DILIP SHIRODKAR, MUMBAI V. ITO 18(2)(1), MUMBAI

ITA 6607/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2561 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 12-11-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 11-11-2013
• Court: TRIBUNAL
• Keywords: Bonafide belief; Difference of opinion; Revised return

Judgement Text

1 ITA NO.6607/MUM/2013 IN THE INCOME TAX PPELLATE TRIBUNAL DBENCH, MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO.6607/MUM/2013 (ASSESSMENT YEAR 2008-09) SHRI DILIP SHIRODKAR A-141, RAMGIRI PARADISE GOKHALE ROAD, DADAR (W) MUMBAI 28 THE ITO 18(2)(1) MUMBAI PAN : AJCPS9140C (APPELLANT) (RESPONDENT) APPELLANT BY MS ASMITA GUPTA / MR YAHYA BATATAWALA / MS ANUPRIYA AGGARWAL / MS NIKITA PANHALKAR / MS TRIPTI JAIN RESPONDENT BY SHRI RAKESH RANJAN DATE OF HEARING 22/06/2016 DATE OF PRONOUNCEMENT 13/07/2016 O R D E R PER ASHWANI TANEJA, AM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) DT 19-08-2013 PASSED AGAINST PENALTY ORDER U/S 271 (1)(C) DT 09-06-2011. 2 ITA NO.6607/MUM/2013 2. IN THIS APPEAL, THE SOLITARY ISSUE IS WITH REGAR D TO LEVY OF PENALTY OF RS. 1,55,302/-. DURING THE COURSE OF HEARING THE ASSES SEE APPEARED IN PERSON AND SUBMITTED THAT HE WAS NOT GETTING REQUISITE ASSISTA NCE FROM HIS COUNSEL. KEEPING IN VIEW THE SITUATION OF THE ASSESSEE AND F ACTS AND CIRCUMSTANCES OF THE CASE, THIS BENCH APPOINTED MS. ASMITA GUPTA AS AMICUS CURIE ASSISTED BY HER COLLEAGUES YAHYA BATATAWALA / ANUPRIYA AGGARWAL / NIKITA PANHALKAR / TRIPTI JAIN, WHO WERE PRESENT IN THE COURT ROOM AT THE TIME OF HEARING AND VOLUNTEERED TO ASSIST THE BENCH. ON BEHALF OF THE D EPARTMENT, THE APPEAL WAS ARGUED BY SHRI RAKESH RANJAN, SENIOR LD. DEPARTMENT AL REPRESENTATIVE FOR THE REVENUE. 3. MS. GUPTA SUBMITTED THAT IN THIS CASE, NO PENA LTY SHOULD HAVE BEEN LEVIED AS ASSESSEE WAS A LAYMAN BELONGING TO A RURA L BACKGROUND AND WAS NOT AWARE OF THE NITTY GRITTIES OF THE INCOME-TAX PROCEEDINGS. THERE WAS NO CONCEALMENT OF INCOME ON THE PART OF THE ASSESSEE. THE CLAIM MADE BY THE ASSESSEE WAS WITHDRAWN DURING THE COURSE OF ASSESSM ENT PROCEEDINGS ITSELF, THE MOMENT THE ASSESSEE WAS APPRISED OF THE CORRECT POSITION OF LAW. THE DEPARTMENT COULD NOT BRING ANY CONTRARY MATERIAL ON RECORD TO SHOW THAT THE FACTS NARRATED BY THE ASSESSEE WERE FALSE. 4. LD. DR RELIED UPON THE ORDERS OF THE LOWER AUTHORIT IES. 5. THE BRIEF BACKGROUND OF THE CASE IS THAT THE ASSESS EE SOLD AGRICULTURAL LAND DURING THE YEAR FOR RS.11,21,000 ON WHICH THE ASSESSEE CLAIMED LONG TERM CAPITAL GAIN O RS.7,53,667 AS EXEMPT ON THE GROUND THAT THE ASSET SOLD WAS AGRICULTURAL LAND. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS BROUGHT TO THE NOTICE OF THE ASSESSEE THAT THE LAND IS SITU ATED WITHIN 8 KMS RADIUS OF THE MUNICIPAL LIMITS AND, THEREFORE, IT WOULD NOT FALL WITHIN THE DEFINITION OF AGRICULTURAL LAND, CAPITAL GAIN OF WHICH WOULD BE E XEMPT. UNDER THESE 3 ITA NO.6607/MUM/2013 CIRCUMSTANCES, THE ASSESSEE IMMEDIATELY WITHDREW TH E CLAIM AND FURNISHED REVISED COMPUTATION AND DECLARED THE LONG TERM CAPI TAL GAIN OF RS.7,53,667 AS TAXABLE AND PAID THE TAX DUE THEREON. THE ASSESSIN G OFFICER ACCEPTED THE REVISED RETURN AND FILED NO APPEAL AGAINST THE ASSE SSMENT ORDER. THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS, WHEREIN THE ASSESSEE FURNISHED FOLLOWING EXPLANATION: THE AGREEMENT FOR PURCHASE OF LAND SPECIFICALLY MENTI ONED THE LAND IN QUESTION BEING THE AGRICULTURE LAND. THE LAND RECOR D EXTRACT ALSO STATES THE LAND IN QUESTION BEING THE AGRICULTURE LAND. ON THE ADVICE OF HIS THEN CHARTERED ACCOUNTANT, THE ASSESSEE WAS OF THE BELIEF THAT THE SALE OF AGRICULTURE LAND IS NOT TAXABLE TO LONG TERM CAPITAL GAINS. IT IS UNDISPUTED FACT THAT THE ASSESSEE HAD ACTED U NDER PROFESSIONAL ADVICE OF A CHARTERED ACCOUNTANT, WHO FILED HIS RETURN OF INC OME, WHEREIN, AS PER THE ADVICE THEN RECEIVED, THE LAND AT GOA BEING AGRICUL TURE IN NATURE, DID NOT ATTRACT THE PROVISIONS OF INCOME TAX ACT, SO AS TO MAKE THE GAIN ARISING ON THE SALE THEREOF AS TAXABLE. IN THIS CONTEXT, RELIA NCE IS PLACED ON THE FOLLOWING DECISION, WHEREIN, ADDITION ATTRIBUTABLE TO THE MISTAKE OF THE TAX CONSULTANT DOES NOT ATTRACT RIGORS OF PENALTY U /S. 271(1)(C) OF THE INCOME TAX ACT THE ASSESSEE ALSO RELIED ON SEVERAL JUDICIAL PRONOU NCEMENTS. BUT, THE AO WAS NOT SATISFIED WITH THE EXPLANATION AND, THEREFORE, HE LEVIED THE PENALTY ON THE GROUND THAT NO MENS REA IS REQUIRED TO BE PROVED FOR LEVYING PENALTY. 6. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE T HE LD. CIT(A) AND MADE EXHAUSTIVE SUBMISSIONS BEFORE THE LD.CIT(A), B UT HE ALSO DID NOT AGREE WITH THE SUBMISSIONS OF THE ASSESSEE AND CONFIRMED THE PENALTY UPHOLDING THE PENALTY ORDER OF THE AO. 7. BEFORE US, IT WAS INTER-ALIA REITERATED ON BEHALF OF THE ASSESSEE THAT THE ASSESSEE WAS DOING LABOUR JOBS AND WAS NOT AWARE OF THE POSITION OF LAW AND 4 ITA NO.6607/MUM/2013 HE RELIED UPON THE ADVICE RECEIVED AT THE TIME OF F ILING OF RETURN THAT CAPITAL GAIN ARISING ON SALE OF AGRICULTURAL LAND LOCATED A T A VILLAGE IN GOA WAS EXEMPT AS THE AGRICULTURAL LAND DID NOT CONSTITUTE CAPITA L ASSET WHICH WAS LIABLE TO CAPITAL GAIN TAX. SIMILAR STAND WAS TAKEN BEFORE T HE CIT(A) ALSO AND WE FIND IT USEFUL TO REPRODUCE HEREUNDER RELEVANT PORTION OF T HE SUBMISSION FILED BY THE ASSESSEE BEFORE THE LD.CIT(A) : AT THE OUTSET, IT IS SUBMITTED THAT THERE IS NEITHE R ANY CONCEALMENT OF INCOME NOR FURNISHING OF AN INACCURATE PARTICULARS OF SU CH INCOME. THE ADDITION MADE BY THE AO IN THE ASSESSMENT ORDER IS SO LELY ON ACCOUNT OF DIFFERENT VIEWS TAKEN ON THE SAME SET OF FACTS WHICH AT BEST CAN ONLY BE TERMED AS DIFFERENCE OF OPINION AND CERTAINLY NOT CONC EALMENT OF INCOME OR FURNISHING OF AN INACCURATE PARTICULARS OF SUCH INCOME. MERE DISALLOWANCE OF A CLAIM IN THE ASSESSMENT PROCEEDINGS CANNOT BE A SOLE BASIS FOR LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT UNDER SECT ION 271(1)(C) OF THE ACT WHICH IS QUASI-CRIMINAL PROCEEDING IN ITS NATURE. IT IS FURTHER SUBMITTED THAT THERE IS NO MATERIAL EVIDENCE ON RECORD RELATING T O THE ADDITION MADE BY THE AO, WHICH SUGGEST ANY CONCEALMENT, OR FURNISH ING OF INACCURATE PARTICULARS BY THE APPELLANT. IT IS THEREFORE SUBMITT ED THAT MERE DISALLOWANCE / ADDITIONS IN ASSESSMENT PROCEEDINGS IS NOT FOR LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE FACTS AND CIRCUMSTANCES RELATING THE ONLY ADDITIO N MADE BY THE AO AND FURTHER NOT DISPUTED IN APPEAL ARE AS UNDER:- THE APPELLANT HAD PURCHASED AN AGRICULTURAL LAND \(JOI NTLY WITH PRADEEP K. MHASKAR) SITUATED AT VILLAGE PORIEM TLUKA SATTARI, NORTH GOA. THE AGRICULTURAL LAND WAS PURCHASED FROM ANAND GOPAL MHASKA R AND MRS. SHUBHADA MHASKAR IN APRIL 2004. THE PURCHASE CONSIDE RATION FOR SUCH AGRICULTURAL LAND WAS RS.3,20,000/-. THE ENTIRE CONSI DERATION WAS PAID BY THE APPELLANT. IN NOVEMBER 2007, THIS LAND WAS SOLD TO SMT RATNABAI A MANDREKAR FOR A SUM OF RS.11,21,000/-. THE CAPITAL GA IN ARISING ON SUCH SALE OF AGRICULTURAL LAND WAS TREATED AS EXEMPT SINCE THE CAPITAL GAINS WERE ARISING FROM THE SALE OF AGRICULTURAL LA ND. THE APPELLANTS CLAIM FOR TREATING THE CAPITAL GAINS AS EXEMPT WAS BASED ON THE LAND RECORDS WHICH CLEARLY STATED THAT THE I MPUGNED LAND IS AN AGRICULTURAL LAND AND ALSO ON THE ADVICE PROVIDED TO THE APPELLANT BY THE THEN TAX CONSULTANT. IT IS THEREFORE SUBMITT ED THAT THE APPELLANT WAS UNDER A BONAFIDE BELIEF THAT SINCE THE CAPITAL GAINS ARISING ON ACCOUNT OF SALE OF AGRICULTURAL LAND IS EXEMPT FROM TAX, THE AO HAS IN HIS 5 ITA NO.6607/MUM/2013 ASSESSMENT ORDER HAS OBSERVED THAT SINCE THE AGRICU LTURAL LAND WAS WITHIN 8 KMS OF THE MUNICIPALITY LIMITS, THE CAPITA L GAINS ARISING OUT OF SALE OF LAND IS TAXABLE. IT IS RESPECTFULLY SUBMITTED THAT THE CLAIM MADE OR VIEW TAKEN BY THE APPELLANT WAS BASED ON THE ADVICE OF THE THEN TAX C ONSULTANT WHICH IN THE VIEW OF THE AO WAS NOT CORRECT. THE PURCHASE AN D THE SALE DEEDS AND THE RELEVANT LAND RECORDS FROM THE OFFICER-IN-C HARGE OF LAND RECORDS CLEARLY PROVED THAT THE IMPUGNED LAND IS AN AGRICULTURAL LAND. FURTHER COMPLETE DETAILS RELATING TO THE ADDITION W ERE FILED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE S AME IS ONLY A DIFFERENCE OF OPINION AND HENCE THERE IS NEITHER ANY C ONCEALMENT OF INCOME NOR FU R NISHING OF INACCURATE PARTICULARS OF SUCH INCOME. UNDER SECTION 271(1)(C) OF THE ACT THE PENALTY CAN BE IMPOSED ONLY WHEN IT IS FOUND THAT THE ASSESSEE HAS CONCEALED TH E PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH I NCOME. THE SECTION PRESUPPOSES A CONSCIOUS ACT ON THE PART OF THE APPE LLANT TO HAVE CONCEALED INCOME OR FURNISH INACCURATE PARTICULARS OF SUCH INCOME AND MERELY BECAUSE THE ADDITIONS/DISALLOWANCES HAVE BEEN MADE IN THE ASSESSMENT ORDER, WOULD NOT BY ITSELF MAKE THAT DIS ALLOWANCE AN ACT OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS. IN VIEW OF THE FACTS OF THE CASE AND PREVAILING POS ITION IN LAW AT THE RELEVANT POINT OF TIME WHEN CLAIMS WERE MADE BY THE ASSESSEE, IT IS RESPECTFULLY SUBMITTED THAT THE EXPLANATION OFFERED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM FOR HIS CLAIM WERE BASED ON BO NAFIDE BELIEF SUPPORTED BY ON ADVICE OF A PROFESSIONAL. HENCE THE CLAIM MADE BY THE ASSESSEE UNDER BONAFIDE BELIEF BASED ON ADVICE OF A PROFESSIONAL CANNOT BE TERMED AS CONCEALMENT OF INC OME OR FURNISHING OF INACCURATE PARTICULARS. IT IS SUBMITT ED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE IT FALLS WITHIN THE E XCEPTION PROVIDED IN EXPLANATION I TO SECTION 271(1)(C) OF THE ACT AS TH E CLAIM IS BASED UNDER BONE FIDE BELIEF SUPPORTED BY PROFESSIONAL ADVICE. 8. THE ABOVE SUBMISSIONS HAVE BEEN REITERATED AND ELAB ORATED BEFORE US ALSO. RELIANCE HAS BEEN PLACED ON THE FOLLOWING JU DGEMENTS IN SUPPORT OF THE ARGUMENT THAT NO PENALTY SHOULD BE LEVIED UNDER SUC H CIRCUMSTANCES. 1. BENNET COLEMAN & CO LTD ITA NO. 2117 OF 2012 (BO MBAY HIGH COURT) 2. CHANDRAPAL BAGGA 261 ITR 67 (RAJ) 3. ITO VS ROBORANT INVESTMENTS (P) LTD 7 SOT 181 ( MUM) 6 ITA NO.6607/MUM/2013 4. CIT VS CAPLIN POINT LABORATORIES LTD 293 ITR 52 4 (MAD) 9. WE HAVE CONSIDERED THE ENTIRE FACTS AND CIRCUMSTANC ES OF THE CASE. THIS FACT IS NOT DENIED THAT THE LAND WAS SITUATED IN A VILLAGE. FURTHER, THIS FACT IS ALSO NOT DENIED THAT THE IMPUGNED LAND IS DESCRIBED AS AGRICULTURAL LAND IN THE LAND RECORDS MAINTAINED WITH THE LOCAL AUTHORITIES. THIS FACT IS ALSO NOT DENIED THAT THE ASSESSEE BELONGED TO A RURAL BACKGROUND AN D HE IS NOT WELL EDUCATED. THE ASSESSEE IS APPARENTLY NOT AWARE OF THE NITTY- GRITTIES OF THE INCOME-TAX PROCEEDINGS. THE ASSESSEE WAS PERSONALLY PRESENT I N THE COURT ROOM. HE HAD APPARENTLY ACTED ON THE ADVICE OF OTHER PERSONS, WH O WERE INDEED NOT COMPETENT ENOUGH TO ADVISE THE ASSESSEE. THESE FAC TS HAVE NOWHERE BEEN DENIED BY THE AO OR LD. CIT(A). THE CONDUCT OF THE ASSESSEE HAS BEEN SUCH THAT THE MOMENT HE CAME TO KNOW THAT AGRICULTURAL L AND MAY BE SITUATED WITHIN 8 KMS OF THE MUNICIPAL LIMITS, AND THEREFORE , IT MAY NOT BE EXEMPT FROM INCOME-TAX, HE IMMEDIATELY REVISED THE RETURN OF IN COME AND PAID TAX THEREON. ALTHOUGH, THE ASSESSEE WITHDREW THE CLAIM AND PAID TAXES, THE PRECISE LOCATION OF LAND AND ITS DISTANCE FROM THE MUNICIPAL LIMIT I S STILL UNKNOWN. DURING THE PENALTY PROCEEDINGS ALSO NOTHING WAS BROUGHT ON REC ORD BY THE AO TO PROVE THAT THE CLAIM OF THE ASSESSEE WAS FALSE AND DISTAN CE OF THE LAND WAS ACTUALLY LESS THAN 8 KMS FROM THE MUNICIPAL LIMITS. THIS FAC TS STILL REMAINS UNDER SHADOW OF DOUBTS. DURING THE PENALTY PROCEEDINGS ALSO, NO THING WAS BROUGHT ON RECORD BY THE AO TO PROVE THAT THE CLAIM OF THE ASS ESSEE WAS FALSE AND DISTANCE OF THE LAND WAS ACTUALLY LESS THAN 8 KMS. THE ADDI TION HAS BEEN MADE SOLELY RELYING UPON THE REVISED COMPUTATION SHEET FILED BY THE ASSESSEE. IN THE GIVEN CIRCUMSTANCES, WE FIND THAT IT CANNOT BE SAID THAT THE CLAIM WAS NOT BONAFIDE AT ALL. NO MALA FIDE INTENTIONS CAN BE ATTACHED IN THIS CASE. THE NATURE OF LAND IS ACCEPTED BY THE AO TO BE AGRICULTURAL LAND. IT IS ADMITTEDLY LOCATED IN A VILLAGE. THE ONLY REASON FOR DISALLOWING THE CLAIM WAS THE POSSIBILITY OF ITS 7 ITA NO.6607/MUM/2013 LOCATION WITHIN THE 8 KMS RADIUS OF THE MUNICIPALIT Y. THE EXACT ANSWER TO THIS QUESTION IS NOT AVAILABLE ON RECORD. UNDER THESE CI RCUMSTANCES, THE ADDITION ITSELF REMAINS UNDER THE SHADOW OF DOUBTS. UNDER TH ESE CIRCUMSTANCES, WE DOUBT WHETHER PENALTY CAN BE LEVIED AS PER LAW CONT AINED IN THE INCOME TAX ACT. IN THIS REGARD, WE TAKE GUIDANCE FROM THE JUDG MENT OF HONBLE GUJRAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES CORPORATION VS CIT 249 ITR 125 (G UJ), WHEREIN IT WAS HELD THAT IF THE ASSESSEE GIVES AN E XPLANATION WHICH REMAINS UNPROVED, BUT, IS NOT DISPROVED, NO PENALTY IS IMPO SABLE. IDENTICAL VIEW WAS TAKEN BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS UPENDRA V. MITHANI (ITA NO 1860 OF 2009 DT 5 TH AUGUST, 2009), WHEREIN FOLLOWING OBSERVATIONS WERE MADE: THE ISSUE INVOLVED IN THE APPEAL REVOLVES AROUND DELETION OF PENALTY UNDER SECTION 271(1)(C) OF THE I.T. ACT. THE TRIBU NAL HAS CONCURRED WITH THE VIEW TAKEN BY THE COMMISSIONER OF INCOME TAX (A). THE COMMISSIONER OF INCOME TAX (A) HAS RIGHTLY TAKEN A VIEW THAT NO PENALTY CAN BE IMPOSED IF THE FACTS AND CIRCUMSTANC ES ARE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT THE AMOUNT DOES NOT REPRESENT CONCEALED INCOME AS WITH THE HYPOTHESIS THAT IT DOE S. IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISP ROVED, I.E. IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO THE REASO NABLE AND POSITIVE INFERENCE THAT THE ASSESSEES CASE IS FALSE. THE V IEW TAKEN BY THE TRIBUNAL IS A REASONABLE AND POSSIBLE V IEW. THE APPEAL IS WITHOUT ANY SUBSTANCE. THE SAME IS DISMISSED IN LIMINE WITH NO ORDER AS TO COSTS. THUS, IN VIEW OF FACTS OF THIS CASE AND AFORESAID L EGAL POSITION, WE DO NOT FIND IT TO BE A CASE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, AND THUS NOT FIT FOR LEVY OF PENALTY. THER EFORE, PENALTY LEVIED BY THE AO IS DIRECTED TO BE DELETED. 8 ITA NO.6607/MUM/2013 10. AS A RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS _13 TH ____DAY OF JULY, 2016. SD/- SD/- (JOGINDER SINGH) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 13 TH JULY, 2016 PK & PATEL COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE ACIT 4. THE CIT(A) 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , D BENCH (TRUE COPY) BY ORDER ASSTT.REISTRAR,ITAT, MUMBAI BENCHES