MR. MURLIDHAR S. AGRAWAL, Nagpur V. ITO,WARD-4(1), Nagpur

ITA 401/NAG/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3907 (ITAT-NAGPUR)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 26-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHARDHA NICHHAL ACIT
• Assessee Lawyers: M MANI; A C BAWARE
• Keywords: Capital asset
• Section: 2(14); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR E-BENCH, NAGPUR (THROUGH VIDEO CONFERENCE AT MUMBAI) BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER A ND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO.401/NAG/2012 (AY: 2007-2008) MR. MURLIDHAR S. AGRAWAL, 222, EAST WARDHAMAN, NAGAR, MITTAL VILLA, NAGPUR. PAN: AAJPA4954C VS. INCOME TAX OFFICER, WARD 4(1), 3 RD FLOOR, SARAF CHAMBERS, NAGPUR-440001 (APPELLANT) (RESPONDENT) REVENUE BY : SMT. SHARDHA NICHHAL (ACIT) AS SESSEE BY : M. MANI & A.C. BAWARE DATE OF HEARING: 15.03.2013 DATE OF PRONOUNCEMENT :3.4.2013 O R D E R PER D. KARUNAKARA RAO, AM: 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) NO. II-NAGPUR DATED 28.11.2011. THE GROUNDS OF APPEAL READ AS UNDER: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDERS PASSED BY THE LOWER AUTHORITIES IN LEVYING AND CONFIRMING THE PEN ALTY UNDER SECTION 271(1) (C) OF THE INCOME TAX ACT, 1961 ARE ILLEGAL, INVALI D AND BAD IN LAW. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-II, NAGPUR ERRED IN CONFIRMING THE PENALTY OF RS. 50,535/- LEVIED BY THE ITO, WARD-4(1), NAGPUR UNDER SECTION 271(1) (C) OF THE ACT BY NOT A PPRECIATING THE FACT THAT THE APPELLANT HIMSELF SUBMITTED AL THE PARTICULARS TO THE AO. (III) THE LD. CIT(A)-II, NAGPUR ERRED IN NOT APPRECIATING THE FACTS THAT THE CLAIM MADE BY THE ASSESSEE IN RETURN IS DEBATABLE ONE AND HENCE NO PENALTY IS LEVIABLE ON DEBATABLE ISSUE. (IV) THE LD. CIT(A), NAGPUR FAILED TO APPRECIATE THE FAC T THAT THE ASSESSEE COOPERATED WITH THE DEPARTMENT AND OFFERED THE SAID INCOME TO PURCHASE PEACE AND AVOID LITIGATION. HENCE LOOKING TO THE CO NDUCT OF THE ASSESSEE, 2 I.T.A. NO.401/NAG/2012 MR. MURLIDHAR S. AGRA WAL THE ASSESSEES CASE IS NOT FIT FOR PENALTY TO BE LE VIED UNDER SECTION 271(1) (C) OF THE ACT. (V) THE LD. CIT(A)-II, NAGPUR FURTHER ERRED IN NOT APPR ECIATING THE FACT THAT THE ASSESSEE BONAFIDELY MADE THE CLAIM WHICH WAS FOUND BY THE AO AS INADMISSIBLE AND HENCE IN THE ABSENCE OF ANY CONCEA LMENT OR FURNISHING INACCURATE PARTICULARS, NO PENALTY UNDER SECTION 27 1(1) (C) OF THE ACT IS ELIGIBLE. (VI) WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT HUMBL Y PRAYS THAT THE PENALTY LEVIED AT RS. 50,535/- IS EXCESSIVE AND THE SAME MA Y BE REDUCED TO MINIMUM LEVIABLE UNDER THE ACT. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IS AN INDIVIDUAL AND SOLD HIS LAND SITUATED AT KAPSI KHURD AND TIRODI. THE SAME I S LOCATED UNDISPUTEDLY WITHIN THE LIMITS OF THE NAGPUR MUNICIPAL CORPORATION. HOWEVER, THE ASSE SSEE IS UNDER THE IMPRESSION THAT THE SAID LAND IS OF AGRICULTURAL NATURE AND THEREFORE, IT IS NOT A CAPITAL ASSET THAT MEANING OF SECTION 2(14) OF THE ACT. THEREFORE, THE SALE PROCE EDINGS WERE NOT SHOWN IN THE RETURN AS CAPITAL GAIN. AT THE INSTANCE OF THE AO, THE QUESTI ON CAME UP ABOUT THE TAXABILITY OF SUCH CAPITAL GAINS ARISING ON THE SALE OF THE SAID LANDS . RELYING ON THE M. P. GAZETTEE NOTIFICATION DATED 12.05.1950, A.O. STATED THAT THE ASSESSEES L ANDS ARE LOCATED WITHIN THE BOUNDARIES OF THE NAGPUR MUNICIPAL CORPORATION AND THEREFORE, THE SALE PROCEEDS ARE EXIGIBLE TO TAX. DURING THE ASSESSMENT PROCEEDINGS, ASSESSEE EXPRESSED HIS IGNORANCE ABOUT THE SAID M.P. GAZETTEE AND MAINTAINED THAT HE HAS ONLY CONSIDERED THE LAND S ARE LOCATED BEYOND 8 KM FROM OCTROI LIMITS. HOWEVER, HE PASSIVELY AGREED TO THE ADDITIO N. THE ADDITION ON QUANTUM THUS REACHED FINALITY. AO INITIATED PENALTY PROCEEDING UNDER SEC TION 217 (1) (C) OF THE ACT AND LEVIED THE PENALTY VIDE ORDER DATED 30 TH JUNE 2010 AND LEVIED PENALTY @ 100% OF THE TAX SOU GHT TO BE CONCEALED I.E. 42,112/- ON THE CONCEALED INCOME OF RS. 1,40,374/-. THE MATTER TRAVELLED TO THE CIT(A). DURING THE PROCEEDINGS, ASSESSEE FURNISHED WRITTEN SUBMISSIONS WHICH ARE EXTRACTED AND PLACED AT PARA-4 OF THE IMPUGNED ORDER. FURTHER THE ASSESSEE RELIED ON VARIOUS JUDICIAL DECISIONS DISCUSSED IN PARA-5. AFTER EXAMINING THE SUBMISSIONS OF THE ASSESSEE AND THE DECISIONS CITED THEREIN, CIT(A) REJECTED THE SAID S UBMISSIONS OF THE ASSESSEE AND CONFIRMED THE PENALTY LEVIED BY THE AO. IN THE BACKGROUND OF THE ABOVE FACTS AND DEVELOPMENTS, ASSESSEE FILED THE INSTANT APPEAL WITH THE GROUNDS MENTIONED ABOVE BEFORE THE TRIBUNAL. DURING THE PROCEEDINGS, LEARNED COUNSEL FOR THE AS SESSEE MENTIONED THAT THERE IS NO APPEALS ON THE QUANTUM OF ADDITIONS. LEARNED COUNSE L ALSO ARGUED STATING THAT THE ASSESSEES IGNORANCE ON THE FACT RELATING TO DISTANCE OF LANDS FROM THE LIMITS OF NAGPUR MUNICIPAL 3 I.T.A. NO.401/NAG/2012 MR. MURLIDHAR S. AGRA WAL CORPORATION MUST BE CONSIDERED FAVOURABLE AND DELET E THE PENALTY. FURTHER HE MENTIONED THAT THE SATISFACTION RECORDED BY THE AO IS WITH REGARD TO FURNISHING INACCURATE PARTICULARS AND NOT THE CONCEALMENT OF INCOME AND RELIED UPON ON CERTAI N DECISIONS FOR QUASHING OF THE PENALTY ORDERS INITIATED FOR THE WRONG REASONS. 3. ON THE OTHER HAND LD. DR FOR THE REVENUE RELIED ON THE ORDERS OF THE AO UNDER CIT(A), LEARNED DR ALSO MENTIONED THAT THE REASONS FOR INIT IATION OF PENALTY RECORDED AS EVIDENT FROM PARAGRAPH-8 THE ASSESSEE CONCEALED PARTICULARS OF HIS INCOME AND PARA-10 ASSESSEE CONCEALED THE INCOME TO THE EXTENT OF RS. 1,40,374/ - GOES AGAINST THE ASSESSEE. THE FACT OF EARNING OF CAPITAL GAINS IS COMPLETELY KEPT OUTSIDE THE SCOPE OF COMPUTATION OF INCOME AND ALSO OUTSIDE THE RETURN OF INCOME. IT IS UNDISPUTED FACT A SUM OF RS. 1,04,347/- IS NOT OFFERED IN THE RETURN. FURTHER, IT IS A FACT THAT THE IMPUGNED LANDS, WHI CH IS THE SOURCE OF THE SAID CAPITAL GAINS, ARE LOCATIONALLY WITHIN THE BOUNDARIES OF TH E MUNICIPAL CORPORATION OF NAGPUR. FURTHER, THE ASSESSEES BELIEF THAT 8 KM DISTANCE SHOULD BE CALCULATED FROM THE OCTROI LIMITS, IS PATENTLY UNACCEPTABLE, IN VIEW OF THE PROVISIONS OF SECTION 2(14) OF THE ACT AND ALSO IN THE LIGHT OF THE SAID GAZETTEE NOTIFICATION. BONAFIDE NATURE OF THE ASSESSEES FAILURE TO OFFER OF SAID INCOME OF RS. 1,04,347/- IS NOT ESTABLISHED BY THE ASSESSEE. NOTHING IS PLACED BEFORE US TO DEMONSTRATE THAT THE ASSESSEE IS IGNORANT OF THE BASIC FACTS RE LATING TO THE PROVISIONS OF SECTION 2(14) OF THE ACT. IN THESE FACTUAL CIRCUMSTANCES, WE HAVE PE RUSED THE CONTENTS OF PARA-6 & 7 OF THE IMPUGNED ORDER AND THE SAME ARE EXTRACTED AS UNDER: 6. I HAVE CAREFULLY CONSIDERED THE CONTENTION OF THE APPELLANT AS WELL AS CAREFULLY GONE THROUGH THE CASE BROUGHT OUT IN THE ASSESSMENT ORDER AS WELL AS THE PENALTY ORDER. IT IS SEEN THAT THE APPELLANT HA D NOT SHOWN ANY TRANSACTIONS FROM THE SALE OF AGRICULTURAL LAND IN HIS ORIGINAL RETURN OF INCOME FILED AND IT WAS ONLY BECAUSE OF THE SCRUTINY PROCEEDINGS AND BECAUS E OF THE CONSEQUENT VERIFICATION OF THE CREDITS IN THE CAPITAL OF THE A SSESSEE BEING VERIFIED THAT THE FACT OF THE ASSESSEE HAVING EARNED THE SAID CAPITAL GAIN AND OFFERING THE SAID CREDITS FOR TAX WAS DETECTED. THE FACTS STATED BY THE APPEL LANT THAT THE SAID AGRICULTURAL LAND WERE LOCATED IN KAPSI-KHURD AND TIRODI WHICH H AS POPULATION OF TEN THOUSAND HAS NO BEARING ON THE TAXABILITY AS THE SA ID VILLAGES ARE WITHIN 8 KM. OF NMC LIMIT AND AS PER THE PROVISIONS OF SEC. 2(14)(I II)(A) IT IS THE POPULATION OF NAGPUR WHICH IS RELEVANT AND NOT OF THE SAID VILLAG ES. ALSO, NOT MUCH CREDENCE 4 I.T.A. NO.401/NAG/2012 MR. MURLIDHAR S. AGRA WAL CAN BE GIVEN TO THE ASSERTION THAT THE ASSESSEE FUL LY COOPERATED WITH THE ASSESSING OFFICER AND DID NOT DRAG THE MATTER OF TH E LITIGATION. THE FACT OF THE MATTER IS THAT THE ASSESSEE NEVER SHOWED THIS TRANS ACTION IN THE ORIGINAL RETURN OF INCOME AND ACCEPTED THE ADDITION WHEN THE ASSESSMEN T WAS FINALIZED AT IT REALIZED THAT THERE WAS NO VALID JUSTIFICATION FOR ITS STAND 7. I FIND THAT IN ADDITION TO NORMAL CONNOTA TIONS OF CONCEALMENT, A DEEMING FICTION IS ALSO IMPLICIT IN THE SCHEME OF PENALTY P ROVISIONS. THE DEEMING FICTION INSERTED BY WAY OF EXPLN. 1 TO S. 271(1)(C) ENVISAG ES TWO SITUATIONS --- (A) FIRST, WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPU TATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE FAILS TO OF FER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE AO OR THE CIT(A); AND, (B) SECOND, WHERE IN RESPECT OF ANY FACTS MATE RIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE A SSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND THE ASSESSEE 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 COMPUTATION OF TOTA L INCOME. IN THE FIRST SITUATION, THE DEEMING FICTION IS TRIGGERED BY THE INACTION OF THE ASSESSEE BY HIS NOT GIVING THE EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME, OR BY ACTION OF THE AO OR THE CIT(A) BY GIVING CATEGORICAL FINDING TO THE EFFECT THAT THE EXPLANATION GIVEN BY THE ASSESS EE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FICTION IS TRIGGERED BY THE FAILURE OF THE ASSESSEE LEADING TO SATISFACTION OF CONDITIONS LAID DOWN IN CL. (B) OF EXPLN. 1 TO S. 271(1)(C), NAMELY THAT THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE AN EX PLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME, AND, I N ADDITION TO THIS, THE ASSESSEE IS ALSO NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMP UTATION OF TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. WHEN THIS DEEMING F ICTION COMES INTO PLAY, WHICH CAN ONLY HAPPEN IN ONE OF THE ABOVE SITUATION S, THE RELATED ADDITION OR DISALLOWANCE IN COMPUTING THE TOTAL INCOME OF THE A SSESSEE, FOR THE PURPOSES OF S. 271(1) (C), IS DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. IN THE INSTANT CAS E THE APPELLANT HAD NOT SHOWN ANY TRANSACTIONS FROM THE SALE OF AGRICULTURAL LAND IN HIS ORIGINAL RETURN OF INCOME FILED AND IT WAS ONLY BECAUSE OF THE SCRUTINY PROCE EDINGS AND BECAUSE OF THE CONSEQUENT VERIFICATION OF THE CREDITS IN THE CAPIT AL OF THE ASSESSEE BEING VERIFIED THAT THE FACT OF THE ASSESSEE HAVING EARNED THE SAI D CAPITAL GAIN AND OFFERING THE 5 I.T.A. NO.401/NAG/2012 MR. MURLIDHAR S. AGRA WAL SAID CREDITS FOR TAX WAS DETECTED. IN THESE CIRCUMS TANCES, ESPECIALLY WHEN EXPLANATION GIVEN BY THE ASSESSEE DURING THE PENALT Y PROCEEDINGS HAS NOT BEEN SUBSTANTIATED NOR FOUND TO BE BONA FIDE AND THERE I S NO MATERIAL TO TAKE A DIFFERENT VIEW IN THE MATTER, I AM OF THE OPINION T HAT THE LD. AO WAS JUSTIFIED IN THE LEVY OF PENALTY ON ACCOUNT OF FURNISHING OF INA CCURATE PARTICULARS OF INCOME IN RELATION TO SALE OF CAR. IN MY CONSIDERED VIEW, L A ND BEARING INTO MIND ENTIRELY OF THE CASE, THE EXPLANATION OF THE ASSESSEE DOES NOT MERIT ACCEPTANCE. THE PENALTY LEVIED BY THE LD. AO IS ACCORDINGLY CONFIRMED. 4. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF REVENUE. 5. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION TH E DETAILS RELIED UPON BY THE ASSESSEE ARE OF NO USE AND CONSEQUENTIALLY, THE ORDER OF THE CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. 6. ACCORDINGLY GROUNDS RAISED BY THE ASSESSEE ARE D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 3 RD DAY OF APRIL, 2013 SD/- SD/- (R.K. GUPTA) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 3.4.2013 AT :MUMBAI COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE DCIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR NAGPUR, BENCH, ITAT, NAGPUR. 6. GUARD FILE. // TRUE COPY// SK. BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI