ACIT, Panipat V. Sh. Ashok Raj Nath, Panipat

ITA 2970/DEL/2012

• Counselvise Citation: 297020114 RSA 2012
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 14-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Keywords: Opportunity of being heard; Question of law; Revised return
• Section: 142(1); 139(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI A BENC H BEFORE SHRI A.D. JAIN, JM & SHRI A.N. PAHUJA, AM ITA NO.2970/DEL/2012 ASSESSMENT YEAR:2006-07 ASSISTANT CIT, PANIPAT CIRCLE, PANIPAT V/S . ASHOK RAJ NATH, C/O M/S DEEPAK WOOLEN MILLS, G.T. ROAD, PANIPAT [PAN : AAPPN 8330 P] (APPELLANT) (RESPONDENT) ASSESSEE BY NONE REVENUE BY MRS. ANUSHA KHURANA, DR DATE OF HEARING 22-08-2012 DATE OF PRONOUNCEMENT 31-08-2012 O R D E R A.N.PAHUJA:- THIS APPEAL FILED ON 14.06.2012 BY THE REVENUE AGAI NST AN ORDER DATED 01.03.2012 OF THE LEARNED CIT(A)-KARNAL, RAIS ES THE FOLLOWING GROUNDS:- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN LAW IN CANCELLING PENAL TY OF ` `10,77,190/- LEVIED U/S 271(1)(C) ON ACCOUNT OF NON - DISCLOSURE OF SHORT TERM AND LONG TERM CAPITAL GAIN IN THE RETURN ORIGINALLY FILED WITHOUT APPRECIATING THE FA CT THAT THE SO CALLED REVISED RETURN FILED INCLUDING THE AMOUNT OF CAPITAL GAINS WAS SUBSEQUENT TO THE RECEIPT OF NOTI CES U/S 143(2)/142(1) ISSUED BY THE DEPARTMENT. 2. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR DIS POSED OF. 2. AT THE OUTSET, NONE APPEARED BEFORE US ON BEHAL F OF THE ASSESSEE NOR SUBMITTED ANY REQUEST FOR ADJOURNMENT. CONSIDE RING THE NATURE OF ISSUE AND ITA N O.2970 /DEL./2012 2 FINDINGS OF THE LD. CIT(A), THE BENCH PROCEEDED TO DISPOSE OF THE APPEAL AFTER HEARING THE LD. DR. 3.. FACTS, IN BRIEF, AS PER RELEVANT ORDERS AR E THAT RETURN DECLARING INCOME OF ` ` `73,73,806/- FILED ON 31.10.2006 BY THE ASSESSEE, W AS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE INCO ME-TAX ACT, 1961, (HEREINAFTER REFERRED TO AS THE ACT) ISSUED ON 11 TH OCTOBER, 2007. NONE RESPONDED TO THIS NOTICE. IN RESPONSE TO A SHOW CAUSE NOTICE ALONGWI TH NOTICE U/S 143(2) AND 142(1) OF THE ACT, THE LD. AR ON BEHALF OF THE ASSE SSEE SOUGHT ADJOURNMENT FOR 18 TH AUGUST, 2008 ,WHEN NONE APPEARED. IN RESPONSE TO SUBSEQUENT SHOW CAUSE NOTICE DATED 3 RD SEPTEMBER, 2008, THE ASSESSEE SUBMITTED A DETAILED REPLY ALONG WITH REVISED RETURN DECLARING INCOME OF ` ` 1,28,20,913/-. SINCE THE REVISED RETURN WAS BEYOND THE TIME PRESCRIBED U/S 139(5) OF THE AC T, I.E. BEYOND THE PERIOD OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YE AR, THIS RETURN WAS TREATED AS INVALID RETURN. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (A.O. IN SHORT) NOTICED THAT THE ASSESSEE DECLARED GROSS RENTAL INCOME OF ` ` 9,05,071/- WHEREAS CERTIFICATE ISSUED IN FORM NO.16 A BY UNITECH LTD., NEW DELHI AND M/S IQUARA TELCOMS INDIA LTD., REFLECTED RENTAL INCOME OF ` ` 14,47,319/- AND ` ` 1,87,833/- RESPECTIVELY. TO A QUERY BY THE AO,SEEK ING DETAILS OF PROPERTIES AND RECONCILIATION OF RENTAL INCOME VIS--VIS AMOUNT REFLECTED IN THE TDS CERTIFICATES, THE ASSESSEE REPLIED THAT RENT OF UNIT NO.206, CYBER PARK, GURGAON WAS RECEIVED TO THE EXTENT OF ` ` 14,47,319/- AND IN RESPECT OF UNIT NO.201 - ` `1,73,003/-) AND UNIT NO.206- ` `12,74,316/-. OUT OF RENT OF ` `12,74,316/- FOR UNIT NO.206, A SUM OF ` `4,63,388/- WAS GIVEN TO M/S P.J. ASSOCIATES VIDE CHEQUE NO.618356 DATED 8.6.2006 AS PER MUTUAL UNDER STANDING AS ADVANCE OF ` ` 47 LACS WAS RECEIVED FROM M/S P.J. ASSOCIATES ON AC COUNT OF SALE OF THE SAID UNIT NO.206 TO THEM. THOUGH ADVANCE OF ` ` 47 LACS HAD BEEN RECEIVED BY THE ASSESSEE ON 29.12.2005, THE ASSESSEE DID NOT FURNIS H ANY EVIDENCE IN THE SHAPE OF AGREEMENT REGARDING THE SALE OF UNIT NO.206 TO P .J. ASSOCIATES OR FOR RETURNING RENT OF ` ` 4,63,388/- TO THEM. IN RESPONSE TO ANOTHER SHOW C AUSE NOTICE DATED 10.09.2008 THE ASSESSEE REPLIED AS UNDER:- ITA N O.2970 /DEL./2012 3 THE ASSESSEE DID NOT BONAFIDELY CLAIM TDS ON THE B ASIS OF CERTIFICATE AS RENT FOR FOUR MONTHS WAS REFUNDABLE WHICH HE ACTUALLY DID IN THE IMMEDIATELY SUCCEEDING YEAR. AN ASSESSE E HAS TO BE TAXED ON REAL INCOME AND NOT ON HYPOTHETICAL BASIS. IT IS UNDERSTANDABLE THAT AN ASSESSEE WHO WAS HONOURED BY HONBLE CBDT CHAIRMAN AT CHANDIGARH AS ONE OF THE 16 ASSESS EES OF NWR IN THE CATEGORY OF ASSESSES IN HIGHER BRACKET O F INCOME, IS BEING QUESTIONED VIDE YOUR SHOW CAUSE TO ADD WHAT H AS TO COME TO HIM AS HIS REAL INCOME. 3.1 AFTER CONSIDERING THE AFORESAID REPLY AND IN T HE ABSENCE OF ANY EVIDENCE OF AGREEMENT TO SELL OR RETURN OF RENT, TH E AO DENIED DEDUCTION OF ` `4,63,388/-. INTER ALIA, PENALTY PROCEEDINGS U/S 2 71(1)(C) OF THE ACT WERE ALSO INITIATED. 3.2 THE AO FURTHER NOTICED THAT THE ASSESSEE DECLA RED SHORT TERM CAPITAL GAIN ON SALE OF THREE PROPERTIES AT ` ` 13,93,279/- (8,49,979+19,000+5,24,250/-) BESIDE FROM SALE OF SH ARES AT ` `47,10,726/-. IN RESPONSE TO `A SHOW CAUSE NOTICE ISSUED BY THE AO, SEEKING DETAILS OF THE PROPERTIES SOLD AND COPIES OF THEIR SALE DEEDS AS ALSO DETAILS OF SHARES, THE ASSESSEE SUBMITTED THE FOLLOWING DETAILS:- PROPERTY STYLED UNIT NO.201, CYBRE PARK, GURGAON: SALE PRICE 77,24,250/- COST PRICE 72,00,000/- CAPITAL GAIN 5,24,250/- LAND AT V. KHERI SADH (ROHTAK) SALE PRICE 53,13,379/- COST PRICE 33,90,400/- CAPITAL GAIN 19,19,979/- 3.3 SINCE TOTAL CAPITAL GAIN ON SALE OF PROPERTIES AS PR THE AFORESAID COMPUTATION WORKED OUT TO ` ` 24,44,229/- AS AGAINST ` ` 13,93,279/- SHOWN IN THE ITA N O.2970 /DEL./2012 4 RETURN, THE AO ADDED THE DIFFERENCE AND INITIATING PENALTY U/S 271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF CAPITAL GA IN. 3.4 THOUGH, THE ASSESSEE REFLECTED SHORT TERM CAPI TAL GAIN ON SALE OF SHARES TO THE EXTENT OF ` `47,10,726/-,IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE REFLECTED FOLLOWING WORKING OF SHORT TERM CAPITAL GAIN:- GAIN ON SALE OF SHARES (STT PAID) ` ` 47,09,951/- ADD DIVIDEND U/S 94(7) ` ` 1,61,278/- TOTAL: ` `48,71,229/- 3.5 BESIDE IN THE RETURN FILED ON 31 ST OCTOBER, 2006, THE ASSESSEE CLAIMED EXEMPTION OF LONG TERM CAPITAL GAIN TO THE EXTENT OF ` ` 1,17,67,514/- U/S 10(38) OF THE INCOME-TAX ACT, 1961. HOWEVER, IN RE SPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE REVISED THE CLAIM OF EXEMPTION TO ` ` 76,68,595/- ,RESULTING IN TAXABLE LONG TERM CAPITAL GAIN OF ` ` 40,98,919/-. INTER ALIA, PENALTY PROCEEDINGS WERE ALSO INITIATED U/S 271(1) OF THE ACT FOR FURNISHING IN ACCURATE PARTICULARS OF INCOME. 3.6 APART FROM ABOVE, THE AO DISALLOWED INTEREST OF ` 2,51,507/- CLAIMED BY WAY OF DEDUCTION FROM INTEREST INCOME OF ` 9,87,808/- 4. ON APPEAL, THE LD.CIT(A) UPHELD THE ADDITION T OWARDS RENTAL INCOME WHILE REDUCING THE DISALLOWANCE OF INTEREST BY ` 29,166/- AS AGAINST DISALLOWANCE OF ` ` 2,51,507/- MADE BY THE AO. ON FURTHER APPEAL, THE I TAT VIDE THEIR ORDER DATED 18 TH MARCH, 2011 ADJUDICATED THE ISSUE OF TWO ADDITIONS ON ACCOUNT OF RENTAL INCOME AND INTEREST, IN THE FOLLOWING TERMS: - WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE I S NO DISPUTE ON THIS FACTUAL ASPECT THAT ADVANCE OF `47 LAKHS WAS R ECEIVED BY THE ASSESSEE FROM M/S PJ ASSOCIATES ON ACCOUNT OF SALE OF THE IMPUGNED PROPERTY BY THE ASSESSEE TO THAT PARTY. T HE DISPUTE IS REGARDING THE RENTAL INCOME FROM THE MONTH OF DECEM BER, 2005 TO MARCH, 2006 I.E. FOR FOUR MONTHS. IT IS ALSO ADMIT TED FACTUAL POSITION ITA N O.2970 /DEL./2012 5 THAT UNDER SIMILAR CIRCUMSTANCES, THE ASSESSEE RECE IVED RENTAL INCOME FOR THE MONTH OF APRIL AND MAY, 2006 AND THE SAME WAS ALSO PASSED ON TO THE BUYER BY WAY OF THE SAME CHEQ UE OF DATED 8.6.2006 BECAUSE AS PER THE DETAILS AVAILABLE ON PA GE NO.3 AND 4 OF THE PAPER BOOK, ONE CHEQUE NO.618356 FOR `5,72,8 06/- WAS RECEIVED BY THAT PARTY FROM THE ASSESSEE ON 5.6.200 6. AS PER THE DETAILS OF THIS AMOUNT, IT IS ON ACCOUNT OF RENTAL INCOME RECEIVED BY THE ASSESSEE FROM DECEMBER, 2005 TO MAY, 2006 AFTER DEDUCTING TDS OF RS.L,21,076/-. AS PER THE ORDER FOR ASSESSME NT YEAR 2007- 08 SUBMITTED BY THE ASSESSEE BEFORE US, IT IS SEEN THAT THE ASSESSING OFFICER HAS NOT MADE ANY ADDITION IN THE INCOME OF THE ASSESSEE ON ACCOUNT OF RENT FOR THE MONTH OF APRIL & MAY, 2006 HENCE, IT IS SEEN THAT THE ASSESSING OFFICER HAS AC CEPTED THE CLAIM OF THE ASSESSEE IN THE SUBSEQUENT YEAR THAT THE REN TAL INCOME FROM THIS PROPERTY DOES NOT BELONG TO THE ASSESSEE ALTHO UGH THE PROPERTY IN QUESTION WAS REGISTERED IN THE NAME OF THE BUYER AFTER MAY, 2006. HENCE, IT IS SEEN THAT THE CLAIM OF THE ASSES SEE HAS BEEN ACCEPTED BY THE ASSESSING OFFICER IN THE SUBSEQUENT YEAR UNDER SIMILAR FACTS AND CIRCUMSTANCES. HENCE, IN THE PRES ENT YEAR, WHETHER THIS CLAIM OF THE ASSESSEE DESERVES TO BE A CCEPTED OR NOT IS TO BE DECIDED BY US. WHEN WE EXAMINE THE FACTS O F THE PRESENT CASE IN ITS ENTIRETY. WE FIND THAT THIS IS ADMITTED POSITION THAT CAPITAL GAIN ON SALE OF THIS PROPERTY WAS DECLARED BY THE A SSESSEE IN THE NEXT YEAR AND HENCE, AS PER THE ASSESSEE ALSO, OWNE RSHIP OF THE PROPERTY WAS WITH THE ASSESSEE IN THIS YEAR AND HEN CE, IF WE APPLY THE LEGAL POSITION STRICTLY RENTAL INCOME FOR THE P ERIOD FROM DECEMBER, 2005 TO MARCH, 2006 IS ALSO TAXABLE IN TH E HANDS OF THIS ASSESSEE ONLY BUT WE FIND THAT THREE OTHER ASPECTS ARE ALSO VERY MUCH IMPORTANT. ONE ASPECT IS THE TAX IMPACT. AS PE R THE TAX IMPACT OF THE IMPUGNED ADDITION OF RS.4,63,388/- IN THE PRESENT YEAR, IT IS WORKED OUT BY THE ASSESSEE AT RS.L,09,1 84/- AFTER DEDUCTING 30% AS PER THE PROVISIONS OF SECTION 24 O F THE ACT AND THE TAX WAS DETERMINED AT RS.97,312/- @ 30% OF RS.3 ,24,372/-AND AFTER MAKING ADDITION OF SURCHARGE AND EDUCATION CE SS, TOTAL TAX PAYABLE IS OF `1,09,184/-. IT IS THE SUBMISSION OF THE LD AR OF THE ASSESSEE THAT IN CASE, WE DECIDE THIS ISSUE IN FAVO UR OF THE ASSESSEE, THE ASSESSING OFFICER MAY BE DIRECTED TO DISALLOW CREDIT OF TDS FROM THE RENTAL INCOME OF THESE FOUR MONTHS FROM DECEMBER, 2005 TO MARCH, 2006 WHICH IS AMOUNTING TO RS.82,482/ - . HENCE, THE NET TAX IMPACT COMES TO RS.26,702/ -. THE SECOND IMPORTANT ASPECT IS THAT THE CLAIM OF THE ASSESSEE HAS BEEN ACCEPTED BY THE ASSESSING OFFICER ALSO IN THE SUBSE QUENT YEAR BECAUSE IN SPITE OF COMPLETING THE ASSESSMENT OF AS SESSMENT YEAR 2007-08 U/S 143(3), NO ADDITION HAS BEEN MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF RENTAL INCOME FOR THE MONTH O F APRIL & MAY, 2006 ALTHOUGH THE SAME WAS ALSO REFUNDED BY THE ASS ESSEE TO SHRI ITA N O.2970 /DEL./2012 6 PJ SINGH BY WAY OF SAME CHEQUE N0.618356 DATED 5.6. 2006 AND THE PROPERTY IN QUESTION WAS TRANSFERRED BY THE ASS ESSEE TO THE BUYER AFTER THAT DATE ONLY. HENCE, IT IS SEEN THAT UNDER SIMILAR CIRCUMSTANCES, THE REVENUE HAS ACCEPTED THE CLAIM O F THE ASSESSEE IN THE SUBSEQUENT YEAR. AS PER THE JUDGMEN T OF HON'BLE PUNJAB & HARYANA HIGH COURT RENDERED IN THE CASE OF CIT V. REITA BISCUITS CO. PVT. LTD. (SUPRA), IF THE ISSUE IS BEI NG DECIDED IN SUBSEQUENT YEAR IN FAVOUR OF THE ASSESSEE AND AGAIN ST THE REVENUE, DIFFERENT VIEW CANNOT BE TAKEN IN THE PREC EDING YEAR. HENCE, THIS JUDGMENT OF HON'BLE PUNJAB & HARYANA HI GH COURT BECOMES APPLICABLE UNDER THESE FACTS OF THE PRESENT CASE AND AS PER THE SAME, THE CLAIM OF THE ASSESSEE HAS TO BE A CCEPTED IN THE PRESENT YEAR ALSO THAT RENTAL INCOME FROM DECEMBER, 2005 TO MARCH, 2006 ALSO DID NOT ACCRUE TO THE ASSESSEE. TH E THIRD IMPORTANT POINT IS THAT EVEN IF IT IS HELD THAT REN TAL INCOME IS ASSESSABLE IN THE HANDS OF THE ASSESSEE THEN THIS A MOUNT OF RS.4,63,338/ - PAID BY THE ASSESSEE TO SHRI P.J. SI NGH HAS TO BE REDUCED FROM THE CAPITAL GAIN TAX IN THE HANDS OF T HE ASSESSEE IN THE SUBSEQUENT YEAR I.E. ASSESSMENT YEAR 2007-08 AN D AS A RESULT, THE SHORT TERM CAPITAL GAIN OF RS.3, 77, 756/ - DEC LARED BY THE ASSESSEE IN THAT YEAR WILL BE CONVERTED INTO SHORT TERM CAPITAL LOSS OF RS.85,632/-AND THE DIFFERENCE IN TAX IN THAT YEA R WILL WORK OUT TO RS.1,36,764/ - IN ASSESSMENT YEAR 2007-08. TAX PAYA BLE BY THE ASSESSEE IN THAT YEAR WILL GO DOWN BY THIS AMOUNT W HEREAS THE TAX LIABILITY CREATED BY THE ASSESSING OFFICER IN THE P RESENT YEAR IS ONLY OF RS.1,09,184/-. THIS IS BECAUSE OF THIS REASON TH AT ON ACCOUNT OF RENTAL INCOME OF RS.4,63,388/ -, THE ASSESSEE IS GE TTING DEDUCTION OF 30% U/S 24 AND HENCE THIS TAX LIABILITY IS GOING DOWN TO THIS AMOUNT TO RS.1, 09,184/ - WHEREAS THE CONSEQUENT RE LIEF FROM SHORT TERM CAPITAL GAIN WILL BE ON THE FULL AMOUNT OF RS. 4,63,388/ -. IF WE CONSIDER THESE FACTORS, WE FEEL THAT THE REVENUE IS NOT GAINER BY REJECTING THE TREATMENT GIVEN BY THE ASSESSEE AND V ARIOUS CONSEQUENTIAL ORDERS ARE TO BE PASSED I.E., IN THE CASE OF THE. ASSESSEE IN NEXT YEAR AND ALSO IN THE HANDS OF THE BUYER FOR THE PRESENT YEAR BECAUSE RENT INCOME CANNOT BE ASSESSED IN THE HANDS OF BOTH I.E, THE PRESENT ASSESSEE AND THE BUY ER TO WHOM RENT IS TRANSFERRED BY THIS ASSESSEE BUT ONE ASPECT IS N OT CLEAR AS TO WHETHER THAT ASSESSEE HAS INCLUDED THIS AMOUNT IN H IS TAXABLE INCOME OR NOT BECAUSE AS PER THE CERTIFICATE ON PAG E NO.3-4 OF THE PAPER BOOK, THAT PARTY IS CERTIFYING THAT THEY HAVE RECEIVED THE NET AMOUNT OF RS.572806/ - AND DID NOT CLAIM TDS CREDIT BUT THERE IS NO MENTION THAT THEY HAD INCLUDED THIS AMOUNT IN TAXAB LE INCOME AS PER THE RETURN OF INCOME FILED. HENCE, WE FIND THAT IF THIS AMOUNT HAS BEEN DECLARED AS INCOME BY THAT PARTY , THAN THE SA ME SHOULD NOT BE ADDED IN THE HANDS OF THIS PRESENT ASSESSEE TO A VOID MULTIPLE CONSEQUENTIAL RECTIFICATIONS WITHOUT ANY TAX GAIN T O THE REVENUE AND ITA N O.2970 /DEL./2012 7 ALSO BECAUSE THE REVENUE HAS ACCEPTED THIS CLAIM IN NEXT YEAR AND AS PER THE DECISION OF HON'BLE PUNJAB & HARYANA HIG H COURT IN THE CASE OF CIT V. REITA BISCUITS CO. (SUPRA), DIFFEREN T STAND CANNOT BE TAKEN IN THIS YEAR BUT FOR THIS, THE ASSESSING OFFI CER HAS TO FIND OUT AS TO WHETHER THE BUYER HAS DECLARED THIS INCOME OR NOT IN ITS RETURN OF INCOME. WE, THEREFORE, SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THIS MATTER BACK TO THE FILE OF T HE ASSESSING OFFICER FOR A DECISION AFRESH. THE ASSESSING OFFICE R SHOULD FIND OUT AS TO WHETHER THE BUYER, TO WHOM THIS RENTAL INCOME IS TRANSFERRED BY THIS ASSESSEE HAS DECLARED THIS INCOME IN ITS RE TURN OF INCOME OR NOT IN THE PRESENT YEAR, IF THE BUYER HAS DECLARED THIS INCOME IN THE RETURN OF INCOME FILED BY THE BUYER FOR THE PRESENT YEAR, THEN NO ADDITION SHOULD BE MADE IN THE HANDS OF THIS ASSESS EE ON ACCOUNT OF RENT FOR DECEMBER, 2005 TO MARCH, 2006 AND THE A SSESSING OFFICER SHOULD WITHDRAW THE CREDIT OF TDS OF RS.82, 482/- ON RENTAL INCOME FOR DECEMBER, 2005 TO MARCH, 2006 BECAUSE IF THE INCOME IS NOT TAXED IN THE HANDS OF THIS ASSESSEE, CREDIT FOR TDS CANNOT BE ALLOWED. BUT IF THIS RENTAL INCOME FOR DECEMBER, 20 05 TO MARCH, 2006 HAS NOT BEEN DECLARED BY THE BUYER IN ITS RETU RN OF INCOME THEN SUCH RENTAL INCOME HAS TO BE TAXED IN THE HAND S OF THIS ASSESSEE. THE ASSESSING OFFICER SHOULD PASS NECESSA RY ORDER AS PER LAW AS PER ABOVE DISCUSSION AFTER PROVIDING ADE QUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND TO M AKE IT CLEAR THAT BURDEN IS ON THE ASSESSEE TO BRING EVIDENCE ON RECO RD ESTABLISHING THAT THE BUYER HAS DECLARED THIS INCOME IN ITS RETU RN OF INCOME FOR THIS ASSESSMENT YEAR. THIS GROUND IS ALLOWED FOR ST ATISTICAL PURPOSES. .. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE T HROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT LD. CIT( A} HAS WORKED OUT THE INTEREST INCOME ON ACCOUNT OF THIS DEPOSIT OF R S.1 CRORE IN SAVINGS BANK A/C OF THE ASSESSEE BY APPLYING 3.5% O F BANK INTEREST RATE AND HE HAS HELD THAT THE ASSESSEE HAS EARNED I NTEREST INCOME FOR ONE MONTH ONLY ON THIS BASIS THAT THE BANK HAS CREDITED INTEREST UP TO 31.1.2006 ONLY ON 4.2.2006 ALTHOUGH THERE WAS CREDIT BALANCE AFTER THAT ALSO UP TO 31.3.2006. UNDER THIS FACTUAL POSITION, WE FIND THAT ON THIS AMOUNT OF RS.1 CRORE, THE ASSESSEE WAS EARNING INTEREST INCOME FROM THE 1 ST DAY OF CREDIT IN THE SAME SAVINGS BANK A/C I.E. ON 20.12.005. EVEN FOR THE PERIOD AFTER 31 .1.2006, INTEREST INCOME MUST BE THERE ON THIS ACCOUNT ALTHOUGH THE S AME IS NOT CREDITED BY THE BANK TILL 31.3.2006. INTEREST FOR T HE PERIOD FROM 1.2.2006 UP TO 31.3.2006 MUST HAVE BEEN CREDITED BY BANK IN THE NEXT YEAR BEING INTEREST FOR 1.2.2006 TO 31. 7.2006 . THE ASSESSING OFFICER COULD HAVE BROUGHT TO TAX SUCH INTEREST INC OME IN THE PRESENT YEAR FOR 1.2.2006 TO 31.3.2006 BUT THIS WAS NOT DONE EVEN ITA N O.2970 /DEL./2012 8 THAN, IT CANNOT BE SAID THAT THE ASSESSEE WAS NOT E ARNING INCOME IN THIS PERIOD. NOW, THE QUESTION IS WHETHER FOR THE I NTEREST BEARING BORROWED FUNDS WHICH WAS UTILIZED FOR EARNING INTER EST INCOME, DEDUCTION ON ACCOUNT OF INTEREST PAYMENT IS ALLOWAB LE ONLY TO THE EXTENT OF ACTUAL INTEREST INCOME THEREON OR THE WHO LE AMOUNT OF INTEREST PAYMENT SHOULD BE ALLOWED. IN OUR CONSIDE RED OPINION, WHEN THE INTEREST BEARING BORROWED FUNDS HAVE BEEN UTILIZED BY THE ASSESSEE FOR EARNING INTEREST INCOME WHICH IS TAXAB LE UNDER THE HEAD INCOME FROM OTHER SOURCES, DEDUCTION ON ACCOUN T OF FULL PAYMENT OF INTEREST IS ALLOWABLE TO THE ASSESSEE A ND IT CANNOT BE RESTRICTED TO THE EXTENT OF ACTUAL INTEREST INCOME ONLY. HENCE, WE DELETE THE DISALLOWANCE OF INTEREST EXPENDITURE CON FIRMED BY LEARNED CIT(A). THIS GROUND OF THE ASSESSEE IS ALL OWED. 5. MEANWHILE ON RECEIPT OF ORDER OF THE LD. CIT(A ), IN RESPONSE TO A SHOW CAUSE NOTICE BEFORE LEVY OF PENALTY, THE ASSESSEE PLEADED THAT RETURN WAS REVISED VOLUNTARILY WITHOUT ANY SHOW CAUSE NOTICE, WITH A F OLLOWING NOTE IN THE COMPUTATION SHEET:- RETURN OF INCOME IS BEING REVISED VOLUNTARILY TO C ORRECT THE FIGURE OF CAPITAL GAIN IN RESPECT OF LAND AT KHERI SADH (ROHT AK) AS ALSO TO CORRECT THE INTEREST INCOME WHEREIN INTEREST PAID W AS WRONGLY CLAIMED AGAINST INTEREST INCOME INADVERTENTLY. THE RETURN OF INCOME IS BEING ALSO REVISED TO INCLUDE SHORT TERM CAPITAL GAIN IN ACQUISITION OF LAND AT BAHADURGARH WHICH WAS EARLIER WRONGLY CR EDITED TO LAND AT PANCHKULA. SINCE THE RETURN WAS REVISED VOLUNTARILY, RELYING U PON DECISIONS IN CHEAP CYCLE STORES VS. CIT,196 CTR 173 (ALL.); CIT VS. SV ELECT RICALS PVT. LTD.,274 ITR 334 (MP);CIT VS. MRS. ROSHAN D REHMAN,295 ITR 280 (BOM. ) AND CIT VS. SSP P LTD.,302 ITR 43 (P&H),THE ASSESSEE PLEADED THAT PEN ALTY PROCEEDINGS SHOULD BE DROPPED. HOWEVER, THE AO DID NOT ACCEPT THE EXPLAN ATION OF THE ASSESSEE AND IMPOSED A PENALTY OF ` ` 10,77,190/- FOR FURNISHING INACCURATE PARTICULARS O F INCOME OF ` ` 60,39,824/- WHILE OBSERVING THAT SINCE THE REVISED RETURN HAD BEEN FILED ON 10.9.2008 WHILE NOTICE U/S 143(2) OF THE ACT WAS IS SUED ON 11.10.2007,REVISED RETURN WAS NOT VOLUNTARY NOR VALID. 6. ON APPEAL, THE LD. CIT(A) CANCELLED THE PENALTY , IN THE FOLLOWING TERMS:- ITA N O.2970 /DEL./2012 9 1.9 THE ISSUE IS EXAMINED. AS DISCUSSED ABOVE TH AT THE APPELLANT DECLARED FURTHER INCOME ON ACCOUNT OF SHO RT TERM AND LONG TERM CAPITAL GAIN BY FILING A REVISED RETURN O F INCOME. THE APPELLANT IMPRESSED UPON THAT NO INFORMATION WAS AV AILABLE WITH THE DEPARTMENT IN THIS REGARD AND THE ASSESSMENT WA S MADE BY ADOPTING THE FIGURES DECLARED BY HIM IN THE REVISED RETURN OF INCOME. IN VIEW OF THIS FACT, IT IS NOTED THAT THE ADDITIONAL INCOME OFFERED AND ASSESSED FOR CAPITAL GAIN HEADS WAS PRO VIDED BY THE APPELLANT ONLY AND THE SAME WAS ASSESSED AS SUCH BE SIDES THE FACT THAT THE OTHER TWO ADDITIONS MADE BY THE ASSES SING OFFICER WAS DELETED BY THE ITAT IN AS FAR AS ONE OF THE ISSUES WAS RESTORED BACK TO THE ASSESSING OFFICER WITH THE SPECIFIC DIR ECTIONS FOR VERIFYING THE FACTS AND THE OTHER ONE WAS DELETED. IN VIEW OF THESE FACTS, BOTH THE ADDITIONS DO NOT STAND AS ON DATE. AT MOST, THE ASSESSING OFFICER IS FREE TO TAKE NECESSARY ACTION AS PER LAW WITH REFERENCE TO FIRST ADDITION IF THE FACTS ARE FOUND OTHERWISE. 7. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE FINDINGS OF LEARNED CIT(A).THE LD. DR SUPPORTED THE ORDER OF TH E AO, LEVYING PENALTY. 8. WE HAVE HEARD THE LD. DR AND GONE THROUGH THE FA CTS OF THE CASE. AS IS APPARENT FROM THE AFORESAID FACTS, THE AO LEVIED PE NALTY U/S 271(1)(C) OF THE ACT IN RESPECT OF AN AMOUNT OF ` 60,39,824/-COMPRISING ADDITION ON ACCOUNT OF RENTA L INCOME- ` 4,63,388/-;DISALLOWANCE OF INTEREST- ` 2,51,507/-,ADDITION TOWARDS SHORT TERM CAPITAL GAINS ON SALE OF PROPERTIES- ` 10,50,950/-;SHORT TERM CAPITAL GAINS ON SALE OF SHARES- ` 1,60,503/- AND LONG TERM CAPITAL GAINS- ` 40,98,919/-. THE LD. CIT(A) CANCELLED THE PENALTY ON THE GROUND THAT DI SALLOWANCE OF INTEREST WAS DELETED BY THE ITAT WHILE ISSUE RELATING TO ADDITIO N TOWARDS RENTAL INCOME HAD BEEN RESTORED TO THE FILE OF THE AO AND ADDITIONAL INCOME TOWARDS CAPITAL GAINS ON SALE OF PROPERTIES AND SHARES WAS DISCLOSED BY T HE ASSESSEE SUO MOTU DURING THE COURSE OF ASSESSMENT PROCEEDING. THE A SSESSEE SUBMITTED REVISED RETURN SINCE IN THE ORIGINAL RETURN LONG TERM CAPI TAL GAIN ON UTI LIQUID PLUS FUND INSTITUTION PLAN WAS CLAIMED EXEMPT U/S 10(38) OF T HE ACT AS ALSO TO REFLECT CORRECT FIGURES OF SALE OF LAND AT KHERI SADH AND RENTAL IN COME. MERELY BECAUSE THE ASSESSEE DISCLOSED ADDITIONAL INCOME SUO MOTU AFTER ISSUE OF A NOTICE U/S 143(2) ITA N O.2970 /DEL./2012 10 OF THE ACT, DOES NOT AMOUNT TO DETECTION OF CONCEAL MENT BY THE AO. APPARENTLY, THE ASSESSEE HAD GIVEN ALL PARTICULARS OF HIS INC OME AND HAD DISCLOSED ALL FACTS TO THE AO DURING THE ASSESSMENT PROCEEDINGS.. IT IS NOT THE CASE OF THE AO THAT IN REPLY TO A QUERY OF THE AO, SOME NEW FACTS WERE DIS COVERED OR THE AO HAD DUG OUT SOME INFORMATION WHICH WAS NOT FURNISHED BY THE ASSESSEE. IN SUCH CIRCUMSTANCES, WE ARE OF THE OPINION THAT NO PENALT Y IS LEVIABLE. IT IS WELL SETTLED THAT ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT AND AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF ANANTHRAMAN VEERASINGHAIAH & CO. VS. CIT, 123 ITR 457, THE FIND ING IN THE ASSESSMENT PROCEEDINGS CANNOT BE REGARDED AS CONCLUSIVE FOR TH E PURPOSES OF THE PENALTY PROCEEDINGS. IT IS, THEREFORE, NECESSARY TO REAPPRE CIATE AND RECONSIDER THE MATTER SO AS TO FIND OUT AS TO WHETHER THE ADDITION MADE I N THE QUANTUM PROCEEDINGS ACTUALLY REPRESENTS THE CONCEALMENT ON THE PART OF THE ASSESSEE AS ENVISAGED IN SEC. 271(1 )(C) OF THE ACT AND WHETHER IT IS A FIT CASE TO IMPOSE THE PENALTY BY INVOKING THE SAID PROVISIONS. IT IS ALSO WELL SETTL ED THAT THE CRITERION AND YARDSTICKS FOR THE PURPOSE OF IMPOSING PENALTY U/S 271(1)(C) OF THE ACT ARE DIFFERENT THAN THOSE APPLIED FOR MAKING OR CONFIRMING THE ADDITION S. THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT V. M. GEORGE & BROS. [1986 ] 160 ITR 511 HELD THAT WHERE THE ASSESSEE FOR ONE REASON OR THE OTHER AGRE ES OR SURRENDERS CERTAIN AMOUNTS FOR ASSESSMENT, THE IMPOSITION OF PENALTY S OLELY ON THE BASIS OF THE SURRENDER WILL NOT BE WELL-FOUNDED. HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT V. SURAJ BHAN [2007] 159 TAXMAN 26 WHILE FOLLOWING THE DECISION IN CIT V. SURESH CHANDRA MITTAL [2001] 251 ITR 9 (SC), HELD THAT WHEN AN ASSESSEE FILES A REVISED RETURN SHOWING HIGHER INCO ME AND GIVES AN EXPLANATION THAT HE OFFERED HIGHER INCOME TO BUY PEACE OF MIND AND AVOID LITIGATION, PENALTY CANNOT BE IMPOSED MERELY ON ACCOUNT OF HIGHER INCOM E HAVING BEEN SUBSEQUENTLY DECLARED. THE HONBLE APEX COURT IN CIT V. SURESH CHANDRA MITTAL, [2001] 251 ITR 9/119 TAXMAN 433, UPHELD TH E DECISION OF THE HONBLE MADHYA PRADESH HIGH COURT RENDERED IN THE CASE OF C IT VS. SURESH CHANDRA MITTAL [2000] 241 ITR 124, WHERE IN SIMILAR CIRCUMS TANCES IT WAS HELD THAT THE INITIAL BURDEN LIES ON THE REVENUE TO ESTABLISH THA T THE ASSESSEE HAD CONCEALED ITA N O.2970 /DEL./2012 11 THE INCOME HAD FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THE BURDEN SHIFTS TO THE ASSESSEE ONLY IF HE FAILS TO OFFER AN Y EXPLANATION FOR THE UNDISCLOSED INCOME OR OFFERS AN EXPLANATION WHICH IS FOUND TO B E FALSE BY THE ASSESSING OFFICER. 8.1 IN QUDAI INTERNATIONAL VS. INCOME TAX OFFICE R 2009 (13) MTC 622 (TRIB), THE ITAT LUCKNOW BENCH 'A' HELD THAT ' MERE RAISING OF QUERY BY THE ASSESSING OFFICER DID NOT AMOUNT TO DETECTION OF CONCEALMENT. IT CANNOT THEREFORE, BE SAID THAT THE REVISED RETURN WAS FILED AFTER DETECTION O F CONCEALMENT AND WAS NOT VOLUNTARY. THE TERM 'DETECTION' ITSELF IMPLIES THE ASSESSING OFFICER HAD REACHED A CONCLUSION BUT THE QUERY RAISED BY THE ASSESSING OF FICER WAS ONLY FIRST STEP IN DETECTION OF CONCEALMENT. IF THE ASSESSEE VOLUNTARI LY REVISED THE RETURN, IT COULD NOT BE SAID THAT IT DOES NOT FULFILL REQUIREMENTS O F SECTION 139(5) OF THE ACT.' THE FACTS OF THE PRESENT CASE ARE ALSO SIMILAR TO THE F ACTS OF THE AFORESAID REFERRED TO CASE. 8.2 SIMILARLY, IN THE CASE OF DY. CIT VS. TARUN AGARWAL 2009 (13) MTC 831, THE ITAT LUCKNOW BENCH 'A' HELD THAT 'THE ASSESSEE HAD SURRENDERED THE AMOUNT BEFORE ANY SPECIFIC DETECTION OF UNDISCLOSED INCOME OR EVEN BEFORE THE ISSUE OF NOTICE. EVEN THOUGH A GENERAL ENQUIRY WAS GOING ON AND NOTICES HAD BEEN ISSUED TO SOME OF HIS RELATIVES AND THE AMOUNT MIGH T HAVE BEEN SURRENDERED BECAUSE OF COMPULSION OF CIRCUMSTANCES, IT WAS NOT SUFFICIENT TO PENALISE THE ASSESSEE AS THE FACTUM OF DETECTION WAS NOT THERE.' IN THE INSTANT CASE ALSO, NOTHING IS BROUGHT ON RECORD THAT THERE WAS ANY DET ECTION AT THE LEVEL OF THE AO TO SUGGEST THAT THE ASSESSEE CONCEALED THE INCOME ON ACCOUNT OF CAPITAL GAINS, WHICH WAS OFFERED FOR TAXATION SUO MOTU IN THE REVI SED RETURN. 8.3 MERELY BECAUSE A NOTICE U/S 143(2) HAD ALREA DY BEEN ISSUED AND THE ASSESSEE FILED REVISED RETURN THEREAFTER, DISCLOSIN G ADDITIONAL INCOME TOWARDS CAPITAL GAINS, WHICH WAS NOT CORRECTLY SHOWN IN TH E ORIGINAL RETURN, DOES NOT TANTAMOUNT TO DETECTION OF CONCEALMENT OF INCOME U/ S. 271(1)(C) OF THE ACT . ITA N O.2970 /DEL./2012 12 HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF CI T V. S.V. ELECTRICALS P. LTD., 155 TAXMAN 158 AND HONBLE JHARKHAND HIGH COURT I N CIT V. ASHIM KUMAR AGARWAL, 153 TAXMAN 226 HELD THAT WHERE THE ASSESS EE SURRENDERS HIS FULL INCOME, THOUGH AT A LATER STAGE, THERE WAS NO QUEST ION OF ANY CONCEALMENT ON HIS PART AND CONSEQUENTLY, NO PENALTY UNDER SECTION 271 (1)(C) WAS LEVIABLE, AND THAT A OMISSION FROM RETURN OF INCOME DID NOT AMOUNT TO CONCEALMENT. HONBLE JURISDICTIONAL HIGH COURT WHILE ADJUDICATING THE IS SUE OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT IN THE CASE OF CIT VS. HARNARA IN IN THEIR DECISION DATED 31 ST OCTOBER,2011 IN ITA NO.2072/2010 CONCLUDED THAT SURRENDER OF THE AMOUNT BY THE ASSESSEE AFTER RECEIPT OF THE QUESTIONNAIRE COU LD NOT LEAD TO AN INFERENCE THAT IT WAS NOT VOLUNTARY, IN THE ABSENCE OF ANY MATERIA L ON RECORD TO SUGGEST THAT IT WAS BOGUS OR UNTRUE. IT IS FURTHER EVIDENT THAT THE RE WAS NEITHER ANY DETECTION NOR ANY INFORMATION IN THE POSSESSION OF THE REVENUE WH ICH MIGHT LEAD TO A CONCLUSION THAT THERE WAS A DETECTION BY THE REVENU E OF CONCEALMENT. ACCORDINGLY, THE QUESTION OF LAW FRAMED IS ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 9.. IN THE INSTANT CASE, THE ASSESSEE VOLUNTARY DISCLOSED ADDITIONAL INCOME DURING THE COURSE OF ASSESSMENT P ROCEEDINGS AND PAID TAX THEREON. IN THE LIGHT OF VIEW TAKEN IN THE AFORESAID DECISIONS , IT CANNOT BE SAID IN THE CASE BEFORE US, ADDITION AL INCOME DISCLOSED DURING THE COURSE OF ASSESSMENT PR OCEEDINGS WAS NOT VOLUNTARY OR THAT THE ASSESSEE WANTED TO CONCEA L THE INCOME. EVEN THOUGH THE REVISED RETURN WAS FOUND TO BE INVA LID, THE AO ACCEPTED THE INCOME AS DECLARED IN THE REVISED RETU RN AND COMPUTATION. THE AO DID NOT BRING ANY MATERIAL ON RECORD THAT THE DECL ARATION OF INCOME MADE BY THE ASSESSEE IN HIS REVISED RETURN OR HIS EXPLANATION W AS NOT BONAFIDE. IN THESE CIRCUMSTANCES, THERE APPEARS TO BE NO BASIS FOR IMP OSITION OF PENALTY ON THE GROUND THAT THE ASSESSEE FURNISHED INACCURATE PART ICULARS OF INCOME. SINCE THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL NOR BROUGHT TO OUR NOTICE ANY ITA N O.2970 /DEL./2012 13 CONTRARY DECISION SO AS TO ENABLE US TO TAKE A DIFF ERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE. THEREFORE, GROUND NO.1 I N THE APPEAL IS DISMISSED. 10.. NO ADDITIONAL GROUND HAVING BEEN RAISED IN TE RMS OF RESIDUARY GROUND NO.2 IN THE APPEAL; ACCORDINGLY, THIS GROUND IS ALSO DISMISSED. 11. NO OTHER PLEA OR ARGUMENT WAS MADE BEFORE US. 12. IN THE RESULT, APPEAL IS DISMISSED. SD/- SD/- (A.D. JAIN) (A.N. PAHUJA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NS COPY OF THE ORDER FORWARDED TO :- 1. ASSESSEE 2. ASSISTANT CIT,PANIPAT CIRCLE,PANIPAT 3. CIT CONCERNED 4. CIT(A)- KARNAL. 5. DR, ITAT A BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI ORDER PRONOUNCED IN OPEN COURT