ACIT, Bangalore V. Shri. M.V.C. Hanumanthiah, Bangalore

ITA 633/BANG/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0701 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-10-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 12-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V S SREELEKHA
• Assessee Lawyers: R B KRISHNA
• Keywords: Initiation of penalty proceedings; Agreed addition; Revised return; Capital Gains
• Section: 271(1)(c); 274

Judgement Text

ITA NO.633 & 1275/B/08 1 IN THE INCOME TAX APPELL ATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH BANGALORE BENCH BANGALORE BENCH BANGALORE BENCH B BB B BEFORE BEFORE BEFORE BEFORE GEORGE GEORGE K, JUDICIAL MEMBER GEORGE GEORGE K, JUDICIAL MEMBER GEORGE GEORGE K, JUDICIAL MEMBER GEORGE GEORGE K, JUDICIAL MEMBER AND AND AND AND SHRI SHRI SHRI SHRI A. MOHAN ALANKAMONY A. MOHAN ALANKAMONY A. MOHAN ALANKAMONY A. MOHAN ALANKAMONY, A , A, A , ACCOUNTANT MEMBER CCOUNTANT MEMBER CCOUNTANT MEMBER CCOUNTANT MEMBER ITA NO.633 & 1275/BANG/2008 (ASSESSMENT YEAR 2 003-04 & 2004-05) THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-9(1), BANGALORE. . APPELLANT VS. SHRI MVC HANUMANTHAIAH, NO.2, WEST OF PARK ROAD, MALLESHWARAM, BANGALORE. . RESPONDENT APPELLANT BY : SMT. V.S SREELEKHA RESPONDENT BY : SHRI R.B KRISHNA O R D E R O R D E R O R D E R O R D E R PER PER PER PER GEORGE GEORGE GEORGE GEORGE GEORGE GEORGE GEORGE GEORGE K KK K, , , , JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER : : : : THESE APPEALS PREFERRED BY THE REVENUE ARE DIRECTED AGAINST THE COMMON ORDER OF THE LEARNED COMMISSIONER OF INC OME-TAX (APPEALS) - II, BANGALORE DATED 14.01.2008. THE AS SESSMENT YEARS CONCERNED ARE 2003-04 AND 2004-05. THE ORDER OF TH E CIT(A) EMANATES FROM THE ORDER OF ACIT LEVYING PENALTY U/S 271(1)(C)OF THE ACT. SINCE COMMON ISSUES ARE INVOLVED IN THESE CAS ES, THEY ARE DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAK E OF CONVENIENCE AND BREVITY. ITA NO.633 & 1275/B/08 2 2. THE SOLITARY ISSUE THAT IS RAISED IN THESE APPEA LS ARE WHETHER CIT(A) IS JUSTIFIED IN DELETING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT AMOUNTING TO RS.9,13,164/- AND RS.29,88,-080/- FOR ASSESSMENT YEARS 2003-04 AND 2004-05 RESPECTIVELY. THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS : 3. THE ASSESSEE IS AN INDIVIDUAL. FOR ASSESSMENT YEAR 2003-04, ASSESSEE FILED RETURN OF INCOME ON 29.9.03 DECLARIN G CAPITAL GAINS ON SALE OF APARTMENTS. THE AVERAGE SALE PRICE PER SQ. FT. ADMITTED BY THE ASSESSEE WAS RS.620. DURING THE COURSE OF ASSESSME NT PROCEEDINGS, THE AO WAS OF THE VIEW THAT MARKET VALUE OF THE PRO PERTY IN AND AROUND THE AREA WHERE THE APARTMENTS WERE SOLD WAS MUCH HI GHER AT THAT RELEVANT TIME. AFTER THE MATTER WAS DISCUSSED AT L ENGTH, THE ASSESSEE CAME FORWARD TO ESTIMATE THE SALE PRICE AT RS.1050 PER SQ. FT. INSTEAD OF RS.620 PER SQ. FT.. THUS, THE ASSESSEE OFFERED ADDITIONAL INCOME OF RS.43,48,400/- UNDER LONG TERM CAPITAL GAINS BY FIL ING REVISED RETURN ON 27/12/06 IN RESPONSE TO 148 NOTICE. ASSESSMENT WAS ACCORDINGLY COMPLETED ON 27/2/07. PENALTY PROCEEDINGS U/S 271( 1)(C) WAS INITIATED AND PENALTY AMOUNTING TO RS.9,13,164/- WAS IMPOSED. 4. SIMILARLY, FOR ASSESSMENT YEAR 2004-05, THE AVER AGE SALE PRICE PER SQ. FT. ADMITTED BY THE ASSESSEE WAS RS.598 PER SQ. FT. AFTER THE MATTER WAS DISCUSSED WITH THE ASSESSEE, THE ASSESSE E CAME FORWARD TO ESTIMATE THE SALE PRICE AT RS.1325 PER SQ. FT. A ND OFFERED ADDITIONAL ITA NO.633 & 1275/B/08 3 INCOME OF RS.90,54,785/-. THEREAFTER ASSESSMENT WAS COMPLETED ON 30.11.06. THE PENALTY PROCEEDINGS U/S 271(1)(C) WA S INITIATED AND PENALTY AMOUNTING TO RS.29,88,080.- WAS LEVIED. 5. BEFORE THE CIT(A), THE DEFENCE OF THE ASSESSEE A GAINST THE LEVY OF PENALTY WAS THAT HE RECEIVED ADVANCE AT THE TIME OF BOOKING DURING THE YEARS 1995 TO 1997 AND THEN PREVAILING MARKET R ATE WAS CLOSE TO 500 PER SQ. FT. IT WAS FURTHER SUBMITTED, BEFORE T HE CIT(A) THAT THE AVERAGE RATE AT RS.598 PER SQ. FT. IS THE REASONABL E RATE AND NONE OF THE FLATS REGISTERED WERE SUBJECTED TO UNDER VALUAT ION PROCEEDINGS BY THE SUB REGISTRAR. THE ASSESSEE OFFERED TO ACCEPT THE ADDITION ON ACCOUNT OF ESTIMATE RATE AT RS.1325 PER SQ. FT. IN ORDER TO BUY PEACE WITH THE DEPARTMENT AND WITH THE HOPE THAT NO PENAL TY U/S 271(1)(C) WOULD BE LEVIED. IT WAS FURTHER CONTENTED THAT THE ADDITION MADE IS ONLY ON ESTIMATE BASIS AND HIS ACCEPTANCE OF THE SAME, S HOULD NOT TO BE TAKEN AS ADMISSION OF CONCEALMENT. THE ASSESSEE IS ALSO RELIED ON THE TWO DECISION OF THE DELHI HIGH COURT IN THE CAS E OF CIT VS. M/S RAM COMMERCIAL ENTERPRISES, 246 ITR 568 AND DIWAN E NTERPRISES VS. CIT & OTHERS, 246 ITR 571, IN SUPPORT OF HIS ARGUM ENT THAT NO REASON/SATISFACTION HAS BEEN RECORDED BY THE AO FOR INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. THE CIT(A) F OR HIS REASONING MENTIONED IN PARA 3, 3.1 AND 3.2 OF HIS ORDER ALLO WED THE APPEAL OF THE ASSESSEE. THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US. ITA NO.633 & 1275/B/08 4 6. THE LEARNED DR SUBMITTED THAT THE ASSESSEE IN HI S LETTER DATED 13.11.06 HAD OFFERED ADDITIONAL INCOME WHEN HE WAS NOT IN A POSITION TO SUBSTANTIATE THE LOW SALE PRICE OF APARTMENTS AS REASONABLE COMPARE TO THE PRICES AS PER THE NEWS PAPER ADVERTI SEMENT FOR THE FLATS SOLD IN THE NEAR BY VICINITY. SHE ALSO SUBMI TTED EVEN IN THE CASE OF AGREED ADDITION, PENALTY CAN BE LEVIED. FOR THI S PROPOSITION, SHE RELIED ON THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF CIT VS. CHANDRA VILAS HOTEL, 291 ITR 202 AND THE DECISION O F THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. R KESAVAN NAIR, 287 ITR 276. ON THE OTHER HAND THE LEARNED AR REITERATED H IS CONTENTIONS MADE BEFORE THE LOWER AUTHORITIES AND SUPPORTED THE FINDINGS OF THE CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. UNDER SECTION 271(1)(C) TO INITIATE PEN ALTY PROCEEDINGS THE FOLLOWING PRE-REQUISITES SHOULD OBTAIN : (I) THE AO SHOULD BE SATISFIED THAT : (A) THE ASSESSEE HAS EITHER CONCEALED PARTIC ULARS OF HIS INCOME; OR (B) FURNISHED INACCURATE PARTICULARS OF HIS INCO ME; OR (C) INFRACTED BOTH (A) AND (B). (II) THIS SATISFACTION SHOULD B E ARRIVED AT DURING THE COURSE OF ANY PROCEEDINGS. THESE COULD BE ASSESS MENT, REASSESSMENT OR RECTIFICATION PROCEEDINGS, BUT NOT PENALTY PROCEEDINGS. (III) IF INGREDIENTS CONTAINED IN (I) AND (II) ARE PRESENT A NOTICE TO SHOW CAUSE U/S 274 OF THE ACT SHALL ISSUE SETTING OUT THEREIN THE INFRACTION THE ASSESSEE IS SAID TO HAVE COMMITT ED. THE NOTICE U/S ITA NO.633 & 1275/B/08 5 274 OF THE ACT CAN BE ISSUED BOTH DURING OR AFTER T HE COMPLETION OF ASSESSMENT PROCEEDINGS, BUT THE SATISFACTION OF THE AO THAT THERE HAS BEEN AN INFRACTION OF CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271 SHOULD PRECEDE CONCLUSION OF THE PROCEEDINGS PENDING BEFOR E THE AO. (IV) THE ORDER IMPOSING PENALTY CAN BE PASSED ONLY AFTER ASS ESSMENT PROCEEDINGS ARE COMPLETED. THE TIME FRAME FOR PASS ING THE ORDER IS CONTAINED IN SEC 275 OF THE ACT. DUE COMPLIANCE WO ULD BE REQUIRED TO BE MADE IN RESPECT OF THE PROVISIONS OF SEC 274 AND 275 OF THE ACT. 8. IN THE INSTANT CASE, ON PERUSAL OF THE ASSESSME NT ORDER FOR THE ASSESSMENT YEAR 2003-04, WE DO NOT FIND RECORD OF S ATISFACTION FOR INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. THE LEARNED DR HAS NOT BEEN ABLE TO POINT OUT THE SATISFACTION OF THE AO FOR INITIATION OF PENALTY PROCEEDING IN THE ASSESSMENT ORDER CONCERNING ASSESSMENT YEAR 2003-04. THEREFORE FOR ASSESSMENT YEAR 2003-04, THE PRESENCE OF PRIMA FACIE SATISFACTION FOR INITIA TION OF PENALTY PROCEEDINGS, WHICH IS A JURISDICTIONAL FACT IS ABSE NT. HENCE, FOR THIS REASON, WE QUASH THE PENALTY LEVIED FOR ASSESSMENT YEAR 2003-04. 9. FOR ASSESSMENT YEAR 2004-05, THE CONTENTION OF T HE AR THAT NO REASON/SATISFACTION HAS BEEN RECORDED BY THE AO FOR INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT, CANNOT HOLD M UCH WATER, IN VIEW OF THE INSERTION OF SUB SEC. 1(B) TO SEC. 271(1)(C) BY FINANCE ACT 2008 W.E.F 1.4.89. IN THE ASSESSMENT ORDER, IT IS CLEARL Y MENTIONED AT THE BOTTOM OF THE ORDER THAT THE PENALTY PROCEEDINGS U /S 271(1)(C) HAS ITA NO.633 & 1275/B/08 6 BEEN SEPARATELY INITIATED, WHICH ACCORDING TO SUB SEC. (1B) TO SEC. 271(1)(C) DEEMED TO CONSTITUTE SATISFACTION OF AO F OR INITIATION OF THE PENALTY PROCEEDING U/S 271(1)(C). THEREFORE, THIS C ONTENTION OF THE AR FAILS. HOWEVER, FURTHER QUESTION IS, WHETHER ON FA CTS THE PENALTY IS IMPOSABLE. IN THIS CASE, THE ADDITIONS TO THE TOTA L INCOME DECLARED HAVE BEEN MADE ON THE BASIS OF AN OFFER MADE BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT IS AN ADM ITTED FACT THAT THE INCOME OFFERED IS ENTIRELY ON AN ESTIMATE BASIS AND THERE IS NO CONCRETE EVIDENCE TO SUPPORT THE SAID ESTIMATE. IT IS NOT PROVED BY THE AO THAT THE ASSESSEE IN FACT RECEIVED THE SAID EXTR A CONSIDERATION AS ADMITTED OR SOLD FLATS AT THE RATE OF RS.1325 PER S Q. FT. AND NOT AT THE RATES MENTIONED IN THE REGISTERED DEED. SINCE THE ADDITION MADE IS ONLY ON THE BASIS OF ESTIMATE, IT CANNOT BE SAID TH AT ASSESSEE HAD CONCEALED INCOME SO OFFERED. ANOTHER IMPORTANT ASP ECT TO BE NOTED IN THIS CASE IS THAT ASSESSMENT ORDER IS SILENT ON THE REASON FOR WHICH FORCED THE ASSESSEE TO COME FORWARD WITH THE ADDITI ONAL INCOME. THE AO HAS MERELY ACCEPTED THE OFFER MADE BY THE ASSESS EE AND THERE IS NOTHING ON RECORD TO SUGGEST, THAT THE SALE PRICE O RIGINALLY DISCLOSED BY ASSESSEE WAS BELOW ACTUAL SALE CONSIDERATION RECEIV ED BY THE ASSESSEE. THEREFORE IT WOULD BE DIFFICULT TO HOLD THE OFFER OF ADDITIONAL INCOME MADE BY THE ASSESSEE WILL TANTAMOUNT TO ADMI SSION OF CONCEALMENT. 10. IN THE COURSE OF HEARING OF THIS APPEAL, WE HA D GRANTED TIME TO THE LEANED DR TO PRODUCE MATERIAL THAT WAS AVAILAB LE WITH THE AO FOR ITA NO.633 & 1275/B/08 7 ARRIVING AT THE CONCLUSION THAT ASSESEE HAD DECLARE D A FIGURE LESS THAN THE ACTUAL AMOUNT THAT WAS RECEIVED. THE LEARNED DR HA S PRODUCED THE LETTER OF THE BUILDER NAMELY M/S SRIRAM PROPERTIES LTD., WHE REIN THE BUILDER HIMSELF HAD STATED THE SALE PRICE DEPENDS VERY MUCH ON FAC TORS LIKE PROXIMITY TO THE MAIN ENTRANCE, WHICH FLOOR THE FLAT IS LOCATED ETC . THE BUILDER HAD STATED IN THE LETTER THAT THE APPROXIMATE VALUE PER SQ. FT. I S AROUND RS.925 AND 950 FOR THE ASSESSMENT YEARS CONCERNED. IT IS THE CASE OF THE ASSESSEE, AGREEMENT OF SALE WITH PURCHASES OF FLATS WAS ENTERED IN THE YEARS 1995 TO 1997. SOME AGREEMENT OF SALE PERTAINING TO THE YEAR 1995 WAS P RODUCED. THEREFORE THE SUBMISSION OF ASSESSEE, AVERAGE SQ. FT. RATE AT RS. 593/- PER SQ. FT. IS REASONABLE FOR THE YEAR 1995, CANNOT BE TOTALLY BRU SHED ASIDE AS FALSE, WHEN THE BUILDER (M/S SRIRAM PROPERTIES) HAS STATED APPR OXIMATE VALUE PER SQ. FT. AT RS.925/- IN THE YEAR 2003. THESE FACTS ONLY POINT O UT THAT ADDITIONS MADE ARE PURELY IN THE REALM OF ESTIMATE AND CANNOT BE STATE D THAT THERE IS CONCEALMENT OF INCOME. TAKING INTO ACCOUNT THE TOTA LITY AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE PENALTY CANNO T BE LEVIED IN THIS CASE AND ORDER OF THE CIT(A), DELETING PENALTY, IS CORRECT AND IS IN ACCORDANCE WITH LAW. 11. IN THE RESULT, THE APPEALS OF THE REVENUE ARE D ISMISSED. PRONOUNCED IN THE OPEN COURT ON 13TH NOV, 2009. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - ( (( (A. MOHAN ALANKAMONY A. MOHAN ALANKAMONY A. MOHAN ALANKAMONY A. MOHAN ALANKAMONY) ) ) ) ( ( ( (GEORGE GEORGE K) GEORGE GEORGE K) GEORGE GEORGE K) GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE DATED : 13/11/09 VMS. ITA NO.633 & 1275/B/08 8 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF 7. GF, ITAT, NEW DELHI. BY ORDER ASST. REGISTRAR, ITAT, BANGAL ORE.