Pankaj Durlabhji Nathwani, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-1(3), RAJKOT-GUJARAT

ITA 519/RJT/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1291 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 23-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V J BORICHA
• Assessee Lawyers: KULDEEP R SHETH
• Keywords: Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH : E COURT, AT AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./ ITA.NO.519/RJT/2013 [ASSTT.YEAR 2008-09] PANKAJ DURLABHJI NATHWANI DHANRAJ NR. MOTI TANKI CHOWK SADAR BAZAAR OFF PANCHANTH PLOT RAJKOT 360 001. VS ITO, WARD - 1(3) RAJKOT. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI KUL D EEP R. SHETH REVENUE BY : SHRI V.J. BORICHA, SR.DR / DATE OF HEARING : 04/05/2016 / DATE OF PRONOUNCEMENT: 04/05/2016 !'#/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF THE LD.CIT(A), JAMNAGAR DATED 22.11.2013 PASSED FOR THE ASST.YEAR 2008- 2009. 2. THOUGH THE ASSESSEE HAS TAKEN SEVEN GROUNDS OF A PPEAL, BUT HIS GRIEVANCES REVOLVES AROUND A SINGLE ISSUE WHEREBY H E HAS PLEADED THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE PENALTY O F RS.66,530/- IMPOSED BY THE AO UNDER SECTION 271(1)(C) OF THE IN COME TAX ACT. ITA NO.519/RJT/2013 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED HIS RETURN OF INCOME ON 28.7.2008 DECLARING TOTAL INCOME AT RS.3, 20,580/-. THE ASSESSEE HAS SOLD A HOUSE PROPERTY FOR A CONSIDERAT ION OF RS.17.50 LAKHS. HE HAS CALCULATED THE ACQUISITION COST AT RS.4,02,2 07/- WHICH INCLUDES THE COST OF HOUSE PROPERTY AT RS.3,22,500/-, INVEST MENT IN FURNITURE OF RS.79,527/- AND BROKERAGE OF RS.50,000/-. THE ASSE SSEE HAS WORKED THE INDEX COST AT RS.16,62,183/-. AS AGAINST THIS, TH E AO DID NOT ALLOW THE ASSESSEE BROKERAGE EXPENSES. HE WORKED OUT THE COS T OF THE PROPERTY AT RS.4,02,207/- AGAINST RS.4,52,027/- CLAIMED BY THE ASSESSEE. ON THE WORKING OF THE AO, THE INDEX COST COMES TO RS.14,76 ,779/-. THUS, THERE WAS A DIFFERENCE OF RS.1,85,404/-. ACCORDING TO TH E AO, THE ASSESSEE DID NOT DISPUTE THE EXCLUSION OF BROKERAGE EXPENSES FROM COST OF ACQUISITION. HENCE, AN ADDITION OF RS.1,85,404/- W AS MADE IN THE TOTAL INCOME OF THE ASSESSEE. THE LD.AO HAS INITIATED PE NALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. 4. AFTER HEARING THE ASSESSEE, HE IMPOSED A PENALTY OF RS.66,530/- WHICH IS EQUIVALENT TO THE TAX SOUGHT TO BE EVADED. 5. APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 HAS D IRECT BEARING ON THE CONTROVERSY. THEREFORE, IT IS PERTINENT TO TAK E NOTE OF THE SECTION. '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) OR THE CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON ITA NO.519/RJT/2013 3 (A) AND (B)** ** ** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I)AND (INCOME-TAX OFFICER,)** ** ** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CL AUSE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF T AX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INACCURATE PARTICU LARS OF SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1- WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR O FFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE CIT TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIA L TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THE N, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME O R SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB- SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPE CT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 6. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THA T FOR VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS B EFORE THEM SHOULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS FAR AS THE QUANTIFICATION OF THE PENALTY IS CONCERNED, THE PENALTY IMPOSED UN DER THIS SECTION CAN RANGE IN BETWEEN 100% TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THE OTHER MOST IMPORTANT FE ATURES OF THIS SECTION IS DEEMING PROVISIONS REGARDING CONCEALMENT OF INCO ME. THE SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE ASSESSEE HA S CONCEALED THE ITA NO.519/RJT/2013 4 INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERT AIN SITUATION, EVEN WITHOUT THERE BEING ANYTHING TO INDICATE SO, STATUT ORY DEEMING FICTION FOR CONCEALMENT OF INCOME COMES INTO PLAY. THIS DEE MING FICTION, BY WAY OF EXPLANATION I TO SECTION 271(1)(C) POSTULATE S TWO SITUATIONS; (A) FIRST WHETHER IN RESPECT OF ANY FACTS MATERIAL TO T HE COMPUTATION OF THE TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE A SSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE AS SESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARNED CIT(APPEA L); AND, (B) WHERE IN RESPECT OF ANY FACT, MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND THE ASSESSEE FAILS, TO PROVE THAT S UCH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL T HE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOT AL INCOME. UNDER FIRST SITUATION, THE DEEMING FICTION WOULD COME TO PLAY IF THE ASSESSEE FAILED TO GIVE ANY EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASS ESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CATEGORICAL FINDIN G TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FICTION WOULD COME TO PLAY BY THE FAILURE O F THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME AND IN ADDITION TO THIS THE ASSESSEE IS 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 THE TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. THESE T WO SITUATIONS PROVIDED IN EXPLANATION 1 APPENDED TO SECTION 271(1 )(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMING FICTION COMES INTO PLAY IN THE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWAN CE IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSE OF SEC TION 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE INCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. ITA NO.519/RJT/2013 5 7. IN THE LIGHT OF THE ABOVE, IF WE EXAMINE THE FAC TS OF THE PRESENT CASE, THEN, IT WOULD REVEAL THAT THE ASSESSEE HAS N OT FURNISHED ANY INACCURATE PARTICULARS. HE HAS MADE A DIFFERENT CA LCULATION OF COST OF ACQUISITION. WHEN THE AO HAS CONFRONTED HIM FOR JU STIFYING THE CLAIM OF RS.50,000/- PAID FOR BROKERAGE, THE ASSESSEE DID NO T PURSUE AND OFFERED IT FOR TAXATION. THIS LEADS TO A DIFFERENT CALCULATIO N OF CAPITAL GAIN. IT IS NOT THE CASE THAT THE EXPLANATION OFFERED BY THE AS SESSEE ABOUT THE INCURRENCE OF BROKERAGE EXPENSES WAS FOUND TO BE FA LSE BY THE AO. THIS WAS EXCLUDED FROM THE COST OF ACQUISITION, BECAUSE, THE ASSESSEE DID NOT PRESS IT. THEREFORE, IN OUR OPINION, THE ASSESSEE DOES NOT DESERVE TO BE VISITED WITH PENALTY. WE ALLOW THE APPEAL OF THE A SSESSEE AND DELETE THE PENALTY. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON 4 TH MAY, 2016 AT AHMEDABAD. SD/- SD/- ( N.K. BILLAIYA ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER