Sh. Gautam Chawla, Delhi V. ITO, New Delhi

ITA 5143/DEL/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7540 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 12-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 09-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Assessee Lawyers: INDERJIT AHUNA
• Section: 133A; 54

Judgement Text

ITA NO.5143/DEL/2013 ASSTT.YEAR: 2009-10 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES C NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER ITA NO. 5143/DEL/2013 ASSTT.YEAR: 2009-10 SHRI GAUTAM CHAWLA, VS ITO, PROP. M/S R.G. INTERNATIONAL, WARD 39(3), GALI NO. 139, GALI POST OFFICE, NEW DELHI. SADAR BAZAR, DELHI. (PAN: ADIPC6314Q) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI INDERJIT AHUNA, ADV. RESPONDENT BY: SHRI SATPAL SINGH , SR. DR O R D E R PER CHANDRAMOHAN GARG, J.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-XVIII, NEW DELHI DATED 24.7.2013 IN APPEAL N O. 65/2012-13 FOR AY 2009-10 BY WHICH THE CIT(A) UPHELD THE PENALTY ORDE R PASSED U/S 271(1)(C) R/W SECTION 274 OF THE INCOME TAX ACT, 1961 CONFIRMING THE PENALTY OF RS.8,22,041/-. 2. ALTHOUGH THE ASSESSE HAS RAISED AS MANY AS SEVEN GROUNDS IN THIS APPEAL BUT EXCEPT GROUND NO.1, OTHER GROUNDS ARE ARGUMENTA TIVE AND SUPPORTIVE TO THE MAIN GROUND NO. 1 WHICH READS AS UNDER:- ITA NO.5143/DEL/2013 ASSTT.YEAR: 2009-10 2 1. THE LEARNED CIT(A) WAS NOT JUSTIFIED TO UPHOLD THE PENALTY OF RS.8,22,041/- LEVIED U/S 271(1)( C) OF T HE I.T.ACT. 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 30.9.2009 DECLARING INCOME OF R S.3,92,189/-. THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND AFTER NECESS ARY VERIFICATION, THE AO MADE ADDITION OF RS. 39,90,498/- AS INCOME FROM LON G TERM CAPITAL GAIN. SUBSEQUENTLY, THE AO ISSUED NOTICE TO THE ASSESSEE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. AFTER CONSIDERING THE EXPLAN ATION OF THE ASSESSEE, THE AO IMPOSED PENALTY ON THE ASSESSEE WITH THE FOLLOWING CONCLUSION:- AS DISCUSSED ABOVE, THE ASSESSEE IS FOUND COVERED BY THE CLAUSE (A) OF EXPLANASTION-1 TO SECTION 271 (1) OF !.TAX ACT. THEREFORE, IT IS ESTABLISHED THAT THE EXPLANAT ION OFFERED BY THE ASSESSEE IN RESPECT OF CHARGING OF LONG TERM CA PITAL GAINS OF RS. 39,90,498/- ON SALE OF BHIWADI LAND, BUILDIN G AND PLANT & MACHINERY AT THE TIME OF FRAMING ASSESSMENT U/S 1 43(3) VIDE ORDER DATED 26.12.2011 AND AGAIN DURING THE COURSE OF PENALTY PROCEEDINGS WAS NOT FOUND SUPPORTED WITH CORROBORAT IVE EVIDENCES. THUS, THE DEFAULT, IN QUESTION, IS PATEN T ON THE PART OF THE ASSESSEE AND THE ASSESSEE IS LIABLE TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT ON THE AMOUNT CONCEALED OF RS. 39,90,498/-. I, THEREFORE, IMPOSE A PENALTY OF RS. 8,22,041/- U/S 271(1)(C) READ WITH EXPLANATION-1 THERETO, WHIC H IS EQUIVALENT TO 100% OF TAX SOUGHT TO BE EVADED.' 4. BEING AGGRIEVED BY THE ABOVE PENALTY ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHICH WAS ALSO DISMISSED B Y PASSING THE IMPUGNED ORDER. THE RELEVANT OPERATIVE PART OF THE ORDER RE ADS AS UNDER:- FURTHER, EVEN IF IT IS ACCEPTED THAT THE APPELLANT HAS VOLUNTARILY WITHDRAWN THE CLAIM OF EXEMPTION UNDER SECTION 54F, THE CASE OF THE APPELLANT IS SQUARELY COVERED BY THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. ITA NO.5143/DEL/2013 ASSTT.YEAR: 2009-10 3 MAK DATA LTD VIDE ORDER DATED 22.1.2013 IN ITA NO.4 15/2012 HAS ON THE ISSUE OF LEVY OF PENALTY IN THE CASE OF DISCLOSED INCOME, DISCLOSED AFTER ENQUIRY CONDUCTED BY THE AS SESSING OFFICER HAS HELD AS UNDER:- A SURVEY U/S 133A WAS CONDUCTED ON THE ASSESSEE'S PREMISES IN THE COURSE OF WHICH CERTAIN DOCUMENTS B ELONGED TO CERTAIN ENTITIES WHO HAD APPLIED FOR SHARES IN THE ASSESSEE COMPANY WERE FOUND. THE AO CALLED UPON THE ASSESSEE TO PROVE THE NATURE AND SOURCE OF THE MONIES RECEIVED AS SHARE CAPITAL, THE CREDITWORTHINESS OF THE APPLICANTS AND THE GENUINENESS OF THE TRANSACTIONS. THE ASSESSEE OFFER ED RS. 40.74 LAKHS AS INCOME FROM OTHER SOURCES 'TO AVOID LITIGA TION AND TO BUY PEACE'. IT WAS MADE CLEAR THAT IN MAKING THE SU RRENDER, THERE WAS NO ADMISSION OF CONCEALMENT. THE AO COMPL ETED THE ASSESSMENT BY ADDING THE SAID SUM AND LEVIED PENALT Y U/S 271(1)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME U/S 271 (1)(C). THIS WAS UPHELD BY THE CIT(A) THOUGH RE VERSED BY THE TRIBUNAL (INCLUDED IN FILE) ON THE GROUND THAT THERE WAS NO MATERIAL TO SHOW ANY CONCEALMENT AND EVEN IN THE PE NALTY ORDER IT WAS NOT SPECIFIED AS TO THE PARTICULAR CRE DIT IN RESPECT OF WHICH THE PENALTY WAS BEING IMPOSED. IT WAS ALSO EMPHASIZED BY THE TRIBUNAL THAT THE ASSESSEE HAD MA DE IT CLEAR WHILE SURRENDERING THAT THERE WAS NO ADMISSION OF CONCEALMENT AND THAT THE OFFER WAS MADE IN A SPIRIT OF SETTLEMENT. ON APPEAL BY THE DEPARTMENT TO THE HIGH COURT, HELD REVERSING THE TRIBUNAL: WHEN THE AO CALLED UPON THE ASSESSEE TO PRODUCE EVI DENCE AS TO THE NATURE AND SOURCE OF THE AMOUNT RECEIVED AS SHARE CAPITAL, THE CREDITWORTHINESS OF THE APPLICANTS AND THE GENUINENESS OF THE TRANSACTIONS THE ASSESSEE SIMPLY FOLDED UP AND SURRENDERED THE SUM OF RS. 40.74 LAKHS BY MEREL Y STATING THAT IT WANTED TO 'BUY PEACE'. IN THE ABSENCE OF AN Y EXPLANATION IN RESPECT OF THE SURRENDERED INCOME, T HE FIRST PART OF CLAUSE (A) OF EXPLANATION 1 TO S. 271(1)(C) IS A TTRACTED BECAUSE THE NATURE AND SOURCE OF THE AMOUNT SURREND ERED ARE FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME. THE ABSENCE OF ANY EXPLANATION REGARDING THE RECEIPT OF THE MON EY, WHICH IS IN THE EXCLUSIVE KNOWLEDGE OF THE ASSESSEE LEADS TO AN ADVERSE INFERENCE AGAINST THE ASSESSEE AND IS STATU TORILY CONSIDERED AS AMOUNTING TO CONCEALMENT OF INCOME UN DER THE ITA NO.5143/DEL/2013 ASSTT.YEAR: 2009-10 4 FIRST PART OF CLAUSE (A) OF THE EXPLANATION TO S. 2 71(1)(C) AND PENALTY HAS TO BE LEVIED. IN VIEW OF THE AFORESAID, I HOLD THAT THE ASSESSING OFFICER HAS RIGHTLY CHARGED THE APPELLANT COMPANY WITH CONCEALM ENT AND FURNISHING OF INACCURATE PARTICULARS. ACCORDINGLY, THE PENALTY U/S 271 (1 (C) OF THE ACT IS BEING SUSTAINED.' 5. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. FROM THE QUANT UM ASSESSMENT ORDER, WE OBSERVE THAT AS PER ORDER SHEET ENTRY DATED 19.11.2 011, THE AR WAS ASKED TO FILE THE DETAILS IN RESPECT OF PROPERTY SOLD AND PURCHAS ED DURING THE YEAR UNDER CONSIDERATION AND IN RESPONSE TO THE SAME, THE ASSE SSEE FILED REVISED COMPUTATION OF ITS INCOME ON 26.12.2011 BY STATING THAT THE ASSESSEE EARNED RS.39,90,948 AS LONG TERM CAPITAL GAIN AT BHIWADI, RAJASTHAN AND TO OFFSET THE LTCG, THE ASSESSEE PURCHASDS A RESIDENTIAL FLAT FRO M SHRI VRIJESH KUMAR GUPTA AND MADE PAYMENT OF RS. 40 LAKH ON VARIOUS DATES TH ROUGH CHEQUES. IT WAS ALSO STATED THAT UNFORTUNATELY THE ASSESSEE COULD NOT GE T POSSESSION OF THE PROPERTY/FLAT DUE TO DISPUTE IN THE FACTORY OF THE SELLER AND DEAL COULD NOT MATERIALISE AND AGREEMENT OF SALE WAS CANCELLED AND THE SELLER RETURNED THE PAYMENT OF RS.40 LAKH THROUGH VARIOUS CHEQUES ISSUE D BY AXIS BANK LTD. THE ASSESSEE FURTHER EXPLAINED THAT DUE TO THESE CIRCUM STANCES, THE ASSESSEE COULD NOT AVAIL EXEMPTION U/S 54 OF THE ACT, THEREFORE, T HE ASSESSEE SURRENDERED LTCG TO BE TAXED AND ALSO SUBMITTED CHALLANS FOR TAX DEP OSITED BY HIM OF RS.8,20,000. 6. FROM THE PENALTY ORDER, WE OBSERVE THAT THE ASSE SSEE ALSO REITERATED ITS EXPLANATION DURING THE PENALTY PROCEEDINGS BUT THE AO HELD THAT THE ACT OF THE ITA NO.5143/DEL/2013 ASSTT.YEAR: 2009-10 5 ASSESSEE FOUND COVERED BY CLAUSE (A) TO EXPLANATION (1) TO SECTION 271(1) OF THE ACT. THE CIT(A) UPHELD THE PENALTY BY FOLLOWING TH E DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF C IT VS MAK DATA LTD. ORDER DATED 22.01.2013 IN ITA NO.415/2012. ON CAREFUL PE RUSAL OF THE ORDER OF THE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF M AK DATA LTD, WE NOTE THAT THE CASE WAS RELATED WITH SURRENDER OF RS. 40.74 LA KH RECEIVED AS SHARE CAPITAL. IN THIS CASE, WHEN THE AO CALLED UPON THE ASSESSEE TO PRODUCE EVIDENCE AS TO THE NATURE AND SOURCE OF THE AMOUNT RECEIVED IN SHARE C APITAL, THE CREDITWORTHINESS OF THE APPLICANTS AND THE GENUINENESS OF THE TRANSA CTIONS, THE ASSESSEE SIMPLY FOLDED UP AND SURRENDERED THE SAME AMOUNT BY MERELY STATING THAT IT WANTED TO BUY PEACE. THE HONBLE JURISDICTIONAL HIGH COURT H ELD THAT IN ABSENCE OF ANY EXPLANATION IN RESPECT OF SURRENDERED AMOUNT THE FI RST PART OF CLAUSE (A) OF EXPLANATION 1 TO SECTION 271(1)(C) IS ATTRACTED BEC AUSE THE NATURE AND SOURCE OF THE AMOUNT SURRENDERED ARE FACTS MATERIAL TO THE CO MPUTATION OF TOTAL INCOME. 7. IN THE LIGHT OF FACTUAL MATRIX OF THE PRESENT CA SE, WE OBSERVE THAT THE FACTS OF THIS CASE ARE CLEARLY DISTINGUISHABLE FROM THE C ASE OF CIT VS MAK DATA LTD. (SUPRA) AS THE PRESENT CASE IS RELATED TO THE WITHD RAWAL OF CLAIM OF SECTION 54 BY THE ASSESSEE. FROM THE OPERATIVE PART OF THE QUANT UM ASSESSMENT ORDER, WE OBSERVE THAT THE ASSESSEE IN ITS LETTER DATED 26.12 .2011 HAD CLEARLY MENTIONED THE CIRCUMSTANCES BEYOND THE CONTROL OF THE ASSESSEE WH EREIN THE SELLER MR. VRIJESH KUMAR GUPTA CANCELLED THE AGREEMENT TO SELL A FLAT TO THE ASSESSEE AND RETURNED ITA NO.5143/DEL/2013 ASSTT.YEAR: 2009-10 6 THE ADVANCE OF RS.40 LAKH THROUGH CHEQUES OF AXIS B ANK TO THE ASSESSEE. THE ASSESSEE FURTHER EXPLAINED THAT UNFORTUNATELY THE D EAL OF PURCHASE OF FLAT COULD NOT MATERIALISE, THEREFORE, HE OFFERED THE AMOUNT O F LONG TERM CAPITAL GAIN FOR TAXATION AND ALSO DEPOSITED TAX OF RS.8.20 LAKH TO THE EXCHEQUER AND THE ASSESSEE ALSO SUBMITTED COPIES OF THE CHALLAN TAX DEPOSITED ALONG WITH EXPLANATION DATED 26.12.11 WHICH SHOWS SINCERITY AND TRUTHFULNESS OF THE ASSESSEE DURING THE QUANTUM PROCEEDINGS AND IN THIS SITUATION, IT CAN S AFELY BE PRESUMED THAT THE ASSESSEE OFFERED AN EXPLANATION DURING QUANTUM AND PENALTY PROCEEDINGS WHICH WAS QUITE SUSTAINABLE AND HENCE, THE AO WAS WRONG I N HOLDING THAT THE ASSESSEE DID NOT FURNISH ANY EXPLANATION TOWARDS AMOUNT OF L ONG TERM CAPITAL GAIN WHICH WAS OFFERED FOR TAX DURING THE RELEVANT YEAR UNDER CONSIDERATION. WE MAY ALSO NOTE THAT THE PROVISIONS OF THE ACT ENVISAGED U/S 5 4(1)(II) OF THE ACT ALSO PROVIDE THAT THE AMOUNT OF LONG TERM CAPITAL GAIN SHOULD BE UTILISED WITHIN A PERIOD OF THREE YEARS. IN THE EXTANT CASE, THE ASSESSEE TRIE D HARD TO PURCHASE A FLAT FROM MR. VRIJESH KUMAR GUPTA TO ENJOY EFFECT OF SECTION 54 OF THE ACT BUT THE DEAL FAILED DUE TO DISPUTE IN THE FAMILY OF THE SELLER A ND FINALLY DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE OFFERED THE AMOUNT OF L ONG TERM CAPITAL GAIN FOR TAXATION AND ALSO PAID THE TAX WITHIN PRESCRIBED LI MIT, THEREFORE, THE AUTHORITIES BELOW WERE WRONG IN HOLDING THAT THE ASSESSEE DID N OT FURNISH ANY EXPLANATION IN THIS REGARD AND THE AO GROSSLY ERRED IN HOLDING THA T THE CASE OF THE ASSESSEE IS FOUND COVERED BY CLAUSE (A) OF EXPLANATION 2 TO SEC TION 271(1)(C) OF THE ACT BECAUSE THE ASSESSEE FURNISHED A PLAUSIBLE EXPLANAT ION DURING THE QUANTUM ITA NO.5143/DEL/2013 ASSTT.YEAR: 2009-10 7 PROCEEDINGS WHICH WAS ALSO FILED BEFORE THE AO DURI NG PENALTY PROCEEDINGS. HENCE, WE REACH TO A LOGICAL CONCLUSION THAT THE AO IMPOSED PENALTY ON THE BASIS OF WRONG PREMISES AND ERRONEOUS INTERPRETATIO N OF THE PROVISIONS OF THE ACT AND THE SAME WAS WRONGLY UPHELD BY THE CIT(A). ACCORDINGLY, WE ARE INCLINED TO HOLD THAT PENALTY IS NOT LEVIABLE ON TH E ASSESSEE IN THE PRESENT CASE. HENCE, SOLE GROUND OF THE ASSESSEE IS ALLOWED AND T HUS, IMPUGNED ORDER IS SET ASIDE WITH A DIRECTION TO THE AO THAT PENALTY LEVIE D ON THE ASSESSEE IS HEREBY CANCELLED AND DELETED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.12.2014. SD/- SD/- (R.S.SYAL) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 22ND DECEMBER, 2014 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER AS STT. REGISTRAR