ITO, W-11(1), Hyderabad V. Shri K. Ravi(HUF), Hyderabad

ITA 374/HYD/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53666 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 10-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T DIWAKAR PRASAD
• Assessee Lawyers: S RAMA RAO
• Keywords: Search and seizure; Ignorance of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI AKBER BASHA, ACCOUNTANT MEMBER ITA NO.374/HYD/2011 : A SSESSMENT YEAR 2003-04 INCOME TAX OFFICER, WARD-11(1), HYDERABAD V/S. SHRI K.RAVI (HUF), HYDERABAD (PAN AADHK 1361 D) (APP E L L ANT) (RESPONDENT) APPELLANT BY : SHRI T.DIWAKAR PRASAD RESPONDENT BY : SHRI S.RAMA RAO DATE OF HEARING 8.9.2011 DATE OF PRONOUNCEMENT 14.10.2011 O R D E R PER G.C.GUPTA, VICE PRESIDENT: THIS APPEAL BY THE REVENUE FOR THE ASSESSMENT YEA R 2003-04 IS DIRECTED AGAINST THE ORDER FO THE CIT(A) . 2. GROUNDS OF APPEAL OF THE REVENUE ARE AS UNDER- 1) THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS IN LAW AND ON FACTS. 2) THE CIT(A) ERRED IN COMING TO A CONCLUSION MEREL Y DEPENDING ON THE CONTENTIONS RAISED BY THE ASSESSEE, WHICH AR E NOT SUPPORTED BY PROPER DETAILS AND DOCUMENTARY EVIDENC ES 3) THE DECISION TAKEN BY THE CIT(A) IS NOT FOUND TO BE REASONABLE AND ACCEPTABLE. AS POINTED OUT BY THE CIT(A), THAT THE A.O. HAS NOT GATHERED ANY EVIDENCE TO SHOW THAT THERE WA S MOLIFIED INTENTION/DESIRE ON THE PART OF THE ASSESS EE TO CONCEAL THE INCOME SO AS TO AVOID IMPOSITION OF TAX THEREON IS NOT ACCEPTABLE IN VIEW OF THE FOLLOWING REASONS; A) IF THERE IS NO MOLLIFIED INTENTION, THE ASSESSEE MI GHT HAVE OFFERED THE DIVIDEND INCOME AND INCOME FROM ITA NO.374/H/2011 SHRI K.RAVI (HUF), H YDERABAD 2 CAPITAL GAIN IN THE ORIGINAL ROI FILED ON 31.3.2004 . IT AT ALL THIS FACT MUST BE BROUGHT TO THE NOTICE OF T HE A.O. DURING THE COURSE OF COMPLETION OF SCRUTINY ASSESSMENT PROCEEDINGS, EVEN THEN THE ASSESSEE IS SILENT, WHICH SHOWS THE ASSESSEE IS INTENTIONALLY CONCEALED THE PARTICULARS OF DIVIDEND INCOME AND INCOME FROM CAPITAL GAINS. B) DURING THE COURSE OF SEARCH AND SEIZURE OPERATION I N THE GROUP CASES OF M/S. NCL INDUSTRIES, A SWORN STATEMENT WAS RECORDED FROM THE ASSESSEE ON 27- 01-2005 WHERE IN REPLY TO Q.NO.3, THE ASSESSEE ADMITTED THAT HE HAS SOLD 8 ACRES OF LAND BELONGING TO THE ASSESSEE AND OTHERS DURING 2003 FOR A CONSIDERATION OF RS.1.15 CRORES. THEREFORE ONCE THE ASSESSEE KNOWS THAT HE HAS SOLD THE LAND, WHICH MAY HAVE A LIABILITY OF INCOME HE SHOULD HAVE FILED THE ROI. BUT HE HAS NOT FILED THE ROI INCORPORATIN G THE INCOME, WHICH SHOWS THE INTENTION OF THE ASSESSEE TO CONCEAL THE INCOME. C) THE SWORN STATEMENT WAS RECORDED ON 27-01-2005 AND THE NOTICE U/S. 148 WAS ISSUED ON 06-03-2007 WHICH WAS SERVED ON 14-03-2007, IF THE INTENTION IS NOT TO CONCEAL THE INCOME EARNED, HE MIGHT HAVE FILED THE ROI AT LEAST IMMEDIATELY AFTER THE DATE OF SWORN STATEMENT. HE IS SILENT FOR A PERIOD OF 2 YE ARS AND FILED ROI ONLY AFTER THE DATE OF ISSUE OF NOTIC E U/S. 148 IE. ON 13-6-2007 WHICH WAS REVISED ON 10- 09-2007. D) THE ASSESSEES ARGUMENT THAT HE WAS NOT AWARE OF THE LEGAL PRINCIPLES OF THE TAXABILITY IS NOT ACCEP TABLE SINCE IGNORANCE OF LAW CANNOT BE TAKEN AS AN EXCUSE. THE ASSESSEE IS FILING I.T. RETURNS REGULAR LY. THE ASSESSEE IS NOT A LAYMAN BUT DIRECTOR OF M/S. NCL INDUSTRIES, WHICH IS A PUBLIC LIMITED COMPANY HAVING TAXATION ADVISORS. HENCE THE ARGUMENT IS BASELESS AND NOT ACCEPTABLE. 3. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE IS A DIRECTOR IN A COMPANY AND THERE WAS SEARCH ACTION ON 27.1.2005 AT THE PREMISES OF THE COMPANY AS WELL AS THE ASSESSEE. DURING THE COURSE OF SEARCH, CERTAIN PAPERS WERE FO UND AND STATEMENT OF THE ASSESSEE WAS RECORDED. HE SUBMITTE D THAT IN REPLY TO QUESTION NO.3 DURING THE COURSE OF RECORDING OF STATEMENT ON ITA NO.374/H/2011 SHRI K.RAVI (HUF), H YDERABAD 3 27.1.2005, ASSESSEE HAS ADMITTED THAT HE HAS SOLD E IGHT ACRES OF LAND BELONGING TO HIM AND OTHERS DURING THE YEAR 2003 FO R A CONSIDERATION OF RS.1.15 CRORES AND THEREFORE HE WAS VERY MUCH I N KNOWLEDGE OF THE FACT THAT HE HAS SOLD THE LAND, WHICH MAY HAVE A LIABILITY OF INCOME ALSO AND THEREFORE, HE SHOULD HAVE FILED HIS RETURN OF INCOME. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT THE ASSESSEE HAS NOT FILED HIS RETURN OF INCOME INCORPO RATING THE INCOME BY WAY OF CAPITAL GAINS, WHICH SHOWS THE INTENTION OF THE ASSESSEE TO CONCEAL THE INCOME. HE SUBMITTED THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME ONLY AFTER ISSUE OF NOTICE UNDER S .148 OF THE ACT ON 13.6.2007, WHICH WAS REVISED ON 03.9.2007. HE SUBM ITTED THAT THE ASSESSEES ARGUMENT THAT HE WAS NOT AWARE OF THE LE GAL PRINCIPLES OF TAXATION IS NOT ACCEPTABLE FOR THE REASON THAT IGNO RANCE OF LAW COULD NOT BE SAID TO BE AN EXCUSE. HE SUBMITTED THAT THE ASSESSEE HAS RAISED ADDITIONAL GROUND BEFORE THE CIT(A) CLAIMIN G THAT THE LAND IN QUESTION ON WHICH CAPITAL GAINS TAX WAS COMPUTED, W AS AGRICULTURAL LAND. HE SUBMITTED THAT DURING THE COURSE OF ASSES SMENT PROCEEDINGS, THE ASSESSEE HAS NEVER RAISED THIS IS SUE BEFORE THE ASSESSING OFFICER AND THEREFORE, THE ASSESSMENT HA S BECOME FINAL AND THE ISSUE COULD NOT BE RAISED DURING APPELLATE PROC EEDINGS BEFORE THE CIT(A), THAT TOO ARISING OUT OF THE ORDER LEVYING PENALTY UNDER S.271(1)(C) OF THE ACT FOR CONCEALMENT OF INCOME. H E RELIED ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS SUBMISSION TH AT THE ASSESSMENT HAS BECOME FINAL AND THE ASSESSEE IS NOT AT LIBERTY TO RAISE THE ISSUES OF LAND BEING OF AGRICULTURAL NATURE DURING THE COU RSE OF PENALTY PROCEEDINGS. (A) BHARAT RICE MILL V/S. CIT(278 ITR 599)-ALL (B) S.S.RATANCHAND BHOLANATH V/S. CIT(210 ITR 682)-MP (C) H.V.VENUGOPAL CHETTIAR V/S. CIT (153 ITR 376)-MAD ITA NO.374/H/2011 SHRI K.RAVI (HUF), H YDERABAD 4 4. THE LEARNED COUNSEL FOR THE ASSESSEE HAS OPPOS ED THE SUBMISSIONS OF THE LEARNED DEPARTMENTAL REPRESENTAT IVE. HE SUBMITTED THAT THE SEARCH WAS IN FACT AT THE PREMIS ES OF THE COMPANY, IN WHICH THE ASSESSEE WAS A DIRECTOR. HE REFERRED TO THE COPY OF ASSESSMENT ORDER DATED 30.11.2004 FOR THE ASSESSMENT YEAR 2003-04 UNDER S.143(3) OF THE ACT, WHEREIN THE ONL Y SOURCE OF INCOME HAS BEEN ASSESSED AS AGRICULTURAL INCOME AT RS.2,78,500 FOR THE RELEVANT ASSESSMENT YEAR, VIZ. 2003-04. THE LE ARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS NO CONCEALMENT ON THE PART OF THE ASSESSEE. AS THE CAPITAL GAINS RELATED TO THE ASSESSMENT YEAR 2003-04 AND NOT FOR THE ASSESSMENT YEAR 2005-06, R EVISED RETURNS FOR BOTH THE ASSESSMENT YEARS 2003-04 AND 2005-06 W ERE FILED ON SINGLE DAY, I.E. 3.9.2007, WHEREBY THE LONG TERM CA PITAL GAINS SHOWN EARLIER IN THE RETURN FOR ASSESSMENT YEAR 2005-06 W AS REMOVED FROM THE COMPUTATION FOR ASSESSMENT YEAR 2005-06 AND IN CLUDED IN THE COMPUTATION OF INCOME FOR THE ASSESSMENT YEAR 2003- 04. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREF ULLY AND HAVE PERUSED THE ORDERS OF THE ASSESSING OFFICER AN D THE CIT(A). WE FIND THAT THE ASSESSEE HAS STATED IN HIS SWORN STAT EMENT RECORDED BY THE DEPARTMENT ON 27.1.2005 THAT HE HAS SOLD EIGHT ACRES OF LAND BELONGING TO THE ASSESSEE AND OTHERS DURING THE YEA R 2003 FOR A CONSIDERATION OF RS.1.15 CRORES. ASSESSEE HAS RAISE D AN ADDITIONAL GROUND OF APPEAL BEFORE THE CIT(A), SUBMITTING THAT THE LAND IN QUESTION ON WHICH CAPITAL GAINS TAX HAS BEEN WORKED OUT WAS IN FACT AGRICULTURAL LAND AND IN SUPPORT OF HIS CLAIM NOTI FICATION AND OTHER EVIDENCE INDICATING THAT THE LAND IN QUESTION WAS B EYOND EIGHT KILOMETERS OF MUNICIPAL CORPORATION OF HYDERABAD WA S FILED BY THE ASSESSEE BEFORE THE CIT(A). WE FIND THAT THE CIT(A ) HAS RECORDED ITA NO.374/H/2011 SHRI K.RAVI (HUF), H YDERABAD 5 THAT AT THE TIME OF COMPLETION OF ASSESSMENT, THE I SSUE WHETHER THE LAND IN QUESTION WAS OF AGRICULTURAL NATURE OR NOT WAS NOT RAISED BY THE ASSESSEE AND THAT THE ASSESSMENT HAS BECOME FI NAL AND AS SUCH NOTHING COULD BE DONE AT THE APPELLATE STAGE TO CON SIDER WHETHER THE LAND IN QUESTION WAS OF AGRICULTURAL OR NON-AGRICUL TURAL NATURE. THIS OBSERVATION OF THE CIT(A), IN OUR CONSIDERED VIEW, IS NOT SUSTAINABLE IN LAW, PARTICULARLY WHEN THE ASSESSEE IS AT LIBERT Y TO RAISE ANY ISSUE AND LEAD EVIDENCE AFRESH DURING THE COURSE OF PENAL TY PROCEEDINGS, EVEN IF SUCH ISSUE WAS NOT RAISED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS THE ASSESSMENT PROCEEDINGS AND PEN ALTY PROCEEDINGS ARE DIFFERENT AND INDEPENDENT OF EACH O THER. 6. THE CASE-LAW RELIED UPON BY THE LEARNED DEPAR TMENTAL REPRESENTATIVE ON THIS ISSUE ARE CLEARLY DISTINGUIS HABLE. IN BHARAT RICE MILLS V/S. CIT (SUPRA), THE HONBLE ALLAHABAD HIGH COURT HAS OBSERVED THAT THE RE-ASSESSMENT ORDER HAVING NOT BE EN CHALLENGED IN AN APPEAL OR ANY OTHER PROCEEDINGS, IT COULD NOT BE SAID TO BE A VOID ORDER IN A COLLATERAL PROCEEDINGS, THIS DECISION OF THE HONBLE HIGH COURT IS DISTINGUISHABLE SINCE THE PENALTY PROCEEDI NGS COULD NOT BE SAID TO BE COLLATERAL PROCEEDINGS. IN S.S. RATANCH AND BHOLANATH V/S. CIT (SUPRA), THE ASSESSEE HAS ADMITTED CERTAIN INCO ME TO BE INCLUDED IN ITS TOTAL INCOME AND NEVER CHALLENGED THE INCLUS ION OF INCOME IN ITS HANDS EVEN DURING THE PENALTY PROCEEDINGS AND IN TH AT CONTEXT, HONBLE HIGH COURT DECIDED THE MATTER IN FAVOUR OF THE REVENUE. IN THE CASE BEFORE US, THE ASSESSEE HAS TAKEN A SPECIF IC ADDITIONAL GROUND OF APPEAL BEFORE THE CIT(A) CHALLENGING THE INCLUSION OF LONG TERM CAPITAL GAINS IN ITS HANDS, AS IT WAS CLAIMED BY THE ASSESSEE THAT THE LAND IN QUESTION WAS OF AGRICULTURAL NATUR E. IN H.V. VENUGOPAL CHETTIAR V/S. CIT (SUPRA), HONBLE MADRAS HIGH COURT HAS ITA NO.374/H/2011 SHRI K.RAVI (HUF), H YDERABAD 6 HELD THAT THOUGH THE ASSESSMENT PROCEEDINGS SHOULD BE TAKEN TO BE INDEPENDENT OF THE PENALTY PROCEEDINGS AND THE MERE FACT THAT CERTAIN ADDITIONS HAD BEEN MADE IN THE ASSESSMENT PROCEEDINGS COULD NOT AUTOMATICALLY BE TAKEN AS A GROUND FOR LE VY OF PENALTY, IN THE CASE BEFORE THE HONBLE HIGH CORUT, THE ASSESSE E HAS MADE A STATEMENT ADMITTING SUPPRESSION OF RS.15000 PER YEA R AND THIS ADMISSION MADE AT THE STAGE OF RE-ASSESSMENT PRO CEEDINGS HAD NOT BEEN RETRACTED BY THE ASSESSEE, AND IN SUCH CIRCUM STANCES, IT WAS NOT NECESSARY FOR THE DEPARTMENT TO MAKE ANY INDEPE NDENT ENQUIRY TO FIND OUT WHETHER THERE WAS IN FACT ANY SUPPRESSI ON AND WHETHER SUCH SUPPRESSION WAS DUE TO ANY DISHONEST INTENTIO N ON THE PART OF THE ASSESSEE. IN THE CASE OF THE ASSESSEE BEFORE US, A SPECIFIC ADDITIONAL GROUND OF APPEAL HAS BEEN TAKEN BY THE A SSESSEE AND THE ASSESSEE HAS CHALLENGED THE INCLUSION OF THE INCOME FROM LONG TERM CAPITAL GAINS IN ITS HANDS. 7. WE FIND THAT THE ONLY SOURCE OF INCOME ASSESSE D IN THE ORIGINAL ASSESSMENT OF THE ASSESSEE FOR THE RELEVA NT ASSESSMENT YEAR 2003-04 WAS AGRICULTURAL INCOME, WHICH WAS DETERMIN ED AT RS.2,78,500 IN THE ASSESSMENT COMPLETED UNDER S.14 3(3) OF THE ACT. WE FIND THAT THE CLAIM OF THE ASSESSEE WAS THAT IT WAS NOT IN POSSESSION OF THE CERTIFIED COPY OF THE SALE DEED W HICH WAS ISSUED TO IT ONLY ON 25.8.2007. ASSESSEE HAS FILED BEFORE US A COPY THEREOF BEFORE THE TRIBUNAL, WHEREIN THE STAMP BEARING THE DATE 25 AUG 2007, WHICH IS CLEARLY READABLE, WAS AFFIXED BY TH E ISSUING AUTHORITY, VIZ. SUB-REGISTRAR. THE CASE OF THE ASSESSEE WAS T HAT IT WAS UNDER A BONA FIDE BELIEF IN THE ABSENCE OF THE COPY OF THE SALE DEED AND OTHER DETAILS, THAT THE LONG TERM CAPITAL GAINS RESULTING OUT OF THE SALE OF LAND RELATE TO THE ASSESSMENT YEAR 2005-06 AND ACCO RDINGLY, THE ITA NO.374/H/2011 SHRI K.RAVI (HUF), H YDERABAD 7 ASSESSEE INCLUDED THE LONG TERN CAPITAL GAINS IN IT S INCOME IN THE COMPUTATION OF INCOME FOR THE ASSESSMENT YEAR 2005- 06, WHILE FILING THE RETURN FOR THAT YEAR 13.6.2007. ON THE SAME DA Y, VIZ. 13.6.2007, THE ASSESSEE HAS FILED RETURN UNDER S.148 FOR THE A SSESSMENT YEAR 2003-04, WITHOUT INCLUDING THE LONG TERM CAPITAL GA INS IN ITS COMPUTATION. THE ASSESSEE, ON RECEIPT OF THE CERTIF IED COPY OF THE SALE DEED ON 25.8.2007, REALIZED THE MISTAKE AND ACCORDI NGLY REVISED ITS RETURNS OF INCOME FOR BOTH THE ASSESSMENT YEARS 200 3-04 AND 2005- 06 ON THE SAME DAY VIZ. 3.9.2007, WHEREBY THE LONG TERM CAPITAL GAINS WAS REMOVED FROM THE COMPUTATION OF INCOME F OR THE ASSESSMENT YEAR 2005-06 AND THE SAME WAS INCLUDED I N THE COMPUTATION OF INCOME FILED ALONGWITH THE REVISED R ETURN OF INCOME FOR THE ASSESSMENT YEAR 2003-04. THIS CONDUCT OF T HE ASSESSEE SEEMS TO BE BONA FIDE AND THERE IS NO MATERIAL BRO UGHT ON RECORD ON BEHALF OF THE DEPARTMENT TO SHOW THAT THE CONDUCT O F THE ASSESSEE IN THIS BEHALF WAS NOT BONA FIDE. THE ORDER IMPOSING THE PENALTY UNDER S.271(1)(C) IS LIABLE TO BE CANCELLED ON BOTH THE C OUNTS, VIZ. FIRSTLY ON ACCOUNT OF NON-DISPOSAL OF THE SPECIFIC GROUND RAI SED BY THE ASSESSEE THAT THE LAND IN QUESTION WAS OF AGRICULTURAL NATU RE AND THEREFORE, PROCEEDS RECEIVED ON SALE THEREOF, ARE NOT LIABLE T O BE SUBJECTED TO CAPITAL GAINS TAX, AND ALSO ON MERITS THEREOF, SINC E THE ASSESSEE CONDUCT SEEMS TO BE BONA FIDE AS IT HAS DECLARED TH E LONG TERM CAPITAL GAINS IN ITS ORIGINAL RETURN OF INCOME FILE D FOR THE ASSESSMENT YEAR 2005-06 IN THE ABSENCE OF THE SALE DEED DETAIL S ON 13.6.2007, AND LATER ON, AFTER OBTAINING THE CERTIFIED COPY OF THE SALE DEED ON 25.8.2007, AT THE EARLIEST OPPORTUNITY, HAS REVISED ITS RETURNS OF INCOME FOR THE ASSESSMENT YEARS 2003-04 AS WELL AS 2005-06 ON 3.9.2007 AND HAS INCLUDED THE LONG TERMS CAPITAL GA INS IN ITS INCOME FOR THE ASSESSMENT YEAR 2003-04 AND REMOVED THE SAM E FROM THE ITA NO.374/H/2011 SHRI K.RAVI (HUF), H YDERABAD 8 COMPUTATION OF ITS INCOME FOR THE ASSESSMENT YEAR 2 005-06. IN THIS VIEW OF THE MATTER, WE HOLD THAT THE PENALTY UNDER S.271(1)(C) WAS NOT LEVIABLE ON THE ASSESSEE. IN THE FACTS OF THE CASE, WE FIND NO MERIT IN THE GROUNDS OF THE REVENUE IN THIS APPEAL, WHICH ARE ACCORDINGLY REJECTED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE COURT ON 14.10 .2011 SD/- SD/- (AKBER BASHA) (G.C.GUPTA) ACCOUNTANT MEMBER VICE PRESIDENT DT/- 14 TH OCTOBER, 2011 COPY FORWARDED TO: 1. SHRI K.RAVI (HUF), PLOT NO.149 & 150, NCL ENCLAV EE, PETBASHEEERABAD, MEDCHAL ROAD, HYDERABAD HYDERABAD 2. INCOME - TAX OFFICER, WARD 11(1) HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) - VI HYDERABAD 4. COMMISSIONER OF INCOME-TAX V, HYDERABAD 5. THE DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S