ASST CIT 29(1), MUMBAI V. BATUK P SHAH, MUMBAI

ITA 3956/MUM/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0225 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 10-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Date of conversion; Assessment record
• Section: 271(1)(c); 45(2); 27

Judgement Text

, H , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H, MUMBAI BEFORE SHRI B.R.BASKARAN, AM AND SHRI AMARJIT SINGH , JM ITA NO.3956/MUM/2016 : ASST.YEAR 2011-2012 THE ASST.COMMISSIONER OF INCOME-TAX CIRCLE 29(1) MUMBAI. / VS. SHRI BATUK P.SHAH 17-A, INDRAPRASTHA, JAIN MANDIR ROAD, SARVODAYA NAGAR MULUND (WEST), MUMBAI-400 080. PAN : AAEPS7301L. ( / APPELLANT) ( / RESPONDENT) CO NO.273/MUM/2017 : ASST.YEAR 2011-2012 SHRI BATUK P.SHAH 17-A, INDRAPRASTHA, JAIN MANDIR ROAD, SARVODAYA NAGAR MULUND (WEST), MUMBAI-400 080. / VS. THE ASST.COMMISSIONER OF INCOME- TAX CIRCLE 29(1) MUMBAI. (CROSS OBJECTOR) ( / RESPONDENT) REVENUE BY : SHRI MANOJ KUMAR SINGH, DR ASSESSEE BY : S/SHRI PARAS SAVLA & PRATIK PODDAR / DATE OF HEARING : 25.10.2018 / DATE OF PRONOUNCEMENT : 05.12.2018 / O R D E R PER B.R.BASKARAN (AM) : THE REVENUE HAS FILED THIS APPEAL AND THE ASSESSEE HAS FILED CROSS OBJECTION CHALLENGING THE ORDER DATED 16-03-2016 PA SSED BY LD CIT(A)-40, MUMBAI DELETING THE PENALTY LEVIED BY THE AO U/S 27 1(1)(C) OF THE ACT AND IT RELATES TO THE ASSESSMENT YEAR 2011-12. 2. THE FACTS RELATING TO THE PENALTY LEVIED BY T HE AO U/S 271(1)(C) OF THE ACT ARE STATED IN BRIEF. THE ASSESSEE IS A BUILDER AND DEVELOPER. THE ASSESSEE ALONG WITH HIS WIFE SMT. ANILA B SHAH JOINTLY PURCH ASED A PLOT OF LAND ADMEASURING 652 SQ. MT AT VILLAGE BHANDUP ON 04-07- 1985. THEY HELD THE ITA NO.3956/M/2016 & CO 273/M/2017. SHRI BATUK P.SHAH. 2 PLOT OF LAND AS CAPITAL ASSET. SMT. ANILA B SHAH EX PIRED ON 16.12.1991 AND HENCE THE ASSESSEE BECAME ABSOLUTE OWNER OF THE ABO VE SAID PLOT OF LAND. THE ASSESSEE CONVERTED THE ABOVE SAID LAND INTO STO CK IN TRADE IN THE YEAR 2003. THE ASSESSEE DEVELOPED THE LAND AND COMPLETE D THE PROJECT DURING THE YEAR RELEVANT TO AY 2011-12. ACCORDINGLY, IN T ERMS OF SEC. 45(2) OF THE ACT, THE ASSESSEE COMPUTED LONG TERM CAPITAL GAIN I N AY 2011-12 ARISING ON CONVERSION OF THE CAPITAL ASSET INTO STOCK IN TRADE . WHILE DOING SO, THE ASSESSEE (A) APPLIED INDEXATION UPTO THE AY 2011-12, WHILE T HE CONVERSION HAS TAKEN PLACE IN AY 2003-04. (B) APPLIED INDEXATION FOR ENTIRE PORTION OF LAND F ROM THE DATE OF PURCHASE OF LAND. THE AO ALLOWED INDEXATION BENEFIT UPTO ASSESSMENT Y EAR 2003-04 ONLY, SINCE THE LAND LOST THE CHARACTER OF CAPITAL ASSET IN THAT YEAR ON ITS CONVERSION INTO STOCK IN TRADE. THE AO ALSO TOOK T HE VIEW THAT THE INDEXATION BENEFIT PERTAINING TO THE LAND INHERITED BY THE ASS ESSEE ON THE DEMISE OF HIS WIFE SHALL BE AVAILABLE ONLY FROM THE YEAR OF INHER ITANCE. ACCORDINGLY, THE AO RE-WORKED THE CAPITAL GAINS AND THE SAME RESULTED I N AN ADDITION OF RS.12.20 LAKHS. 3. THE AO NOTICED THAT THE ASSESSEE, WHILE COMPU TING THE BUSINESS INCOME, HAS REDUCED THE LONG TERM CAPITAL GAIN OF R S.77.61 LAKHS FROM THE NET PROFIT DECLARED BY THE ASSESSEE. THE AO NOTICE D THAT THE ASSESSEE HAS DEBITED THE PROFIT AND LOSS ACCOUNT WITH THE MARKET VALUE OF LAND AS ON THE DATE OF CONVERSION, MEANING THEREBY, THERE IS NO RE QUIREMENT OF REDUCING THE AMOUNT OF CAPITAL GAIN FROM THE NET PROFIT, I.E., H AD THE ASSESSEE DEBITED THE ITA NO.3956/M/2016 & CO 273/M/2017. SHRI BATUK P.SHAH. 3 PROFIT AND LOSS ACCOUNT WITH THE COST VALUE OF LAND , THEN THERE WAS REQUIREMENT OF REDUCING THE LONG TERM CAPITAL GAIN AMOUNT FROM THE NET PROFIT. WHEN IT WAS POINTED OUT TO THE ASSESSEE BY THE AO, THE ASSESSEE ACCEPTED ITS MISTAKE AND AGREED FOR THE ADDITION OF LONG TER M CAPITAL GAIN AMOUNT OF RS.77.61 LAKHS. 4. THE AO COMPLETED THE ASSESSMENT, INTER ALIA, BY MAKING ABOVE SAID ADDITIONS. THE ASSESSEE ACCEPTED BOTH THE ADDITION S BY NOT PREFERRING APPEAL BEFORE LD CIT(A). THEREAFTER, THE AO LEVIED PENALTY OF RS.28.74 LAKHS U/S 271(1)(C) OF THE ACT ON BOTH THE ADDITION S REFERRED ABOVE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE L D CIT(A) DELETED THE SAME AND HENCE THE REVENUE HAS FILED THIS APPEAL. 5. THE LD D.R SUBMITTED THAT THE MISTAKES COMMI TTED BY THE ASSESSEE IN COMPUTING LONG TERM CAPITAL GAIN AS WELL AS THE BUS INESS INCOME WOULD HAVE GONE UNNOTICED HAD THERE NOT BEEN SCRUTINY ASSESSME NT DONE BY THE AO. ACCORDINGLY HE SUBMITTED THAT THE LD CIT(A) WAS NOT JUSTIFIED IN DELETING THE PENALTY. 6. ON THE CONTRARY, THE LD A.R SUBMITTED THAT THE ADDITION RELATING TO INDEXATION BENEFITS IS A DEBATABLE ONE. HE SUBMITT ED THAT, SINCE THE LAND HAS BEEN SOLD IN AY 2011-12 THE QUESTION WHETHER INDEXA TION BENEFIT IS AVAILABLE ONLY UPTO THE DATE OF CONVERSION OR UPTO THE DATE O F ACTUAL SALE OF LAND IS DEBATABLE ONE. HE FURTHER SUBMITTED THAT THE INDEX ATION BENEFIT CLAIMED BY THE ASSESSEE ON INHERITED PORTION OF LAND IS SUPPOR TED BY THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE O F MANJULA J SHAH (355 ITR 474), EVEN THOUGH THE ASSESSEE HAS ACCEPTED THE ADDITION. WITH REGARD ITA NO.3956/M/2016 & CO 273/M/2017. SHRI BATUK P.SHAH. 4 TO THE DEDUCTION OF LONG TERM CAPITAL GAINS FROM TH E NET PROFIT, THE LD A.R SUBMITTED THAT THE SAME WAS GENUINE CLERICAL MISTAK E COMMITTED BY THE ASSESSEE. BY PLACING RELIANCE ON THE DECISIONS REN DERED BY HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS (P) LTD (322 ITR 158) AND IN THE CASE OF PRICE WATERHOUSE COOPER S (P) LTD (348 ITR 306), THE LD A.R SUBMITTED THAT THE LD CIT(A) WAS J USTIFIED IN DELETING THE PENALTY LEVIED BY THE AO. 7. WE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICE THAT THE LD CIT(A) HAS DELETED THE PENALTY WITH THE FOLLOWING O BSERVATIONS:- 7.4 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT CAREFULLY. FROM THE ASSESSMENT ORDER IT CAN BE SEEN THAT ALL THE FA CTS WERE AVAILABLE IN THE ASSESSMENT RECORDS AND THERE HAS NOT BEEN ANY SUPPR ESSION OF FACTS. THE APPELLANT HAS RELIED ON THE DECISION IN THE CASE OF CIT V. RELIANCE PETRO PRODUCTS P LTD. REPORTED IN 322 ITR 112, WHEREIN TH E HON'BLE APEX COURT HAS HELD THAT READING THE WORDS `INACCURATE AND ` PARTICULARS IN CONJUNCTION, THEY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NO ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. IN THIS CASE, THERE IS NO FINDING THAT ANY DETAILS SUP PLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT, ERRONEOUS OR FALSE. SUCH NOT BEING THE CASE, THERE WOULD BE NO QUESTION OF LEVY OF PEN ALTY UNDER S.271(1)(C). THE APPELLANT HAS ALSO RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPERS (P) L TD. V. CIT REPORTED IN 348 ITR 306, IN THIS CASE THE ASSESSEE HAD CLAIMED DEDUCTION ON ACCOUNT OF PROVISIONS TOWARDS GRATUITY WHICH WAS NOT ALLOWA BLE, AND IT HAS BEEN HELD THAT UNDOUBTEDLY THE ASSESSEE IS A REPUTED FIR M AND HAS GREAT EXPERTISE AVAILABLE WITH IT, NOTWITHSTANDING THIS, IT IS POSSIBLE THAT EVEN THE ASSESSEE COULD MAKE A SILLY MISTAKE. IT HAS BEEN FU RTHER HELD THAT THIS IS A HUMAN ERROR WHICH WE ALL ARE PRONE TO MAKE. THE CAL IBRE AND EXPERTISE OF THE ASSESSEE HAS LITTLE OR NOTHING TO DO WITH THE I NADVERTENT ERROR. THAT THE ASSESSEE SHOULD HAVE BEEN CAREFUL CANNOT BE DOUBTED , BUT THE ABSENCE OF DUE CARE, IN A CASE SUCH AS THE PRESENT DOES NOT ME AN THAT THE ASSESSEE IS GUILTY OF EITHER FURNISHING INACCURATE PARTICULA RS OR ATTEMPTING TO CONCEAL ITS INCOME. (PARA 19 OF THE SC JUDGMENT EMPHASIS SUPPLIED). WE, THEREFORE, SUBMIT THAT IF PERSON WITH DUE EXPERTISE IN TAX LAWS CAN MAKE MISTAKE IN COMPUTATION OF INCOME, THE ASSESSEE WHO IS LAY-MAN AS FAR AS ITA NO.3956/M/2016 & CO 273/M/2017. SHRI BATUK P.SHAH. 5 TAX LAWS ARE CONCERNED CAN ALSO MAKE UNINTENTIONAL INADVERTENT MISTAKES, AND AS SUCH CANNOT BE SUBJECTED TO SUCH HARSH PENAL PROVISIONS. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE LEGAL POSITION DISCUSSED ABOVE, IN RESPECT OF THE ADDITION OF RS.1 2,20,543/-, ON ACCOUNT INCORRECT CLAIM OF YEAR FOR THE PURPOSE OF INDEXATI ON WHILE CALCULATING THE CAPITAL GAINS, AND THE OTHER DISALLOWANCE OF RS.77, 61,239/- ON ACCOUNT DOUBLE DEDUCTION OF VALUE OF LAND ONCE IN THE PROFI T & LOSS ACCOUNT AND AGAIN IN COMPUTATION OF INCOME, IT CANNOT BE HELD T HAT THE APPELLANT HAD EITHER CONCEALED THE PARTICULARS OF ITS INCOME OR H AD FURNISHED INACCURATE PARTICULARS OF ITS INCOME. HENCE THE LD.AO WAS NOT CORRECT IN LEVYING PENALTY U/S 271(1)(C) OF THE ACT ON THE SAID ADDITI ON AND DISALLOWANCE. ACCORDINGLY, THE LD.AO IS DIRECTED TO DELETE THE PE NALTY LEVIED ON BOTH THE ABOVE REFERRED ADDITION OF RS.12,20,543/- AND D ISALLOWANCE OF RS.77,61,239/-. 8. WITH REGARD TO THE ADDITION OF RS.12.20 LAKHS RELATING TO INDEXATION BENEFITS, WE AGREE WITH THE SUBMISSION OF THE ISSUE THAT THE SAID ISSUE IS DEBATABLE IN NATURE. I.E., THE QUESTION AS TO WHETH ER THE INDEXATION BENEFIT IS AVAILABLE UPTO THE PERIOD OF CONVERSION OR UPTO THE DATE OF SALE IS DEBATABLE ONE. WITH REGARD TO THE PERIOD OF INDEXATION AVAIL ABLE FOR THE PROPERTY INHERITED BY THE ASSESSEE FROM HIS WIFE, THE SAME H AS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY HONBLE JURISDICTIONAL BO MBAY HIGH COURT IN THE CASE OF MANJULA J SHAH (SUPRA). HENCE THE PENALTY IS NOT LEVIABLE ON THE SAME. ACCORDINGLY, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN DELETING PENALTY ON THE ADDITION OF RS.12.20 LAKHS, REFERRED ABOVE. 9. WITH REGARD TO THE ADDITION OF RS.77.61 LAKHS, BEING THE DEDUCTION WRONGLY CLAIMED BY THE ASSESSEE, THE CONTENTION OF THE ASSESSEE WAS THAT THE SAME WAS GENUINE MISTAKE COMMITTED BY THE ASSES SEE. AS POINTED BY THE AO, IF THE ASSESSEE HAD DEBITED ACTUAL COST OF THE PLOT OF LAND TO THE PROFIT AND LOSS ACCOUNT, THEN THE ASSESSEE IS ENTIT LED TO DEDUCT THE CAPITAL GAIN AMOUNT FROM THE NET PROFIT, SINCE THE NET PROF IT WOULD INCLUDE THE CAPITAL ITA NO.3956/M/2016 & CO 273/M/2017. SHRI BATUK P.SHAH. 6 GAINS AMOUNT ALSO. SINCE THE ASSESSEE HAS DEBITED MARKET VALUE OF THE LAND (WHICH IS ALREADY ENHANCED BY THE CAPITAL GAIN AMOU NT), THERE IS NO REQUIREMENT OF DEDUCTING CAPITAL GAIN AGAIN FROM TH E NET PROFIT. ON THE FACTS DISCUSSED ABOVE, WE FIND MERIT IN THE SUBMISSION OF THE ASSESSEE THAT IT HAS COMMITTED GENUINE MISTAKE IN REDUCING THE CAPITAL G AIN AMOUNT FROM NET PROFIT. WE FURTHER NOTICE THAT ABOVE SAID MISTAKE HAS OCCURRED ONLY AT THE TIME OF COMPUTING TOTAL INCOME OF THE YEAR UNDER CO NSIDERATION, I.E., THE ASSESSEE DID NOT CONCEAL ANY PARTICULARS OF INCOME OR FURNISHED ANY INACCURATE PARTICULARS OF INCOME IN ITS BOOKS OF AC COUNTS. HENCE WE ARE OF THE VIEW THAT THE SAME WAS A GENUINE MISTAKE COMMIT TED BY THE ASSESSEE. ACCORDINGLY WE ARE OF THE VIEW THAT THE LD CIT(A) W AS JUSTIFIED IN DELETING THE PENALTY ON THIS ADDITION ALSO. 10. IN VIEW OF THE FOREGOING DISCUSSIONS, WE AR E OF THE VIEW THAT THE ORDER PASSED BY LD CIT(A) DOES NOT CALL FOR ANY INTERFERE NCE. ACCORDINGLY WE UPHOLD THE SAME. 11. SINCE WE HAVE DISMISSED THE APPEAL OF THE REVEN UE, THERE IS NO REQUIREMENT TO ADJUDICATE THE C.O. OF THE ASSESSEE. 12. IN THE RESULT, THE APPEAL FILED BY THE REVE NUE AND THE C.O. OF THE ASSESSEE ARE DISMISSED. ORDER HAS BEEN PRONOUNCED IN THE COURT ON 05.12. 2018 SD/- SD/- (AMARJIT SINGH) (B.R.BASKARAN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 05 TH DECEMBER, 2018. DEVDAS* ITA NO.3956/M/2016 & CO 273/M/2017. SHRI BATUK P.SHAH. 7 !'#$%&%'# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! ! ' ( ) / THE CIT, MUMBAI. 4. ! ! ' / CIT(A)-40, MUMBAI 5. %&' (()* , ! )* , / DR, ITAT, MUMBAI 6. ',-. / GUARD FILE. / BY ORDER, %( //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI