Shri DHARMENDRA SHRIVASTAVA, Indore V. THE ITO Wd- 4(1), Indore

ITA 275/IND/2014

• Counselvise Citation: 27522714 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 15-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: N D PATWA S
• Keywords: Depreciation; Question of law
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, J.M. AND SHRI B.C.MEENA, A.M. I.T.A.NO. 275/IND/2014 A.Y. : 2008-09 SHRI DHARMENDRA SHRIVASTAVA, ITO, WARD 4(1), INDORE. VS INDORE.WARD 4(1), INDORE. APPELLANT RESPONDENT P.A.N. NO ADUS9066R APPELLANT BY SHRI ASHISH GOYAL AND SHRI N. D. PATWA, ADVOCATES. RESPONDENT BY SHRI R. A. VERMA, SR. DR DATE OF HEARING : 10 .0 9 .2015 DATE OF PRONOUNCEMENT : 06 . 10 .2015 -: 2: - 2 O R D E R PER GARASIA, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)-II, INDORE, DATED 31.01.2014 FOR THE ASSE SSMENT YEAR 2008-09. 2. THE SHORT FACTS OF THE CASE ARE AS UNDER. 3. THE ASSESSEE IS A SALARIED EMPLOYEE AND WORKING AS ASSISTANT ENGINEER IN MPKVVCL, INDORE. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE AO HAS NOTICED THAT THE ASSESSEE HAS SOLD A HOUSE PROPERTY FOR CONSIDERATION OF RS. 37,00,000/- AND NO CAPITAL GAINS IN SALE CONSIDERATION WAS DISC LOSED IN THE RETURN OF INCOME. ON FURTHER ENQUIRY, WHEN CALCULAT ION OF THE CAPITAL GAINS WAS DONE, IT WAS REVEALED THAT A SHOR T TERM CAPITAL GAINS OF RS. 6,03,610/- WAS NOT DISCLOSED B Y THE ASSESSEE AS INCOME. THE ASSESSEE HAS ACCEPTED THE M ISTAKE AND PAID THE TAXES. THEREFORE, THE PENALTY U/S 271( 1)(C) WAS INITIATED AND IMPOSED BY THE ASSESSING OFFICER. 4. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) DISMISSED THE APPEAL. -: 3: - 3 5. THE ASSESSEE HAS FILED THE WRITTEN SUBMISSIONS AND THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A GOVERNMEN T SERVANT. THE ASSESSEE HAS SOLD HOUSE PROPERTY WORTH RS. 37,00,000/- AND EARNED SHORT TERM CAPITAL GAINS. TH E ASSESSEE WAS HOLDING THE PROPERTY FOR 26 MONTHS. THE ASSESSE E HAS REINVESTED THIS CAPITAL AGAIN IN ANOTHER HOUSE AND HE WAS UNDER THE BONA FIDE BELIEF THAT THE ASSESSEES CAPI TAL GAIN IS COVERED. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTE D THAT THE DEPARTMENT HAS ACCEPTED THE REINVESTMENT. THE ASSES SEE HAS DISCLOSED THE COMPUTATION OF INCOME. THEREFORE, AS PER THE DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PROD UCTS (P) LIMITED, (2010) 230 CTR ( S.C.) 320, THE ASSESSEE H AS NOT CONCEALED ANYTHING AND PENALTY MAY BE DELETED. 6. ON THE OTHER HAND, THE LD. SENIOR D.R. RELIED UPON THE ORDER OF THE REVENUE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT, IN THIS CASE, THE ASSESSEE IS ASSISTA NT ENGINEER IN MPKVVCL. THE ASSESSEE HAS SOLD HOUSE AND HAS PURCHA SED NEW HOUSE BY SELLING THE OLD HOUSE. THE ASSESSEE HA S -: 4: - 4 PURCHASED THE HOUSE AND HE HAS SOLD THE HOUSE WITHI N 26 MONTHS ONLY. THEREFORE, THE AO WAS OF THE VIEW THAT IT IS A SHORT TERM CAPITAL GAL AND IF IT IS A SHORT TERM CA PITAL GAIN AND IF HE HAS INVESTED IN PURCHASE OF NEW HOUSE, THEN T HE ASSESSEE IS LIABLE FOR SHORT TERM CAPITAL GAIN. DURING THE A SSESSMENT PROCEEDINGS, THE ASSESSEE HAS ACCEPTED THIS FACT AN D PAID THE CAPITAL GAIN TAX OF RS. 6,01,610/-. WE FIND THAT WH EN THE LAW WAS BROUGHT TO HIS NOTICE, THE ASSESSEE HAS PAID TH E TAX OF CAPITAL GAIN AND THERE WAS NO SUPPRESSION OF INCOME FOR EVADING TAX AND NO PENALTY CAN BE LEVIED. WE FIND S UPPORT FORM THE DECISION OF HON'BLE KARNATAKA HIGH COURT I N THE CASE OF CIT VS. CHANDRASEKARAN, (2015) 56 TAXMANN.COM 210(KARNATAKA) HAS CONSIDERED THE DECISION OF MAK D ATA AND HAS DELETED THE PENALTY BY OBSERVING AS UNDER :- THE ASSESSEE CATEGORICALLY STATED HIS CLAIM WAS BASED ON THE LAW WHICH WAS IN FORCE IN THE PREVIOUS YEAR. HE WAS NOT AWARE OF CHANGE IN LAW. HE RELIED ON HIS ADVOCATE WHO WAS NOT UP TO DATE WITH THE LAW. IN THOSE CIRCUMSTANCES, THE SET-OFF WHICH WAS LEGAL -: 5: - 5 AND VALID FOR THE PREVIOUS YEAR WAS PUT FORTH FOR THE RELEVANT YEAR. ONCE IT WAS BROUGHT TO HIS NOTICE THAT THERE IS CHANGE IN LAW AND LIABLE TO PAY THE TAX, HE HAS PAID TRUE THEREFORE, IT IS NOT THE CASE OF DELIBERATELY SUPPRESSING INCOME FOR THE PURPOSE OF EVADING TAX. [PARA 6] INSOFAR AS DEPRECIATION IS CONCERNED, HE HAS LET OUT HIS PREMISES, HE IS THE OWNER OF THE PROPERTY, HE HONESTLY BELIEVED THAT HE IS ENTITLED TO DEPRECIATION. THEREFORE, HE CLAIMS THE SAID INCOME AS 'INCOME FROM BUSINESS, WHEREAS THE REVENUE HAS TREATED IT AS 'INCOME FROM HOUSE PROPERTY'. IN THAT CONTEXT, THE CLAIM FOR DEPRECIATION WAS ALSO A BONA FIDE ERROR. WHEN POINTED OUT, HE HAS PAID THE TAX. UNDER THESE CIRCUMSTANCES, APPELLATE AUTHORITY ON APPRECIATION OF ENTIRE FACTS HAVE CONCURRENTLY HELD THAT THERE IS NO DELIBERATE SUPPRESSION OF INCOME NOR IT IS A CASE OF FURNISHING OF INACCURATE PARTICULARS. IT IS A BONA FIDE MISTAKE AND THE MOMENT THE MISTAKE WAS POINTED OUT, THE ASSESSEE HAS PAID THE TAX. IT IS WELL SETTLED THAT IMPOSITION OF PENALTY IS NOT -: 6: - 6 AUTOMATIC AND THEREFORE THEY HAVE RIGHTLY SET ASIDE THE ORDER IMPOSING THE PENALTY. INFACT, TILE ORDER IMPOSING PENALTY IS CONTRARY TO LAW, DECLARED BY THIS COURT IN THE CASE OF CIT V. MANJUNATHA COTTON AND GINNING FACTORY [20131 359 ITR 565/218 TAXMAN 423/35 TAXMANN.COM 250 (KAR.) , IN AS MUCH AS, IT IS CLEAR FROM THE ORDER THAT THERE IS NO DIRECTION TO INITIATE PENALTY PROCEEDINGS. IN THE AFORESAID JUDGMENT, IT WAS HELD THAT IT IS IMPERATIVE THAT THE ASSESSMENT ORDER CONTAINS A DIRECTION. THE USE OF PHRASES LIKE (A) PENALTY PROCEEDINGS ARE BEING INITIATED SEPARATELY, AND (B) PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) ARE INITIATED SEPARATELY, DO NOT COMPLY WITH THE MEANING OF THE WORD 'DIRECTION' AS CONTEMPLATED EVEN IN THE AMENDED PROVISIONS OF LAW. THE DIRECTION SHOULD BE CLEAR 'AND WITHOUT ANY AMBIGUITY. A DIRECTION BY A STATUTORY AUTHORITY IS IN THE NATURE OF AN ORDER REQUIRING POSITIVE COMPLIANCE. WHEN IT IS LEFT TO THE OPTION AND DISCRETION OF THE INCOME TAX OFFICER WHETHER OR NOT TAKE ACTION, IT CANNOT BE DESCRIBED AS A DIRECTION. IT IS SETTLED LAW THAT IN THE ABSENCE -: 7: - 7 OF THE EXISTENCE OF THESE CONDITIONS IN THE ASSESSMENT ORDER PENALTY PROCEEDINGS COULD NOT BE PROCEEDED WITH. THE PROCEEDINGS WHICH ARE INITIATED CONTRARY TO THE SAID LEGAL POSITION ARE LIABLE TO BE SET ASIDE. THEREFORE, THE APPELLATE AUTHORITY WAS JUSTIFIED IN SETTING ASIDE THE ORDER IMPOSING PENALTY: ACCORDINGLY, THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. [PARA 7] XX XX XX XX XX XX 5. IN SUPPORT OF THE SAID CONTENTION, RELIANCE WAS PLACED ON THE JUDGMENT OF THE APEX COURT IN THE CASE OF MAK DATA (P) LIMITED VS. CIT, (2013) 358 ITR 593/38TAXMANN.COM 448, WHEREIN THE APEX COURT HAS HELD AS UNDER :- '7. THE AO, IN OUR VIEW, SHALL NOT BE CARRIED AWAY BY THE PLEA OF THE ASSESSEE LIKE 'VOLUNTARY DISCLOSURE', 'BUY PEACE', 'AVOID LITIGATION', 'AMICABLE SETTLEMENT', ETC. TO EXPLAIN AWAY ITS CONDUCT. THE QUESTION IS WHETHER THE -: 8: - 8 ASSESSEE HAS OFFERED ANY EXPLANATION FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. EXPLANATION TO SECTION 271(1) RAISES A PRESUMPTION OF CONCEALMENT, WHEN A DIFFERENCE IS NOTICED BY THE AO, BETWEEN REPORTED AND ASSESSED INCOME. THE BURDEN IS THEN ON THE ASSESSEE TO SHOW OTHERWISE, BY COGENT AND RELIABLE EVIDENCE. WHEN THE INITIAL ONUS PLACED BY THE EXPLANATION, HAS BEEN DISCHARGED BY HIM, THE ONUS SHILLS ON THE REVENUE TO SHOW THAT THE AMOUNT IN QUESTION CONSTITUTED THE INCOME AND NOT OTHERWISE. 8. ASSESSEE HAS ONLY STATED THAT HE HAD SURRENDERED THE ADDITIONAL SUM OF RS.40,74,000/- WITH A VIEW TO AVOID 7 LITIGATION, BUT PEACE AND TO CHANNELIZE THE ENERGY AND RESOURCES TOWARDS PRODUCTIVE WORK AND TO MAKE AMICABLE SETTLEMENT WITH THE INCOME TAX DEPARTMENT. STATUE DOES NOT RECOGNIZE THOSE -: 9: - 9 TYPES OF DEFENCES UNDER THE EXPLANATION 1 TO SECTION 271(1 )(C) OF THE ACT. IT IS TRITE LAW THAT THE VOLUNTARY DISCLOSURE DOES NOT RELEASE THE APPELLANT - ASSESSEE FROM THE MISCHIEF OF PENAL PROCEEDINGS. THE LAW 'DOES NOT PROVIDE THAT WHEN AN ASSESSEE MAKES A VOLUNTARY DISCLOSURE OF HIS CONCEALED INCOME, HE HAD TO BE ABSOLVED FROM PENALTY. 9. WE ARE OF THE VIEW THAT THE SURRENDER OF INCOME IN THIS CASE IS NOT VOLUNTARY IN THE SENSE THAT THE OFFER OF SURRENDER WAS MADE IN VIEW OF DETECTION MADE BY THE AO IN THE SEARCH CONDUCTED IN THE SISTER CONCERN OF THE ASSESSEE. IN THAT SITUATION, IT CANNOT BE SAID THAT THE SURRENDER OF INCOME WAS VOLUNTARY. AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS NOTICED THAT CERTAIN DOCUMENT COMPRISING OF SHARE APPLICATION' FORM, BANK STATEMENT, MEMORANDUM OF ASSOCIATION OF COMPANIES, -: 10: - 10 AFFIDAVITS, COPIES OF INCOME TAX RETURNS AND ASSESSMENT ORDERS AND BLANK SHARE TRANSFER 8 DEEDS DULY SIGNED, HAVE BEEN IMPOUNDED IN THE COURSE OF SURVEY PROCEEDINGS UNDER SECTION 133A CONDUCTED ON 16-12-2003, IN THE CASE OF A SISTER CONCERN OF THE ASSESSEE. THE SURVEY WAS CONDUCTED MORE THAN LO MONTHS BEFORE THE ASSESSEE TILED ITS RETURN OF INCOME. HAD IT BEEN THE INTENTION OF THE ASSESSEE TO MAKE FULL AND TRUE DISCLOSURE OF ITS INCOME, IT WOULD HAVE FILED THE RETURN DECLARING AN INCOME INCLUSIVE OF THE AMOUNT WHICH WAS SURRENDERED LATER DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. CONSEQUENTLY, IT IS CLEAR THAT THAT THE ASSESSEE HAD NO INTENTION TO DECLARE ITS TRUE INCOME. IT IS THE STATUTORY DUTY OF THE ASSESSEE TO RECORD ALL IT S TRANSACTIONS IN THE BOOKS OF ACCOUNT, TO EXPLAIN THE SOURCE OF PAYMENTS MADE BY IT AND TO DECLARE ITS TRUE INCOME IN THE RETURN OF INCOME FILED BY IT S FROM YEAR TO YEAR. THE AO, IN OUR VIEW, HAS -: 11: - 11 RECORDED A CATEGORICAL FINDING THAT HE WAS SATISFIED THAT THE ASSESSEE HAD CONCEALED TRUE PARTICULARS OF INCOME AND IS LIABLE FOR PENALTY PROCEEDINGS UNDER SECTION 271 READ WITH SECTION 274 OF THE INCOME TAX ACT, 1961'. 6. THERE CANNOT BE ANY ARGUMENT WITH REGARD TO THE AFORESAID LEGAL PREPOSITION LAID DOWN BY THE APEX COURT. THIS IS NOT A CASE OF VOLUNTARY DISCLOSURE O R PAYMENT OF TAX TO BUY PEACE OR TO AVOID LITIGATION OR BY AMICABLE SETTLEMENT. THE ASSESSEE CATEGORICALLY STATED HIS CLAIM WAS BASED ON THE LAW WHICH WAS IN FORCE IN THE PREVIOUS YEAR. HE WAS NOT AWARE OF CHANGE IN LAW. HE RELIED ON HIS ADVOCATE WHO WAS NOT UP TO DATE WITH THE LAW. IN THOSE CIRCUMSTANCES , THE SET-OFF WHICH WAS LEGAL AND VALID FOR THE PREVIOUS YEAR WAS PUTFORTH FOR THE RELEVANT YEAR. ONCE IT WAS BROUGHT TO HIS NOTICE THAT THERE IS CHANGE IN LAW AND LIABLE TO PAY THE LAX, HE HAS PAID -: 12: - 12 TAX. THEREFORE, IT IS NOT THE CASE OF DELIBERATELY SUPPRESSING INCOME FOR THE PURPOSE OF EVADING TAX. 7. INSOFAR AS DEPRECIATION IS CONCERNED, HE HAS LET OUT HIS PREMISES, HE IS THE OWNER OF THE PROPERTY, HE HONESTLY BELIEVED THAT HE IS ENTITLED TO DEPRECIATI ON. THEREFORE, HE CLAIMS THE SAID INCOME AS 'INCOME FRO M BUSINESS, WHEREAS THE REVENUE HAS TREATED IT L1S 'INCOME FROM HOUSE PROPERTY'. IN THAT CONTEXT, THE CLAIM [OR DEPRECIATION WAS ALSO A BONA FIDE ERROR. WHEN POINTED OUT, HE HAS PAID THE TAX. UNDER THESE CIRCUMSTANCES, APPELLATE AUTHORITY ON APPRECIATION OF ENTIRE FACTS HAVE CONCURRENTLY HELD THAT THERE I S NO DELIBERATE SUPPRESSION OF INCOME NOR IT IS A CASE O F FURNISHING OF INACCURATE PARTICULARS. IT IS A BONA FIDE MISTAKE AND THE MOMENT THE MISTAKE WAS POINTED OUT, THE ASSESSEE HAS PAID THE TAX. IT IS WELL SETT LED THAT IMPOSITION OF PENALTY IS NOT AUTOMATIC AND THEREFORE THEY HAVE RIGHTLY SET ASIDE THE ORDER IMPOSING THE PENALTY. IN FACT, THE ORDER IMPOSING -: 13: - 13 PENALTY IS CONTRARY TO LAW, DECLARED BY THIS COURT IN THE CASE OF CIT V. MANJUNATHA COTTON & GINNING FACTORY (2013] 359 ITR 565/218 TAXMAN 423/35 TAXMANN.COM 250 (KAR.) , IN AS MUCH AS, IT IS CLEAR FROM THE ORDER THAT THERE IS NO DIRECTION TO INITIA TE PENALTY PROCEEDINGS. IN THE AFORESAID JUDGMENT, IT WAS HELD THAT IT IS IMPERATIVE THAT THE ASSESSMENT ORDER CONTAINS A DIRECTION. THE USE OF PHRASES LIKE (A) PENALTY PROCEEDINGS ARE BEING INITIATED SEPARATELY, AND (B) PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) ARE INITIATED SEPARATELY. DO NOT COMPLY WITH THE MEANING OF THE WORD 'DIRECTION' AS CONTEMPLATED EVEN IN THE AMENDED PROVISIONS OF LAW. THE DIRECTION SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. A DIRECTION BY A STATUTORY AUTHORITY IS IN THE NATURE OF AN ORDER REQUIRING POSITIVE COMPLIANC E. WHEN IT IS LEFT TO THE OPTION AND DISCRETION OF THE INCOME-TAX OFFICER WHETHER OR NOT TAKE ACTION, IT CANNOT BE DESCRIBED AS A DIRECTION. IT IS SETTLED LAW THAT IN THE ABSENCE OF THE EXISTENCE OF THESE -: 14: - 14 CONDITIONS IN THE ASSESSMENT ORDER PENALTY PROCEEDINGS COULD NOT BE PROCEEDED WITH. THE PROCEEDINGS WHICH ARE INITIATED CONTRARY TO THE SAI D LEGAL POSITION ARE LIABLE TO BE SET ASIDE. THEREFOR E, THE APPELLATE AUTHORITY WAS JUSTIFIED IN SELLING AS IDE THE ORDER IMPOSING PENALTY. ACCORDINGLY, THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR O F THE ASSESSEE AND AGAINST THE REVENUE. WE DO NOT FIND ANY MERIT IN THIS APPEAL. ACCORDINGLY, THE APPEAL IS DISMISSED. 8. WE FIND THAT IN THIS CASE THE ASSESSEE HAS SOLD THE HOUSE FOR CONSIDERATION OF RS. 37 LAKHS AND NO CAPI TAL GAIN WAS DISCLOSED IN THE RETURN. THE ASSESSEE HAS ALREA DY PURCHASED A NEW HOUSE AND THAT FACTS WERE DISCLOSED TO THE DEPARTMENT AND DURING THE ASSESSMENT PROCEEDINGS, T HE ASSESSEE HAD AGREED FOR ADDITION. THEREFORE, THE FA CTS OF THIS CASE ARE SIMILAR TO THE FACTS OF THE CASE OF CIT VS . CHANDRASEKARAN OF HON'BLE HIGH COURT KARNATAKA (SUP RA). -: 15: - 15 FACTS OF THE HON'BLE KARNATAKA HIGH COURT. THEREFOR E, WE, FOLLOWING THE SAME, ALLOW THE APPEAL OF THE ASSESSE E. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 6 TH OCTOBER, 2015. SD/- (B. C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 6 TH OCTOBER, 2015. CPU* 30