Hatish Prabhudas Chaudhary, Ahmedabad V. The Income Tax Officer, Ward-5(1)(3), Ahmedabad

ITA 3557/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8115 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 29-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revised return

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR ./ I.T.A. NO.3557/AHD/2016 ( ASSESSMENT YEAR : 2012-13) HATISH PRABHUDAS CHAUDHARY 6, ROOPNAGAR SOCIETY, BEHIND A.G. SCHOOL, NAVRANGPURA, AHMEDABAD - 380014 / VS. INCOME - TAX OFFICER , WARD 5(1)(3), 6 TH FLOOR, ROOM NO. 604, NATURE VIEW BUILDING, OPP. BATA SHOW ROOM, OFF. ASHRAM ROAD, AHMEDABAD-380009 ./ ./ PAN/GIR NO. : ABBPC1489M ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SAKAR SHARMA, A.R. / RESPONDENT BY : SHRI MUDIT NAGPAL, SR.D.R. DATE OF HEARING 08/06/2018 !'# / DATE OF PRONOUNCEMENT 19/06/2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-5, AHMEDAB AD (CIT(A) IN SHORT), DATED 07.11.2016 ARISING IN THE PENALTY ORD ER DATED 18.09.2015 PASSED BY THE ASSESSING OFFICER (AO) UNDER S.271(1) (C) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING ASSESSMENT YEAR 2012-13. ITA NO.3557/AHD/16 [HATISH P. CHAUDHARY VS. ITO] A.Y. 2012-13 - 2 - 2. IN THE CAPTIONED APPEAL, THE ASSESSEE HAS SOUGHT TO ASSAIL IMPOSITION OF PENALTY AMOUNTING TO RS.22,08,500/- U NDER S.271(1)(C) OF THE ACT ON SHORT TERM CAPITAL GAINS OFFERED FOR TAXATION IN THE COURSE OF ASSESSMENT AMOUNTING TO RS.71,90,875/- WH ICH WAS NOT INCLUDED IN THE RETURN OF INCOME. 3. BRIEFLY STATED, THE ASSESSEE FILED ITS RETURN OF INCOME ON 10.07.2012 DECLARING TOTAL INCOME AT RS.5,83,320/-. THE RETURN WAS SELECTED FOR SCRUTINY. IN THE COURSE OF THE SCRUTI NY ASSESSMENT, THE AO CALLED FOR VARIOUS DETAILS INCLUDING COPY OF BANK S TATEMENT. ON THE COMMENCEMENT OF SCRUTINY PROCEEDINGS, THE ASSESSEE FILED A REVISED STATEMENT OF TOTAL INCOME AND INCLUDED THEREIN SHOR T TERM CAPITAL GAINS ARISING ON SALE OF LAND PARCEL BEARING SURVEY NO. 7 9/2 AS PER REGISTERED SALE DEED DATED 05.08.2011. THE LAND WA S STATED TO BE AGRICULTURAL LAND. THE SAID LAND WAS EARLIER PURCH ASED BY THE ASSESSEE ALONGWITH ONE SMT. PARULBEN KANUBHAI PATEL ON 15.04 .2010. THE ASSESSEE WORKED OUT SHORT TERM CAPITAL GAINS AT RS. 71,90,875/- ON SALE AND OFFERED THE SAME FOR TAXATION BY WAY OF REVISED COMPUTATION. IT WAS PLEADED BY THE ASSESSEE BEFORE THE AO THAT THE CAPITAL GAIN WAS INADVERTENTLY REMAINED TO BE OFFERED FOR TAXATION W HILE FILING THE RETURN OF INCOME. ON THE BASIS OF WORKING OF CAPIT AL GAINS PROVIDED BY THE ASSESSEE IN THE COURSE OF ASSESSMENT, THE IN COME OFFERED BY WAY SHORT TERM CAPITAL GAIN AMOUNTING TO RS.71,90,875/- AS OFFERED BY THE ASSESSEE WAS ACCEPTED AND ASSESSED BY AO. THE QUAN TUM ASSESSMENT UNDER S.143(3) OF THE ACT WAS THUS COMPLETED INCLUD ING THE AFORESAID SHORT TERM CAPITAL GAIN. THE AO SIMULTANEOUSLY INI TIATED PENALTY PROCEEDINGS ALLEGING FURNISHING INACCURATE PARTICUL ARS OF INCOME WITH A VIEW TO CONCEAL THE INCOME. 4. CONSEQUENT UPON THE ASSESSMENT ORDER PASSED UNDE R S.143(3) WHEREIN ADDITIONAL INCOME TOWARDS SHORT TERM CAPITA L GAIN AMOUNTING ITA NO.3557/AHD/16 [HATISH P. CHAUDHARY VS. ITO] A.Y. 2012-13 - 3 - TO RS.71.90 LAKHS WAS ASSESSED, THE AO ALSO SHOW CA USED THE ASSESSEE FOR IMPOSITION OF PENALTY UNDER S.271(1)(C) FOR ALL EGED CONCEALMENT. IN RESPONSE, THE ASSESSEE SUBMITTED BEFORE THE AO T HAT HE IS A B.E. CIVIL ENGINEER WORKING AS AN EMPLOYEE OF AHMEDABAD MUNICIPAL CORPORATION (AMC) SINCE 1996. DUE TO THIS TECHNICA L BACKGROUND, THE ASSESSEE IS NOT CONVERSANT WITH THE TAX PROVISIONS AND DEPENDS UPON THE TAX CONSULTANT FOR ITS TAX COMPLIANCES. THE AS SESSEE SUBMITTED BEFORE THE AO THAT HE WAS NOT AWARE ABOUT THE TAX L IABILITY ON THE SALE OF AGRICULTURAL LAND AND THEREFORE SAME WAS NOT REP ORTED. IT WAS SUBMITTED THAT PURSUANT TO NOTICE UNDER S.142(1) OF THE ACT, THE CHARTERED ACCOUNTANT (CA) ON VERIFICATION OF DOCUME NTS ADVISED THE ASSESSEE ABOUT THE TAX LIABILITY ON SALE OF AGRICUL TURAL LAND AND THEREFORE SAME WAS IMMEDIATELY REPORTED TO AO. THE ASSESSEE FILED A REVISED COMPUTATION AND ALSO PAID MAJOR PORTION OF TAX LIABILITY BEFORE ANY SPECIFIC QUERY WAS RAISED IN THIS REGARD BY THE AO. THEREFORE, NO MALAFIDE INTENTION IS ATTRIBUTABLE ON THE PART OF T HE ASSESSEE. IT WAS SUBMITTED THAT THE TRANSACTIONS OF LAND SALE ALSO D OES NOT FORM PART OF THE AIR INFORMATION AND THEREFORE SUCH TRANSACTIONS OF SALE WAS NOT WITHIN THE KNOWLEDGE OF AO BEFORE IT WAS BROUGHT OU T TO HIS NOTICE. THE ASSESSEE, IN SHORT, CONTENDED BEFORE THE AO THA T IT IS A CASE OF PURE OMISSION WITHOUT ANY DELIBERATE INTENT TO CONC EAL THE INCOME. THE AO HOWEVER DID NOT FIND ANY MERIT IN THE INNOCE NCE PLEADED BY THE ASSESSEE. IT WAS ALLEGED BY THE AO THAT ASSESS EE HAD CALCULATED SHORT TERM CAPITAL GAIN OF RS.1,70,000/- ON SALE OF AGRICULTURAL LAND ARISING FROM OTHER TRANSACTIONS AND THEREFORE THE C ONTENTION OF THE ASSESSEE THAT HE WAS NOT AWARE ABOUT THE TAX LIABIL ITY ON SALE OF AGRICULTURAL LAND IS UNTRUE AND NOT TENABLE. IT WA S ALSO FOUND THAT THE ASSESSEE DID NOT FILE A FORMAL REVISED RETURN DESPI TE THE TIME AVAILABLE FOR IT AND MERELY CHOSE TO FILE A REVISED STATEMENT INCLUDING THE IMPUGNED SHORT TERM CAPITAL GAINS. THE AO PADDLED THAT THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF THE BANK ACCOUN T IN THE COURSE OF ITA NO.3557/AHD/16 [HATISH P. CHAUDHARY VS. ITO] A.Y. 2012-13 - 4 - ASSESSMENT PROCEEDINGS AND THUS LEFT WITH NO CHOICE , THE ASSESSEE FILED THE REVISED COMPUTATION. THE SHORT TERM CAPITAL GA IN NOT OFFERED FOR TAXATION WOULD THUS HAVE COME TO LIGHT IN THE COURS E OF ASSESSMENT IN ANY EVENT. THE AO THUS REJECTED THE CONTENTION OF THE ASSESSEE THAT THE SALE OF LAND WAS REPORTED WITHOUT ANY NOTICE FR OM THE AO. THE AO ACCORDINGLY INVOKED PROVISIONS OF SECTION 271(1) (C) OF THE ACT AND IMPOSED PENALTY ON THE ADDITIONS MADE TOWARDS S HORT TERM CAPITAL GAINS ALLEGING CONCEALMENT OF PARTICULARS OF INCOME IN NOT DISCLOSING SHORT TERM CAPITAL GAINS ETC. A PENALTY OF RS.22,0 8,500/- WAS ACCORDINGLY IMPOSED ON THE SHORT TERM CAPITAL GAINS OMITTED TO INCLUDE IN THE RETURN TOGETHER WITH SOME INTEREST INCOME WH ICH ALSO ESCAPED INCLUSION IN THE RETURN OF INCOME. 5. THE ASSESSEE CHALLENGED THE AFORESAID PENALTY OR DER OF THE AO BEFORE THE CIT(A). 5.1 IT WAS ONCE AGAIN PLEADED BEFORE THE CIT(A) THA T THE CAPITAL GAIN REMAINED TO BE OFFERED FOR TAXATION DUE TO INADVERT ENCE AND WAS SUO MOTU OFFERED PRIOR TO DETECTION BY THE AO. THE CIT(A) NOTED THAT THE LAND SOLD WAS A NON AGRICULTURAL LAND. HAVING NOTE D THE VARIOUS FACTS AS CAPSULED ABOVE, THE CIT(A) RELIED UPON THE DECIS ION OF THE HONBLE GUJARAT HIGH COURT IN CASE OF A. M. SHAH & CO. VS. CIT 238 ITR 415 (GUJ.) AND THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF K. P. MADHUSUDAN 251 ITR 99 (SC) AND HELD THAT HAVING REGARD TO THE DIFFERENCE BETWEEN THE RETURN OF INCOME FILED AND T HE ASSESSED INCOME, THE ONUS IS ON THE ASSESSEE TO REBUT THE INFERENCE OF CONCEALMENT. IN THE ABSENCE OF DISCHARGE OF ONUS, THE CIT(A) UPHELD THE ACTION OF THE AO AND CONFIRMED THE PENALTY IMPOSED BY THE AO. 6. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. ITA NO.3557/AHD/16 [HATISH P. CHAUDHARY VS. ITO] A.Y. 2012-13 - 5 - 7. THE LEARNED AR SUBMITTED AT THE OUTSET THAT THE INCOME BY WAY OF SHORT TERM CAPITAL WAS OFFERED UPFRONT BY THE AS SESSEE BEFORE THE OMISSION TO INCLUDE THE CAPITAL GAINS WAS DETECTED BY THE AO AND NOT ONLY THIS SUBSTANTIAL TAX (NEARLY RS.25 LAKHS) WAS PAID IMMEDIATELY OUT OF TOTAL LIABILITY IN THE VICINITY OF ABOUT RS. 29 LAKHS. THE LEARNED AR SUBMITTED THAT THE LAND UNDER SALE WAS IN FACT T HE AGRICULTURAL LAND BUT THE TAX LIABILITY AROSE BECAUSE NO AGRICULTURAL OPERATIONS WERE CARRIED OUT ON SUCH LAND. LOOKING AT THE OVERALL C ONDUCT OF THE ASSESSEE AND IN VIEW OF THE INADVERTENT ERROR, THE ASSESSEE DESERVES RELIEF FROM THE CLUTCHES OF PENALTY PROVISIONS. 7.1 THEREAFTER, THE LEARNED AR TOOK A LEGAL PLEA TH AT THE PENALTY NOTICE ISSUED DOES NOT SPECIFY THE NATURE OF DEFAUL T I.E. WHETHER THE CASE FALLS UNDER THE CONCEALMENT OF PARTICULARS OF INCOME OR INACCURATE PARTICULARS OF INCOME. THE LEARNED AR REFERRED TO THE ASSESSMENT ORDER AND POINTED OUT THAT THE SATISFACT ION WAS STATED TO BE FORMED TOWARDS FURNISHING OF INACCURATE PARTICULAR S OF INCOME IN THE COURSE OF THE ASSESSMENT. HOWEVER, THE PENALTY WAS FINALLY IMPOSED FOR CONCEALMENT OF PARTICULARS OF INCOME WHICH IS NOT PERMISSIBLE IN LAW. FOR THIS PROPOSITION, THE LEARNED AR RELIED UP ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF NEW SORAT HIA ENGINEERING CO. VS. CIT 282 ITR 642 (GUJ). LEARNED AR SUBMITTE D THAT THE SATISFACTION OF THE AO IN THE PENALTY PROCEEDINGS IS NOT CONSISTENT WITH THAT OF THE SATISFACTION FORMED IN THE COURSE OF THE QUANTUM ASSESSMENT. 7.2 LEARNED AR SUBMITTED IN CONCLUSION THAT IN THE CIRCUMSTANCES WHERE THE ASSESSEE DOES NOT POSSESS EXPERT KNOWLEDG E OF THE SUBJECT AND HAS DUTIFULLY PAID TAXES BEFORE DETECTION OF TH E PURPORTED CONCEALED INCOME AND HAVING REGARD TO THE INCONSIST ENCY IN THE ITA NO.3557/AHD/16 [HATISH P. CHAUDHARY VS. ITO] A.Y. 2012-13 - 6 - SATISFACTION FOR IMPOSITION OF PENALTY, THE ASSESSE E DESERVES RELIEF FROM THE ONEROUS PROVISIONS OF SECTION 271(1)(C) OF THE ACT. 8. LEARNED DR, ON THE OTHER HAND, STRONGLY RELIED U PON THE ORDERS OF THE AO AND THE CIT(A) AND CONTENDED THAT WHEN TH E ASSESSEE WAS CORNERED DUE TO SCRUTINY NOTICE, THE ASSESSEE WAS L EFT WITH NO OPTION INDEED BUT TO COME FORWARD TO DECLARE THE SHORT TER M CAPITAL GAINS IN QUESTION. THE LEARNED DR SUBMITTED THAT, HAD THE C ASE NOT BEEN SELECTED UNDER SCRUTINY, THE INCOME WOULD HAVE ESCA PED TAXATION ALTOGETHER CONVENIENTLY. THEREFORE, THE BURDEN IS VERY HEAVY ON THE ASSESSEE TO PLEAD BONAFIDE WHICH HAS NOT BEEN DISCH ARGED AT ALL. THE LEARNED DR ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) CONFIRMING THE ACTION OF THE AO TOWARDS IMPOSITION OF PENALTY DOES NOT CALL FOR ANY INTERFERENCE WHATSOEVER. 9. WE HAVE CAREFULLY CONSIDERED RIVAL SUBMISSIONS A ND PERUSED THE ASSESSMENT ORDER, PENALTY ORDER AND THE FIRST APPEL LATE ORDER IN PENALTY PROCEEDINGS. THE MATERIAL REFERRED IN THE COURSE O F HEARING WAS ALSO PERUSED. AS NOTED ABOVE, THE CONTROVERSY REVOLVES AROUND THE MAINTAINABILITY OF PENALTY ON INCOME BY WAY OF SHOR T TERM CAPITAL GAIN NOT INCLUDED IN THE RETURN OF INCOME BUT OFFERED FO R TAXATION IN THE COURSE OF SCRUTINY PROCEEDINGS. IN THIS REGARD, IT IS NOTED THAT THE ASSESSEE HAS READILY OFFERED THE INCOME ON SALE IN THE COURSE OF ASSESSMENT PROCEEDINGS AND PAID TAXES THEREON. NO DOUBT, IT IS THE BOUNDEN DUTY OF AN ASSESSEE TO OFFER THE INCOME CHA RGEABLE TO TAX IN THE RETURN OF INCOME ITSELF. THE ASSESSEE HAS FILE D REVISED COMPUTATION AFTER THE ISSUANCE OF SCRUTINY NOTICE S EEKING PERTINENT DETAILS INCLUDING BANK STATEMENT WHICH COULD HAVE E ASILY UNEARTHED THE CAPITAL GAINS NOT OFFERED THUS FAR. HOWEVER, T HIS BY ITSELF WILL NOT, IN OUR VIEW, PROPEL A REASONABLE PERSON TO DRAW AN INFLEXIBLE INFERENCE THAT OMISSION WAS DELIBERATE. THE TOTALITY OF CIRC UMSTANCES IS REQUIRED ITA NO.3557/AHD/16 [HATISH P. CHAUDHARY VS. ITO] A.Y. 2012-13 - 7 - TO BE GAUGED. THE INTENTION REQUIRES TO BE SEEN FR OM THE CONDUCT OF THE ASSESSEE. THE ASSESSEE HEREIN IS A TECHNICAL PERSON AND MAY NOT NECESSARILY KNOW THE COMPLICATED TAX LAWS. A PERUS AL OF LAND SALE AGREEMENT SUGGESTS THAT THE LAND WAS IN THE NATURE OF AGRICULTURAL LAND THE GAIN ON SALE OF WHICH, UNDER THE POPULAR BELIEF , IS NOT TAXABLE. HOWEVER, ON OBJECTIVE CONSIDERATION, IT WAS FOUND T HAT SUCH AGRICULTURAL LAND WAS ALSO REQUIRED TO UNDERGO AGRI CULTURAL OPERATIONS, WHICH WAS MISSING IN THE PRESENT CASE. IN THESE CI RCUMSTANCES, THE ASSESSEE ACTING ON LEGAL ADVICE, READILY CAME FORWA RD AND OFFERED THE CAPITAL GAINS WITHOUT RESORTING TO LITIGATION. ON WEIGHING THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ONUS OF BONAFIDE THEREFORE, IN OUR VIEW, IS BROADLY DISCHARGED. THE STRICT PROV ISIONS OF SECTION 271(1)(C) OF THE ACT SHOULD NOT APPLY IN THESE FACT S. COUPLE WITH THIS, WE SIMULTANEOUSLY NOTICE THAT THE ACTION OF THE AO IS QUITE VAGUE. THE SATISFACTION IN THE COURSE OF THE ASSESSMENT WAS FORMED FOR ALLEGED FURNISHING OF INACCURATE PARTICULARS OF IN COME. THE PENALTY NOTICE DOES NOT SPECIFY THE NATURE OF DEFAULT AND T HUS SUFFERS FROM VICE OF AMBIGUITY. THE AO, HOWEVER, IN DEPARTURE WITH T HE SATISFACTION FORMED IN THE ASSESSMENT PROCEEDINGS, WENT ON TO IM POSE PENALTY ON A DIFFERENT GROUND I.E. CONCEALMENT OF PARTICULARS OF INCOME. OSTENSIBLY, THE ORIGINAL BASIS OF INITIATION OF PEN ALTY HAS BEEN ALTERED IN A SIGNIFICANT WAY BY THE AO HIMSELF BY IMPOSING THE PENALTY. THE BASIS FOR FORMATION OF SATISFACTION, THUS, WAS ALTE RED AND RENDERED NONEXISTENT. HENCE, IN THE ABSENCE OF CONTINUITY I N THE SATISFACTION OF THE AO AT THE QUANTUM STAGE VIS--VIS PENALTY STAGE , THE PENALTY ORDER PASSED BY THE AO IS LIABLE TO BE STRUCK DOWN ON THI S GROUND ALSO. FOR SUCH A VIEW, WE MAY USEFULLY REFER TO THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NEW SORATHIA ENGI NEERING CO. (SUPRA) AS WELL AS ANOTHER DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. MANU ENGINEERING WORKS (1980 ) 122 ITR 306 ITA NO.3557/AHD/16 [HATISH P. CHAUDHARY VS. ITO] A.Y. 2012-13 - 8 - (GUJ). THUS, IN TOTALITY, PENAL ACTION UNDER S.271 (1)(C) OF THE ACT IS NOT SUSTAINABLE IN LAW. 10. CONSEQUENTLY, PENALTY ORDER PASSED BY THE AO DA TED 18.09.2015 IS SET ASIDE AND PENALTY IMPOSED THEREBY IS CANCELL ED. 11 IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . SD/- SD/- (MAHAVIR PRASAD) (PRADIP K UMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 19/06/2018 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 19/06/2 018