ACIT 2(2)(1), MUMBAI V. INDIAN EXTRACTION LTD, MUMBAI

ITA 5758/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8310 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 26-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OMI NINGSHEN
• Assessee Lawyers: SHRI
• Keywords: Sale consideration of property below Jantri Value
• Section: 143(3); 50C; 6

Judgement Text

1 ITA NO.5758/MUM/2016 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI BEFORE SHRI SKTIJIT DEY(JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.5758/MUM/2016 (ASSESSMENT YEAR:2012-13 ) DY.CIT, CIR.2(2)(1), MUMBI VS M/S INDIAN EXTRACTIO N LTD 18, NANAVATI MAHALAYA HOMI MODY STREET MUMBAI-23 PAN : AAACI0993B APPELLANT RESPONDEDNT APPELLANT BY SHRI OMI NINGSHEN RESPONDENT BY SHRI PANKAJ J JAIN DATE OF HEARING 01-11-2017 DATE OF PRONOUNCEMENT 22-11-2017 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A)-5, MUMBAI DATED 06-06-2016 AND IT PERTAINS T O AY 2012-13. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-13 ON 25-09- 2012 DECLARING LOSS OF RS.2,94,31,153. THE REGULAR ASSESSMENT WAS COMPLET ED U/S 143(3) ON 30-03- 2015 DETERMINING TOTAL INCOME AT RS.2,84,29,655 BY RE-COMPUTING LONG TERM CAPITAL GAIN ON SALE OF LAND. THEREAFTER PENALTY P ROCEEDINGS U/S 271(1)(C) WERE 2 ITA NO.5758/MUM/2016 INITIATED BY ISSUING SHOW CAUSE NOTICE U/S 274 R.W. S.271(1)(C) DATED 30-03-2015 FOR FURNISHING INACCURATE PARTICULARS OF INCOME IN RELATION TO COMPUTATION OF LONG TERM CAPITAL GAIN FROM SALE OF IMMOVABLE PROPE RTY WHICH IS EVIDENT FROM THE FACT THAT SALE CONSIDERATION SHOWN IN THE SALE DEED AND ADMITTED BY THE ASSESSEE IN HIS RETURN OF INCOME IS LESSER THAN STA MP DUTY VALUE DETERMINED BY THE AUTHORITIES. THE AO FURTHER OBSERVED THAT DURI NG THE YEAR UNDER CONSIDERATION, THE ASSESSEE SOLD AN IMMOVABLE PROPE RTY AT JAMNAGAR FOR A CONSIDERATION OF RS.5,33,75,450 WHEREAS THE FAIR MA RKET VALUE ASSESSED BY STAMP VALUATION AUTHORITY WAS AT RS.9,79,42,127. T HE ASSESSEE OUGHT TO HAVE COMPUTED LONG TERM CAPITAL GAIN BY TAKING INTO ACCO UNT THE VALUE FIXED FOR STAMP DUTY PURPOSE AS PER THE PROVISIONS OF SECTION 50C(2). HOWEVER, THE ASSESSEE HAS NOT CHOSEN TO CONSIDER STAMP DUTY VALU ATION AUTHORITY VALUE. THE AO DETERMINED THE VALUE OF THE BUILDING BY REFERRIN G THE VALUATION TO DVO AND THE DVO HAS DETERMINED THE VALUE OF THE PROPERTY AT RS.7,32,25,264. THEREFORE, HE OPINED THAT THE ASSESSEE HAS FURNISHE D INACCURATE PARTICULARS OF INCOME WHICH ATTRACTS PENALTY U/S 271(1)(C) AND ASK ED AS TO WHY PENALTY SHOULD NOT BE LEVIED FOR FURNISHING INACCURATE PART ICULARS OF INCOME. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE SUBMITT ED THAT THERE IS NO FURNISHING OF INACCURATE PARTICULARS OF INCOME WITH IN THE MEANING OF SECTION 271(1)(C) AS VALUE DETERMINED AS PER THE PROVISIONS OF SECTION 50C(2) DOES NOT 3 ITA NO.5758/MUM/2016 AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF I NCOME. THE ASSESSEE FURTHER SUBMITTED THAT DEEMING FICTION PROVIDED U/S 50C CAN NOT BE EXTENDED TO LEVY PENALTY U/S 271(1)(C) AS THE AO WAS NOT IN THE POSS ESSION OF ANY EVIDENCE TO PROVE THAT THE ASSESSEE HAS RECEIVED ANY EXTRA CONS IDERATION OVER AND ABOVE WHAT IS STATED IN THE SALE DEED. IN THIS REGARD TH E ASSESSEE RELIED UPON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF FORTUNE HOTELS & ESTATES PVT LTD 52 TAXMAN.COM330 (BOM) AND THE DECI SION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS MADAN THE ATRES LTD 260 CTR 75 (CAL). THE AO, AFTER CONSIDERING THE RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO RELYING UPON A PLETHORA OF JUDGEMENTS HELD THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) WHICH ATTRACTS PENALTY AND ACCORDINGLY LEVIED PENALTY OF RS.94,23,472 BEING 100% OF TAX SOUGHT TO BE EVADED. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). 3. BEFORE CIT(A), ASSESSE REITERATED HIS SUBMISSIONS M ADE BEFORE THE AO. THE CIT(A) FOR THE DETAILED DISCUSSION IN HIS ORDER DATED 06-06-2016 DELETED PENALTY LEVIED BY THE AO BY HOLDING THAT AD DITION MADE TOWARDS LONG TERM CAPITAL GAIN BY INVOKING DEEMING PROVISIO NS PROVIDED IN SECTION 50C ITSELF WOULD NOT AMOUNT TO FURNISHING OF INACCU RATE PARTICULARS OF INCOME SO AS TO LEVY PENALTY U/S 271(1)(C). THE RE LEVANT PORTION OF THE ORDER OF CIT(A) IS EXTRACTED BELOW:- 4 ITA NO.5758/MUM/2016 5. I HAD CONSIDERED THE APPELLANT SUBMISSIONS, IN THIS CASE, A.O. HAD SOLD A LAND IN JAMNAGAR FOR AGREEMENT VALU E OF RS.5,43,75,450/- AND LONG TERM CAPITAL GAINS ON TRA NSFER OF LAND WAS COMPUTED AT RS.3,19,60,996/-. HOWEVER, DUR ING THE ASSESSMENT PROCEEDINGS, A.O. HAD INVOKED SECTION 50 C SUBSTITUTED THE AGREEMENT VALUE WITH THE STAMP DUTY VALUE OF RS.9,79,42,127/- INSTEAD OF AGREEMENT VALUE OF RS.5,43,75,450/- UNDER SECTION 50C OF THE 1.1. ACT. A.,O. HAD REFERRED THIS VALUE TO THE DVO WHICH COMPUTED THE V ALUE OF THE LAND IS RS.7,32,25,266/-. IN THIS CASE, IN THIS ISSUE AS THERE IS A DIFFERENCE BETWEEN THE LONG TERM CAPITAL GAIN COM PUTED BY THE APPELLANT AND A.O. ON THE DIFFERENTIAL AMOUNT A .O. HAD LEVIED PENALTY U/S. 271(1)(C). 6. DURING THE SUBMISSIONS, APPELLANT MAIN CONTENTION I S THAT A.O. HAD SUBSTITUTED AGREEMENT VALUE WITH THE STAMP DUTY VALUE IN VIEW OF SECTION 50C OF THE I.T. ACT. ACCOR DING TO THE APPELLANT 50C IS DEEMING SECTION AS DEEMING PROVISI ON IS FICTION OF LAW. THIS CANNOT BE EXTENDED BEYOND THE OBJECT FOR WHICH IT IS ENACTED. IN VIEW OF THE SUPREME COURT C ASE IN BENGAL IMMUNITY COMPANY LTD. VS. STATE OF BIHAR 603 CIT VS. K.S. BUILDERS 281 ITR 210 (BOM). HERE AS SECTION 50 C IS A DEEMING SECTION. ACCORDING TO THE ABOVE DECISIONS O F THE SUPREME COURT THIS 50C VALUATION DIFFERENTIAL CANNO T BE EXTENDED BEYOND THE COMPUTATION OF LONG TERM CAPITA L GAIN AND IT CANNOT BE EXTENDED TO LEVY PENALTY U/S. 271( 1)(C). FURTHER, SAME VIEW ALSO UPHELD FOR BOMBAY HIGH COUR T IN CIT VS. FORTUNE HOTELS & ESTATES (P.) LTD. 52 TAXRNANN. COM 330 (BORN) WHERE IT IS HELD AS UNDER 'SECTION 271(1)(C), READ WITH SECTION 50C, OF THE I.T. ACT, 1961 PENALTY FOR CONCEALMENT OF INCOME (DISALLOWANCE OF CLAIM, EFFECT OF ) - WHETHE R WHERE IN RESPECT OF SALE OF A PROPERTY, MATTER WAS REFERRED TO DVO WHO DETERMINED SALE CONSIDERATION AT A HIGHER AMOUNT, T HAT BY ITSELF WOULD NOT AMOUNT TO FURNISHING INACCURATE PARTICULA RS OF INCOME SO AS TO LEVY PENALTY UNDER SECTION 271(1)(C).' FURTHER, CALCUTTA HIGH COURT IN CIT VS. MADAN THEATRES LTD. 44 TAXMAN N.COM 382 (CALCUTTA) HELD AS UNDER 'SECTION 271(1)(C), READ WITH SECTION 50C OF THE L.T. ACT, 1961 - PENALTY - FOR CONCEALMENT OF INCOME - WHERE ACTUAL AMOUNT RECEIVED ON ACCOUNT OF SALE OF PROPERTY WAS OFFERED FOR TAXATION BUT ASSESSING OFF ICER INVOKING SECTION 50C DEEMED SALE CONSIDERATION AT H IGHER SUM, 5 ITA NO.5758/MUM/2016 IN ABSENCE OF ANY IOTA OF EVIDENCE THAT ASSESSEE HA D RECEIVED MORE AMOUNT THAN SHOWN BY IT, PENALTY UNDER SECTION 271( 1) (C) WAS NOT LEVIABLE.' [IN FAVOUR OF SSESSEE] . IN THE ABOVE BOTH THE DECISIONS IT IS HELD THAT IF A.O. COULD NOT FIND ANY EXTRA AMOUN T RECEIVED BY THE APPELLANT ABOVE AGREEMENT VALUE WHICH IS BY INVOKIN G SECTION 50C IF ANY DIFFERENCE IS THERE IN LONG TERM CAPITAL GAI N BASED ON THE ABOVE DIFFERENTIAL PENALTY CANNOT BE LEVIED. IN VIEW OF THE ABOVE DECISIONS OF BOTH THE HIGH COURT PENALTY LEVIED/S. 271(1)(C) IS CANCELLED. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE I S IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIA L AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES B ELOW. THE AO LEVIED PENALTY U/S 271(1)(C) TOWARDS ADDITION MADE ON ACCO UNT OF LONG TERM CAPITAL GAIN RE-COMPUTED BY INVOKING PROVISIONS OF SECTION 50C(2) OF THE ACT. ACCORDING TO THE AO, THE ASSESSEE HAS DELIBERATELY FURNISHED INACCURATE PARTICULARS OF INCOME IN RESPECT OF SALE CONSIDERAT ION OF LAND WHICH IS EVIDENT FROM THE FACT THAT THE VALUE SHOWN IN THE SALE DEED AND DISCLOSED BY THE ASSESSEE IN HIS RETURN OF INCOME IS LESSER THAN THE VALUE DETERMINED BY THE STAMP DUTY AUTHORITY FOR THE PURPOSE OF PAYMENT OF STAMP DUTY. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS SHOWN A SALE CONSIDERATION OF RS.5,33,75,450 WHEREAS THE STAMP DUTY VALUE WAS DET ERMINED AT RS.9,79,42,127. THE AO FURTHER OBSERVED THAT THE D VO HAS DETERMINED VALUE OF THE BUILDING AT RS. 7,32,25,264. ALL THESE FACT S LEAD TO AN UNDISPUTED FACT THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICUL ARS IN RESPECT OF COMPUTATION OF LONG TERM CAPITAL GAIN WHICH ATTRACT S PENALTY PROVISIONS U/S 6 ITA NO.5758/MUM/2016 271(1)(C) OF THE ACT. IT IS THE CONTENTION OF THE ASSESSEE THAT PENALTY CANNOT BE LEVIED FOR FURNISHING INACCURATE PARTICULARS OF INC OME IN RESPECT OF ADDITION MADE TOWARDS RE-COMPUTATION OF LONG TERM CAPITAL GA IN BY INVOKING DEEMING PROVISIONS OF SECTION 50C OF THE ACT. THE ASSESSEE FURTHER CONTENDED THAT THE AO DOES NOT HAVE ANY EVIDENCE TO PROVE THAT THE ASS ESSEE HAS RECEIVED ANY CONSIDERATION OVER AND ABOVE WHAT IS STATED IN THE SALE DEED. IN THE ABSENCE OF ANY IOTA OF EVIDENCE THAT ASSESSEE HAD RECEIVED MOR E AMOUNT THAN THAT SHOWN BY IT IN SALE DEED, PENALTY U/S 271(1)(C) CANNOT BE LEVIED. 6. HAVING HEARD BOTH THE SIDES, WE FIND MERITS IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT DEEMING FICTION PROVID ED U/S 50C FOR COMPUTATION OF CAPITAL GAIN CANNOT BE EXTENDED TO THE PROVISION S OF SECTION 271(1(C) SO AS TO LEVY PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THIS LEGAL PROPOSITION WAS SUPPORTED BY THE DECISION OF HONBL E BOMBAY HIGH COURT IN THE CASE OF CIT VS FORTUNE HOTELS & ESTATES PVT LTD 232 TAXMAN 481 (BOM) WHEREIN IT WAS OBSERVED THAT IN TERMS OF SECTION 50 C, HIGHER SALE CONSIDERATION OF PROPERTY DETERMINED BY DVO DID NOT BY ITSELF AMO UNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME SO AS TO LEVY PENA LTY U/S 271(1)(C). THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS M ADAN THEATRES LTD (SUPRA) OBSERVED THAT THE ACTUAL AMOUNT RECEIVED FROM SALE OF PROPERTY WAS OFFERED FOR TAXATION. IT WAS ONLY ON THE BASIS OF THE DEEMED C ONSIDERATION THAT THE 7 ITA NO.5758/MUM/2016 PROCEEDINGS U/S 271(1)(C) WAS INITIATED. THE REVEN UE HAD FAILED TO PRODUCE ANY IOTA OF EVIDENCE THAT THE ASSESSEE ACTUALLY RECEIVE D MORE THAN THE AMOUNT SHOWN TO HAVE BEEN RECEIVED BY HIM. THE HONBLE SU PREME COURT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS P LTD VS CIT 222 I TR 158 (SC) OBSERVED THAT MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDI TURE WHICH WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE THAT BY ITSELF WOULD NOT ATTRACT THE PENALTY U/S 271(1)(C). IN THIS CASE, ADMITTEDL Y, THE AO HAS LEVIED PENALTY ON THE ADDITION MADE TOWARDS RE-COMPUTATION OF LONG TE RM CAPITAL GAIN OF THE INCOME-TAX ACT, 1961. THEREFORE, CONSIDERING THE F ACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE RATIOS OF C ASE LAWS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT PENALTY CANNOT BE LEVIED U/S 271(1)(C) FOR ADDITION MADE ON ACCOUNT OF DIFFERENCE FOR SALE CONSIDERATION AS PER THE PROVISIONS OF SECTION 50C OF THE ACT. THE CIT(A), AFTER CONSIDERING RELE VANT SUBMISSIONS HAS RIGHTLY DELETED PENALTY LEVIED BY THE AO. HENCE, WE ARE IN CLINED TO UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL FILED BY THE R EVENUE. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND NOVEMBER, 2017. SD/- SD/- (SAKTJIT DEY) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 22 ND NOVEMBER, 2017 PK/- 8 ITA NO.5758/MUM/2016 COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI