KANAIYA D. KATARIA, MUMBAI V. THE ASST.C.I.T., CIRCLE-23(2), MUMBAI

ITA 6572/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2189 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-04-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 12-11-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM GAUR
• Keywords: Sale consideration of property below Jantri Value
• Section: 50C; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, A, MUMBAI BEFORE SHRI R V EASWAR, SENIOR VICE PRESIDENT AND SHRI J SUDHAKAR REDDY, ACCOUNTANT MEMBER I T A NO: 6572/MUM/2008 (ASSESSMENT YEAR: 2003-04) KANAIYA D KATARIA, MUMBAI APPELLANT (PAN: AAKPK3925C) VS ASSISTANT COMMISSIONER OF INCOME TAX RESPONDENT CIRCLE 23(2), MUMBAI APPELLANT BY: SHRI NITESH JOSHI RESPONDENT BY: SHRI VIKRAM GAUR O R D E R R V EASWAR, SENIOR VICE PRESIDENT: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E PENALTY OF RS.85,588/- IMPOSED ON HIM UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2003-04. 2. THE ASSESSEE IS A RESIDENT INDIVIDUAL. HIS TWO MINOR SONS HAD 1/4 TH SHARE EACH IN A DUPLEX FLAT WHICH THEY SOLD IN THE RELEVANT ACCOUNTING YEAR. THE CAPITAL GAINS ACCRUING TO THE M WERE TO BE INCLUDED IN THE ASSESSEES INCOME UNDER SECTION 64 OF THE ACT. IN COMPUTING THE CAPITAL GAINS, THE ASSESSEE ADOPTED T HE SALE VALUE OF THE FLAT AND FOR THE HALF SHARE OF THE MINORS, IT C AME TO RS.7,50,000/-. HE DECLARED CAPITAL GAINS IN HIS RETURN ON THE ABOV E BASIS. WHILE COMPLETING THE ASSESSMENT, HOWEVER, THE ASSESSING O FFICER FOUND THAT THE STAMP VALUATION AUTHORITY HAD ADOPTED THE MARKE T VALUE FOR THE ENTIRE PROPERTY AT RS.22.30 LAKHS AND THE VALUE OF THE HALF SHARE CORRESPONDINGLY CAME TO RS.11.15 LAKHS. HE APPLIED SECTION 50C OF 2 THE ACT, WHICH MANDATES THAT IN SUCH CASES THE VALU E ADOPTED BY THE STAMP VALUATION AUTHORITY SHOULD BE MADE THE BASIS OF THE COMPUTATION OF THE CAPITAL GAINS. ACCORDINGLY THE ASSESSING OFFICER TOOK THE FULL VALUE OF THE CONSIDERATION FOR THE HA LF SHARE OF THE MINORS AT RS.11.15 LAKHS AS AGAINST RS.7.50 LAKHS, WHICH W AS THE ACTUAL SALE PRICE. THE DIFFERENCE OF RS.3.65 LAKHS WAS ADDED U NDER SECTION 50C IN THE ASSESSMENT OF THE ASSESSEE AS CAPITAL GAINS. T HE ASSESSMENT WAS ACCEPTED BY THE ASSESSEE. 3. SUBSEQUENTLY THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 274 OF THE ACT, CALLING UPON THE ASSESSEE TO EXPLAI N WHY PENALTY CANNOT BE LEVIED UNDER SECTION 271(1)(C) FOR HAVING CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF. IN RESPONSE THERETO THE ASSESSEE FILED A WRITTEN REPLY DATED 29 TH MARCH 2006, WHICH HOWEVER SEEMS TO HAVE BEEN OVERLOOKED BY THE ASSESS ING OFFICER WHILE PASSING THE PENALTY ORDER. BE THAT AS IT MAY , THE ASSESSING OFFICER TOOK THE VIEW IN THE PENALTY PROCEEDINGS TH AT THE ASSESSEE COMMITTED A DEFAULT WITHIN THE MEANING OF EXPLANATI ON (1A) AND EXPLANATION 4(A) BELOW SECTION 271(1)(C) AND IMPOSE D THE IMPUGNED PENALTY. THE SAME HAVING BEEN CONFIRMED BY THE CIT (A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE CONSIDERED THE FACTS AND THE RIVAL CONTE NTIONS. IN THE REPLY DATED 29 TH MARCH 2006, THE ASSESSEE SUBMITTED THAT SECTION 50 C HAVING BEEN RECENTLY INTRODUCED AND MADE APPLICABLE FROM THE ASSESSMENT YEAR UNDER APPEAL, HE HAD INADVERTENTLY NOT CONSIDERED THE EFFECT OF THE SAID PROVISION AND THERE WAS NO I NTENTION TO CONCEAL 3 HIS INCOME. HE ALSO SUBMITTED THAT THERE WAS A NET LOSS OF RS.2.48 CRORES DECLARED IN THE RETURN AND EVEN AFTER THE AD DITIONS AND DISALLOWANCES MADE IN THE ASSESSMENT ORDER, THERE W AS AN ASSESSED LOSS OF RS.2.35 CRORES AND THE ASSESSEE COULD NOT B E SAID TO HAVE HAD ANY INTENTION TO CONCEAL HIS INCOME. IT WAS ALSO A RGUED BEFORE US ON BEHALF OF THE ASSESSEE THAT THERE WAS NO FINDING OF UNDERSTATEMENT OR SUPPRESSION OF THE ACTUAL SALE CONSIDERATION AND EV EN THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY HAS NOT BE EN MADE FINAL BY THE SECTION WHICH PROVIDES FOR VARIATION OF THE SAM E ON THE BASIS OF THE REPORT OF THE VALUATION OFFICER TO WHOM A REFERENCE COULD BE MADE BY THE ASSESSING OFFICER. IT WAS THUS CONTENDED THAT NO PENALTY WAS IMPOSABLE. RELIANCE WAS ALSO PLACED ON THE JUDGMEN T OF THE GUJARAT HIGH COURT IN CIT VS. GLOW TECH STEELS (P) LTD. (20 05) 148 TAXMAN 289 (GUJ). 5. ON THE OTHER HAND, THE SUBMISSION OF THE DEPARTM ENT WAS THAT THIS IS NOT A CASE OF AN INADVERTENT OMISSION AND T HAT THE ASSESSEE WAS BOUND TO APPLY THE PROVISIONS OF SECTION 50C; A ND THE FAILURE TO DO SO, INVITED PENALTY. 6. IN OUR OPINION, THIS IS NOT A FIT CASE FOR THE L EVY OF PENALTY. AS POINTED OUT ON BEHALF OF THE ASSESSEE, SECTION 50C OF THE ACT, WHICH MADE SPECIAL PROVISIONS FOR ASCERTAINING THE FULL V ALUE OF CONSIDERATION IN CERTAIN CASES, WAS INSERTED BY THE FINANCE ACT, 2002 WITH EFFECT FROM 01.04.2003. THE PROVISION HAVING BEEN NEWLY I NTRODUCED, IT IS QUITE LIKELY THAT THE ASSESSEE HAS MISSED THE IMPAC T OF THE SAME IN THE COMPUTATION OF CAPITAL GAINS. EVERY YEAR SEVERAL A MENDMENTS ARE 4 MADE TO THE INCOME TAX ACT, WHICH IMPINGE UPON THE COMPUTATION OF THE INCOME AND THE DUTIES OF THE ASSESSEE VIS--VIS COMPUTING THE INCOME. IT IS QUITE POSSIBLE THAT THE ASSESSEE DID NOT REALIZE THE IMPACT OF THE NEWLY INSERTED PROVISION, BEING THE F IRST YEAR IN WHICH THE SECTION WAS MADE APPLICABLE. WE ARE UNABLE TO SPEL L OUT ANY INTENTION TO CONCEAL THE INCOME OF THE ASSESSEE AND IT APPEAR S TO US TO BE A CASE OF INADVERTENT OMISSION NOT AMOUNTING TO CONCE ALMENT. THE PROVISIONS OF EXPLANATION (1A) BELOW SECTION 271(1) (C) ARE NOT APPLICABLE TO THE CASE BECAUSE THE ASSESSEE HAD FIL ED AN EXPLANATION IN WRITING ON 29 TH MARCH 2006, WHICH HAS NOT BEEN FOUND TO BE FALSE. EXPLANATION 4(A) ONLY PROVIDES FOR THE LEVY OF PENA LTY EVEN IN A CASE WHERE THE ULTIMATE ASSESSMENT HAS RESULTED IN A FIG URE OF LOSS. THAT DOES NOT AFFECT THE MERITS OF THE ASSESSEES EXPLAN ATION. WE ACCORDINGLY CANCEL THE PENALTY AND ALLOW THE APPEAL WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED ON 20 TH APRIL 2010. SD/- SD/- (J SUDHAKAR REDDY) (R V EASWAR) ACCOUNTANT MEMBER SENIOR VICE PRESI DENT MUMBAI, DATED 20 TH APRIL 2010 SALDANHA COPY TO: 1. KANAIYA D KATARIA E-4, SHANTI BHUVAN, S N ROAD MULUND (WEST), MUMBAI 400 080 2. ACIT, CIRCLE 23(2) 3. CIT-23 4.CIT(A)-XXIII 5.DR A BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI