Shri Manilal M. Patel, (HUF), Surat V. The ACIT, Circle-6, Surat

ITA 2884/AHD/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3661 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 25-05-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 14-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Bonafide belief; Date of conversion; Fair market value; Difference of opinion

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD , , ! BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ I.T.A. NO.2884/AHD/2015 ( / ASSESSMENT YEAR : 2011-12) MANILAL M. PATEL (HUF) 190, NANI FALI AT & POST PAL TALUKA CHORYASI SURAT / VS. THE ACIT CIRCLE-6 SURAT & ./ ./ PAN/GIR NO. : AAJHM 1596 E ( &) / APPELLANT ) .. ( *+&) / RESPONDENT ) &), / APPELLANT BY : SHRI MEHUL SHAH, AR *+&) - , / RESPONDENT BY : SHRI S.L. CHANDEL, SR.DR . - / DATE OF HEARING 25/05/2016 /012 - / DATE OF PRONOUNCEMENT 01/06/2016 / O R D E R PER SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-I, SURAT DATED 21/08/2015 FOR THE ASSESSMENT YEAR 2011-12. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- ITA NO.2884/AHD /2015 MANILAL M. PATEL (HUF) VS. ACIT ASST.YEAR 2011-12 - 2 - 2.1. ASSESSEE IS ENGAGED IN THE BUSINESS OF BUILDER S & PROPERTY DEVELOPER. ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2011-12 ON 28/09/2011 DECLARING TOTAL INCOME OF RS.40,98,847/- . THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT) BY THE ASSESSING OFFICER VIDE ORDER DATED 27/03/2014 AND T HE TOTAL INCOME WAS DETERMINED AT RS.58,80,780/- INTER ALIA, BY MAKING ADDITION OF RS.17,81,931/- TO THE CAPITAL GAIN OF RS.48,88,267/ - THAT WAS SHOWN BY ASSESSEE. ON THE AFORESAID ADDITION OF RS.17,81,93 1/- MADE TO THE CAPITAL GAINS AOS VIDE ORDER DATED 22/09/2014 LEVIED PENA LTY OF RS.5,50,616/- U/S.271(1)(C) ON ACCOUNT OF CONCEALMENT OF INCOME. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A), WHO VIDE ORDER DATED 21/08/2015 (IN APPEAL NO.CAS-I/271/2014 -15) CONFIRMED THE PENALTY LEVIED BY THE AO. AGGRIEVED BY THE OR DERS OF THE LD.CIT(A), ASSESSEE IS NOW BEFORE US AND HAS RAISED FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN LE VYING PENALTY OF RS.5,50,616/- U/S.271(1)(C) OF THE I.T.ACT. 2. IT IS THEREFORE PRAYED THAT ABOVE PENALTY LEVIE D BY ASSESSING OFFICER AND CONFIRMED BY CIT(A) MAY PLEASE BE DELETED. 3. BEFORE US, LD.AR REITERATED THE SUBMISSIONS MAD E BEFORE AO & LD.CIT(A) AND FURTHER SUBMITTED THAT ASSESSEE IN F. Y. 2007-08 (A.Y. 2008-09) HAD CONVERTED LAND, BEING CAPITAL ASSET, I NTO STOCK IN TRADE. AS ITA NO.2884/AHD /2015 MANILAL M. PATEL (HUF) VS. ACIT ASST.YEAR 2011-12 - 3 - PER THE PROVISIONS OF SECTION 45(2), WHEN A CAPITAL ASSET IS CONVERTED INTO STOCK-IN-TRADE, THE PROFITS OR GAIN ON TRANSFER OF SUCH ASSET IS CHARGEABLE TO TAX AS INCOME IN THE YEAR IN WHICH SUCH STOCK-IN -TRADE IS SOLD OR TRANSFERRED AND THE FAIR MARKET VALUE OF THE ASSET ON THE DATE OF CONVERSION SHALL BE DEEMED TO BE THE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF TRANSFER OF CAPITAL ASSE T. HE SUBMITTED THAT AS PER PROVISIONS OF S.45(2), ASSESSEE HAD OFFERED THE GAINS FOR TAXATION IN THE IMPUGNED YEAR AND THAT THERE IS NO DISPUTE WITH RESPECT TO YEAR OF TAXATION. FOR THE PURPOSE OF COMPUTING CAPITAL GA INS, ASSESSEE HAD TAKEN INFLATION INDEX FOR F.Y. 2010-11 INSTEAD OF INFLATI ON INDEX FOR F.Y. 2007- 08, BEING THE YEAR OF TRANSFER OF CAPITAL ASSET TO STOCK-IN-TRADE. DUE TO THE ERROR ON THE PART OF ASSESSEE, THERE WAS AN EXCESS CLAIM OF INDEXED COST TO THE EXTENT OF RS.2,09.249/- WHICH WAS DISALLOWED BY AO. THE OTHER PORTION OF ADDITION WAS WITH RESPECT TO RS.15,72,68 2/- AND IN THAT CONNECTION, HE SUBMITTED THAT ASSESSEE HAD SOLD SHO PS AND FLATS TO HITENDRA MANILAL HUF, THE FAMILY MEMBER. FOR THE P URPOSE OF SALE, ASSESSEE HAD CHARGED ONLY THE AMOUNT ATTRIBUTABLE T O THE COST OF CONSTRUCTION AND NO VALUE FOR LAND WAS RECOVERED. AO WAS OF THE VIEW THAT ASSESSEE SHOULD HAVE ALSO RECOVERED THE COST O F LAND. HE ACCORDINGLY ADOPTED THE FAIR MARKET VALUE OF LAND @RS.8,000/- P ER SQ.MT. AND PROCEEDED TO MAKE ADDITION OF RS.15,72,682/- U/S.45 (2) OF THE ACT. LD.AR SUBMITTED THAT ASSESSEE HAS NEITHER CONCEALED ANY INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCOME IN THE R ETURN OF INCOME. ITA NO.2884/AHD /2015 MANILAL M. PATEL (HUF) VS. ACIT ASST.YEAR 2011-12 - 4 - ASSESSEE WAS UNDER BONAFIDE BELIEF THAT SINCE THE L AND THAT WAS CONVERTED INTO STOCK-IN-TRADE WAS SOLD IN FY 2010-11 FOR THE PURPOSE OF INDEXATION, THE INFLATION INDEX OF FY 2010-11 WAS TO BE CONSIDE RED FOR WORKING OUT CAPITAL GAINS. WITH RESPECT TO THE NON-RECOVERY OF COST OF LAND ON SALE OF SHOPS TO THE FAMILY MEMBER, HE SUBMITTED THAT THE A DDITION WAS ON ACCOUNT OF DIFFERENCE OF OPINION AND THAT THERE WAS NO EVIDENCE TO SUGGEST THAT ASSESSEE HAD RECEIVED THE COST OF LAND BUT WAS NOT RECORDED IN THE BOOKS OF ACCOUNT. HE FURTHER SUBMITTED THAT THE ADDITION HAS BEEN MADE UNDER DEEMING PROVISION AND, THEREFORE, IN SUC H A SITUATION, IT WAS NOT NECESSARY FOR LEVY OF PENALTY ON THE ADDITIONS MADE. HE ALSO PLACED RELIANCE ON THE DECISION OF HONBLE APEX COURT IN T HE CASE OF PRICE WATER HOUSE CO-OPERATIVE PVT.LTD. REPORTED AT 348 I TR 306 (SC). HE, THEREFORE SUBMITTED THAT PENALTY BE DELETED. LD.DR ON THE OTHER HAND SUPPORTED THE ORDER OF LOWER AUTHORITIES. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO PE NALTY U/S.271(1)(C) OF THE ACT ON THE ADDITIONS MADE U/S.45(2) OF THE ACT. 4.1. THE NECESSARY INGREDIENTS FOR ATTRACTING EXPLA NATION 1 TO SECTION 271(1)(C) ARE THAT: (I) THE PERSON FAILS TO OFFER T HE EXPLANATION, OR (II) HE OFFERS THE EXPLANATION WHICH IS FOUND BY THE AO OR THE LD.CIT(A) OR THE ITA NO.2884/AHD /2015 MANILAL M. PATEL (HUF) VS. ACIT ASST.YEAR 2011-12 - 5 - LD.CIT TO BE FALSE, OR (III) THE PERSON OFFERS EXPL ANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH E XPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME HAVE BE EN DISCLOSED BY HIM. IF THE CASE OF ANY ASSESSEE FALLS IN ANY OF THESE THRE E CATEGORIES, THEN ACCORDING TO THE DEEMING PROVISION PROVIDED IN EXPL ANATION 1 TO SECTION 271(1)(C) THE AMOUNT ADDED OR DISALLOWED IN COMPUTI NG THE TOTAL INCOME SHALL BE CONSIDERED AS THE INCOME IN RESPECT OF WHI CH PARTICULARS HAVE BEEN CONCEALED, FOR THE PURPOSES OF CLAUSE (C) OF S ECTION 271(1), AND THE PENALTY FOLLOWS. ON THE OTHER HAND, IF THE ASSESSE E IS ABLE TO OFFER AN EXPLANATION, WHICH IS NOT FOUND BY THE AUTHORITIES TO BE FALSE, AND ASSESSEE HAS BEEN ABLE TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME HAVE BEEN D ISCLOSED BY HIM, THEN IN THAT CASE PENALTY SHALL NOT BE IMPOSED. 4.2. A CASE FOR LEVY OF PENALTY FOR CONCEALMENT OF INCOME HAS TO BE EVALUATED IN TERMS OF PROVISIONS OF EXPLANATION 1 T O SECTION 271(1)(C), AS PER WHICH IF IN RELATION TO ANY ADDITION IN THE ASS ESSMENT, THE ASSESSEE OFFERS NO EXPLANATION OR OFFERS EXPLANATION WHICH I S FOUND TO BE FALSE OR IS NOT ABLE TO SUBSTITUTE THE EXPLANATION AND IS AL SO NOT ABLE TO PROVE THAT THE EXPLANATION IS BONAFIDE, THE ADDITION MADE WOUL D AMOUNT TO CONCEALMENT OF PARTICULARS, OF INCOME. IT IS WELL SETTLED THAT THE PARAMETERS OF JUDGING THE JUSTIFICATION FOR ADDITIO N MADE IN THE ASSESSMENT CASE OF THE ASSESSEE IS DIFFERENT FROM T HE PENALTY IMPOSED ON ITA NO.2884/AHD /2015 MANILAL M. PATEL (HUF) VS. ACIT ASST.YEAR 2011-12 - 6 - ACCOUNT OF CONCEALMENT OF INCOME OR FILING INACCURA TE PARTICULARS OF INCOME AND THAT CERTAIN DISALLOWANCE/ADDITION COULD LEGALLY BE MADE IN THE ASSESSMENT PROCEEDINGS ON THE PREPONDERANCE OF PROBABILITIES BUT NO PENALTY COULD BE IMPOSED U/S. 271(1)(C) OF THE ACT ON THE PREPONDERANCE OF PROBABILITIES AND REVENUE HAS TO PROVE THAT THE CLAIM OF EXPENSES BY THE ASSESSEE WAS NOT GENUINE OR WAS INFLATED TO RED UCE ITS TAX LIABILITY. FURTHER MERELY BECAUSE ADDITIONS HAVE CONFIRMED IN APPEAL OR NO APPEAL HAS BEEN FILED BY ASSESSEE AGAINST ADDITIONS MADE, IT CANNOT BE THE SOLE GROUND FOR COMING TO THE CONCLUSION THAT ASSESSEE H AS CONCEALED ANY INCOME. BEFORE US, L.DAR HAS GIVEN THE REASONS AND THE FACTS WHICH HAD RESULTED INTO ADDITION. THESE SUBMISSIONS HAVE NOT BEEN CONTROVERTED BY THE REVENUE. FURTHER, THERE IS NOTHING ON RECORD T O DEMONSTRATE THAT ASSESSEE HAD FILED INACCURATE PARTICULARS OF INCOME OR HAD CONCEALED THE PARTICULARS OF INCOME. 4.3. WE ALSO GET SUPPORT FROM THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT.LTD. REPORTED AT (2010) 322 ITR 158 (SC), WHEREIN THE HONBLE APEX COURT HAS HELD THAT A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTA INABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULAR S REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANN OT AMOUNT TO THE INACCURATE PARTICULARS. ITA NO.2884/AHD /2015 MANILAL M. PATEL (HUF) VS. ACIT ASST.YEAR 2011-12 - 7 - 4.4. CONSIDERING THE AFORESAID FACTS AND RELYING O N THE FORESAID JUDGEMENT OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT.LTD.(SUPRA), WE ARE OF THE VIEW THAT IN THE PRESENT CASE NO CASE FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE A CT HAS BEEN MADE OUT. WE THUS DIRECT THE DELETION OF PENALTY U/S. 271(1)( C) OF THE ACT. THUS, THE GROUND OF ASSESSEE IS ALLOWED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 0 1 /0 6 /2016 SD/- SD/- ( ) () (SHAILENDRA KUMAR YADAV) ( ANIL CHATUR VEDI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 01/ 06 /2016 5..,.../ T.C. NAIR, SR. PS !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. &) / THE APPELLANT 2. *+&) / THE RESPONDENT. 3. 678 9 / CONCERNED CIT 4. 9 ( ) / THE CIT(A)-1, SURAT 5. :;<*78 , 78 2 , 6 / DR, ITAT, AHMEDABAD 6. <>?. / GUARD FILE. / BY ORDER, +:* //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD