ITO, Chandigarh V. Sh. Balwinder Singh Bhunder, Chandigarh

ITA 27/CHANDI/2015

• Counselvise Citation: 2721514 RSA 2015
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 07-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Capital asset; Opportunity of being heard
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L. KARWA, HONBLE VICE PRESIDENT AND MRS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO.27/CHD/2015 ASSESSMENT YEARS:2007-08 THE ITO VS. SH. BALWINDER SINGH BHUNDER WARD 1(4) H.NO. 254 CHANDIGARH SECTOR 11-A CHANDIGARH PAN NO. AAQPB1401J (APPELLANT) (RESPONDENT) APPELLANT BY : SH. MANJIT SINGH RESPONDENT BY : SH. TEJ MOHAN SINGH DATE OF HEARING : 21/10/2015 DATE OF PRONOUNCEMENT : 08/12/2015 ORDER PER ANNAPURNA MEHROTRA A.M THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF LD. CIT(A), CHANDIGARH DT. 21/10/2014, CANCELING THE PENALTY OF RS. 35,87,962/- LEVIED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961. 2. BRIEF FACTS RELATING TO THE CASE ARE THAT THE AS SESSEE WAS A MEMBER OF A HOUSING SOCIETY OF MLAS NAMED AS PUNJAB CO-OPERATI VE HOUSE BUILDING SOCIETY LTD. MOHALI WHICH WAS THE OWNER OF 21.2 ACRES OF LA ND IN VILLAGE KANSAL, DISTRICT MOHALI. THE SAID SOCIETY ENTERED INTO A TRIPARTITE JOINT DEVELOPMENT AGREEMENT ON 25/02/2007 WITH M/S HASH BUILDER (PVT.) LTD. CHA NDIGARH AND M/S TATA HOUSING DEVELOPMENT COMPANY LTD. MUMBAI BY VIRTUE O F WHICH THE SOCIETY WOULD TRANSFER ITS LAND FOR DEVELOPMENT IN LIEU OF MONETARY CONSIDERATION AND 2 ALSO CONSIDERATION IN KIND TO MEMBERS OF THE SOCIET Y. THE TOTAL CONSIDERATION WAS SETTLED AT RS. 82,50,000/- PLUS ALLOTMENT OF ONE FL AT OF 2250 SQ. FEET TO THE ASESSEE OUT OF WHICH ASSESSEE HAD RECEIVED RS. 15 LAKHS. TH E ASSESSEE FURNISHED HIS RETURN OF INCOME DECLARING INCOME OF RS. 13,39,720/-. THE ASSESSING OFFICER NOTICED THAT AS PER THE AGREEMENT DATED 25/02/2007, EACH OF THE MEMBER OF THE SOCIETY INCLUDING THE ASSESSEE, OWNING PLOT OF 250 SQ. YARD S WERE TO RECEIVE RS. 40,00,000/- IN CASH AND A FURNISHED FLAT MEASURING 2250 SQ. FEET WITH MARKET VALUE OF RS. 1,01,25,000/-CALCULATED @RS. 4500/- PE R SQUARE FEET. THUS, THE TOTAL CONSIDERATION FOR TRANSFER OF PLOT CAME TO RS. 1,83 ,75,000/-. THE ASSESSING OFFICER COMPUTED THE INCOME BY WAY OF CAPITAL GAINS BY ADOP TING THIS AMOUNT AS SALE CONSIDERATION. FINALLY, THE ASSESSMENT WAS MADE BY TAKING CAPITAL GAINS AT RS. 1,77,74,258/- AND AFTER CONSIDERING THE CAPITAL GAI N DISCLOSED BY THE ASSESSEE ON THE IMPUGNED PROPERTY AMOUNTING TO RS. 11,11,785/- AN ADDITION OF RS. 1,66,62,473/- WAS MADE TO THE INCOME OF THE ASSESSE E. THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT AND AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, THE ASS ESSING OFFICER LEVIED A PENALTY OF RS. 35,87,962/-. 3. ON APPEAL, LD. CIT(A), CANCELLED THE PENALTY BY OBSERVING AS UNDER : 5.1 THUS, THE PENALTY FOR CONCEALMENT CAN BE LEVI ED WHEN THE ASSESSEE HAS CONCEALED PARTICULARS OF HIS INCOME OR HAS FURNISHE D INACCURATE PARTICULARS OR IS NOT ABLE TO GIVE ANY SATISFACTORY EXPLANATION IN RE GARD TO ANY MATTER WHICH IS MATERIAL TO THE COMPUTATION OF INCOME. NOW WE EXAMI NE THE FACTS OF THE PRESENT CASE. IT IS NOTEWORTHY THAT THE VIEW TAKEN BY THE A SSESSING OFFICER THAT THE AMOUNT OF CAPITAL GAINS HAS TO BE COMPUTED BY TAKIN G THE TOTAL CONSIDERATION, ACTUALLY RECEIVED OR RECEIVABLE BY THE APPELLANT AS SALE CONSIDERATION AND THAT THE TOTAL AMOUNT OF CAPITAL GAIN IS ASSESSABLE AS T HE INCOME OF THE YEAR UNDER APPEAL HAS BEEN UPHELD BY THE TRIBUNAL. THEREFORE, THE LIMITED POINT FOR CONSIDERATION IS WHETHER THE APPELLANT HAS A REASON ABLE EXPLANATION FOR HIS OMISSION TO DISCLOSE THE INCOME BY WAY OF CAPITAL G AINS IN THE RETURN. IN THE RETURN FILED ON 12.11.2009 I.E. BEFORE THE ISSUE OF NOTICE U/S 148 (ON 31.12.200), THE APPELLANT HAD DISCLOSED THE AMOUNT OF RS. 15 LACS, RELATING TO THE TRANSFER OF PLOT AND HAD PAID TAX ON CAPITAL GAIN COMPUTED ON THIS S ALE CONSIDERATION. IN THIS RETURN, SOME INCOME UNDER THE HEAD CAPITAL GAINS WA S SHOWN BUT THE SALE CONSIDERATION SHOWN WAS ONLY THE AMOUNT WHICH HE HA D ACTUALLY RECEIVED DURING THE PREVIOUS YEAR. IN FACT, THE APPELLANT HAD DECLA RED THE CONSIDERATION RECEIVED IN THE NEXT FINANCIAL YEAR ALSO IN THE RETURN OF A. Y. 2008-09. IT IS CLEAR FROM THE ARGUMENTS RAISED BY THE APPELLANT THAT THERE WERE C ERTAIN CONTROVERSIES AND DISPUTES IN REGARD TO THE TRANSFER OF PLOT. IN FACT , I UNDERSTAND THAT THE VARIOUS ISSUES HAVE STILL NOT BEEN RESOLVED AND THE CONSTRU CTION OF THE BUILDING, IN WHICH 3 THE APPELLANT WAS TO GET A FLAT AS A PART OF SALE C ONSIDERATION, HAS NOT STARTED TILL DATE. IN THESE PECULIAR CIRCUMSTANCES, THE BELIEF O F THE APPELLANT THAT THE CAPITAL GAINS, ON WHICH HE HAS TO PAY TAX, HAS TO BE COMPUT ED ONLY ON THE BASIS OF THE AMOUNT WHICH HE HAS ACTUALLY RECEIVED, CANNOT BE CO NSIDERED TO BE TOTALLY UNREASONABLE, THOUGH IT IS NOT STRICTLY LEGAL. THE FACT THAT ALL THE MATERIAL FACTS WHICH WERE REQUIRED TO COMPUTE THE CORRECT CAPITAL GAIN WERE FURNISHED BY THE APPELLANT IN HIS RETURN, ESTABLISH HIS BONAFIDE CRE DENTIALS. IN VIEW OF THIS DISCUSSION, IT IS HELD THAT PENALTY FOR CONCEALMENT HAS BEEN WR ONGLY LEVIED IN THE INSTANT CASE AND THE SAME IS ACCORDINGLY CANCELLED. GROUNDS OF APPEAL TAKEN BY THE APPELLANT ARE ALLOWED. 4. AGGRIEVED BY THE SAME THE REVENUE FILED THE PRES ENT APPEAL BEFORE US. 5. BEFORE US LD. AR SUBMITTED THAT THE ASSESSEE HAD DISCLOSED THE AMOUNT RECEIVED FROM M/S TATA HOUSING DEVELOPMENT COMPANY LIMITED. AS FOR THE AMOUNT NOT RECEIVED, LD. AR STATED THAT THE SAME BE ING IN DISPUTE SINCE THE AGREEMENT HAD BEEN CANCELLED, WAS THEREFORE NOT DEC LARED IN THE RETURN OF INCOME. LD. AR STATED THAT THE ADDITION MADE WAS IN RESPECT OF A FLAT WHICH WAS NOT IN EXISTENCE AND THE VALUE OF WHICH H AD BEEN TAKEN @ RS. 4500/- PER SQ. FEET WITHOUT ANY BASIS. LD. AR ARGUED THAT SINCE THE ADDITION ITSELF WAS BASED ON SURMISES AND CONJE CTURES, PENALTY COULD NOT BE LEVIED ON THE SAME. HE FURTHER POINTED OUT THAT THE ASSESSEE HAS DISCLOSED ALL THE PARTICULARS IN THE R ETURN OF INCOME AS WELL AS BEFORE ASSESSING OFFICER AND ON A MERE DIFF ERENCE OF OPINION, PENALTY COULD NOT BE LEVIED. LD. AR ALSO SUBMITTED THAT THE QUANTUM ISSUE HAD BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN ITA NO. 306 OF 2013 (O&M) DT. 22/07/2015 BUNCHED ALONGWITH THE CASE OF C.S. ATWAL VS. CIT, LUDHIANA IN ITA NO. 200 OF 2013. LD. AR FURTHER PLA CED COPIES OF THE IMPUGNED ORDER BEFORE US. THEREFORE LD. AR SUBMITTE D THERE REMAINED NO BASIS AT ALL FOR LEVYING THE PENALTY U/ S 271(1)(C) OF THE ACT AND THE SAME IS LIABLE TO BE CANCELLED. LD. AR FURTHER RELIED ON THE ORDER OF ITAT, CHANDIGARH BENCH IN THE CASE OF ITO VS. SHRI BALWINDER SINGH DHILLON IN ITA NO. 1140/CHD/2014, A ND SH. TEJ PRAKASH SINGH IN ITA NO. 491/CHD/2015 WHEREIN THE TRIBUNAL DECIDED 4 A SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE, AND CONF IRMED THE ORDER OF LD. CIT(A) IN CANCELING THE PENALTY LEVIED U/S 271( 1) (C) OF THE ACT. 6. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIE S AND PERUSED THE DOCUMENTS PLACED BEFORE US. 7. ON PERUSAL OF THE ORDER OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF THE ASSESSEE BUNCHED ALONGWITH THE CASE OF C.S ATWAL(SUPRA), WE FIND THAT THE HIGH COURT HAS DECID ED THE QUANTUM ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE ASSESSEE WAS LIABLE TO PAY TAX ON CAPITAL GAIN EARNED ON ONLY TH AT PORTION OF THE LAND WHICH HAD BEEN DULY TRANSFERRED BY WAY OF REGI STERED SALE DEED AND CONSIDERATION RELATING TO WHICH HAD BEEN R ECEIVED BY THE ASSESSEE. WITH RESPECT TO THE BALANCE LAND, THE HIG H COURT HELD THAT NO TRANSFER OF THE SAME HAD TAKEN PLACE EVEN BY VIR TUE OF THE JDA AND HENCE THE ASSESSEE WAS NOT EXIGIBLE TO CAPITAL GAIN TAX ON THE SAME. THE HONBLE HIGH COURT HAS SUMMARIZED ITS CON CLUSION AT PARA 46 OF THE ORDER AS FOLLOWS : 46. WE SUMMARIZE OUR CONCLUSIONS AS UNDER:- 1. PERUSAL OF THE JDA DATED 25.2.2007 READ WITH SAL E DEEDS DATED 2.3.007 AND 25.4.2007 IN RESPECT OF 3.08 ACRES AND HTTP://WWW.I TATONLINE.ORG ITA NO.200 OF 2013 (O&M) 75 4.62 ACRES RESPECTIVELY WOULD REVEAL THAT THE PARTIES HAD AGREED FOR PRO-RATA TRANSFER OF LAND. 2. NO POSSESSION HAD BEEN GIVEN BY THE TRANSFEROR T O THE TRANSFEREE OF THE ENTIRE LAND IN PART PERFORMANCE OF JDA DATED 25.2.2007 SO AS TO FALL WITHIN THE DOMAIN OF SECTION 53A OF 1882 ACT. 3. THE POSSESSION DELIVERED, IF AT ALL, WAS AS A LI CENCEE FOR THE DEVELOPMENT OF THE PROPERTY AND NOT IN THE CAPACITY OF A TRANSFEREE. 4. FURTHER SECTION 53A OF 1882 ACT, BY INCORPORATIO N, STOOD EMBODIED IN SECTION 2(47)(V) OF THE ACT AND ALL THE ESSENTIAL INGREDIEN TS OF SECTION 53A OF 1882 ACT WERE REQUIRED TO BE FULFILLED. IN THE ABSENCE OF RE GISTRATION OF JDA DATED 25.2.2007 HAVING BEEN EXECUTED AFTER 24.9.2001, THE AGREEMENT DOES NOT FALL UNDER SECTION 53A OF 1882 ACT AND CONSEQUENTLY SECTION 2(47)(V) O F THE ACT DOES NOT APPLY. 5. IT WAS SUBMITTED BY LEARNED COUNSEL FOR THE ASSE SSEE APPELLANT THAT WHATEVER AMOUNT WAS RECEIVED FROM THE DEVELOPER, CAPITAL GAI NS TAX HAS ALREADY BEEN PAID ON THAT AND SALE DEEDS HAVE ALSO BEEN EXECUTED . IN VIEW OF CANCELLATION OF JDA DATED 25.2.2007, NO FURTHER AMOUNT HAS BEEN REC EIVED AND NO ACTION THEREON HAS BEEN TAKEN. IT WAS URGED THAT AS AND WH EN ANY AMOUNT IS RECEIVED, CAPITAL GAINS TAX SHALL BE DISCHARGED THEREON IN AC CORDANCE HTTP://WWW.ITATONLINE.ORG ITA NO.200 OF 2013 (O&M) 76 WITH LAW. IN VIEW OF THE 5 AFORESAID STAND, WHILE DISPOSING OF THE APPEALS, WE OBSERVE THAT THE ASSESSEE APPELLANTS SHALL REMAIN BOUND BY THEIR SAID STAND. 6. THE ISSUE OF EXIGIBILITY TO CAPITAL GAINS TAX HA VING BEEN DECIDED IN FAVOUR OF THE ASSESSEE, THE QUESTION OF EXEMPTION UNDER SECTION 5 4F OF THE ACT WOULD NOT SURVIVE ANY LONGER AND HAS BEEN RENDERED ACADEMIC. 7. THE TRIBUNAL AND THE AUTHORITIES BELOW WERE NOT RIGHT IN HOLDING THE ASSESSEE- APPELLANT TO BE LIABLE TO CAPITAL GAINS TAX IN RESP ECT OF REMAINING LAND MEASURING 13.5 ACRES FOR WHICH NO CONSIDERATION HAD BEEN RECE IVED AND WHICH STOOD CANCELLED AND INCAPABLE OF PERFORMANCE AT PRESENT D UE TO VARIOUS ORDERS PASSED BY THE SUPREME COURT AND THE HIGH COURT IN P ILS. THEREFORE, THE APPEALS ARE ALLOWED. IN VIEW OF THE ABOVE, SINCE THE ADDITION MADE TO TH E INCOME OF THE ASSESSEE DOES NOT SURVIVE, THE QUESTION OF LEVY OF PENALTY U/S 271(1)(C) DOES NOT ARISE AT ALL. FURTHER WE FIND TH AT THE EXPLANATION OF THE ASSESSEE WAS BONAFIDE WHICH IS STRENGTHENED BY THE SUBSEQUENT RULING OF THE HIGH COURT IN THE CASE OF C.S. ATWAL (SUPRA), AND HENCE FOR THIS REASON ALSO, NO PENALTY U/S 271( 1)(C) WAS EXIGIBLE. 8. WE THEREFORE FIND NO INFIRMITY IN THE ORDER OF T HE LD. CIT(A) DELETING THE PENALTY OF RS. 35,87,962/- LEVIED UNDE R SECTION 271(1)(C) OF THE ACT. 9. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 08/12/2015. SD/- SD/- (H.L. KARWA) (ANNAPURNA MEHROTRA) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 08/12/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR