D.Prasad, Visakhapatnam V. THE ITO, Visakhapatnam

ITA 51/VIZ/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1108 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 10-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Application of stay; Revised return
• Section: 143(3); 148

Judgement Text

ITA NO.51/VIZAG/2016 D. PRASAD, VISAKHAPATNAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.51/VIZAG/2016 ( / ASSESSMENT YEAR: 2009-10) D. PRASAD, VISAKHAPATNAM ITO, WARD - 1(4), VISAKHAPATNAM [PAN: AEBPD9924K ] ( % / APPELLANT) ( &'% / RESPONDENT) S.A. NO.4/VIZAG/2016 (ARISING OUT OF I.T.A.NO.51/VIZAG/2016) ( / ASSESSMENT YEAR: 2009-10) D. PRASAD, VISAKHAPATNAM ITO, WARD - 3(2), VISAKHAPATNAM ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI M.N. MURTHY NAIK, DR / DATE OF HEARING : 30.05.2016 / DATE OF PRONOUNCEMENT : 10.06.2016 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT-1, VISAKHAPATNAM DATED 20.1.2016 FOR THE ASSESS MENT YEAR 2009-10. ITA NO.51/VIZAG/2016 D. PRASAD, VISAKHAPATNAM 2 2. FACTS ARE IN BRIEF THAT ASSESSEE IS AN INDIVIDUA L, IS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF RESIDENTIAL APARTMENTS IN THE NAME AND STYLE OF KRISHNA PRIYA CONSTRUCTIONS. THE ASSESSEE FIL ED A RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 30.3.2010, ADMIT TING A TOTAL INCOME OF RS.8,51,809/-. THE A.O. HAS COMPLETED THE ASSES SMENT U/S 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED AS TH E ACT) BY DETERMINING TOTAL INCOME OF RS.9,51,809/-. 3. SUBSEQUENTLY, THERE WAS A SURVEY CONDUCTED IN TH E CASE OF M/S. VNC-GEV HOUSING LIMITED, IT WAS FOUND THAT ASSESSEE ALONG WITH TWO OTHERS PURCHASED TWO ACRES OF LAND AT MADHURAWADA, VISAKHAPATNAM ON 29.12.2006 FOR A TOTAL CONSIDERATION OF RS.90 LAKHS , IN WHICH THE ASSESSEE IS HAVING 1/3 RD SHARE. IT WAS ALSO FOUND THAT THE ASSESSEE ALONG WITH TWO CO-OWNERS ENTERED INTO A DEVELOPMENT AGREEMENT ON 15.7.2008 WITH M/S. VNC-GEV HOUSING, FOR THE DEVELO PMENT OF SAID LAND AS PER WHICH ASSESSEE GETS BUILT UP AREA OF 33,240 SQ.FT. AND 3,600 SQ.FT. PARKING AREA. THE ASSESSEE AND OTHER CO-OWN ERS HAD ALSO HANDED OVER THE POSSESSION OF THE PROPERTY ON 15.7.2008 RE CEIVED A REFUNDABLE DEPOSIT OF ` 2,25,00,000/-. SUBSEQUENTLY, THE A.O. HAS ISSUED S HOW CAUSE NOTICE U/S 148 OF THE ACT DATED 12.7.2012 ON THE GROUND THAT THERE IS AN ESCAPEMENT OF INCOME IN THE HANDS OF TH E ASSESSEE. MEANWHILE, THE ASSESSEE FILED A REVISED RETURN ON 1 6.7.2012 BY REVISING ITA NO.51/VIZAG/2016 D. PRASAD, VISAKHAPATNAM 3 HIS TOTAL INCOME AT RS.2,01,62,545/- ADMITTING SHOR T TERM CAPITAL GAIN AT RS.1,92,10,735/-. THE A.O. AFTER VERIFICATION OF T HE DETAILS FURNISHED BY THE ASSESSEE DURING THE RE-ASSESSMENT PROCEEDINGS, COMPLETED THE ASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT ACCEPTE D THE RETURN OF INCOME FILED BY THE ASSESSEE. 4. SUBSEQUENTLY, THE A.O. HAS INITIATED THE PENALTY PROCEEDINGS BY ISSUING A NOTICE U/S 271(1)(C) OF THE ACT ON THE GR OUND THAT THE ASSESSEE HAS CONCEALED THE INCOME AND CALLED THE EXPLANATION OF THE ASSESSEE. THE ASSESSEE HAS SUBMITTED A DETAILED EXPLANATION B EFORE THE A.O. THAT THE ASSESSEE NEITHER CONCEALED THE INCOME NOR FILED INACCURATE PARTICULARS AND SUBMITTED THAT PENALTY PROCEEDINGS MAY BE DROPPED. HOWEVER, THE A.O. HAS NOT ACCEPTED THE EXPLANATIONS GIVEN BY THE ASSESSEE AND HE HAS OBSERVED THAT THE ASSESSEE HAS NOT DISCLOSED THE FACTS VOLUNTARILY AND CONSEQUENT TO THE DETECTION B Y THE DEPARTMENT, ASSESSEE ADMITTED THE FACT THAT HE HAD EARNED THE C APITAL GAINS, IT IS A CLEAR CASE OF CONCEALMENT. ACCORDINGLY, PENALTY U/ S 271(1)(C) OF THE ACT WAS LEVIED. 5. ON BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 6. IT WAS SUBMITTED BEFORE THE CIT(A) THAT IN SO FA R AS ADMISSION OF CAPITAL GAINS, THE LAW IS NOT CLEAR THAT WHETHER TH E CAPITAL GAIN CAN BE ITA NO.51/VIZAG/2016 D. PRASAD, VISAKHAPATNAM 4 CHARGED ON THE DATE OF EXECUTION OF DEVELOPMENT AGR EEMENT OR RECEIPT OF SALE CONSIDERATION. UNDER THOSE CIRCUMSTANCES, NO PENALTY CAN BE LEVIED. 7. THE ASSESSEE FILED REVISED RETURN ON 16.7.2012 A DMITTING TOTAL SHORT TERM GAIN OF RS.1,92,10,735/- AND THE NOTICE U/S 148 OF THE ACT WAS SERVED ON 20.7.2012 AND SUBMITTED THAT THE ASSE SSEE HAS OFFERED THE SHORT TERM CAPITAL GAIN VOLUNTARILY AND THE REV ISED RETURN FILED BY THE ASSESSEE WAS ACCEPTED BY THE A.O. AND CAPITAL GAINS OFFERED BY THE ASSESSEE WAS ALSO ACCEPTED, THEREFORE, SINCE THE AS SESSEE HAS OFFERED CAPITAL GAINS VOLUNTARILY, THERE IS NO CONCEALMENT AND SECTION 271(1)(C) OF THE ACT HAS NO APPLICATION IN THE ASSESSEES CAS E. 8. THE CIT(A) AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE, HE HAS OBSERVED THAT THERE IS LOT OF FORCE IN THE ARGU MENT OF LD. COUNSEL FOR THE ASSESSEE. HOWEVER, THE UNIMPEACHABLE FACT REMA INS THAT THE ASSESSEE HAVING ENTERED INTO A DEVELOPMENT AGREEMEN T WITH THE BUILDER FOR THE DEVELOPMENT OF HIS LAND AND HANDED OVER THE POSSESSION ON 15.7.2008, ASSESSEE SHOULD HAVE BEEN OFFERED THE IN COME RECEIVED FROM THE DEVELOPER AS A SHORT TERM CAPITAL GAIN BUT ASSE SSEE FAILED TO ADMIT IT AND THEREFORE IT IS AMOUNTING TO CONCEALMENT OF TRU E PARTICULARS OF INCOME AND CONFIRMED THE ORDER PASSED BY THE A.O. ITA NO.51/VIZAG/2016 D. PRASAD, VISAKHAPATNAM 5 9. ON BEING AGGRIEVED, ASSESSEE CARRIED MATTER IN A PPEAL BEFORE THE TRIBUNAL. 10. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED SO FAR AS ADMISSION OF CAPITAL GAINS IS CONCERNED WHETHER CAP ITAL GAIN CAN BE CHARGED ON THE DATE OF EXECUTION OF DEVELOPMENT AGR EEMENT OR RECEIPT OF SALE CONSIDERATION, THERE ARE TWO VIEWS POSSIBLE AND THEREFORE THE ASSESSEE IS HAVING A DOUBT IN HIS MIND TO DECLARE T HE CAPITAL GAINS FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. HOWEVER, ASSESSEE HAS FILED A REVISED RETURN ON 16.7.2012 AND THEREAFTER NOTICE U/S 148 OF THE ACT WAS RECEIVED BY THE ASSESSEE ON 20.7.2012. ON THE BASIS OF RETURN FILED BY THE ASSESSEE, ASSESSMENT WAS COMPLETED ACCEPTING THE SHORT TERM CAPITAL GAIN DECLARED BY THE ASSESSEE U/S 143(3) R. W.S. 147 OF THE ACT AND SUBMITTED THAT THE REVISED RETURN FILED BY THE ASSESSEE IS VOLUNTARY AND THERE IS NO CONCEALMENT OF INCOME, THEREFORE NO PENALTY CAN BE LEVIED. LD. A.R. ALSO HAS POINTED OUT THAT THE ASSE SSEE ALONG WITH THE ORIGINAL RETURN FILED A BALANCE SHEET, WHEREIN HE H AS DISCLOSED THE AMOUNT OF RS.75,01,215/- RECEIVED FROM THE DEVELOPE R (PAPER BOOK PAGE NO.14). THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO POINTED OUT FROM THE PAPER BOOK PAGE NO.35 THAT IN RESPONSE TO A.OS QUESTION NO.4 IT IS REPLIED THAT ALL THE BOOKS OF ACCOUNTS WERE F ILED FOR HIS VERIFICATION ON BALANCE SHEET AND ALSO PROFIT & LOSS ACCOUNT WER E ALREADY SUBMITTED ITA NO.51/VIZAG/2016 D. PRASAD, VISAKHAPATNAM 6 VIDE LETTER DATED 22.2.2011. THE LD. COUNSEL FOR T HE ASSESSEE HAS RELIED ON THE FOLLOWING CASE LAWS TO SUBSTANTIATE THE ABOV E ARGUMENTS:- 1) CIT VS. NAJOO DARA DEBOO 218 TAXMAN 473 (AHB) 2) METAL ROLLING WORKS LTD. VS. CIT 339 ITR 373 3) CIT VS. S.M. CONSTRUCTION 223 TAXMAN 263 (BOMBA Y) 11. ON THE OTHER HAND, THE LD. D.R. HAS SUBMITTED T HAT THE ASSESSEE OUGHT TO HAVE BEEN DISCLOSED THE CAPITAL GAIN WHEN HE ORIGINALLY FILED THE RETURN OF INCOME AND SUBMITTED THAT IT IS A CLE AR CASE OF CONCEALMENT OF INCOME AND SUPPORTED THE ORDER PASSED BY THE A.O . AS WELL AS CIT(A). 12. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ASSESSEE HAD FILED A RETURN OF INCOME ORIGINALLY ON 30.3.2010. THE RETURN FILED BY THE ASSESSEE WAS PROCESSED U/S 143( 1) OF THE ACT, THEREAFTER A NOTICE U/S 143(2) OF THE ACT WAS ISSUE D TO THE ASSESSEE ON 24.8.2010 AND FILED ALL THE DETAILS IN RESPONSE TO THE NOTICE ISSUED BY THE A.O. IN THE ASSESSMENT ORDER, THE A.O. HAS OBSERVE D THAT BOOKS OF ACCOUNTS ALONG WITH BILLS & VOUCHERS WERE CALLED FO R AND THE SAME WERE VERIFIED AND ACCORDINGLY ASSESSMENT WAS COMPLETED U /S 143(3) OF THE ACT BY ORDER DATED 31.3.2011. 13. SUBSEQUENTLY, THERE WAS A SURVEY CONDUCTED IN T HE CASE OF M/S. VNC-GEV HOUSING LTD, IT WAS FOUND THAT THE ASSESSEE ALONG WITH TWO ITA NO.51/VIZAG/2016 D. PRASAD, VISAKHAPATNAM 7 OTHERS HAS ENTERED INTO A DEVELOPMENT AGREEMENT WIT H A DEVELOPER ON 15.7.2008 AND NO CAPITAL GAIN TAX IS OFFERED. THER EAFTER, THE A.O. HAS ISSUED A NOTICE U/S 148 OF THE ACT DATED 12.7.2012 SERVED ON THE ASSESSEE ON 20.7.2012. MEANWHILE, THE ASSESSEE HAS FILED REVISED RETURN OF INCOME ON 16.7.2012 BY ADMITTING SHORT TE RM CAPITAL GAIN AND THE SAME WAS ACCEPTED BY THE A.O. AND ASSESSMENT WA S COMPLETED U/S 143(3) R.W.S. 147 OF THE ACT BY ORDER DATED 12.3.20 14. 14. SUBSEQUENTLY, A.O. HAS INITIATED THE PENALTY P ROCEEDINGS U/S 271(1)(C) OF THE ACT FOR CONCEALMENT OF INCOME ON T HE GROUND THAT THE ASSESSEE HAS FAILED TO OFFER SHORT TERM CAPITAL GAI NS DERIVED FROM THE PROPERTY GIVEN FOR DEVELOPMENT AND CALLED THE EXPLA NATION. THE ASSESSEE HAS EXPLAINED BEFORE THE A.O. THAT THE SHO RT TERM CAPITAL GAIN OFFERED BY ME BY FILING A REVISED RETURN DATED 16.7 .2012 IS VOLUNTARY, WHICH IS OFFERED BEFORE RECEIVING A NOTICE U/S 148 OF THE ACT AND THEREFORE PENALTY PROCEEDINGS MAY BE DROPPED. THE A.O. AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE WAS OF THE VIEW THAT ASSESSEE HAS DISCLOSED THE CAPITAL GAINS ONLY AFTER DEPARTMENT DETECTED NON-DISCLOSURE, THEREFORE, IT IS A CONCEALMENT OF I NCOME, ACCORDINGLY PENALTY U/S 271(1)(C) OF THE ACT WAS LEVIED. THE A SSESSEE HAS MADE A DETAILED SUBMISSIONS BEFORE THE LD. CIT(A). THE LD . CIT(A) AFTER ITA NO.51/VIZAG/2016 D. PRASAD, VISAKHAPATNAM 8 CONSIDERING THE EXPLANATION GIVEN BY THE ASSESSEE, HE HAS OBSERVED THAT THERE IS A LOT OF FORCE AND MERIT IN THE CONTENTION S OF THE LD. COUNSEL FOR THE ASSESSEE, HOWEVER, IT IS AN IMPEACHABLE FACT WH ICH REMAINS THAT ASSESSEE HAVING ENTERED INTO A DEVELOPMENT AGREEMEN T WITH A BUILDER FOR THE DEVELOPMENT OF THE LAND, WHICH CLEARLY RAIS ED TO THE CAPITAL GAINS IN THE HANDS OF THE ASSESSEE, THE SAME WAS NOT ADMI TTED IN THE ORIGINAL RETURN FILED AND THEREFORE IT IS A CONCEALMENT OF T RUE PARTICULARS OF INCOME. WITH THE ABOVE OBSERVATIONS, HE HAS CONFIRM ED THE ORDER OF THE A.O. WE FIND THAT THOUGH THE ASSESSEE HAS NOT DISCL OSED SHORT TERM CAPITAL GAINS IN THE ORIGINAL RETURN FILED, HOWEVER , THE ASSESSEE ALONG WITH THE RETURN OF INCOME FILED A BALANCE SHEET AS ON 31.3.2009, WHEREIN HE SPECIFICALLY MENTIONED, THE AMOUNT RECEIVED FROM THE DEVELOPER (PAPER BOOK PAGE NO.14) AND THE SAME WAS EXPLAINED BEFORE THE A.O. (PAPER BOOK PAGE NO.35). IT IS ALSO THE CASE OF TH E ASSESSEE THAT NOTICE U/S 148 OF THE ACT WAS SERVED ON THE ASSESSEE ON 20 .7.2012. HOWEVER, THE REVISED RETURN OF INCOME FILED ON 16.7.2012 BEF ORE RECEIVING THE NOTICE ISSUED BY THE A.O. U/S 148 OF THE ACT AND IT IS SUBMITTED THAT THE REVISED RETURN FILED BY THE ASSESSEE IS VOLUNTARY. THE A.O. HAS ACTED UPON THE RETURN FILED BY THE ASSESSEE ACCEPTED THE CAPITAL GAINS. THEREFORE, THE A.O. CANNOT INITIATE THE PROCEEDINGS ON THE GROUND THAT ASSESSEE HAS CONCEALED THE INCOME. WE FIND THAT THE RE IS A LOT OF FORCE ITA NO.51/VIZAG/2016 D. PRASAD, VISAKHAPATNAM 9 IN THE ARGUMENT OF LD. COUNSEL FOR THE ASSESSEE. T HAT APART THE ASSESSEE HAS DISCLOSED THE AMOUNT RECEIVED BY HIM A LONG WITH THE RETURN OF INCOME, WHICH WAS ALSO EXPLAINED TO THE A .O. KEEPING IN VIEW OF THE ABOVE, BY CONSIDERING THE FACTS AND CIRCUMST ANCES OF THE CASE, WE ARE OF THE OPINION THAT IT IS NOT A FIT CASE TO IMP OSE PENALTY U/S 271(1)(C) OF THE ACT. 15. APART FROM ABOVE, THERE ARE DIVERGENT VIEWS ABO UT THE TAXABILITY OF CAPITAL GAINS THAT, WHETHER CAPITAL GAIN CAN BE CHA RGED ONLY ON RECEIPT OF SALE CONSIDERATION OR FROM THE DATE ON WHICH DEVELO PMENT AGREEMENT WAS ENTERED. IN THIS CONTEXT, THE HONBLE ALLAHABA D HIGH COURT IN THE CASE OF CIT VS. NAJOO DARA DEBOO (SUPRA) HAS HELD T HAT THE CAPITAL GAINS CAN BE CHARGED ONLY ON RECEIPT OF THE SALE OF CONSIDERATION AND NOT OTHERWISE, WHEN ONLY THE AGREEMENT IS SIGNED AN D NO MONEY IS RECEIVED. 16. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M ETAL ROLLING WORKS LTD. VS. CIT (SUPRA) HAS CONSIDERED THE PENALT Y U/S 271(1)(C) OF THE ACT OBSERVED THAT THE ASSESSEE HAVING RECEIVED ONLY INITIAL PAYMENT OF RS.6 CRORES AND NOT THE LAST INSTALMENT AS PER T HE TERMS OF THE PROPERTY DEVELOPMENT AGREEMENT WITH THE DEVELOPER IN THE RELEVANT ASSESSMENT YEAR 2002-03, IT WAS JUSTIFIED IN NOT OF FERING THE CAPITAL GAINS TO TAX IN THIS ASSESSMENT YEAR, MORE SO WHEN THE ASSESSEE HAS ITA NO.51/VIZAG/2016 D. PRASAD, VISAKHAPATNAM 10 DISCLOSED THE SAID AMOUNT ITS RETURN AS AN ADVANCE AND THE A.O. HIMSELF WAS NOT SURE TILL THE DATE OF PASSING OF THE ASSESS MENT ORDER AS TO WHETHER THE ASSESSEE IS LIABLE TO PAY TAX ON THE IM PUGNED AMOUNT AND IF SO, IN WHICH ASSESSMENT YEAR AND UNDER WHICH HEAD O F THE INCOME AND ACCORDINGLY, PENALTY U/S 271(1)(C) OF THE ACT IS NO T LEVIABLE. 17. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CI T VS. S.M. CONSTRUCTION (SUPRA) HAS HELD THAT WHERE THERE IS A COMPLETE DISCLOSURE OF FACTS AND CLAIM MADE BY ASSESSEE THOUGH NOT FOUN D ACCEPTABLE WAS BONAFIDE, PENALTY U/S 271(1)(C) OF THE ACT WAS NOT JUSTIFIED. BY CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO KEEPING IN VIEW OF THE JUDICIAL PRECEDENTS, WE ARE OF THE OPI NION THAT THIS IS NOT A FIT CASE TO IMPOSE PENALTY U/S 271(1)(C) OF THE ACT . THUS, WE CANCEL THE PENALTY BY REVERSING THE ORDER PASSED BY THE LD. CO MMISSIONER. 18. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . 19. SO FAR AS STAY APPLICATION IS CONCERNED, IN VIE W OF THE DISPOSAL OF THE QUANTUM APPEAL, IT BECAME INFRUCTUOUS AND THE S AME IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 10 TH JUN16. SD/- SD/- ( . ) ( . ) (G. MANJUNATHA) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 10.06.2016 VG/SPS ITA NO.51/VIZAG/2016 D. PRASAD, VISAKHAPATNAM 11 '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT SHRI D. PRASAD, PROP. KRISHNA PR IYA CONSTS., D.NO.52-8- 12/2, RAMA TALKIES ROAD, SRINAGAR, VISAKHAPATNAM 2. / THE RESPONDENT THE ITO, WARD-3(2), VISAKHAPATN AM 3. ) / THE CIT-1, VISAKHAPATNAM 4. ) ( ) / THE CIT(A), VISAKHAPATNAM 5. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM