FARZANA DIVKAR, MUMBAI V. INCOME TAX OFFICER WARD 1, PALGHAR

ITA 4987/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6825 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 20-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA
• Assessee Lawyers: KHUSHIRAM JADHWANI
• Keywords: Capital asset; Bonafide belief; Valuation report
• Section: 271(1)(c); 54F; 133(6); 54; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO. 4987 /MUM./2017 ( ASSESSMENT YEAR : 20 12 13 ) FARZANA DIVKAR YUSUF COMPLES, 1 ST FLOOR AT AND POST MANOR, TAL. DIST. PALGHAR PALGHAR, 401 403 (THANE) PAN AJZPD6069L . APPELLANT V/S INCOME TAX OFFICER WARD 1, PALGHAR, THANE . RESPONDENT A SSESSEE BY : SHRI KHUSHIRAM JADHWANI REVENUE BY : SHRI RAJEEV GUBGOTRA DATE OF HEARING 1 2 . 12 .2018 DATE OF ORDER 28.02.2019 O R D E R PER SAKTIJIT DEY, J.M. THE A FORESAID APPE AL HAS BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 10 TH APRIL 2017 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) 3 , MUMBAI, CONFIRMING PENALTY OF ` 10,72,255, IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) FOR THE ASSESSMENT YEAR 20 12 1 3. 2 FARZANA DIVKAR 2 . BRIEF FACTS ARE, THE ASSESSEE IS AN INDIVIDUAL. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED HER RETURN OF INCOME ON 31 ST MARCH 2014, DECLARING TOTAL INCOME OF ` 1,87,790. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT AS PER THE ANNUAL INFORMATION REPORT (AIR) AVAILABLE ON RECORD, THE ASSESSEE ALON G WITH SMT. GULSHAN TASHE, SOLD AN IMMOVABLE PROPERTY SITUATED AT MAUJE KASHA, BEARING SURVEY NO.13/1, ADMEASURING 4670 SQ.MTRS. TO M/S. SAIRAJ DEVELOPERS, FOR A TOTAL SALE CONSIDERATION OF ` 3,85,24,500 . THEREFORE, THE ASSESSING OFFICER ISSUED A QUESTIONN AIRE TO THE ASSESSEE ON 7 TH NOVEMBER 2014, CALLING UPON HER TO FURNISH COPY OF SALE DEED, VALUATION REPORT WITH WORKING OF LONG TERM CAPITAL GAIN, ETC. IN RESPONS E, THE ASSESSEE FURNISHED COPY OF THE SALE DEED AND ALSO THE PAYMENT DETAILS AS PER WHICH OUT OF THE TOTAL SALE CONSIDERATION OF ` 3,85,24,500, AN AMOUNT OF ` 2,10,00,000, WAS PAID TO SMT. GULSHAN TASHE. AS OBSERVED BY THE ASSESSING OFFICER , NO SUBMISSION WAS MADE BY THE ASSESSEE WITH REGARD TO THE BALANCE AMOUNT OF ` 1,75,24,500. THEREFORE, HE ISSUED NOTICE UNDER SECTION 133(6) OF THE ACT TO THE DEVELOPER CALLING FOR INFORMATION REGARDING THE PAYMENTS MADE. AS OBSERVED BY THE ASSESSING OFFICER, VIDE LETTER DATED 8 TH DECEMBER 2014, THE DEVELOPER INTIMATED THAT OUT OF THE TOTAL SALE CONSIDERATION OF ` 3,85,24,500, AN AMOUNT OF ` 2,10,00 ,000 WAS PAID DIRECTLY TO SMT. GULSHAN TASHE, AND THE BALANCE AMOUNT OF ` 3 FARZANA DIVKAR 1,75,24,500, AS PER MUTUAL AGREEMENT , WAS TO BE GIVEN IN THE FORM OF FLATS ADMEASURING 21,400 SQ.FT. SINCE , THE ASSESSING OFFICE R WANTED TO COMPUTE LONG TERM CAPITAL GAIN ON THE SALE OF LAND, HE CALLED UPON THE ASSESSEE TO FURNISH A VALUATION REPORT FOR VALUE OF THE LAND AS ON 1 ST APRIL 1981. IN THE ABSENCE OF ANY INFORMATION FROM THE ASSESSEES SIDE, THE ASSESSING OFFICER OBTAINED INFORMATION REGARDING VALUATION OF THE LAND AS ON 1 ST APRIL 1981, FROM THE ASSTT. DISTRICT REGISTRAR (THANE RURAL) THANE, WHO VALUED THE LAND AS ON 1 ST APRIL 1981, AT ` 10,05,500. ON THE BASIS OF THE SAID VALUATION, THE ASSESSING OFFICER COMPUTED NET LONG TERM CAPITAL GAIN AT ` 3,06,31,325, AND CALLED UPON THE ASSESSEE TO EXPLAIN WHY 50% SHARE OF THE ASSESSEE IN THE SAID CAPITAL GAIN SHOULD NOT BE BROUGHT TO TAX. IN REPLY, IT WAS SUBMITTED BY THE ASSESSEE THAT HER SHARE IN TH E PROPERTY IS ONLY TO THE EXTEN T OF 17%. AFTER ACCEPTING THE AFORESAID CLAIM OF THE ASSESSEE, THE ASSESSING OFFICER COMPUTED ASSESSEES SHARE IN LONG TERM CAPITAL GAIN AT ` 52,07,325 AND ADDED TO THE INCOME OF THE ASSESSEE. ON THE BASIS OF SUCH ADDITION, THE ASSESSING OFFICER INITIATED PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ALLEGING CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME AND ULTIMATELY THE ASSESSING OFFICER BY A SEPARATE ORDER DATED 23TH JULY 2015, IMPOSED PENALTY UNDER SEC TION 271(1)(C) OF THE ACT FOR AN AMOUNT OF ` 16,51,290. SUBSEQUENTLY, BY AN ORDER PASSED UNDER 4 FARZANA DIVKAR SECTION 154 OF THE ACT ON 23 RD AUGUST 2016, THE ASSESSING OFFICER REVISED THE QUANTUM OF PENALTY TO ` 10,72,255. THOUGH, THE ASSESSEE CHALLENGED THE IMPOSITION O F PENALTY UNDER SECTION 271(1)(C) OF THE ACT BEFORE THE LEARNED COMMISSIONER (APPEALS), HOWEVER, SHE WAS UNSUCCESSFUL. 3 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ASS ESSEE DID NOT RECEIVE ANY MONITA RY CONSIDERATION IN LIEU OF THE LAND SOLD AND ON LY RECEIVED CONSTRUCTED AREA. THEREFORE, THE ASSESSEE WAS UNDER A BONAFI D E BELIEF THAT THERE IS NO CAPITAL GAIN ARISING ON TRANSFER OF LAND TO BE OFFERED TO TAX AT HER HAND. HE SUBMITTED , ONCE THE ASSESSING OFFICER BROUGHT T O THE NOTICE OF THE ASSESSEE THAT CAPITAL GAIN HAS TO BE OFFERED TO TAX EVEN ON RECEIPT OF CONSTRUCTED AREA IN LIEU OF LAND , THE ASSESSEE OFFERED IT FOR TAXATION. THUS, HE SUBMITTED , UNDER THESE CIRCUMSTANCES ASSESSEE DID NOT OFFER THE CAPITAL GAIN TO TAX. THAT BEING THE CASE, NEITHE R THERE IS CONCEALMENT OF INCOME NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. FURTHER, HE SUBMITTED , THOUGH , THE ASSESSEE MIGHT HAVE AGREED FOR OFFERING THE CAPITAL GAIN TO TAX, HOWEVER, THE ASSESSEE OTHERWISE WAS ELIGIBLE TO CLAIM DEDUCTION UNDER S ECTION 54F OF THE ACT IN RESPECT OF THE CAPITAL GAIN , SINCE , IN LIEU OF SUCH CAPITAL GAIN, THE ASSESSEE HAS BEEN GIVEN FLATS BY THE BUILDER. IN THIS CONTEXT, HE RELIED UPON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN CIT V/S GUMANMAL JAIN, [2017] 80 T AXMANN.COM 21 (MAD.). 5 FARZANA DIVKAR WITH OUT PREJUDICE TO THE AFORESAID SUBMISSIONS, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , SINCE THE ASSESSING OFFICER HAS NOT RECORDED SATISFACTION WITH REGARD TO THE EXACT NATURE OF VIOLATION COMMITTED BY THE ASSESSEE AS PER S ECTION 271(1)(C) OF THE ACT, THE PENALTY ORDER PASSED IS INVALID. 4 . THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , HAD ASSESSEES CASE NOT BEEN SELECTED FOR SCRUTINY, THE CAPITAL GAIN WOULD HAVE ESCAPED TAXATION. THEREFORE, THE ASSESSEE HAD KNOWINGLY AN D DELIBERATELY FURNISHED INACCURATE PARTICULARS OF INCOME AND CONCEALED INCOME FOR WHICH LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS JUSTIFIED. 5 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. WE HAVE ALSO APPLIED OUR MIND TO THE DECISIONS RELIED UPON. IT IS NOT IN DISPUTE THAT ON SALE OF LAND TO THE DEVELOPER, THE AS SESSEE HAS NOT RECEIVED ANY MONETA RY CONSIDERATION. RATHER, AS PER AGREEMENT WITH THE DEVELOPER, THE ASSESSEE WAS TO RECEIVE CONSTRUCTED AREA IN LIEU OF THE LAND SOLD. THER E FORE, THE EXPLANATION OF THE ASSESSEE THAT IN ABS ENCE OF ANY MONETA RY CONSIDERATION SHE WAS UNDER A BONAFIDE BELIEF THAT NO CAPITAL GAIN ARISES ON SALE OF LAND , IS ACCEPTABLE AND BENEFIT OF DOUBT CAN BE GIVEN TO THE ASSESSEE. EVEN OTHERWISE ALSO , THE HONBLE MADRAS HIGH COURT IN GUMANMAL JAIN 6 FARZANA DIVKAR (SUPRA) HAS HELD THAT IF UNDER A DEVELOPMENT AGREEMENT THE ASSESSEE RECEIVES SEVERAL FLATS CONSTRUCTED ON THE SAME PIECE OF LAND , THE ASSESSEE WOULD BE ELIGIBLE TO AVAIL DEDUCTION UNDER SECTION 54 F OF THE AC T. THUS, AS PER THE RATIO LAID DOWN IN THE AFORESAID DECISION, THE ASSESSEE WOULD HAVE BEEN ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 54 F OF THE ACT AGAINST THE CAPITAL GAIN. THEREFORE, MERELY BECAUSE THE ASSESSEE AGREED FOR THE ADDITION OF CAPITAL GAIN, T HE PROVISIONS OF SECTION 271(1)(C) OF THE ACT DO NOT GET ATTRACTED AUTOMATICALLY. THEREFORE, WE ARE OF THE VIEW THAT IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT IN THE FACTS OF THE PRESENT APPEAL IS NOT JUSTIFIED. ACCORDINGLY, WE DELETE THE PE NALTY IMPOSED OF ` 10,72,255. I N VIEW OF OUR AFORESAID DECISION, WE DO NOT INTEND TO DWELL UPON THE ISSUE RELATING TO LACK OF SATISFACTION RECORDED BY THE ASSESSING OFFICER WHILE INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. 6 . IN THE RESULT, ASSESSEES APPEAL IS ALLOWED TO THE EXTENT INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 28.02.2019 SD/ - G. MANJUNATHA ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 28.02.2019 7 FARZANA DIVKAR COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (ASSTT. REGISTRAR /SR.P.S ) ITAT, MUMBAI