Shri Harshad Mafatlal Prajapati, Ahmedabad V. The Income Tax Officer, Ward-3(1), Ahmedabad

ITA 3333/AHD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8606 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 12-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVETIA
• Section: 2(14); 154

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA.NO.3333/AHD/2014 / ASSTT. YEAR: 2009-10 SHRI HARSHAD MAFATLAL PRAJPATI PROP. ANKIT BRICKS WORKS F/10, ARBUDA FLATS OPP: SABARMATI BUS STAND AHMEDABAD 380 005. PAN : AAYPP 0530 A VS ITO, WARD - 3(1) AMBAWADI AHMEDABAD. ./ ITA.NO. 3334/AHD/2014 / ASSTT. YEAR: 2009-10 SHRI JAYANTILAL MAFATLAL PRAJAPATI PROP. BRICKS WORKS F/10, ARBUDA FLATS OPP: SABARMATI BUS STAND AHMEDABAD 380 005. PAN : AAYPP 0531 B VS ITO, WARD - 3(1) AMBAWADI AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI S.N. DIVETIA, AR REVENUE BY : SHRI MUDIT NAGPAL, SR.DR / DATE OF HEARING : 03/08/2017 / DATE OF PRONOUNCEMENT: 11/09/2017 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEES ARE IN APPEAL BEFORE THE TRIBUNAL AGAINST ORDER OF LD.CIT(A)- II, AHMEDABAD DATED 13.8.2014 PASSED FOR THE ASSTT. YEAR 2009-10 ON THEIR RESPECTIVE APPEALS. ITA NO.3333 AND 3334 /AHD/2014 2 2. COMMON GRIEVANCE OF ASSESSEES, VIS. SHRI HARSHAD BHAI MAFATLAL PRAJAPATI AND SHRI JAYANTILAL MAFATLAL PRAJAPATI IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING PENALTY OF RS.93,729/- AND RS.3,84,00 0/- RESPECTIVELY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 3. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT THE FACTS ON ALL VI TAL POINTS ARE COMMON IN THE CASE OF BOTH APPELLANTS. IT EMERGES OUT FROM THE R ECORD THAT THE AO HAD RECEIVED INFORMATION THROUGH AIR WING EXHIBITING TH E FACT THAT TWO IMMOVABLE PROPERTIES BEARING LAND SURVEY NO.1124 AN D 1125 WERE SOLD BY BOTH THE APPELLANTS VIDE SALE DEED DATED 19.12.2008 . THESE LANDS WERE PURCHASED BY THEM ON 31.12.1985 AND 28.9.1990 RESPE CTIVELY. THERE WAS A GAIN OF RS.16,91,589/- IN EACH HAND OF THE APPELLAN TS. ACCORDING TO THE AO, THIS CAPITAL GAIN HAS NOT BEEN OFFERED BY THEM IN T HE RETURN FILED BY THEM. ACCORDINGLY, HE CONFRONTED THE ASSESSEE AS TO WHY T HIS GAIN SHOULD NOT BE ASSESSED. AFTER HEARING THE ASSESSEE, HE MADE ADDI TION AND INITIATED PENALTY PROCEEDINGS. 4. IN THE CASE OF SHRI HARSHAD MAFATLAL PRAJAPATI O RDER UNDER SECTION 154 OF THE INCOME TAX ACT WAS PASSED WHEREBY QUANTUM OF THE GAIN HAS BEEN REDUCED. THE AO HAS IMPOSED PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE GROUND THAT HAD THERE BEEN NO SCRUTINY ASSESSME NT, THESE APPELLANTS WOULD HAVE NOT DISCLOSED THE TAXABLE INCOME, HENCE, THEY HAVE CONCEALED PARTICULARS OF INCOME. APPEAL TO THE LD.CIT(A) DID NOT BRING A NY RELIEF TO THE ASSESSEE. 5. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD. SECTION 271(1)(C) OF THE INCOME TAX ACT, 1 961 HAS DIRECT BEARING ON THE CONTROVERSY. THEREFORE, IT IS PERTINENT TO TAK E NOTE OF THE SECTION. ITA NO.3333 AND 3334 /AHD/2014 3 '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) OR THE CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (A) AND (B)** ** ** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I)AND (INCOME-TAX OFFICER,)** ** ** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CL AUSE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF T AX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INACCURATE PARTICU LARS OF SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1- WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER 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 CIT TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIA L TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THE N, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME O R SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB- SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPE CT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 6. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THA T FOR VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS BEFORE THEM SH OULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS FAR AS THE QUANTIFICATION OF THE PENALTY IS CONCERNED, THE PENALTY IMPOSED UNDER THIS SECTION CAN RANGE IN BETWEEN 100 % TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF ITA NO.3333 AND 3334 /AHD/2014 4 INCOME OR FURNISHING INACCURATE PARTICULARS. THE OT HER MOST IMPORTANT FEATURES OF THIS SECTION IS DEEMING PROVISIONS REGARDING CON CEALMENT OF INCOME. THE SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERT AIN SITUATION, EVEN WITHOUT THERE BEING ANYTHING TO INDICATE SO, STATUTORY DEEM ING FICTION FOR CONCEALMENT OF INCOME COMES INTO PLAY. THIS DEEMING FICTION, BY WAY OF EXPLANATION I TO SECTION 271(1)(C) POSTULATES TWO SITUATIONS; (A) FI RST WHETHER IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCO ME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARNED CIT(APPEAL); AND, (B) WHERE IN RESPECT OF ANY FACT, MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND THE AS SESSEE FAILS, TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF THE TOTAL INCOME. UNDER FIRST SITUATION, THE DEEMING FICTION WOULD CO ME TO PLAY IF THE ASSESSEE FAILED TO GIVE ANY EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASS ESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CATEGORICAL FINDIN G TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FICTION WOULD COME TO PLAY BY THE FAILURE O F THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME AND IN ADDITION TO THIS THE ASSESSE E IS NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FIDE AND ALL THE FA CTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME HAV E BEEN DISCLOSED BY THE ASSESSEE. THESE TWO SITUATIONS PROVIDED IN EXPLANAT ION 1 APPENDED TO SECTION 271(1)(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMIN G FICTION COMES INTO PLAY IN THE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWANCE IN ITA NO.3333 AND 3334 /AHD/2014 5 COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSE OF SECTION 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE I NCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. 7. IN THE LIGHT OF THE ABOVE, WE HAVE GONE THROUGH THE RECORD. A PERUSAL OF THE RECORD WOULD SHOW THAT STAND OF THE ASSESSEE S BEFORE THE LD.REVENUE AUTHORITIES WAS THAT WHEN THEY HAVE ENTERED INTO AN AGREEMENT FOR SALE OF THIS PROPERTY, AND AT THAT POINT OF TIME THAT LAND WAS A GRICULTURE LAND, AND IT WAS EXEMPT FOR LEVY OF CAPITAL GAIN TAX AS PER SECTION 2(14) OF THE INCOME TAX ACT. VENDEES HAVE GOT CHANGED THE STATUS OF THE LA ND FROM AGRICULTURE TO NON- AGRICULTURE LAND DURING THE FINALIZATION OF THE SAL E DEED, AND THEREFORE, WHEN THE AO HAS CONFRONTED, THEY HAVE PAID THE TAXES. A CCORDING TO THE ASSESSEE, THEY WERE UNDER IMPRESSION THAT SINCE THE LAND WAS AN AGRICULTURE LAND, THEREFORE, NO TAX LIABILITY WOULD THRUST UPON THEM. THIS EXPLANATION WAS NOT FOUND TO BE FALSE BY THE AO. IT IS A BONA FIDE EXPLANATION GIVEN BY THE ASSESSEE. THEY MIGHT HAVE HARBOURED A BELIEF THAT BEING AN AGRICULTURE LAND SOLD BY THEM, NO CAPITAL GAIN WOULD BE LEVIABLE. C ONSIDERING THE ABOVE ASPECTS, WE ALLOW THE APPEALS OF THE ASSESSEES AND DELETE PENALTY. 8. IN THE RESULT, THE APPEALS OF THE ASSESSEES ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON 4 TH SEPTEMBER, 2017 AT AHMEDABAD. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 11/09/2017