ESTATE OF LATE SHRI N.,J PATEL, MUMBAI V. ITO 12(3)(4), MUMBAI

ITA 3563/MUM/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8869 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-03-2016
• Assessment Year: 1994-1995
• Appeal Filed On: 04-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Search and seizure; Date of conversion; Fair market value; Reassessment proceedings
• Section: 37

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNALB BENCH, MUMBAI . . , , , , BEFORE SHRI G.S.PANNU, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.3563/MUM/2011 ( / ASSESSMENT YEAR: 1994-95) ESTATE OF LATE SHRI N.J.PATEL C/O.SHRI. C.N.PATEL MANI BHAVAN, 10 TH PARLESHAR ROAD, VILE PARLE (EAST) MUMBAI - 400057 / VS. ITO 12(3)(4) MUMBAI ./ ./ PAN/GIR NO. : AAACE2830M ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING:27.09.2016 /DATE OF PRONOUNCEMENT:25.01.2017 / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 07.02.2011 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)23, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 1994-95 WHEREIN THE CIT(A) HAS PARTLY ALLOWED THE ORDER DATED 26.02.2010 PASSED BY THE ASSESSING OFFICER AND DIRECTED ASSESSEE BY: SHRI N.M.PORWAL DEPARTMENT BY: SHRI M. RAJAN ITA NO.3563/M/11 A.Y. 1994-95 2 HIM TO NOT TO IMPOSE THE PENALTY ON THE DIFFERENCE OF THE VALUATION OF RS.10,91,710/-. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN NOT APPRECIATING THAT LD. ITO HAS INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) IN RESPECT OF BUSINESS INCOME AT RS.1,10,72,543/- WHEREAS HE HAS LEVIED PENALTY ON CAPITAL GAINS SOUGHT TO BE EVADED WHICH IS NOT PERMISSIBLE. 2. WITHOUT PREJUDICE TO GROUND NO.1, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT APPELLANT HAS DISCLOSED FULL FACTS OF THE CASE AT ALL STAGES AND THERE IS NO FINDING EITHER BY THE LD. CIT(A) OR BY THE HONBLE TRIBUNAL TO THE EFFECT THAT THE APPELLANT HAS CONCEALED FACTS FROM THE DEPARTMENT. 3. WITHOUT PREJUDICE TO GROUND NO.1, THE LD. CIT(A) ERRED IN DIRECTING THE ITO TO REDUCED A SUM OF RS.10,91,700/- (BEFORE INDEXATION) ONLY FROM THE CAPITAL GAINS SOUGHT TO BE EVADED AS AGAINST A CORRECT SUM OF RS.26.63 LACS (AFTER INDEXATION) TOWARDS DIFFERENCE IN VALUATION BETWEEN THE APPELLANTS AUTHORIZED REGISTERED VALUE AND THE DVO. 4. WITHOUT PREJUDICE TO GROUND NO.1, THE LD. CIT(A) ERRED IN NOT REDUCING BUSINESS LOSS OF RS.25,38,659/- FROM THE FIGURE OF INCOME SOUGHT TO BE EVADED. 5. WITHOUT PREJUDICE TO GROUND NO.1, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT THE APPELLANT HAD CLAIMED A SUM OF RS.15 LACS AS EXPENDITURE FOR CLEARING THE URBAN LAND CEILING APPLICATION IN THE YEAR 1992 WHEN THE SAME WAS ALLOWABLE TILL THE SUBSEQUENT AMENDMENT IN SECTION 37 OF THE I.T. ACT. THEREFORE THE SAID AMOUNT OF RS.15 LACS CANNOT BECOME THE SUBJECT MATTER OF PENALTY U/S.271(1)(C). ITA NO.3563/M/11 A.Y. 1994-95 3 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSMENT OF THE ASSESSEE WAS COMPLETED ON 27.03.1997 U/S.143(3) R.W.S.144A OF THE INCOME TAX ACT, 1961( IN SHORT THE ACT) DETERMINING TOTAL INCOME TO THE TUNE OF RS.72,21,590/- AS AGAINST THE RETURNED INCOME OF RS.21,84,530/-. THE MAJOR ADDITION WAS ON ACCOUNT OF LONG TERM CAPITAL GAIN DETERMINED TO THE TUNE OF RS.70,87,395/- AS AGAINST THE LONG TERM CAPITAL GAIN SHOWN BY THE ASSESSEE TO THE TUNE OF RS.20,50,335/-. THEREAFTER, THE ASSESSMENT WAS CANCELLED BY THE ORDER OF THE CIT-12 VIDE ORDER U/S.263 OF THE ACT DATED 05.02.1998 WHEREIN IT WAS HELD THAT THE TRANSACTION ON WHICH LONG TERM CAPITAL GAIN WAS SHOWN IS ACTUALLY IN THE NATURE OF BUSINESS INCOME. CONSEQUENTLY A REVISED ORDER U/S.143(3) R.W.S 263 OF THE ACT WAS MADE ON 22.02.2000 DETERMINING THE TOTAL INCOME TO THE TUNE OF RS.1,04,49,700/- WHICH WAS DUE TO THE TRANSACTION SHOWN BY THE ASSESSEE AS LONG TERM CAPITAL GAIN BEING CONSIDERED BY THE ASSESSEE AS BUSINESS INCOME. THE SAID ORDER HAS ALSO UPHELD BY THE CIT(A) VIDE ORDER DATED 05.03.2004. HOWEVER, ON CERTAIN ISSUES INCLUDING THE ASSESSEE BEING CONSIDERED AS AOP AND SEIZED CASH BEING CONSIDERED AS ADVANCE TAX PAYMENT, THE CIT(A) HELD IN FAVOUR OF THE ASSESSEE. THE DEPARTMENT FILED AN APPEAL AGAINST THE SAID ORDER BUT THE HONBLE ITAT DISMISSED THE SAID APPEAL BY VIRTUE OF ORDER DATED 05.01.2007 ON THE ISSUE OF THE STATUS OF THE ASSESSEE AND TREATMENT OF SEIZED CASH. ITA NO.3563/M/11 A.Y. 1994-95 4 4. THE APPEAL OF THE ASSESSEE WAS DECIDED BY THE HONBLE ITAT VIDE ORDER DATED 30.05.2006 WHEREIN IT WAS HELD THAT THE INCOME FROM SALE OF LAND SHOULD BE TAXED AS CAPITAL GAIN TILL THE DATE OF CONVERSION AND THE INCOME THERE FROM FOR THE SUBSEQUENT PERIOD SHOULD BE CONSIDERED AS BUSINESS INCOME. CONSEQUENTLY, AN ORDER U/S.143(3) R.W.S.254 OF THE ACT WAS PASSED ON 18.12.2007 DETERMINING THE TOTAL INCOME TO THE TUNE OF RS.1.2 CRORES WHICH INCLUDED BUSINESS INCOME OF RS.1.11 CRORES ON SALE OF LAND. THE ASSESSEE FILED FURTHER APPEAL AGAINST THE SAID ORDER BEFORE THE CIT(A) WHICH WAS DECIDED ON 10.10.2008. THE CIT(A) GRANTED THE RELIEF TO THE ASSESSEE REGARDING THE FAIR MARKET VALUE OF THE PROPERTY ON THE DATE OF CONVERSION TO STOCK IN TRADE AND THE VALUE AS ON 01.04.81. CONSEQUENT TO GIVING EFFECT TO THE ORDER OF CIT(A), THE TOTAL INCOME WAS DETERMINED AT RS.9.46 LACS WHEREIN THE BUSINESS INCOME WAS DETERMINED AT LOSS OF RS.25.39 LACS AND THE LONG TERM CAPITAL GAIN WAS DETERMINED OF RS.83.51 LACS. THEREAFTER, THE PENALTY PROCEEDINGS WAS INITIATED U/S.271(1)(C) OF THE ACT IN VIEW OF THE ORIGINAL ORDER U/S.143(3) OF THE ACT DATED 27.03.1997 DUE TO CONCEALMENT AND FILING OF INACCURATE PARTICULARS REGARDING ITS INCOME AS ENUMERATED IN THE SAID ORDER. THEREAFTER, IN THE SUBSEQUENT ORDERS THE PENALTY PROCEEDING WAS ALSO INITIATED AND AFTER CONSIDERING THE REPLY, THE ASSESSING OFFICER LEVIED THE PENALTY TO THE TUNE OF RS.14,11,220/- THEREAFTER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO ALLOWED THE APPEAL PARTLY BY SAYING THAT THE ITA NO.3563/M/11 A.Y. 1994-95 5 DIFFERENCE OF THE VALUATION OF AMOUNT TO THE TUNE OF RS.10,91,710/- IS NOT THE SUBJECT OF THE PENALTY. 5. WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LEARNED REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. ON APPRAISAL OF THE PENALTY ORDER DATED 26.02.2010, IT CAME INTO THE NOTICE THAT THE PENALTY WAS LEVIED ON ACCOUNT OF TAX SOUGHT TO BE EVADED TO THE TUNE OF RS.63.01 LACS ON ACCOUNT OF LONG TERM CAPITAL GAIN. THERE IS NO OTHER GROUND TO LEVY THE PENALTY. THE ASSESSEE WHILE FILING ITS RETURN OF INCOME ASSESSED THE LONG TERM CAPITAL GAIN TO THE TUNE OF RS.20.50 LACS. HOWEVER, SUBSEQUENTLY THE LONG TERM CAPITAL GAIN WAS ASSESSED TO THE TUNE OF RS.83.51 LACS. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE UNDER ASSESSED THE LONG TERM CAPITAL GAIN TO THE EXTENT OF RS.63.01 LACS. THE ASSESSEE UNDERGO THE REASSESSMENT PROCEEDINGS NUMBER OF TIMES. INITIALLY HIS CAPITAL GAIN WAS DETERMINED TO THE TUNE RS.70,87,395/-AS AGAINST LONG TERM CAPITAL GAIN SHOWN BY THE ASSESSEE TO THE TUNE OF RS.20,50,335/-. THEREAFTER, THE MATTER WAS TAKEN UP AGAIN U/S.263 OF THE ACT BY ORDER DATED 05.02.1998 ON THE GROUND OF THAT THE ASSESSEES INCOME WAS QUIETLY IN THE NATURE OF BUSINESS NATURE, THEREAFTER, THE REVISED ORDER WAS PASSED ON 22.02.2000 AND THE INCOME OF THE ASSESSEE WAS DETERMINED TO THE TUNE OF RS.1,04,49,700/- AND THE INCOME OF THE ASSESSEE WAS DETERMINED AS INCOME FROM BUSINESS. THEREAFTER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) AND ON OTHER ISSUES THE ITA NO.3563/M/11 A.Y. 1994-95 6 MATTER WAS DECIDED IN FAVOUR OF THE ASSESSEE. ASSESSEE AGAIN FILED AN APPEAL BEFORE THE HONBLE INCOME TAX APPELLATE TRIBUNAL WHO VIDE ORDER DATED 30.05.2006 HELD THAT THE INCOME FROM THE SALE OF THE LAND SHOULD BE TAXED AS CAPITAL GAIN TILL ITS CONVERSION AND SUBSEQUENTLY, THE INCOME SHOULD BE CONSIDERED AS BUSINESS INCOME. THEREAFTER, THE MATTER WAS AGAIN DECIDED AND THE INCOME OF THE ASSESSEE WAS DETERMINED AS 1.12 CRORES WHICH INCLUDES BUSINESS INCOME OF RS.1.11 CRORES ON ACCOUNT OF THE SALE OF LAND. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) AND THE CIT(A) GAVE THE RELIEF TO THE ASSESSEE AND CONSEQUENT THERETO, THE INCOME WAS DETERMINED AT LOSS OF RS.25.39 LACS AND THE ASSESSED THE LONG TERM CAPITAL GAIN OF RS.83.51 LACS AND ACCORDINGLY LEVIED THE PENALTY. IT IS TO BE SEEN THAT WHETHER IT IS A SUFFICIENT GROUND TO LEVY THE PENALTY OR NOT. THE CONTENTION OF THE ASSESSEE IS THAT THERE IS NO CONCEALMENT OR FILING THE INACCURATE PARTICULARS AND THE DIFFERENCE IN DETERMINING LONG TERM CAPITAL GAIN WAS ON ACCOUNT OF THE VALUATION DIFFERENCE OF DVO AND OF THE ASSESSEES VALUER. THIS FACT IS NOT IN DISPUTE. IN VIEW OF THE SAID CIRCUMSTANCES, WE ARE OF THE VIEW THAT IT IS NOT A CASE WHICH FALLS TO LEVY THE PENALTY U/S.271(1)(C) OF THE ACT. IN THE SIMILAR FACTS AND CIRCUMSTANCES, THE HONBLE SUPREME COURT OF INDIA HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN CASE OF DILIP N. SHROFF VS. JOINT COMMISSIONER OF INCOME TAX & ANR. (2007) 291 ITR 0519 AND IN CASE OF T.ASHOK PAID VS. COMMISSIONER OF INCOME TAX (2007) 292 ITA NO.3563/M/11 A.Y. 1994-95 7 ITR 0011 AND IN CASE OF COMMISSIONER OF INCOME TAX VS. RELIANCE PETROPRODUCTS PVT. LTD. [2010] 322 ITR 158 (SC). 6. IT IS ALSO OBSERVED THAT WHILE PASSING ORDER BY THE CIT(A) IN QUESTION THE CIT(A) ENUMERATED THE FACTS REGARDING SEARCH AND SEIZURE ACTION. BUT TO LEVY THE PENALTY THESE FACTS WERE NOWHERE CONSIDERED NOR SEEMS RELEVANT BECAUSE ON THIS ISSUE NO PENALTY WAS LEVIED. THE PENALTY WAS LEVIED ONLY IN CONNECTION WITH THE DIFFERENCE OF THE ASSESSMENT OF LONG TERM CAPITAL GAIN BY THE ASSESSEE WITH THE HELP OF ASSESSEE VALUER AND BY THE ASSESSING AUTHORITY WITH THE HELP OF DVO. IN VIEW OF THE SAID CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE CIT(A) HAS PASSED THE ORDER WRONGLY AND ILLEGALLY WHICH IS NOT LIABLE TO BE SUSTAINABLE IN THE EYES OF LAW, THEREFORE, WE SET ASIDE THE ORDER PASSED BY THE CIT(A) IN QUESTION AND DELETE THE PENALTY. 7. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JANUARY, 2017 SD/- SD/- (G.S.PANNU) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 25 TH JANUARY, 2017 MP ITA NO.3563/M/11 A.Y. 1994-95 8 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI