SAIFULLAH A KHAN, MUMBAI V. INCOME TAX OFFICER WD-3(3), THANE

ITA 6367/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8913 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2014-2015
• Appeal Filed On: 05-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N PADMANABAN SR
• Assessee Lawyers: NITIN JAIN
• Keywords: Capital asset; Wrong claim
• Section: 271(1)(c); 54B; 2(14); 143(1); 143(2)

Judgement Text

ITA NO.6367/MUM/2018 A.Y. 2014 - 15 SAIFULLAH ABDULLAH KHAN VS. COMMISSIONER OF INCOME TAX (A) - 2 1 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 6367/MUM/2018 (ASSESSMENT YEAR: 2014 - 15 ) SAIFULLAH ABDULLAH KHAN PROP: RELIANCE ENGINEERING CO. G/58, KHARGHAR VILLAGE, SECTOR - 12, BEHIND NIMISHA HOSPITAL, KHARGHAR, NAVI MUMBAI 410210 VS. COMMISSIONER OF INCOME TAX (A) - 2, ROOM NO. 29, B WING, 6 TH FLOOR, ASHAR I.T. PARK, WAGLE INDUSTRIAL ESTATE, THANE - 400 604 PAN ABEPK4182C (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI NITIN JAIN , C.A. RESPONDENT BY: SHRI N. PADMANABAN, SR. A.R DATE OF HEARING: 08.01.2020 DATE OF PRONOUNCEMENT: 10 .01.2020 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 2, THANE, DATED 06.09.2018 UNDER SEC. 271(1)(C) OF THE ACT. THE ASSESSEE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL BE FORE US: THE APPELLANT COMPANY PREFERS AN APPEAL AGAINST THE ORDER U/S.271(1)(C)DATED 06.09. 2018 PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEAL) 2, THANE ON FOLLOWING AMONGST OTHER GROUNDS EACH OF WHICH ARE WITHOUT PREJUDICE TO ANY OTHER : - 1.0 ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN DIRECTING THE LD. AO TO LEVY THE PENALTY U/S 271(1)(C) IN RESPECT OF DISALLOWANCE OF DEDUCTION U/S 54B OF RS. 5,39,75,247/ - WITHOUT APPRECIATING THE FACT THAT THE AGRICULTURE LANDS SOLD DURING THE YEAR ARE NOT CAPITAL ASSET U/S 2(14) AND EVEN OTHERWISE THE CAPITAL GAIN HAD BEEN REINVESTED IN PURCHASE OF AGRICULTURE LANDS ELIGIBLE FOR DEDUCTION U/S 54B; 2.0 THE LD. CIT(A) ERRED IN PASSING THE PENALTY ORDER U/S 271(1)(C) ON REJECTING THE A PPELLANT'S PRAYER TO APPROACH THE HON'BLE ITAT TO GRANT THE STAY OF PENALTY PROCEEDINGS AND ON IGNORING THE WRITTEN SUBMISSIONS FILED BY THE APPELLANT; 3.0 THE LD. CIT(A), BEFORE LEVYING THE PENALTY U/S 271(1)(C) ON ENHANCED INCOME OF RS. 5,39,75,247/ - , OU GHT TO HAVE CONSIDERED THE BONAFIDE EXPLANATION AND EXISTENCE OF DEBATABLE ISSUES, BEING; ITA NO.6367/MUM/2018 A.Y. 2014 - 15 SAIFULLAH ABDULLAH KHAN VS. COMMISSIONER OF INCOME TAX (A) - 2 2 A) THE LD. AO, ON CARRYING INVESTIGATION AND DUE APPLICATION OF MIND, HAD ALLOWED THE APPELLANT'S CLAIM OF DEDUCTION U/S 54B OF RS. 5,39,75,247/ - AND SUBSEQUENT DISALLOWANCE OF ADMISSIBLE DEDUCTION WOULD NOT LEAD TO AN AUTOMATIC LEVY OF PENALTY; B) THERE IS A COMPLETE DISCLOSURE OF ALL MATERIAL FACTS ON RECORD AND THERE EXISTS SERIOUS DEBATE AND DIVERGENT VIEWS FOR ALLOWABILITY OF DEDUCTION U/S 54B OF THE ACT; C ) THE SALE OF AGRICULTURAL LANDS ARE ELIGIBLE FOR EXEMPTION U/S 10(1) SINCE HAD BEEN USED FOR CULTIVATION AND ARE SITUATED BEYOND 8 KMS OF THE MUNICIPAL LIMITS SUPPORTED WITH DISTANCE CERTIFICATES. D) THE AGRICULTURAL LANDS USED FOR CULTIVATION ARE SUPPO RTED WITH PURCHASE AND SALE AGREEMENTS, 7/12 CERTIFICA TES, TALATI RECEIPTS AND OTHER DOCUMENTS. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, AND/OR WITHDRAW ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING. 2. BRIEFLY STATED, THE ASSESSEE HAD E - FILED ITS RETURN OF INCOME FOR A.Y. 2014 - 15 ON 30.03.2016, DECLARING ITS TOTAL INCOME AT RS.2,11,961/ - . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2) OF THE ACT. 3. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS , IT WAS GATHERED BY THE A.O FROM A PERUSAL OF THE AIR DATA THAT THE ASSESSEE HAD DURING THE YEAR UNDER CONSIDERATION PURCHAS ED AND SOLD IMMOVABLE PROPERTIE S OF AN AGGREGATE VALUE OF RS.7,73,83,500/ - . ON BEING QUERIED, IT WAS THE CLAIM OF THE ASSESSEE THAT HE HAD DURING THE YEAR UNDER CONSIDERATION SOLD RURAL AGRICULTURAL LAND FOR AN AGGREGATE CONSIDERATION OF RS.7,50,00,000/ - , WHICH WERE PURCHASED BY HIM ABOUT TWO YEARS BACK FOR A TOTAL VALUE OF RS.1,23,83,500/ - . IT WAS STATED BY THE ASSESSEE, THAT OUT OF THE SALE CONSIDERATION OF RS.7,50,00,000/ - HE HAD REINVESTED AN AMOUNT OF RS.6,59,33,500/ - TOWARDS PURCHASE OF NEW RURAL AGRI CULTURAL LAND. ON A PERUSAL OF THE DETAILS, IT WAS NOTICED BY THE A.O THAT THE AFORESAID FIVE PIECES OF LAND SOLD BY THE ASSESSEE DURING THE YEAR WERE PURCHASED IN THE EARLIER YEARS ON VARIOUS DATES VIZ. (I) ON 06.04.2011: RS.41,64,360/ - ; (II) ON 06.02.201 2: RS.36,34,560/ - ; (III) ON 09.02.2012: RS.5,78,140; AND (IV) ON 21.02.2012: RS.32,10,540/ - . ALSO, IT WAS OBSERVED BY THE A.O THAT THE AFORESAID LANDS WERE SOLD DURING THE YEAR BY THE ASSESSEE FOR AN AGGREGATE CONSIDERATION OF RS.7.50 CRORES TO VARIOUS PAR TIES VIZ. (I) LAND SOLD ON 22.09.2013 TO SHRI JITENDRA N. AGGARWAL: RS.6 CRORES; (II) L AND SOLD ON 22.09.2013 TO LODHA DEVELOPERS PVT. LTD. : RS.1 CRORES; AND (III) L AND SOLD ON 11.09.2013 TO SHRI KISHORE B. GAIKWAD: RS.50 LACS. ITA NO.6367/MUM/2018 A.Y. 2014 - 15 SAIFULLAH ABDULLAH KHAN VS. COMMISSIONER OF INCOME TAX (A) - 2 3 4. IN THE COURSE OF THE ASS ESSMENT PROCEEDINGS, IT WAS THE CLAIM OF THE ASSESSEE THAT AS THE AGRICULTURAL LAND WHICH WERE SOLD BY HIM WERE SITUATED BEYOND THE SPECIFIED LIMIT OF 8 KM S FROM THE NEAREST MUNICIPAL LIMITS, THEREFORE, THE SAME WERE NOT IN THE NATURE OF CAPITAL ASSET. HOWEVER, THE AFORESAID CLAIM OF THE ASSESSEE WAS REJECTED BY THE A.O, FOR THE REASON, THAT THE SAID LAND S WERE FOUND TO BE WITHIN A SPECIFIED DISTANCE OF 8 K M FROM THE MUNICIPAL LIMITS OF KALYAN DOMBIVALI MUNICIPAL CORPORATION (KDMC). ON THE BASIS OF HIS AFORESAID OBSERVATIONS THE A.O DETERMINED THE SHORT TERM CAPITAL GAIN (STCG) ON THE SALE OF THE AFORESAID LANDS AT AN AMOUNT OF RS.6,06,52,400/ - [(RS.7,50,00, 000 / - ( ) RS.1,35,37,600/ - (COST OF LAND INCLUDING EXPENSES)]. AFTER ALLOWING THE ASSESSES CLAIM OF EXEMPTION UNDER SEC.54B OF RS.5,39,73,247/ - , THE A.O WORKED OUT THE NET STCG AT RS.66,77,153/ - [RS.6,06,52,400/ - ( - ) RS.5,39,73,247/ - ] . 5. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). HOWEVER, THE CIT(A) WAS NOT INCLINED TO ACCEPT THE CLAIM OF THE ASSESSEE THAT AS THE AGRICULTURAL LAND SOLD BY HIM WAS NOT A CAPITAL ASSET WITHIN THE MEANING OF SEC.2(14) OF THE ACT, THEREFORE, THE A.O WAS IN ERROR IN BRINGING AN AMOUNT OF RS.66,77,153/ - TO TAX UNDER THE HEAD STCG. OBSERVING, THAT THE ASSESSEE HAD NEVER EXPLOITED THE LAND WHICH WAS SOLD BY HIM FOR AGRICULTURAL ACTIVITIES, THE CIT(A) WAS OF THE VIEW THAT THE ASSESSEE W AS NOT ENTITLED FOR CLAIM OF EXEMPTION UNDER SEC.54B OF THE ACT. IN FACT, THE EXHAUSTIVE REASONS GIVEN BY THE CIT(A) FOR CONCLUDING THAT THE ASSESSEE WAS NOT ELIGIBLE FOR CLAIM OF EXEMPTION UNDER SEC. 54B OF THE ACT HAD BEEN STATED AT LENGTH BY HIM AT PARA 9.2 ON HIS ORDER WHILE DISPOSING OFF THE QUANTUM APPEAL OF THE ASSESSEE. ON THE BASIS OF HIS AFORESAID CONVICTION THAT THE ASSESSEE WAS NOT ENTITLED FOR EXEMPTION UNDER SEC. 54B, THE CIT(A) ISSUED A NOTICE FOR ENHANCEMENT UNDER SEC.251(2) OF THE ACT, THER EIN CALLING UPON THE ASSESSEE TO EXPLAIN AS TO WHY ITS CLAIM FOR EXEMPTION UNDER SEC. 54B THAT WAS ACCEPTED BY THE A.O MAY NOT BE DISALLOWED AND HIS INCOME BE ENHANCED TO THE SAID EXTENT. AS THE REPLY OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE A.O, THERE FORE, HE VIDE HIS ORDER DATED 28.03.2018, WHILE DISPOSING OFF THE QUANTUM APPEAL OF THE ASSESSEE ENHANCED HIS INCOME BY WITHDRAWING THE CLAIM OF EXEMPTION UNDER SEC.54B OF RS.5,39,75,247/ - . ALSO, THE CIT(A) IN HIS ORDER INITIATED PENALTY PROCEEDINGS UNDER SEC. 271(1)(C) R.W.S 254, FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE AS REGARDS RAISING OF THE AFORESAID WRONG CLAIM OF EXEMPTION UNDER SEC. 54B. ITA NO.6367/MUM/2018 A.Y. 2014 - 15 SAIFULLAH ABDULLAH KHAN VS. COMMISSIONER OF INCOME TAX (A) - 2 4 6. SUBSEQUENTLY, THE CIT(A) VIDE HIS ORDER PASSED UNDER SEC.271(1)(C), DATED 06.09.2 018 IMPOSED A PENALTY AS PER THE PROVISIONS OF EXPLANATION 4 TO SEC. 271 (1)(C) AS REGARDS THE AFORESAID WRONG CLAIM OF EXEMPTION UNDER SEC. 54B OF RS.5,39,75,247/ - THAT WAS RAISED BY THE ASSESSEE . 7. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) WHEREIN HE HAD IMPOSED PENALTY UNDER SEC. 271(1)(C) HA S CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE AT THE VERY OUTSET OF THE HEARING OF THE APPEAL SUBMITTED, THAT THE DISALLOWANCE OF THE ASSESSEES CLAIM FOR EXEMPTION UNDER SEC.54B OF RS.5,39,75,247/ - HAD BEEN VACATED BY THE TRIBUNAL VIDE ITS ORDER PASSED WHILE DISPOSING OFF THE QUANTUM APPEAL OF THE ASSESSEE VIZ. SAIFULLAH A. KHAN VS. ITO, WARD - 3(3), THANE [ITA 3981/MUM/2018] (COPY PL ACED ON RECORD). ON THE BASIS OF HIS AFORESAID CLAIM, IT WAS SUBMITTED BY THE LD. A.R THAT NOW WHEN THE ENHANCEMENT OF THE ASSESSES INCOME BY THE CIT(A) HAD BEEN VACATED BY THE TRIBUNAL, THEREFORE, THE CONSEQUENTIAL PENALTY IMPOSED UNDER SEC.271(1)(C) CANN OT BE SUSTAINED AND HAS TO MEET A SIMILAR FATE. 8. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. HOWEVER, THE LD. D.R COULD NOT CONTROVERT THE AFORESAID FACTUAL POSITION AS WAS OFFERED BY THE COUNSEL FOR THE ASSESSEE. 9. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES , PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ENHANCEMENT OF THE INCOME OF THE ASSESSEE ON THE BASIS OF WITHDRAWAL OF HIS CLAIM OF EXEMPTION UNDER SEC.54B BY THE CIT(A) HAD BEEN VACATED BY THE TRIBUNAL VIDE ITS ORDER PASSED IN SAIFULLAH A. KHAN VS. ITO, WARD - 3(3), THANE [ITA 3981/MUM/2018]. ON A PERUSAL OF THE ORDER OF THE TRIBUNAL, WE FIND THAT IT HAD OBSE RVED AS UNDER : 10. IN VIEW OF THE ABOVE FACTS, WE ARE OF THE VIEW THAT THE CAPITAL GAIN ARISING OUT OF SALE OF AGRICULTURAL LAND IS EXEMPT UNDER SECTION 54B OF THE ACT AS THE ASSESSEE HAS INVESTED THE SALE PROCEEDS OF THE AGRICULTURAL LAND IN THE PURCHAS E OF AGRICULTURAL LAND FURTHER. FROM THE RECORDS IS IT CLEAR THAT THE LANDS IN QUESTION IS IN REVENUE RECORD AS AGRICULTURAL LAND AND THERE IS NO ALLEGATION THAT THE OTHER PARTY EVER OBTAINED PERMISSION FOR NON - AGRICULTURAL USE TILL THE TIME OF SALE OF LAN D. EVEN THE ASSESSEE HAS USED THIS LAND AS AGRICULTURAL AS IS CLEAR FROM THE REVENUE RECORDS. HENCE, WE ARE OF THE VIEW THAT THE CIT(A) HAS WRONGLY DENIED THE CLAIM OF DEDUCTION UNDER SECTION 54B OF THE ACT AND WE, REVERSE THE FINDINGS OF CIT(A) ITA NO.6367/MUM/2018 A.Y. 2014 - 15 SAIFULLAH ABDULLAH KHAN VS. COMMISSIONER OF INCOME TAX (A) - 2 5 AS SUCH, WE FIND THAT THE VERY BASIS FOR IMPOSITION OF PENALTY I.E WITHDRAWAL OF EXEMPTION UNDER SEC.54B BY THE CIT(A) HAD BEEN QUASHED BY THE TRIBUNAL WHILE DISPOSING OFF THE QUANTUM APPEAL OF THE ASSESSEE. ALSO, THE LD. A.R HAD DRAWN OUR ATTENTION TO THE ORDER PA SSED BY THE ITO, WARD 3(3), THANE, DATED 09.09.2019, WHEREIN EFFECT HAS BEEN GIVEN TO THE AFORESAID ORDER OF THE TRIBUNAL . ON THE BASIS OF THE AFORESAID FACTS, WE FIND THAT THE ENHANCEMENT OF THE INCOME OF THE ASSESSEE BY AN AMOUNT OF RS.5,39,75,247/ - HAD BEEN VACATED BY THE TRIBUNAL. AS SUCH, NOW WHEN THE ENHANCEMENT OF INCOME MADE BY THE CIT(A) HAD BEEN DELETED, THEREFORE, THE CONSEQUENTIAL PENALTY IMPOSED BY HIM CANNOT BE SUSTAINED AND HAS TO MEET THE SAME FATE. ACCORDINGLY, THE PENALTY IMPOSED BY THE C IT(A) UNDER SEC. 271(1)(C) IS DELETED. 10. RESULTANTLY, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10. 01 .2020 SD/ - SD/ - (MANOJ KUMAR AGGARWAL) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 10 /01/2020 ROHIT, P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (PRIVATE SECRETARY) ITAT, MUMBAI