SMT. NEETA K. MODHWADIA, MUMBAI V. THE ITO 22(1)-4, NAVI MUMBAI

ITA 3060/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1706 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 07-06-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 06-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MOHANTY
• Assessee Lawyers: SHAILESH N DOSHI
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI BEFORE SHRI D.K. AGARWAL, J.M AND SHRI A.L. GEHLOT , A.M. ITA NO. 3060/M/2009 ASSESSMENT YEAR: 2005-06 SMT. NEETA K. MODHWADIA, APPELLANT 7, KAILASH CASTLE, VALLABHBAUG LANE, PLOT NO. 193, GHATKOPAR (EAST) MUMBAI 400 077 (PAN ACPPM3788A) VS. INCOME TAX OFFICER 22(1)-4, RESPONDENT TOWER NO. 6, 4TH FLOOR, VASHI RAILWAY STATION COMPLEX, VASHI, NAVI MUMBAI 400 703 APPELLANT BY : MR. SHAILESH N. DOSHI RESPONDENT BY : MR. S.K. MOHANTY ORDER PER A.L. GEHLOT, A.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A)-XXII, MUMBAI, PASSED ON 08.02.2008 FOR THE ASSESSMENT YEAR 2004-05. 2. THE ASSESSEE HAS RAISED 6 GROUNDS OF APPEAL, THE SUM AND SUBSTANCE OF WHICH IS AGAINST THE ACTION OF THE CIT (A) IN CONFIRMING THE PENALTY OF RS. 2,26,163/- LEVIED BY THE AO U/S 271(1)(C) OF THE ACT. 3. THE FACTS OF THE FACTS OF THE AS NOTED BY THE CI T(A) IN HIS ORDER AT PAGE 2, ARE AS UNDER:- ON PERUSAL OF THE DETAILS FILED IT WAS FOUND THAT T HE ASSESSEE HAD PURCHASED ONE SHOP GODOWN NO. F (ADMEASURING 11 143 SQ.FT.) AT THANE ALONG WITH HER HUSBAND ON 17.11.20 03. THIS SHOP WAS SUBDIVIDED INTO 5 SHOPS AND SOLD ON 21.11. 2003 TO 5 DIFFERENCE PARTIES, I.E. WITHIN FOUR DAYS. SUBSEQUENT TO THIS, THE ASSESSEE AGAIN PURCHASED A SHOP IN GHATKOPAR ON 7.2.2004. THIS NEW SHOP WAS GIVEN ON R ENT. ITA NO. 3060/M/08 NEETA K. MODHWADIA 2 DURING THE ASSESSMENT PROCEEDINGS, THE THEN ASSESSI NG OFFICER FOUND THAT THE WHOLE TRANSACTION RELATED TO THE PUR CHASE/SUB- DIVISION/SALE OF GODOWN AT THANE IS NOT DISCLOSED I N THE RETURN OF INCOME. THE GAIN OR LOSS IS ALSO NOT REFLECTED/O FFERED IN THE COMPUTATION OF TOTAL INCOME, AND/OR IN THE RETURN. VIDE ORDER SHEET NOTING DATED 1.2.2006 AND LETTER D ATED 3.8.2006, 7.12.2006, THE ASSESSEE WAS REQUESTED TO FURNISH DETAILS IN RESPECT OF GAIN ON SALE OF THE SHOP GODO WN AT THANE. NEEDLESS TO MENTION HERE THAT THE LETTERS WERE ADDR ESSED TO THE ASSESSEE AND PROPERLY ACKNOWLEDGED BY HER. VIDE LETTER DATED 31.01.2006, THE AUTHORIZED REPRES ENTATIVE OF THE ASSESSEE HAS INFORMED THAT THE ASSET (SHOP) WAS HELD AS BLOCK OF ASSETS AND HAS FURNISHED THE STATEMENT OF BLOCK OF ASSETS SHOWING OPENING BALANCE, ADDITION AND DELETI ON. THE THEN AO ASKED THAT HOW THE ABOVE ASSET IS CLAI MED TO BE HELD AS BLOCK OF ASSET? IT IS SUBMITTED BY THE AUTH ORIZED REPRESENTATIVE THAT THE ASSESSEE PURCHASED THE GODO WN SHOP AT THANE WITH THE INTENTION TO STAR HER BUSINESS, D UE TO SOME REASONS SHE DID NOT START THE BUSINESS AND SOLD THE PREMISES. IT IS HOWEVER, STATED BY THE AUTHORIZED REPRESENTAT IVE THAT THE ASSESSEE IS SQUARELY COVERED WITHIN THE PARAMETERS OF SECTION 50 PRESCRIBED IN THE INCOME-TAX ACT. THE THEN AO HAS GIVEN FINAL OPPORTUNITY VIDE NOTICE DATED 19.12.2006 WHICH WAS RECEIVED BY THE ASSESSEE HERSE LF ON THE SAME DAY. ON 27.12.2006, THE ASSESSEE ALONG WITH HER HUSBAND ATTENDED AND OFFERED THE GAIN TO TAX AS CAPITAL GAIN ON SALE OF PROPERTY AT THANE. 3. THE PENALTY LEVIED BY THE AO HAS BEEN CONFIRMED BY THE CIT(A). 4. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. THE CRUX OF THE MATTER TO BE EXAMINED IS WHETHER PENALTY UNDER SECTION 271(1) READ WITH TH E EXPLANATION- 1 OF SECTION 271(1) IS APPLICABLE TO THE FACTS OF T HE CASE UNDER CONSIDERATION. THE PROCEEDINGS UNDER SECTION 271(1) (C) CAN BE INITIATED ONLY IF THE A.O OR THE FIRST APPELLATE AU THORITY IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER THE ACT. IF HE IS SATISFIED AS PER CLAUSE (C) THAT ANY PERSON HAS CONCEALED THE PA RTICULARS OF HIS INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF S UCH INCOME, HE ITA NO. 3060/M/08 NEETA K. MODHWADIA 3 MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PEN ALTY THE SUM MENTIONED IN SUB-CLAUSE (III) OF CLAUSE (C). THE EX PRESSION USED IN CLAUSE (C) IS HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THEREFORE, BOTH IN CASES OF CONCEALMENT AND INACCURACY THE PHRASE PARTICULARS OF INCOME ARE USED. IT WILL BE NOTED THAT AS REGARDS CONCEALMENT, THE EXPRESSION IN CLAUSE (C) IS HAS CONCEALED THE PART ICULARS OF HIS INCOME AND NOT HAS CONCEALED HIS INCOME. THE EXP RESSIONS 'HAS CONCEALED THE PARTICULARS OF INCOME' AND 'HAS FURNI SHED INACCURATE PARTICULARS OF INCOME' HAVE NOT BEEN DEFINED EITHER IN SECTION 271(1)(C) OR ELSEWHERE IN THE ACT. ONE THING IS CER TAIN THAT THESE TWO CIRCUMSTANCES ARE NOT IDENTICAL IN DETAIL ALTHO UGH THEY MAY LEAD TO THE SAME EFFECT, NAMELY, KEEPING OFF A CERT AIN PORTION OF INCOME. THE FORMER IS DIRECT AND THE LATTER MAY BE INDIRECT IN ITS EXECUTION. 5. THE WORD 'CONCEAL' IS DERIVED FROM THE LATIN CONCELARE WHICH IMPLIES CON+CELARE TO HIDE. WEBSTER IN HIS NEW INTE RNATIONAL DICTIONARY EQUATES ITS MEANING 'TO HIDE OR WITHDRAW FROM OBSERVATION, TO COVER OR KEEP FROM SIGHT; TO PREVEN T THE DISCOVERY OF; TO WITHHOLD KNOWLEDGE OF'. THE OFFENCE OF CONCEALMENT IS THUS A DIRECT ATTEMPT TO HIDE AN ITEM OF INCOME OR A PORTI ON THEREOF FROM THE KNOWLEDGE OF THE INCOME-TAX AUTHORITIES. THERE IS STRICT LIABILITY ON THE ASSESSEE FOR CONCEALMENT OR FOR GIVING INACC URATE PARTICULARS WHILE FILING THE RETURN. THE PENALTY UNDER THAT PRO VISION IS A CIVIL LIABILITY. WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY. IT IS OBVIOUS THAT THE PENAL PROVISIONS WOULD OPERATE WHEN THERE IS CONCEALMENT OF PARTICUL ARS OF INCOME OR A FAILURE OF DUTY TO DISCLOSE FULLY AND TRULY PA RTICULARS OF INCOME, IMPOSED UNDER THE ACT AND THE RULES THERE UNDER. TH E DUTY IS ENJOINED UPON A PERSON TO MAKE A CORRECT AND COMPLE TE DISCLOSURE OF HIS INCOME AND IT IS ONLY WHEN HE FAILS IN HIS D UTY BY NOT DISCLOSING HIS INCOME OR PART THEREOF, HE CONCEALS THE PARTICULARS OF HIS INCOME. THE DUTY IS ENJOINED UPON HIM TO MAKE A COMPLETE DISCLOSURE OF HIS INCOME AS WELL AS A CORRECT DISCL OSURE. THEREFORE, ITA NO. 3060/M/08 NEETA K. MODHWADIA 4 IF THE DISCLOSURE MADE OF THE PARTICULARS OF INCOME IS INCORRECT, THEN ALSO HE COMMITS BREACH OF HIS DUTY. SUCH DEFAU LTS ENTAIL THE PENAL CONSEQUENCES CONTEMPLATED BY SECTION 271(1)(C )(III). 6. IN ADDITION TO MAIN PROVISIONS OF CONCEALMENT HAS CONCEALED THE PARTICULARS OF HIS INCOME OR HAS FU RNISHED INACCURATE PARTICULARS OF SUCH INCOME THERE ARE DE EMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED .THE DEEMED CONCEALMENT IS PROVIDED IN EXPLANATIONS .OFTEN A QUESTION AROSE WHETHER IN CASES WHERE ADDI TIONS OR DISALLOWANCES MADE BY THE ITO THE PENAL PROVISIONS OF SECTION271 (1) WOULD ATTRACT. EXPLANATION 1 TAKES CARE OF TH IS SITUATION. THE EXPLANATION TO SECTION 271(1) OF THE ACT READS AS U NDER:- EXPLANATION 1.-WHERE IN RESPECT OF ANY FACTS MATE RIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON U NDER THIS ACT,- (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR O FFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER TO BE FA LSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLAN ATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SA ME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAV E BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLO WED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESU LT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB-S ECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 7. A CONSPECTUS OF THE EXPLANATION MAKES IT CLE AR THAT THE STATUTE VISUALISED THE ASSESSMENT PROCEEDINGS AND P ENALTY PROCEEDINGS TO BE WHOLLY DISTINCT AND INDEPENDENT O F EACH OTHER. IN ESSENCE, THE EXPLANATION IS A RULE OF EVIDENCE. PRE SUMPTIONS WHICH ARE REBUTTING TABLE IN NATURE ARE AVAILABLE TO BE D RAWN. THE INITIAL BURDEN OF DISCHARGING THE ONUS OF REBUTTAL IS ON TH E ASSESSEE. THE RATIONALE BEHIND THIS VIEW IS THAT THE BASIC FACTS ARE WITHIN THE SPECIAL KNOWLEDGE OF THE ASSESSEE. SECTION 106 OF T HE INDIAN ITA NO. 3060/M/08 NEETA K. MODHWADIA 5 EVIDENCE ACT, 1872, GIVES STATUTORY RECOGNITION TO THIS UNIVERSALLY ACCEPTED RULE OF EVIDENCE. THERE IS NO DISCRETION C ONFERRED ON THE ASSESSING OFFICER AS TO WHETHER HE CAN INVOKE THE E XPLANATION OR NOT. EXPLANATION 1 COMES INTO OPERATION WHEN, IN RE SPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME O F ANY PERSON, THERE IS FAILURE TO OFFER AN EXPLANATION OR AN EXPL ANATION IS OFFERED WHICH IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR THE FIRST APPELLATE AUTHORITY, OR AN EXPLANATION IS OFFERED W HICH IS NOT SUBSTANTIATED. IN SUCH A CASE, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME IS DEEMED TO REPRESENT T HE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. A S PER THE PROVISION OF EXPLANATION 1, THE ONUS TO ESTABLISH T HAT THE EXPLANATION OFFERED WAS BONA FIDE AND ALL FACTS REL ATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS INCOME HAVE BEEN DISCLOSED BY HIM WILL BE ON THE PERSON CHARGED WITH CONCEALME NT. THE EXPLANATION OF THE ASSESSEE FOR THE PURPOSE OF AVOI DANCE OF PENALTY MUST BE AN ACCEPTABLE EXPLANATION; IT SHOULD NOT BE A FANTASTIC OR FANCIFUL ONE. AS INDICATED ABOVE, THE CONSEQUENCE F OLLOWS AS A MATTER OF LAW. THE BURDEN IS ON THE ASSESSEE. IF HE FAILS TO DISCHARGE THAT BURDEN, THE PRESUMPTION THAT HE HAD CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF IS AVAILABLE TO BE DRAWN. 8. IN THE CASE UNDER CONSIDERATION, THE CRUX OF THE MATTER IS THAT THE ASSESSEE PURCHASED A SHOP, WHICH HAS BEEN DIVIDED INTO 5 SHOPS AND SOLD TO 5 DIFFERENT PARTIES AND THE SAME WAS SHOWN IN THE BLOCK OF ASSETS WHEREAS THE AO WAS OF THE VIEW THAT THE ASSESSEE SHOULD HAVE OFFERED CAPITAL GAIN ON SALE O F SUCH ASSETS. THE ASSESSEE ON THE ADVISE OF HIS CONSULTANT OFFERE D THE GAIN TO TAX AS CAPITAL GAIN ON SALE OF SUCH PROPERTY. THE CASE OF THE AO WAS THAT HOW THE ASSESSEE HAS CLAIMED THE SAID ASSETS I N BLOCK OF ASSET. UNDER THE CIRCUMSTANCES, THE CIT(A) WHILE CONFIRMIN G THE PENALTY ORDER HELD THAT IT IS A CASE OF CONCEALMENT OF INCO ME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THIS CONNEC TION, THE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD., [2010] 322 ITR 158 (SC) HAS LAID DOWN THE LAW AS UN DER:- ITA NO. 3060/M/08 NEETA K. MODHWADIA 6 A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INC OME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHE D INACCURATE PARTICULARS OF HIS INCOME. THE MEANING O F THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRA CE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIV EN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PART ICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROV ISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHIN G WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAU SE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH TH E PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS A RE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRAC T PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE , NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS . WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT S USTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING IN ACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. S UCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INAC CURATE PARTICULARS. 9. IN THE LIGHT OF THE ABOVE DISCUSSION AND IN THE LIGHT OF RATIO LAID DOWN BY THE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. CITED SUPRA, WE ARE OF THE CONSIDERED VIE W THAT THE CASE UNDER CONSIDERATION IS NEITHER A CASE OF CONCEALMEN T OF PARTICULARS OF INCOME NOR FURNISHING OF INACCURATE PARTICULARS OF ITS INCOME AS THE ASSESSEE HAS FURNISHED ALL THE PARTICULARS AND THE AO HAS MADE SIMPLE AND CORRECT COMPUTATION OF INCOME IN ACCORDA NCE WITH LAW, THEREFORE, SUCH CASE IS NEITHER CONCEALMENT OF INCO ME NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE REFORE, WE HEREBY CANCEL THE PENALTY LEVIED U/S 271(1)(C) OF T HE ACT. ITA NO. 3060/M/08 NEETA K. MODHWADIA 7 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. PRONOUNCED IN OPEN COURT ON THIS 11 TH DAY OF JUNE, 2010. SD/- SD/- (D.K. AGARWAL) (A.L. GEHLO T) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED: 11 TH JUNE, 2010. COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, I BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV