPLY. HOWEVER IN RESPONSE TO PENALTY NOTICE ISSUED ALONG WITH ASSESSMENT ORDER ON 31/12/2007, THE ASSESSEE HAS FILED A REPLY DATED 08/02/2008 WHICH IS RE-PRODUCED AS UNDER: 'THIS IS WITH REFERENCE TO YOUR NOTICE ISSUED U/S.271(L)(C) OF THE INCOME-TAX ACT, 1961, REQUIRING US TO SHOW CAUSE AS TO WHY PENALTY U/S.271(L)(C) SHOULD NOT BE LEVIED IN RESPECT OF ADDITION MADE TO OUR RETURNED INCOME, TO WHICH WE STRONGLY OBJECT TO LEVY OF SUCH PENALTY ON THE FOLLOWING GROUNDS:- > UNDER THE FACTS AND CIRCUMSTANCES OF OUR CASE IT IS ABSOLUTELY CLEAR THAT WE HAVE NEITHER CONCEALED ANY INCOME NOR FURNISHED ANY INACCURATE PARTICULARS OF OUR INCOME AND THEREFORE WE ARE NOT LIABLE TO ANY PENALTY AS PROPOSED TO BE IMPOSED BY YOUR NOTICE. >WHILE FINALIZING THE ASSESSMENT, YOU HAVE MADE ADDITIONS OF RS.38,08,333/- IN RESPECT OF INTEREST PAYMENT AND NOT GRANTING COST OF TRANSFER OF RS. 75,00, 000/- FOR CALCULATING OF LONG TERM CAPITAL GAIN WHICH ARE HIGHLY AS UNJUSTIFIABLE AND DISPUTABLE. >IN VIEW OF THE ABOVE WE HAVE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEAL)-XI, AHMEDABAD ON 29/01/2008 AND THE SANE US PENDING. AS CAN BE SEEN FROM THE GROUNDS OF APPEAL THE ADDITIONS MADE ARE VERY LIKELY TO BE DELETED TOTALLY. >IT IS FURTHER SUBMITTED THAT PENALTY PROCEEDINGS BEING OF QUASI CRIMINAL NATURE, PENALTY CANNOT BE IMPOSED UNLESS MENSREA HAS BEEN ESTABLISHED BEYOND ANY DOUBTS AS HAS BEEN HELD IN VARIOUS JUDICIAL PRONOUNCEMENTS. > IT IS SUBMITTED THAT, AS WE HAVE FILED AN APPEAL AGAINST THE ASSESSMENT ON BASIS OF WHICH PENALTY PROCEEDINGS HAVE BEEN INITIATED, THE PENALTY ITA NO.2556/AHD/2013 ACIT VS. M/S.PARSHWANATH FARM ASST.YEAR 2000-01 - 5 - PROCEEDINGS INITIATED MAY KINDLY BE KEPT IN ABEYANCE TILL THE DECISION IN APPEAL AS PER THE PROVISIONS OF SECTION 275 OF THE INCOME-TAX ACT, 1961. AFTER CONSIDERING THE ABOVE, WE HAVE TO REQUEST YOU THAT PENALTY PROCEEDINGS INITIATED U/S.271(L)(C) OF INCOME-TAX ACT, 1961 TILL THE MATTER IS DECIDED BY THE APPELLATE AUTHORITY.' 7. THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE IN VIEW OF THE FACT THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS THEREBY CONCEALED THE INCOME CHARGEABLE TO TAX OF RS.89,97,430/- UNDER THE GUISE OF CLAIMING DEDUCTION ON ACCOUNT OF INTEREST PAID TO THE PARTNERS AND DEPOSITORS, IN ADDITION TO DEDUCTION OF INDEXED COST OF ACQUISITION AND INDEXED COST OF IMPROVEMENT. IN THE CIRCUMSTANCES DISCUSSED ABOVE, THE FACTS OF THE CASE AND EVIDENCE ON RECORD CLEARLY REVEAL THAT THE ASSESSEE HAS MADE FRAUDULENT AND WRONGFUL CLAIM. BY WRONGFUL ACT TO EVADE TAX BY UNDERSTATING CORRECT INCOME TO THE ABOVE EXTENT, THE ASSESSEE HAS COMMITTED THE DEFAULT OF CONCEALMENT OF INCOME BY FURNISHING INACCURATE PARTICULARS OF INCOME. THUS, PENAL PROVISIONS OF SECTION 271(L)(C) READ WITH EXPLANATION THERE UNDER ARE CLEARLY ATTRACTED. FURTHER, ASSESSMENT ORDER ALONG WITH PENALTY NOTICE U/S 274 R W S 271(L)(C) WAS ISSUED AND DULY SERVED DURING THE QUANTUM PROCEEDINGS CLEARLY EVIDENT THIS FACTS. HENCE, IT IS ESTABLISHED THAT TO THE EXTENT OF THE ADDITIONS, FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSEE CLEARLY PROVES. HENCE, PENALTY PROCEEDINGS U/S 271(1) (C) OF THE ACT ARE CLEARLY ATTRACTS IN THIS CASE. BY NOT COMPLYING TO THE SHOW CAUSE NOTICE ISSUED AFTER RECEIPT OF THE ORDER OF THE CIT(A) CONFIRMING THE ABOVE SAID ADDITION WITH REGARD TO LEVY OF ITA NO.2556/AHD/2013 ACIT VS. M/S.PARSHWANATH FARM ASST.YEAR 2000-01 - 6 - PENALTY U/S 271(1) (C), ASSESSEE HAS OPTED NOT TO DEFEND HIS CLAIM OR IT IS PRESUMED TO HAVE ACCEPTED THE CONTENTION OF THE A O. 8. I AM FULLY SATISFIED THAT THE ASSESSEE HAS COMMITTED THE DEFAULT OF FURNISHING OF INACCURATE PARTICULARS THEREBY CONCEALMENT OF INCOME TO THE TUNE OF RS.89,97,430/-, THEREFORE, I HOLD THAT THIS IS A FIT CASE FOR LEVY OF PENALTY U/S 271(L)(C) OF THE ACT. THE AMOUNT OF TAX SOUGHT TO BE EVADED AS LAID DOWN IN THE PROVISIONS BELOW THE SECTION 271(L)(C) OF THE ACT READ WITH EXPLANATION THERE UNDER WOULD WORKS OUT TO RS.19,79,435/- AS UNDER: WORKING OF PENALTY U/S.271 [A ] ASSESSED INCOME AS PER ORDER U/S. 143(3) R.W.S. 147 OF THE IT. ACT, 1961 DTD. 3 1/ 12/2007 RS.89,97,430/- [B] ASSESSED TAX ON RS.89,97,430/- RS.19,79,435/- [C] CONCEALED INCOME RS.89,97,430/- [D] ASSESSED INCOME - CONCEALED INCOME [RS.89,97,430/- - RS.89,97,430/-) RS. NIL/- [E] TAX ON D RS. NIL/- [F] (B-E) [RS.19,79,435/- - RS.NIL/-] RS.19,79,435/- [G] MINIMUM 100% LEVIABLE RS.19,79,435/- [H] MAXIMUM 300% LEVIABLE RS.59,38,305/- IN VIEW OF THE ABOVE FACTS AND WORKING OF PENALTY U/S. 271(1)(C), I HEREBY LEVY A MINIMUM PENALTY OF RS.19,79,435/-. ISSUE DEMAND NOTICE AND CHALLAN OF RS.19,79,435/- ITA NO.2556/AHD/2013 ACIT VS. M/S.PARSHWANATH FARM ASST.YEAR 2000-01 - 7 - 9. THERE AFTER ASSESSEE/APPELLANT PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD.CIT(A) AND LD.CIT(A) DECIDED MATTER IN FAVOUR OF ASSESSEE WITH FOLLOWING OBSERVATION THAT I HAVE CAREFULLY CONSIDERED THE PENALTY ORDER AND THE SUBMISSION FILED BY THE APPELLANT DURING THE COURSE OF APPELLANT PROCEEDINGS. THE CLAIM MADE BY THE APPELLANT TOWARDS INTEREST AND COST OF TRANSFER/IMPROVEMENT DID NOT FIND FAVOUR WITH THE A.O. HOWEVER, IT IS NOT THE CASE OF THE A.O. THAT THE PARTICULARS WERE NOT PROVIDED BY THE APPELLANT. IT WAS MERELY A CASE OF MAKING THE CLAIM WHICH WAS FOUND INADMISSIBLE BY THE A.O. ON SIMILAR ISSUE THE PENALTY HAS BEEN CANCELLED FOR A.Y. 2001-02 IN THE CASE OF THE APPELLANT AND THE DEPARTMENTS APPEAL HAS BEEN DISMISSED BY THE HONBLE ITAT. THE HONBLE ITAT HAVE GIVEN THE FINDING AS UNDER:- WE HAVE PERUSED THE ORDER OF AUTHORITIES BELOW AND GONE THROUGH THE PAPER BOOK AND CO-ORDINATE C BENCH AS WELL AS D BENCH AS MENTIONED ABOVE, WHATEVER RELEVANT FACTS OF THE CASE HAVE BEEN FURNISHED BY THE APPELLANT IN RETURN. THE APPELLANT WAS REDUCED INTEREST PAID TO THE PARTNER AND ALSO THE COST OF IMPROVEMENT WHILE CALCULATING THE CAPITAL GAIN. THE CLAIM OF THE APPELLANT WAS ALSO DULY SUPPORTED BY THE CERTAIN JUDICIAL PRONOUNCEMENTS WHICH FAVOUR THE VIEW TAKEN BY THE APPELLANT REGARDING INCLUSION OF INTEREST PAID TO PARTNERS AS COST ON ACQUISITION FOR CALCULATING THE CAPITAL GAIN. THE A.O. HAD NOT BROUGHT ON RECORD ANY EVIDENCE THAT THE ASSESSEES CLAIM WAS FALSE AND NOT BONAFIDE. LD.CIT(A) RELIED UPON IN CASE OF RELIANCE PETRO PRODUCTS PVT.LTD. REPORTED IN 322 ITR 158 IS CLEARLY APPLICABLE ON THE APPELLANT. THEREFORE, WE HAVE CONSIDERED VIEW THAT THE LD.CIT(A) WAS RIGHT IN DELETING THE PENALTY AGAINST U/S 271(1)(C) IMPOSED BY THE A.O. ACCORDINGLY, WE DISMISS THE REVENUES APPEAL. 10. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGNED ORDER AND ALSO GONE THROUGH THE ORDER IN ITA NO.1636/AHD/2012 AND IN THIS CASE. ITA NO.2556/AHD/2013 ACIT VS. M/S.PARSHWANATH FARM ASST.YEAR 2000-01 - 8 - FOLLOWING OUR TRIBUNAL ORDER WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A). 11. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 14/12/2016 SD/- SD/- . . ( ) ( ) ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 14/12/2016 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-XI, AHMEDABAD. 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY