Chittaluri Srikanth, Hyderabad V. ITO, Ward-1, Nandyal

ITA 502/HYD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69927 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 1995-1996
• Appeal Filed On: 10-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALLIKA
• Assessee Lawyers: GVVS MURTHY
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.502/HYD/2013 ASSESSMENT YEAR 1995-96. CHITTALURI SRIKANTH, -V- INCO ME-TAX OFFICER, HYDERABAD. WARD-1, HYDERABAD. PAN:AAJPC 5219 J (APPELLANT) (RESPONDENT) APPELLANT BY SHRI GVVS MURTHY RESPONDENT BY SMT. SUMAN MALLIKA DATE OF HEARING 30 - 10 - 2013 DATE OF PRONOUNCEMENT 13 - 11 - 2013 ORDER PER SAKTIJIT DEY, J.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 12-2-2013 OF CIT (A)-9, MUMBAI CAMP AT HYDERA BAD PASSED IN APPEAL NO.11/ITO WD-1, NANDYAL/CIT (A)-IV /2008-09 PERTAINING TO THE ASSESSMENT YEAR 2005-06. 2. THE SOLE ISSUE IN THE AFORESAID APPEAL IS WITH R EGARD TO THE IMPOSITION OF PENALTY U/S 271(1)( C) OF THE ACT OF AN AMOUNT OF RS.92,894/-. 2 ITA NO.502 OF 2013 CHITTALURI SRIKANTH, HYD. 3. BRIEFLY THE FACTS ARE, THE ASSESSEE IS AN INDIVI DUAL. FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE FILED HIS RE TURN OF INCOME ON 3-5-1995 DECLARING TOTAL INCOME OF RS.32 1,428/- FROM HOUSE PROPERTY AND COTTON BUSINESS. A SURVEY O PERATION U/S 133A OF THE ACT WAS CONDUCTED IN CASE OF THE ASSESSEES FATHER SRI C. SATYANARAYANA ON 16-12-1994 DURING W HICH THE AGREEMENT WAS ENTERED INTO BY THE ASSESSEES FATHER , HIS MOTHER AND THE ASSESSEE WITH ONE SRI ABHIMANYUDU S ETTY FOR SALE OF CERTAIN IMMOVABLE PROPERTIES AND MOVABLE PROPERTIES CAME TO THE NOTICE OF THE DEPARTMENT. DURING ASSES SMENT PROCEEDINGS ON THE BASIS OF THE SALE AGREEMENT FOUN D DURING THE SURVEY OPERATION, THE ASSESSING OFFICER NOTED T HAT THE ASSESSEE ALONG WITH HIS FATHER AND MOTHER HAD ENTE RED INTO AGREEMENT OF SALE OF IMMOVEABLE PROPERTY FOR A CONS IDERATION OF RS.38 LAKH VIDE AGREEMENT DATED 4-3-1994. HE F URTHER NOTED THAT AS PER THE TERMS OF AGREEMENT THE SALE CONSIDERATION OF RS.38 LAKH WAS TO BE PAID BY THE P URCHASER SRI ABHIMANYUDU SETTY ON OR BEFORE 28-2-1995 AND THE P OSSESSION OF THE GINNING MILL SHOULD BE HANDED OVER BY THE AS SESSEE AND HIS FAMILY TO SAID SRI C. ABHIMANYUDU SETTY WITH E FFECT FROM 1- 8-1994. HE FURTHER NOTED AS PER THE TERMS OF THE A GREEMENT, THE PURCHASER SRI ABHIMANYUDU SETTY HAD TAKEN OVER THE POSSESSION OF THE SAID PROPERTY AND CARRIED ON BUSI NESS IN THE SAID PREMISES AFTER MAKING CERTAIN ALTERATIONS. FR OM THIS, THE ASSESSING OFFICER NOTED THAT AS A CONSEQUENCE OF SA LE OF THE PROPERTY, THE ASSESSEE IS LIABLE FOR CAPITAL GAINS FOR THE 3 ITA NO.502 OF 2013 CHITTALURI SRIKANTH, HYD. IMPUGNED ASSESSMENT YEAR SINCE THE PAYMENT OF RS.32,50,000/- WAS RECEIVED BY JULY, 1994 AND THE P OSSESSION WAS GIVEN ON 1-8-1994. SINCE THE ASSESSEE HAD NOT ADMITTED THE INCOME FROM CAPITAL GAINS, HE ASKED THE ASSESSE E TO EXPLAIN. 4. IN RESPONSE TO THE QUERY MADE BY THE ASSESSING O FFICER, IT WAS SUBMITTED BY THE ASSESSEE THAT SINCE THERE WAS A DISPUTE REGARDING THE PAYMENT AND POSSESSION OF THE PROPERT Y AND THE MATTER WAS PENDING IN THE COURT AND SINCE THE POSSE SSION AND TRANSFER OF PROPERTY WAS NOT COMPLETE LIABILITY TO CAPITAL GAINS WILL NOT ARISE. THEREFORE, THE ASSESSEE HAD NOT AD MITTED ANY INCOME FROM CAPITAL GAINS. THOUGH THE ASSESSING OF FICER ACCEPTED THAT THERE WAS DISPUTE WITH REGARD TO THE PROPERTY WHICH WAS TAKEN UP IN LITIGATION IN THE COURT OF LA W, HOWEVER, HE NOTED THAT FROM THE ORDERS OF THE SUBORDINATE JU DGE, NADYAL DATED 22-3-1995, IT WOULD BE EVIDENT THAT THE COURT HAS CONFIRMED THE POSSESSION OF THE SUBJECT PROPERTY IN FAVOUR OF THE PURCHASER SRI ABHIMANYUDU SETTY THOUGH THERE WA S TEMPORARY INJUNCTION EARLIER GRANTED BY THE LOWER COURT IN FAVOUR OF SRI C. SATYANARAYANA, FATHER OF THE ASSES SEE. THE ASSESSING OFFICER THEREFORE CAME TO A CONCLUSION TH AT THE TRANSACTION CONSEQUENT TO THE AGREEMENT EXECUTED BE TWEEN THE PARTIES AND TAKING OVER THE POSSESSION OF THE PROPE RTY BY THE PURCHASER COUPLED WITH PAYMENT OF CONSIDERATION CON STITUTES TRANSFER WITHIN THE MEANING OF SECTION 2(47) OF TH E ACT READ WITH SECTION 53A OF TRANSFER OF PROPERTY ACT, 1882. THOUGH THE 4 ITA NO.502 OF 2013 CHITTALURI SRIKANTH, HYD. ASSESSEE CONTENDED THAT THE ORDERS OF THE SUBORDINA TE JUDGE HAS BEEN APPEALED AGAINST AND THE LITIGATION IS STI LL PENDING HOWEVER THE ASSESSING OFFICER OBSERVING THAT THE AS SESSEE HAS NOT SUBMITTED ANY DOCUMENTARY EVIDENCE IN THAT REGA RD COMPLETED THE ASSESSMENT BY COMPUTING CAPITAL GAIN S OF RS.11,47,649/-. 5. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BY PREFERRING AN APPEAL BEFORE THE CIT (A). BEING UNS UCCESSFUL BEFORE THE CIT (A) THE ASSESSEE CARRIED AN APPEAL BEFORE THE INCOME-TAX APPELLATE TRIBUNAL. SINCE, BY THE TIME T HE APPEAL OF THE ASSESSEE WAS TAKEN UP FOR HEARING BY THE TRIB UNAL, THE DISPUTE IN RESPECT OF THE PROPERTY WAS SETTLED THRO UGH LOK ADALAT, THE ASSESSEE CONFINED HIS ARGUMENT ONLY TO THE QUANTIFICATION OF THE SALE CONSIDERATION IN HIS HAN DS AND DID NOT PRESS THE OTHER GROUNDS RAISED WITH REGARD TO CHARG EABILITY OF LONG TERM CAPITAL GAINS AND OTHER CONNECTED ISSUES. ACCORDINGLY, THE TRIBUNAL DISPOSED OF THE APPEAL B Y DIRECTING THE ASSESSING OFFICER TO REDUCE THE SALE CONSIDERAT ION ATTRIBUTABLE TO THE ASSESSEES SHARE IN THE PROPERT Y AND THEREAFTER COMPUTE LONG TERM CAPITAL GAINS. IN PUR SUANCE TO THE DIRECTION OF THE TRIBUNAL THE ASSESSING OFFICER PASSED A CONSEQUENTIAL ORDER COMPUTING CAPITAL GAIN AT RS.6, 97,649/- AS AGAINST RS.11,64,470/- COMPUTED IN THE ASSESSMENT O RDER. WHEN THE MATTER STOOD LIKE THIS, THE ASSESSING OFFI CER ISSUED A NOTICE TO THE ASSESSEE DIRECTING HIM TO SHOW CAUSE AS TO WHY PENALTY U/S 271(1) (C) OF THE ACT SHALL NOT BE IMPO SED FOR 5 ITA NO.502 OF 2013 CHITTALURI SRIKANTH, HYD. CONCEALING THE PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. 6. IN RESPONSE TO THE NOTICE ISSUED BY THE ASSESSIN G OFFICER, THE ASSESSEE SUBMITTED HIS EXPLANATION STATING THER EIN THAT THERE IS NEITHER ANY CONCEALMENT OF INCOME NOR FURN ISHING INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE, U NDER THE GIVEN CIRCUMSTANCES AS THERE IS VALID AND SUFFICIE NT REASON FOR NOT ADMITTING CAPITAL GAINS FOR THE IMPUGNED ASSESS MENT YEAR DUE TO PENDENCY OF LITIGATION WITH REGARD TO THE RI GHT OVER THE PROPERTY IN QUESTION. THE ASSESSING OFFICER HOWEVER REJECTING THE CONTENTION OF THE ASSESSEE PASSED AN ORDER ON 2 8-3-2008 IMPOSING PENALTY OF RS.92,894 U/S 271(1)( C) OF THE ACT. THE ASSESSEE BEING AGGRIEVED OF THE IMPOSITION OF PENAL TY PREFERRED AN APPEAL BEFORE THE CIT (A). 7. DURING THE HEARING OF APPEAL BEFORE THE CIT (A) , IT WAS CONTENDED BY THE ASSESSEE THAT ACTUALLY HE HAD NOT ENTERED INTO ANY AGREEMENT WITH THE PURCHASER SRI ABHIMANYU DU SETTY NOR HE HAS RECEIVED ANY SALE CONSIDERATION FROM THE SAID PURCHASER. IT WAS CONTENDED THAT AT THE INSTANCE O F HIS FATHER HE HAD ONLY SIGNED THE AGREEMENT ENTERED INTO BY TH E FATHER, MOTHER AND HIMSELF. IT WAS CONTENDED THAT THE FULL CONSIDERATION ALSO DID NOT PASS ON FROM THE PURCHAS ER TO THE ASSESSEES FATHER. THE ASSESSEE FURTHER CONTENDED THAT SINCE LITIGATION CONCERNING THE SUBJECT LAND WAS PENDING BEFORE THE COURT OF LAW, THE ASSESSEE WAS JUSTIFIED IN NOT ADM ITTING CAPITAL GAINS. IT WAS CONTENDED BY THE ASSESSEE THAT THERE IS NOTHING 6 ITA NO.502 OF 2013 CHITTALURI SRIKANTH, HYD. ON RECORD TO PROVE THAT THERE IS WILFUL INTENTION O N THE PART OF THE ASSESSEE TO EITHER CONCEAL HIS INCOME OR FURNIS H INACCURATE PARTICULARS OF INCOME SO AS TO ATTRACT THE PROVISIO NS OF SECTION 271 (1)(C ) OF THE ACT. THE CIT (A) HOWEVER WAS N OT CONVINCED WITH THE CONTENTION OF THE ASSESSEE ON THE REASONIN G THAT THE ASSESSEE HAD NOT PRESSED THE GROUND RAISED BEFORE T HE INCOME- TAX APPELLATE TRIBUNAL WITH REGARD TO CHARGEABILITY TO CAPITAL GAINS AND AS A CONSEQUENCE THE TRIBUNAL DISMISSED THE ASSESSEES GROUND AND DIRECTED THE ASSESSING OFFICE R TO COMPUTE CAPITAL GAINS. THE CIT (A) THEREAFTER RELYI NG UPON VARIOUS DECISIONS OF HONBLE SUPREME COURT AND DIFF ERENT HIGH COURTS DISMISSED THE ASSESSEES APPEAL BY CONFIRMIN G THE PENALTY IMPOSED BY THE ASSESSING OFFICER. BEING AG GRIEVED OF THE AFORESAID ORDER OF THE CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. 8. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE AS SESSEE REITERATED THE SUBMISSION MADE BEFORE THE LOWER AUT HORITIES. IT WAS CONTENDED BY THE LEARNED AR THAT THE ASSESSEE G ENUINELY BELIEVED THAT CAPITAL GAINS WAS NOT CHARGEABLE TO T AX IN THE IMPUGNED ASSESSMENT YEAR AND THE DISPUTE WITH REGAR D TO THE TITLE AND POSSESSION OVER THE PROPERTY WAS PENDING BEFORE COURT OF LAW. THE LEARNED AR FURTHER SUBMITTED TH AT APART FROM THIS, WHEN THE AGREEMENT WAS EXECUTED , THE AS SESSEE WAS YOUNG BOY PROSECUTING HIS STUDIES AND THE ENTI RE TRANSACTION RELATING TO THE SALE OF PROPERTY WAS N EGOTIATED BY HIS FATHER AND THE ASSESSEE MERELY WAS SIGNATORY TO THE 7 ITA NO.502 OF 2013 CHITTALURI SRIKANTH, HYD. AGREEMENT OF SALE AND ALSO HE DID NOT RECEIVE ANY S ALE CONSIDERATION. THE LEARNED AR SUBMITTED THAT IN TH E CIRCUMSTANCES, WITHOUT PROPERLY APPRECIATING THE FA CTS AND EXAMINING THE EXPLANATION OF THE ASSESSEE, THE ASSE SSING OFFICER WAS NOT JUSTIFIED IN IMPOSING PENALTY U/S 2 71(1)(C ) OF THE ACT. IT WAS CONTENDED THAT THERE BEING NO WILF UL ATTEMPT ON THE PART OF THE ASSESSEE TO EITHER CONCEAL HIS INCO ME OR FURNISHING INACCURATE PARTICULARS OF INCOME, IMPOSI TION OF PENALTY U/S 271(1)(C ) OF THE ACT IS NOT VALID. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE REVENUE AUTHORITI ES. 10. WE HAVE CONSIDERED RIVAL SUBMISSIONS OF THE PAR TIES AND PERUSED THE MATERIAL ON RECORD. AS CAN BE SEEN FROM THE FACTS ON RECORD THE ASSESSEE HAD EXPLAINED BEFORE THE ASS ESSING OFFICER THE REASONS FOR NOT DECLARING THE CAPITAL G AINS IN THE RETURN FILED FOR THE IMPUGNED ASSESSMENT. PROVISIO N CONTAINED U/S 271(1)(C) OF THE ACT MAKES IT CLEAR THAT BEFOR E IMPOSING PENALTY, THE ASSESSING OFFICER MUST GIVE AN OPPORTU NITY TO THE ASSESSEE TO OFFER AN EXPLANATION AND AFTER CONSIDE RING THE EXPLANATION OF THE ASSESSEE MAY PROCEED TO IMPOSE PENALTY U/S 271(1)(C) ONLY AFTER HE COMES TO THE CONCLUSION THAT THE EXPLANATION IS NOT SATISFACTORY. HOWEVER, CALLING F OR AN EXPLANATION IS A STATUTORY REQUIREMENT AND NOT AN E MPTY FORMALITY. THEREFORE, THE EXPLANATION SUBMITTED BY THE ASSESSEE HAS TO BE CONSIDERED IN AN OBJECTIVE AND J UDICIOUS MANNER AND NOT IN A MECHANICAL OR ARBITRARY MANNER. IN THE 8 ITA NO.502 OF 2013 CHITTALURI SRIKANTH, HYD. PRESENT CASE, THE ASSESSING OFFICER IMPOSED PENALTY WITH THE FOLLOWING REASONING:- FRESH PENALTY OPPORTUNITY LETTER WAS ISSUED FIXING THE DATE OF HEARING ON 29-1-2008 REQUESTING THE ASSESS EE TO FILE EXPLANATION AS TO WHY PENALTY UNDER SECTION 271(1)(C ) SHOULD NOT BE LEVIED. IN RESPONSE TO TH E LETTER, THE ASSESSEE HAS FILED REPLY ON 29-1-2008. THE ASSESSEES REPLY IS NOT CONVINCING. HENCE, I LEVY A PENALTY OF RS.92,894/- (RUPEES NINETY TWO THOUSAND EIGHT HUNDRED AND NINETY FOUR ONLY) WHICH SHOULD B E PAID AS PER DEMAND NOTICE AND CHALLAN ENCLOSED. TH IS ORDER IS PASSED WITH THE PRIOR APPROVAL OF THE ADDL . CIT, KURNOOL RANGE, KURNOOL AS REQUIRED U/S 274(2) OF TH E I T ACT, 1961. 11. AS CAN BE SEEN FROM THE FINDING OF THE ASSESSIN G OFFICER, EXCEPT STATING THAT THE ASSESSEES EXPLANATION IS N OT CONVINCING, THE ASSESSING OFFICER HAS ABSOLUTELY NO T GIVEN ANY REASON WHY THE ASSESSEES EXPLANATION IS NOT ACCEPT ABLE. THAT APART BEFORE IMPOSING PENALTY, THE ASSESSING OFFICE R MUST COME TO A CONCLUSION ON THE BASIS OF THE FACTS AND MATE RIALS ON RECORD THAT THERE IS A CONSCIOUS ATTEMPT ON THE PAR T OF THE ASSESSEE TO CONCEAL THE PARTICULARS OF INCOME OR FU RNISHING INACCURATE PARTICULARS OF INCOME. A PERUSAL OF THE ORDER PASSED BY THE ASSESSING OFFICER IMPOSING PENALTY WOULD MAK E IT CLEAR THAT THERE IS NO FINDING BY THE ASSESSING OFFICER T O THAT EFFECT. 9 ITA NO.502 OF 2013 CHITTALURI SRIKANTH, HYD. HE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW T HAT THERE WAS A CONSCIOUS ATTEMPT ON THE PART OF THE ASSESSEE TO CONCEAL HIS INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME WHICH WOULD HAVE MADE THE EXPLANATION SUBMITTED BY THE AS SESSEE UNACCEPTABLE. WITHOUT BRINGING ANY MATERIAL ON RECO RD TO ESTABLISH THE FACT OF CONCEALMENT AND IN ABSENCE OF ANY FINDING WITH REGARD TO EITHER CONCEALMENT OF INCOME OR FURN ISHING INACCURATE PARTICULARS OF INCOME, THE ASSESSING OFF ICER WAS NOT JUSTIFIED IN IMPOSING PENALTY U/S 271(1) (C ) OF T HE ACT. THE ORDER PASSED BY THE ASSESSING OFFICER REVEALS COMPL ETE NON APPLICATION OF MIND. 12. THE CIT (A), IN OUR VIEW, HAS NOT APPRECIATED THE FACTS IN PROPER PERSPECTIVE. THE ORDER PASSED BY THE CIT (A ) GIVES AN IMPRESSION THAT THE CIT (A) WITHOUT CONSIDERING THE FACTS INVOLVED IN ASSESSEES CASE WHETHER WOULD MAKE OUT A CASE FOR IMPOSITION OF PENALTY AND WHETHER ASSESSEES EXPLA NATION WAS PROPERLY CONSIDERED BY THE ASSESSING OFFICER, HAS R ELIED MORE UPON RATIO LAID DOWN IN VARIOUS DECISIONS OF HONB LE SUPREME COURT AND DIFFERENT HIGH COURTS. THE RATIO LAID DOW N IN A JUDGMENT IS ON CONSIDERATION OF FACTS INVOLVED IN T HAT CASE. THEREFORE, WITHOUT LOOKING INTO THE FACTS OF A PART ICULAR CASE, RATIO LAID DOWN IN A DECISION CANNOT BE APPLIED UNI FORMLY. ON CONSIDERATION OF TOTALITY OF FACTS AND CIRCUMSTANCE S OF THE CASE, WE ARE THEREFORE OF THE VIEW THAT SINCE THE ASSESS ING OFFICER HAS NOT ESTABLISHED THE FACT OF CONCEALMENT OF INC OME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME, IMP OSITION OF 10 ITA NO.502 OF 2013 CHITTALURI SRIKANTH, HYD. PENALTY U/S 271(1)(C ) OF THE ACT IN CASE OF THE AS SESSEE IS NOT APPROPRIATE. ACCORDINGLY, WE DELETE THE PENALTY OF RS.92,894/- IMPOSED. 13. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 13-11-2013. SD/- ( CHANDRA POOJARI) ACCOUNTANT MEMBER SD/- (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 13 TH NOVEMBER, 2013 COPY TO:- 1) SRI CH. SRIKANTHM C/O CHALAPATHI ESTATES PVT. LTD., ROAD NO.10, BANJARA HILLS, HYDERABAD-500034. 2) INCOME-TAX OFFICER, WARD-1, NANDYAL. 3) CIT (A)-9, MUMBAI, CAMP AT HYDERABAD. 4) CIT-III, HYDERABAD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. JMR* 11 ITA NO.502 OF 2013 CHITTALURI SRIKANTH, HYD.