M/s. Joseph George & Co., Pathanapuram V. The ITO, Kollam

ITA 323/COCH/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3925 (ITAT-COCHIN)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 18-05-2017
• Assessment Year: 1996-1997
• Appeal Filed On: 18-07-2016
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: T V HARIHARAN
• Keywords: Depreciation; Cost of acquisition; Initiation of penalty proceedings
• Section: 143(3); 147; 27; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI ABRAHAM P. GEORGE, AM & GEORGE GEORGE K., JM I.T.A. NO.323/COCH/2016 ASSESSMENT YEAR : 19 96 - 97 M/S. JOSEPH GEORGE & CO., SAYANNA TOURIST HOME, PATHANAPURAM [PAN: AABPJ 9965G] VS. THE INCOME TAX OFFICER, WARD - 2, KOLLAM. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) ASSESSE E BY SHRI T.V. HARIHARAN, C A REVENUE BY SHRI A. DHANARAJ, SR. DR DATE OF HEARING 1 8 / 0 5 / 201 7 DATE OF PRONOUNCEMENT 19 TH / 0 5 /201 7 O R D E R PER GEORGE GEORGE K.,JUDICIAL MEMBER: THIS APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A), TRIVANDRUM DATED 12/05/2016. THE RELEV ANT ASSESSMENT YEAR IS 1996-97. ITA NO.323/COCH/2016 2 2. THE SOLITARY ISSUE THAT ARISES FOR OUR CONSIDER ATION IS WHETHER THE CIT(A) IS JUSTIFIED IN CONFIRMING THE PENALTY LEVIED U/S. 271 (1)(C) OF THE I.T. ACT AMOUNTING TO RS. 2,34,304/-. 3 . THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINES S OF RUNNING A LODGE. IT ALSO DERIVES RENTAL INCOME FROM LETTING OUT OF BUILDING TO FEDERAL BANK AND NATIONAL TRADING CO. FOR THE ASSESSMENT YEAR 1996-97, THE A SSESSEE DID NOT FILE RETURN OF INCOME VOLUNTARILY. PURSUANT TO THE ISSUE OF NOTIC E U/S. 148 OF THE ACT THE ASSESSEE FILED RETURN OF INCOME DECLARING A LOSS OF RS.1,26,800/-. THE ASSESSEE, DURING THE YEAR UNDER CONSIDERATION, HAD SOLD 7.5 C ENTS OF LAND AND THREE SHOPS. IN THE RETURN OF INCOME FILED PURSUANT TO THE NOTIC E ISSUED U/S. 148 OF THE ACT, THE ASSESSEE HAD NOT OFFERED ANY CAPITAL GAINS. TH E ASSESSMENT U/S. 143(3) READ WITH SECTION 147 OF THE ACT WAS COMPLETED BY THE AS SESSING OFFICER VIDE ORDER DATED 11/01/2001 WHEREIN THE ASSESSING OFFICER HAD CALCULATED SHORT TERM CAPITAL GAINS OF RS.6,43,779/- ON SALE OF SHOPS. T HE CALCULATION OF SHORT TERM CAPITAL GAINS IS AS FOLLOWS: THE SOLD SHOP BUILDING RS.10,10, 000/- (SALE CONSIDERATION) RS. 366,221 (WDV) RS. 643,779/- ITA NO.323/COCH/2016 3 3.1 THE ASSESSING OFFICER HAS ALSO BROUGHT TO TAX SALE OF 7.5 CENTS OF LAND AS LONG TERM CAPITAL GAINS AMOUNTING TO RS.3,58,800/-. THE DETAILS OF CALCULATION OF LONG TERM CAPITAL GAINS ON SALE OF 7.5 CENTS OF LAN D ARE AS FOLLOWS: SALE CONSIDERATION RS.4,15,000/- INDEXED COST OF ACQUISITION RS. 56,200/- RS.3,58, 800/- 3.2 THE ADDITIONS MADE IN THE QUANTUM ASSESSMENT WITH REFERENCE TO SHORT TERM AND LONG TERM CAPITAL GAINS WERE CONFIRMED BY THE CIT(A) AND THE ITAT. 4. PURSUANT TO THE CONFIRMATION OF THE LONG TER M AND SHORT TERM CAPITAL GAINS BY THE ITAT, THE ASSESSING OFFICER LEVIED MINIMUM P ENALTY U/S. 271(1)(C) OF THE ACT AMOUNTING TO RS.2,34,304/-. THE RELEVANT OBSER VATION OF THE ASSESSING OFFICER LEVYING THE PENALTY U/S. 271(1)(C) OF THE A CT READS AS FOLLOWS: I HAVE CONSIDERED THE ABOVE EXPLANATION IN DETAIL. AS MENTIONED ABOVE, THE ASSESSMENT WAS COMPLETED AFTER MAKING ADDITION ACCOUNT OF CAPITAL GAINS OF RS.10,02,579/-. DURING THE YEAR, THE ASSE SSEE HAD SOLD 71/2 CENTS OF LAND AND 3 SHOP ROOMS IN SAYANNA LODGE PRE MISES FOR AN AGGREGATE CONSIDERATION OF RS.14,25,000/-. THIS CO NSISTS OF RS.10,10,000/- FOR THE BUILDING AND RS.4,15,000/- F OR THE LAND. IN ITS RETURN OF INCOME, THE ASSESSEE HAS NOT COMPUTED ANY CAPITAL GAINS. SALE OF THE LAND WITH BUILDING HAS NOT BEEN SHOWN IN THE PROFIT AND LOSS ACCOUNT ALSO. THOUGH THE ASSESSEE HAD RECEIVED THE SALE CONSIDERATION, IT WAS ACCOUNTED AS LAND SALE ADVANCE AND SHOWN AS A L IABILITY IN THE BALANCE SHEET AS AT 31.3.1996. IT WAS ON EXAMINATI ON OF THE BOOKS OF ACCOUNT AND ON INVESTIGATION THAT FOLLOWED, THE FAC T OF THE ACTUAL SALE OF THE PROPERTY CAME TO LIGHT. ACCORDINGLY THE ASSESS ING OFFICER HAD ITA NO.323/COCH/2016 4 COMPUTED THE CAPITAL GAINS AND BROUGHT THE SAME TO TAX AS DETAILED BELOW: SHORT TERM CAPITAL GAINS ON SALE OF BUILDING ON 643,779 WHICH DEPRECIATION WAS CLAIMED AND ALLOWED LONG TERM CAPITAL GAINS ON SALE OF LAND 358,800 IN APPEAL THESE ADDITIONS WERE REDUCED TO RS.4,20,4 13/- AND RS.3,30,700/- RESPECTIVELY. IT WAS ON THIS CONCEALM ENT THAT THE PENALTY PROCEEDINGS U/S. 271(1)(C) WERE INITIATED. THIS FAC T WAS ALSO MENTIONED IN THE ASSESSMENT ORDER. FURTHER PENALTY NOTICE WAS AL SO SENT ALONG WITH THE ASSESSMENT ORDER. I FIND FROM THE RECORDS THAT IT W AS ONLY AFTER FORMING AN OPINION AND SATISFIED HIMSELF ABOUT THE CONCEALMENT OF THE PARTICULARS OF INCOME THAT THE THEN ASSESSING OFFICER HAD ORDERED THE INITIATION OF PENALTY PROCEEDINGS U/S. 271(1)(C) IN THIS CASE. T HE CASE LAWS RELIED ON BY THE ASSESSEE IS NOT SIMILAR TO THE FACTS OF THIS CASE AND IS DISTINGUISHABLE. THE HON. MADRAS HIGH COURT IN THE CASE OF M. SAJJAN RAJ NAHAR VS. CIT (280 ITR 230) HAVE HELD THAT INDICATI ON IN THE ASSESSMENT ORDER REGARDING INITIATION OF PENALTY IS SUFFICIENT . FURTHER THE HON. KERALA HIGH COURT HAVE ALSO HELD IN THE CASE OF CIT VS. P. M. CELINE REPORTED IN 236 ITR 989 THAT IT IS NOT NECESSARY TO RECORD THE SATISFACTION IN THE ASSESSMENT ORDER ITSELF. IN VIEW OF THE ABOVE, I R EJECT THE OBJECTION RAISED BY THE ASSESSEE AGAINST THE LEVY OF PENALTY U/S. 27 1(1)(C). 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICE R LEVYING PENALTY U/S. 271(1)(C) OF THE ACT, THE ASSESSEE PREFERRED AN APP EAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) CONFIRMED THE IMPOSITION OF PENALTY AND DISMISSED THE APPEAL FILED BY THE ASSESSEE. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOWS: 4. I CAREFULLY EXAMINED THE FACTS OF THE CASE AND CONSIDERED THE RIVAL CONTENTIONS. THE APPELLANTS EXPLANATION THAT THE AMOUNT RECEIVED TOWARDS SALE OF LAND AND BUILDING WAS WRONGLY TREAT ED AS ADVANCE BY THE ITA NO.323/COCH/2016 5 ACCOUNTANT CANNOT BE ACCEPTED SINCE NOTHING WAS BRO UGHT INTO THE RECORD SO AS TO PROVE THAT IT WAS NOT THE SALE CONSIDERATI ON WHICH WAS ACTUALLY RECEIVED BUT ONLY THE ADVANCE AGAINST THE SALE TO B E MADE HAD ACTUALLY BEEN RECEIVED. HAD THE ADVANCE REALLY BEEN RECEIVE D AND SHOWN IN THE BALANCE SHEET AS LIABILITY THEN THE APPELLANT SHOUL D HAVE EXPLAINED, HOW MUCH WAS THE ADDITIONAL AMOUNT TOWARDS SALE CONSIDE RATION HAD SUBSEQUENTLY BEEN RECEIVED, WHEN THAT ADDITIONAL AM OUNT WAS BROUGHT TO TAX AND WHEN THE SALE DEED WAS EXECUTED. NONE OF T HESE HAD BEEN EXPLAINED BY THE APPELLANT AT ANY POINT OF GIVEN TI ME. ANOTHER ARGUMENT THAT HE WAS A HEART PATIENT AND HAD TO GO TO HOSPIT AL OFTEN AND THEREBY ENTRUSTED THE WORK OF ACCOUNT KEEPING TO A PART TIM E ACCOUNT, WHO IN TURN WRONGLY TREATED THE AMOUNT RECEIVED AS ADVANCE AGAI NST SALE, IS FACTUALLY INCORRECT SINCE THE APPELLANT HAD NOT BEEN DIAGNOSE D DURING THE YEAR UNDER CONSIDERATION BUT IN OCTOBER, 1994 AT INSTITU TE OF CARDIO-VASCULAR DISEASES, MADRAS, IN SEPTEMBER, 1996 AT MADRAS MEDI CAL MISSION AND AGAIN AT MADRAS MEDICAL MISSION IN JANUARY, 1998. THIS APART, IT IS NOT THE APPELLANT WHO VOLUNTARILY DISCLOSED THE INCIDENCE O F SALE TO THE ASSESSING OFFICER BUT IT WAS ON EXAMINATION OF BOOKS OF ACCOU NT AND ON INVESTIGATION THAT FOLLOWED, THE FACT OF THE ACTUAL SALE OF THE P ROPERTY CAME TO LIGHT. CONSIDERING THE FACT THAT THE SALE OF LAND AND BUIL DING TOOK PLACE DURING THE YEAR UNDER CONSIDERATION AND THE SALE CONSIDERA TION RECEIVED HAD NOT BEEN CREDITED IN THE PROFIT & LOSS ACCOUNT INSTEAD SHOWN IN THE BALANCE SHEET AS LIABILITY, IT CAN BE SAID THAT THE APPELLA NT HAD INTENTION NOT ONLY TO HIDE THE INCIDENCE OF SALE BUT ALSO TO CONCEAL THE INCOME/CAPITAL GAIN EARNED WARRANTING THE PENALTY TO BE LEVIED U/S. 271 (1)(C). IT IS NOT THE CASE OF THE APPELLANT THAT THE PROCESS OF SALE HAD NOT COMPLETED DURING THE YEAR UNDER CONSIDERATION BUT ADVANCE WAS TAKEN FOR THE FUTURE SALE. IT IS ALSO NOT THE CASE OF THE APPELLANT THAT THE W RITTEN DOWN VALUE AGAINST THE LAND AND BUILDING WHICH WERE SOLD GOT REDUCED T O THE EXTENT THE ALLEGED ADVANCE WAS RECEIVED AND DEPRECIATION WAS C LAIMED TO A LOWER AMOUNT WHILE TREATING THE ASSETS SOLD AS PART OF BL OCK OF ASSETS. JUST BY SHOWING THE AMOUNT RECEIVED AGAINST THE SALE OF LAN D AND BUILDING AS ADVANCE RECEIVED, IT HAS BEEN PROVED BEYOND DOUBT T HAT THE APPELLANT NOT ONLY HAD CONCEALED THE CAPITAL GAIN EARNED BUT ALSO FILED INACCURATE PARTICULARS OF SUCH INCOME. HENCE, I FIND NO INFIRM ITY IN THE PENALTY ORDER PASSED U/S. 271(1)(C). IN VIEW OF ALL THE ABOVE, T HE HONBLE DELHI HIGH COURT DECISIONS RELIED ON BY THE APPELLANT ARE TOTA LLY MISPLACED SINCE CONCEALMENT OF INCOME HAS BEEN ESTABLISHED BEYOND D OUBT AND THE ASSESSING OFFICER HAS RIGHTLY MENTIONED IN THE ASSE SSMENT ORDER THAT THE PENALTY PROCEEDINGS U/S. 271(1)(C) HAVE BEEN INITIA TED SEPARATELY FOR CONCEALMENT OF INCOME. THUS, THE PENALTY LEVIED IS HEREBY CONFIRMED. ITA NO.323/COCH/2016 6 6. THE ASSESSEE BEING AGGRIEVED, HAS FILED THE PR ESENT APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE REITERA TED THE SUBMISSIONS MADE BEFORE THE INCOME TAX AUTHORITIES. IN FURTHERANCE , IT WAS CONTENDED THAT THE ASSESSEE TREATED THE LAND AND SHOP BUILDING AS BUSI NESS ASSETS IN ACCOUNTS AND ONLY DUE TO CHANGE IN INTERPRETATION OF CLASSIFICAT ION ASSETS, ASSESSMENT OF CAPITAL GAIN HAS BEEN MADE. IT WAS SUBMITTED THAT LACK OF KNOWLEDGE OF PART TIM E ACCOUNTANT ENGAGED FOR WRITING THE ACCOUNTS AND LAC K OF COMMUNICATION BY MANAGING DIRECTOR DUE TO ILLNESS WAS THE REASON FOR NOT OFFERING CAPITAL GAINS. 6.1 THE LD. DR ON THE OTHER HAND SUPPORTED THE OR DERS OF THE ASSESSING OFFICER AND THE CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. ADMITTEDLY, IN THIS CASE, THE ASSESSEE HAS NOT FILE D ITS RETURN OF INCOME VOLUNTARILY. THE ASSESSING OFFICER ISSUED NOTICE U /S. 148 OF THE ACT AND PURSUANT TO THE NOTICE U/S. 148 OF THE ACT, THE ASSESSEE HAD FILED LOSS RETURN OF RS.1,26,800/-. EVEN IN THE RETURN FILED PURSUANT TO THE ISSUE OF NOTICE U/S. 148 OF THE ACT, THE ASSESSEE HAD NOT DISCLOSED THE FACT OF SALE OF 7.5 CENTS OF LAND AND THREE SHOPS. THE SALE OF 7.5 CENTS OF LAND AND THR EE SHOPS IS NOT AN IGNORABLE BUSINESS TRANSACTION AND THE SAME HAD RESULTED IN L ONG TERM CAPITAL GAINS IN RESPECT OF LAND AND SHORT TERM CAPITAL GAINS IN RES PECT OF SHOPS. THE ASSESSING OFFICER, AFTER EXAMINATION OF THE BOOKS OF ACCOUNT AND INVESTIGATING THE ABOVE ITA NO.323/COCH/2016 7 TRANSACTIONS CAME TO LIGHT THAT THE ASSESSEE HAD SO LD 7.5 CENTS OF LAND AND THREE SHOPS. HAD THERE BEEN NO PROPER EXAMINATION BY THE ASSESSING OFFICER, THE INCOME CHARGEABLE TO TAX ON LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL GAINS WOULD HAVE ESCAPED ASSESSMENT. AS MENTIONED EARLIE R, NO RETURN OF INCOME WAS FILED VOLUNTARILY AND EVEN IN THE RETURN OF INCOME FILED PURSUANT TO THE 148 NOTICE, THE ASSESSEE DID NOT DISCLOSE ANY LONG TERM CAPITAL GAINS OR SHORT TERM CAPITAL GAINS. THEREFORE THE ASSESSEE HAD FURNISHE D INACCURATE PARTICULARS OF INCOME AND THERE IS A DELIBERATE INTENT TO CONCEAL INCOME. IN THE FACTS AND CIRCUMSTANCE OF THE CASE, WE ARE OF THE VIEW THAT T HE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT IS JUSTIFIED. IN TAKING THE A BOVE VIEW, WE RELY ON THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF U NION OF INDIA VS. DHARMENDRA TEXTILES PROCESSORS (306 ITR 277) AND TH E JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. SMT. SOV A BAJORIA (232 ITR 202). 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 19 TH- 05-2017. SD/- SD/- (ABRAHAM P. GEORGE) ( GEORGE GEORGE K.) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE: KOCHI DATED: 19 TH MAY, 2017 GJ COPY TO: 1. M/S. JOSEPH GEORGE & CO., SAYANNA TOURIST HOME, PATHANAPURAM. ITA NO.323/COCH/2016 8 2. THE INCOME TAX OFFICER, WARD-2, KOLLAM ASSISTANT COMMISSIONER OF INCOME- TAX, CIRCLE-1, 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), TRIVAND RUM. 4. THE PR.COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRA R) I.T.A.T. , COCHIN