Appeal details
Counselvise Citation
[2014] 140 COUNSELVISE.COM (IT) 74456 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
8 month(s) 4 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
10-01-2014
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
A
Assessment Year
2006-2007
Appeal Filed On
06-05-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.668/HYD/2013 ASSESSMENT YEAR 2006 - 2007 SHRI BADAM BALAKRISHNA HYDERABAD (PAN ABXPB 9520 G) V/ S. D Y COMMISSIONER OF INCOME - TAX , CIRCLE 1(3) , HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. RAMA RAO RESPONDENT BY : SHRI B. YADAGIRI DATE OF HEARING : 28.11.2013 DATE OF PRONOUNCEMENT : 10 . 0 1.201 4 O R D E R PER SMT. ASHA VIJAYARAGHAVAN, J.M. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - II, HYDERABAD DATED 12.02.2013 CONFIRMING PENALTY OF RS.16,65,027 LEVIED UNDER S.271(1)(C) OF THE ACT FOR THE ASSESSMENT YEAR 2006 - 2007. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL, IS DERIVING INCOME FROM SALARY, AS MANAGING DIRECTOR OF M/S. BADAM BALAKRISHNA HOT ELS (P) LTD., HOUSE PROPERTY, CAPITAL GAINS AND 2 ITA.NO. 668 /HYD/2013 BADAM BALAKRISHNA , HYDERABAD INCOME FROM OTHER SOURCES. HE FILED RETURN OF INCOME, FOR THE YEAR UNDER APPEAL, ON 26.43.2010, ADMITTING TOTAL INCOME OF RS.27,24,330. I N THIS CASE, AN ORDER U/S. 143(3) READ WITH SECTION 148 WAS PASSED ON 28.12.2010 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.1, 13,69,780/ - AS AGAINST A RETURNED INCOME OF RS.27,24,330/ - . A SURVEY U/S. 133A WAS CONDUCTED IN THE BUSINESS PREMISES OF M/S. BADAM BALAKRISHNA HOTELS PVT. LTD., LAKDIKAPUL, HYDERABAD ON 19.3.2008 . 3. DURING THE COURSE OF SURVEY IT IS NOTICED THAT ASSESSEE HAS NOT FILED HIS RETURNS OF INCOME SINCE ASST. YEAR 2002 - 03. IT ALSO CAME TO LIGHT DURING THE COURSE OF SURVEY THAT ASSESSEE IN HIS INDIVIDUAL CAPACITY , ALONG WITH A CO - OWNER , M/ S. BADAM SRIKRISHNA HOTELS PVT. LTD. OF WHICH ASSESSEE IS ALSO THE MANAGING DIRECTOR , HAVE ENTERED INTO A DEVELOPMENT AGREEMENT WITH M/S. ASHOKA BUILDERS ON 02.09.2005 FOR CONSTRUCTION OF APARTMENTS IN LAND ADMEASURING 2700 SQ. YARDS. ASSESSEE AND HIS CO - OWNER HOLD THE LAND IN THE RATIO OF 80:20 WITH 80% BELONGING TO THE ASSESSEE. THE SHARING RATIO OF BUILT UP AREA IS 48:52 WITH 48% BELONGING TO THE LAND OWNERS. ACCORDINGLY, THE LAND OWNER'S SHARE OF BUILT UP AREA WORKED TO 18791 SQ.FT. AND ASSESSEE'S SHA RE WORKS OUT TO 15032 SQ. FT. ASSESSEE, DURING THE PREVIOUS YEAR HAS SOLD AN APARTMENT FALLING TO HIS SHARE AND ADMITTED CAPITAL GAINS ARISING OUT OF THE SAID SALE OF ONE APARTMENT BUT FAILED TO OFFER CAPITAL GAINS ON THE TRANSFER OF UNDIVIDED SHARE OF LAN D. ACCORDINGLY, ASSESSMENT WAS COMPLETED BY MAKING ADDITION ON ACCOUNT OF LONG TERM CAPITAL GAINS OF RS.90,11,813 ARISING ON ACCOUNT OF TRANSFER OF UNDIVIDED SHARE OF LAND IN LIEU OF 15 , 032 SQ.FT. OF BUILT UP AREA , VIDE ORDER OF ASSESSMENT DATED 28.12.201 0, PASSED UNDER S.143(3) READ WITH S.148 OF THE ACT. ASSESSEE , HAVING NOT PREFERRED ANY APPEAL AGAINST THE SAID 3 ITA.NO. 668 /HYD/2013 BADAM BALAKRISHNA , HYDERABAD ASSESSMENT, THE ADDITION ON ACCOUNT OF CAPITAL GAINS MADE BY THE ASSESSING OFFICER, HAS BECOME FINAL. 4. WHILE COMPLETING THE ASSESSMEN T AS ABOVE, PENALTY PROCEEDINGS U/S. 271 (1) (C) OF THE I.T. ACT WERE ALSO SIMULTANEOUSLY INITIATED FOR FURNISHING OF INACCURATE PARTICULARS WHICH CONSEQUENTLY RESULTED INTO CONCEALMENT OF INCOME. IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED IN THAT BEHALF, ASSESSEE FILED A REPLY OPPOSING TEH PENALTY PROPOSED, VIDE LETTER DATED 28.01.2011 , FILED BEFORE THE ASSESSING OFFICER ON 15.4.2011. THE SUBMISSIONS OF THE ASSESSEE IN THE SAID LETTER DATE D 28.01.2011 FURNISHED BEFORE THE ASSESSIN G OFFICER ARE RE - PRODUCED AS UNDER: 'THE MAIN REASON FOR NOT FILING THE INCOME TAX RETURNS THAT THE INFORMATION PERTAINING TO THE D ETAILS OF PURCHASE OF THE PROPERTY GIVEN FOR DEVELOPMENT I . E., SALE DEED COPIES RELATED TO THE YEAR 1978, WILL DEED COPY O F MY MOTHER IN WHICH SHE HAS GIFTED TO ME ETC., WHICH WERE KEPT IN A SEPARATE FILE WAS MISPLACED BY MY STAFF. THE FILE INSPITE OF MY BEST EFFORTS COULD NOT BE TRACED FOR LONG TIME. DUE TO LACK OF THIS INFORMATION, I COULD NOT FILE MY INCOME TAX RETURNS WITHIN THE DUE DATE. THE INFORMATION WAS MOST IMPORTANT FOR ME TO CALCULATE THE CAPITAL GAINS AND PAY THE NECESSARY TAXES AS THE COST OF PURCHASE OF LAND IN THE YEAR 1978 AND REGISTRATION AND OTHER EXPENSES INCURRED WAS AVAIL - ABLE IN THAT FILE AND THIS INFORMATION WAS VERY MUCH RELEVANT FOR THE CALCULATION OF CAPITAL GAINS AND THE TAX. IN THE MEANWHILE SURVEY HAS HAPPENED ON 19.3.2008. IN THE SURVEY, THE OFFICIALS HAVE ADVISED ME TO START PAYING THE TAXES AND THEY HAVE TAKEN A COMMITMENT OF RS.70 LAKHS TOWARDS INCOME TAX ON CAPITAL GAINS, WHICH I GAVE AGREED TO. DURING THE SURVEY PROCEEDINGS, THEY HAVE ALSO ASSURED ME THAT IF I PAY THE TOTAL TAX ALONG WITH INTEREST, I WILL NOT BE LEVIED ANY PENALTY. THEY WERE ALSO VERY M UCH SATISFIED WITH THE FACT THAT I HAVE LOST THE IMPORTANT INFORMATION PERTAINING TO THE CAPITAL GAINS AND THEY ADVISED ME TO FILE THE RETURNS AT THE EARLIEST. I STARTED PAYING SELF - ASSESSMENT TAXES PENDING FILING OF THE INCOME TAX RETURNS IN THE SAME MONT H OF SURVEY ITSELF I.E. MARCH 2008. IN THE YEAR 2010, FORTUNATELY I COULD LOCATE THE FILE AND I COULD FIND ALL THE 4 ITA.NO. 668 /HYD/2013 BADAM BALAKRISHNA , HYDERABAD INFORMATION RELEVANT TO FILING OF THE RETURNS IN THAT FILE. I HAVE FILED THE RETURNS FOR ALL PENDING YEARS. I HAVE ALREADY PAID RS.60 LAKHS TOWARDS TAXES AND THE REMAINING RS. 10 LAKHS, I WILL BE PAYING SHORTLY. THERE WAS NO INTENTION ON MY PART NOT TO FILE THE INCOME TAX RETURNS OR NOT TO PAY THE TAXES. AS THE RELE VANT FILE CONTAINING ALL THE IMPORTANT INFORMATION PERTAINING TO CAPITAL GAINS WAS MISSING, I COULD NOT FILE THE INCOME TAX RETURNS IN TIME, HOWEVER I HAVE PAID TAXES EVEN BEFORE FILING OF THE INCOME TAX RETURNS. B) IN THE COURSE OF ASSESSMENT PROCEEDINGS , I HAVE FULLY CO - OPERATED WITH THE DEPARTMENT AND AGREED TO PAY THE TAXES AS PROPOSED BY THE ASSESSING OFFICER. I HAVE ACCEPTED THE CONSTRUCTION RATE PER SQ.FT, AT RS.800/ - THOUGH THE BUILDER M/S. ASHOKA BUILDERS HAS GIVEN TO ME A CERTIFICATE THAT COST O F CONSTRUCTION IS RS.7251 - PER SQ. FT.. THIS HAS RESULTED IN MORE INCOME TAX LIABILITY, HOWEVER I HAVE AGREED FOR THE SAME IN ORDER TO BUY PEACE WITH THE DEPARTMENT. C) THOUGH 2 DWELLING UNITS I.E , FLATS WHICH WERE GOT BY ME ON GIVING LAND FOR DEVELOPMENT TO THE BUILDER ARE USED BY ME, I HAVE CLAIMED THE COST OF CONSTRUCTION AND OTHER EXEMPTION ONLY IN RESPECT OF 1 FLAT U/S 54F AT THE INSTANCE OF THE ASSESSING OFFICER. I HAVE FULLY CO - OPERATED WITH THE DEPARTMENT AND TO HAVE PEACE WITH THE DEPARTMENT, I AGREED TO ALL THE PROPOSALS MADE BY THE ASSESSING OFFICER TO COMPLETE THE ASSESSMENT. ALREADY I HAVE PAID RS.60 LAKHS TOWARDS SELF - ASSESSMENT TAXES AND IN THE ASSESSMENT ADDITIONAL LIABILITY HAS COM E TO RS.12 LAKHS TOTALLING RS.72 LAKHS. THIS ITSELF IS A BIG BURDEN ON ME. HOWEVER I AGREE TO PAY THE REMAINING TAX AS PER THE DEMAND RAISED BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDERS. I HAVE FULLY COOPERATED WITH THE DEPARTMENT AND AGREED TO PAY ANOTHER RS.12 LAKHS IN ADDITION TO ALREADY PAID RS.60 LAKHS IN ORDER TO BUY PEACE WITH THE DEPARTMENT . 5 . THE ASSESSING OFFICER , ON DETAILED CONSIDERATION OF THE EXPLANATION OF THE ASSESSEE, FINDING NO MERIT IN THE SAME, IMPOSED THE 5 ITA.NO. 668 /HYD/2013 BADAM BALAKRISHNA , HYDERABAD IMPUGNED PENALTY OF RS.16,65,027, VIDE ORDER DATED 28.6.2011, WITH THE FOLLOWING OBSERVATIONS HELD AS FOLLOWS : 5. .. A . THE EXPLANATION FURNISHED BY THE ASSESSEE IS NOT ACCEPTABLE. THE REASON FOR NOT FURNISHING THE RETURN OF INCOME I .E, THE INFORMATION PERTAINING TO THE DETAILS OF PURCHASE OF PROPERTY GIVEN FOR DEVELOPMENT I .E, SALE DEED COPIES, WILL DEED COPIES KEPT IN A SEPARATE FOLDER WERE MISPLACED BY THE STAFF, HAS NO FORCE IN IT AND IS NOT TENABLE. THIS REASON CANNOT EXPLAIN ASSESSE E'S IN ACTION OF NON - PAYMENT OF TAXES AND NON - FILING OF RETURN OF INCOME. WITHOUT SUCH DETAILS, IT IS VERY SURPRISING AS TO HOW REFERENCE COULD BE MADE TO ALL THE PREVIOUS DOCUMENTS THROUGH WHICH THE LAND IN QUESTION CHANGED HANDS AND FINALLY BEQUEATHED ON THE ASSESSEE THROUGH WILL. ON A PERUSAL OF THE DEVELOPMENT AGREEMENT DATED 02.09.2005 AS WELL AS AGREEMENT OF SALE DATED 01.01.2006 EXECUTED BY THE ASSESSEE FOR SALE OF APARTMENT FALLING TO HIS SHARE, IT CAN BE NOTICED FROM THE RECITAL THAT COMPLETE DETAI LS ARE AVAILABLE WITH THE ASSESSEE TO ENABLE HIM TO COMPUTE THE INCOME FROM CAPITAL GAINS ARISING FROM THE LAND TRANSFERRED IN PURSUANCE OF THE DEVELOPMENT. IN THE BODY OF - THE DOCUMENT EVERY DETAIL AS TO HOW THE LAND EXCHANGED HANDS WITH DETAILS AND DOCUM ENT NUMBERS ARE REFERRED TO. BESIDES, ASSESSEE CAN ALSO OBTAIN COPIES OF THE RELEVANT DOCUMENTS FROM THE SUB - REGISTRAR OFFICE CONCERNED. THAT APART, THIS GROUND FAILS FOR THE REASON THAT ASST. YEAR 2006 - 07 IS NOT ONLY YEAR WHERE ASSESSEE FAILED TO FILE THE RETURNS OF INCOME. ASSESSEE HAS NOT FILED RETURNS OF INCOME EVEN FOR ASST. YEARS 2002 - 03 TO 2005 - 06 TILL DATE OF SURVEY. IT IS ALSO PERTINENT TO MENTION HERE THAT THE RETURN OF INCOME FOR ASSESSMENT YEAR 2006 - 07 OF M/S. BADAM SRIKRISHNA HOTELS PVT. LTD., THE CO - OWNER HOLDING 20% SHARE WAS FILED ON 20.6.2011, I.E., A DAY BEFORE THE HEARING IN 6 ITA.NO. 668 /HYD/2013 BADAM BALAKRISHNA , HYDERABAD CONNECTION WITH THE PRESENT PENALTY PROCEEDINGS. ASSESSEE IS THE MANAGING DIRECTOR OF HIS COMPANY AND ALSO RESPONSIBLE FOR FILING THIS RETURN OF INCOME. FROM THIS RET URN, IT IS NOTICED THAT THE ASSESSEE HAS NOT PAID THE TAX DUE ON THE INCOME RETURNED. ASSESSEE'S VERSION OF MISPLACEMENT OF RECORDS/DOCUMENTS BEING THE SOLE REASON FOR NON - FILING OF RETURN OF INCOME DOES NOT HOLD GOOD IN VIEW OF WHAT IS STATED ABOVE. ASSESSEE HAD MULTIPLE OPTIONS TO ENABLE HIM TO FILE RETURN OF INCOME IN TIME AND ASSESSEE CANNOT GET AWAY WITH THE REASON THAT THE RECORDS WERE MISPLACED. 8. THE ABOVE CONDUCT OF THE ASSESSEE DEMONSTRATES CONSCIOUS DISRE GARD TO HIS OBLIGATION. PAYMENT OF RESULTANT TAXES, CONSEQUENT TO SURVEY AND DETECTION BY THE DEPARTMENT OF THE TAX LIABILITY, DOES NOT ABSOLVE THE ASSESSEE FROM THE PENAL CONSEQUENCES U/S 271(1)(C) OF THE I.T. ACT. AS PER EXPLANATION 3 TO SECTION 271(1)(C ) ; 'WHERE ANY PERSON FAILS, WITHOUT REASONABLE CAUSE, TO FURNISH WITHIN THE PERIOD SPECIFIED TO SUB - SECTION(1) OF SECTION 153A RETURN OF HIS INCOME, WHICH HE IS REQUIRED TO FURNISH UNDER SECTION 139 IN RESPECT OF ANY ASSESSMENT YEAR COMMENCING ON OR AFTE R THE 1 ST DAY OF APRIL 1989, AND UNTIL THE EXPIRY OF THE PERIOD AFORESAID, NO NOTICE HAS BEEN ISSUED TO HIM UNDER CLAUSE (I) OF SUB - SECTION (1) OF SECTION 142 OR SECTION 148 AND THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) IS SATISFIED THAT IN RESPECT OF SUCH ASSESSMENT YEAR SUCH PERSON HAS TAXABLE INCOME, THEN SUCH PERSON. SHALL, FOR THE PURPOSE OF CLAUSE (C) OF SECTION 271 (1), BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS' INCOME IN RESPECT OF SUCH ASSESSMENT YEAR, NOTWITHSTANDING THAT SUCH PERSON FURNISHES A R ETURN OF HIS INCOME AT ANY TIME AFTER THE EXPIRY OF THE PERIOD AFORESAID IN PURSUANCE OF A NOTICE UNDER SECTION 148.' ASSESSEE'S CAS E EXACTLY SUITS CONDITIONS LAID DOWN IN THE STATUTE. FOR THE ASST. YEAR 2006 - 07, 7 ITA.NO. 668 /HYD/2013 BADAM BALAKRISHNA , HYDERABAD THE PERIOD SPECIFIED IN SUB - SECTION(1) OF SECTION 153 CONCLUDES BY 31.12.2008 AND THAT ASSESSEE HAD TAXABLE INCOME FOR THE ASST. YEAR 2006 - 07. NOTICE U/S 148 WAS ISSUED TO THE ASSESSEE ON 11.11.2009 I .E., AFTER THE PERIOD AFORESAID AND ASSESSEE FILED RETURN OF INCOME ON 26.03.2010 ADMITTING A TOTAL INCOME OF RS.27,24,330/ - . IT IS FOR THE REASON OF THE SURVEY U/S 133A, THE ISSUE OF CAPITAL GAINS ESCAPING ASSESSMENT HAS COME TO THE NOTICE OF THE DEPARTMENT AND ONLY AFTER THE ISSUE OF NOTICE U/S 148, ASSESSEE HAS FILED RETURNS OF INCOME. C. ASSESSEE'S STAND THAT HE HAS ACCEPTED THE CONSTRUCTION COST AT RS.800/ - PER SQ. FT. AS AGAINST RS.725 CERTIFIED BY THE BUILDER, WITH A VIEW TO CO - OPERATE WITH THE ASSESSMENT PROCEEDINGS, IS BASELESS AND WITHOUT ANY FORCE. THE CONSTRUCTION COST OF RS.800/ - PER SQ. FT IS ARRIVED AT AFTER MUCH EXERCISE WHICH INCLUDES EXAMINATION OF THE BUILDER'S ACCOUNTS, THE SALE INSTANCES AND WORKING OUT THE AVERAGE COST AS DISCUSSED IN THE ASSESSMENT ORDER. ASSESSEE'S CLAIM THAT HE RESTRICTED THE CLAIM U/S 54F FOR ONE DWELLING UNIT THOUGH TWO WERE USED BY HIM DOES NOT STAND ON FIRM GROUND. THE CLA IM IS ALLOWABLE IN RESPECT OF A RESIDENTIAL HOUSE. IN THE INSTANT CASE, THE RESIDENTIAL HOUSE CAN ONLY BE EQUATED TO AN APARTMENT WHICH IS AN INDEPENDENT DWELLING UNIT. THE ASSESSING OFFICER , IN SUPPORT OF THE ABOVE CONCLUSIONS, RELIED ON THE FOLLOWING D ECISIONS : (1) D ILIP N.SHROFF( 291 ITR 519 ) - SC (2) CIT VS. SURESH CHANDRA MITTAL ( 251 ITR 9 ) - SC (3) CIT VS. MUSSADILAL RAM BHARSOSE (1987) 165 ITR 14 (SC), (4) CIT VS. A. SREENIVAS PAI (2000) 242 ITR 29, 26 (KERALA) (5) CIT VS. DRAPCO ELEC TRIC CORPORATION (1980) 122 ITR 341 (GUJ.) (6) CIT VS. M. GEORGE & BROS. (1986) 160 ITR 511 (KER.) (7) CIT VS. HARI RAM SRI RAM (1987) 167 ITR 578 (ALL.) 8 ITA.NO. 668 /HYD/2013 BADAM BALAKRISHNA , HYDERABAD (8) CIT VS. SARAF TRADING CORPORATION (1987) 167 ITR 909 (KER.) (9) CIT VS. INDIA SEA FOODS (1996) 218 ITR 629 (KER. ) - F. B THE ASSESSING OFFICER, THUS, HELD THAT T HE PENALTY IS LEVIABLE IN THIS CASE , AND ACCORDINGLY IMPOSED A MINIMUM PENALTY OF RS.16,65,027/ - , VIDE ORDER DATED 28.6.2011, PASSED UNDER S.271(1)(C) OF THE ACT. 6 . AGGRIEVED BY THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER, ASSESSEE PREFERRED A N APPEAL BEFORE THE CIT(A). DURING THE APPELLATE PROCEEDINGS, IT WAS SUBMITTED THAT: 1) THE ORDER OF THE A.O. IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2) THE A.O. ERRED IN HOLDING THAT THERE IS ANY CONCEALMENT OF INCOME, PARTICULARLY WHEN ALL THE DETAILS WERE SUBMITTED BEFORE THE A.O. 3) THE A.O. ERRED IN LEVYING A PENALTY U/S.271(1)(C) OF RS.16,65,027/ - . 4) ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. IT WAS FURTHER SUBMITTED BY THE ASSESSEE BE FORE THE C OMMISSIONER(APPEALS) INTER ALIA AS FOLLOWS - 'IT IS HUMBLY SUBMITTED THAT IN SO FAR AS TAXABILITY OF THE CAPITAL GAIN ARISING ON DEVELOPMENT AGREEMENT IS CONCERNED, THERE WAS CONFUSION DURING THE RELEVANT PERIOD. THE APPELLANT WAS UNDER THE BONAFIDE IMPRESSION THAT NO CAPITAL GAIN NEED BE PAID AS THERE WAS NO TRANSFER OF PROPERTY ON THE DATE OF ENTERING INTO DEVELOPMENT AGREEMENT. THE APPELLANT WAS ALSO UNDER THE IMPRESSION THAT NO CAPITAL GAIN ARISES 9 ITA.NO. 668 /HYD/2013 BADAM BALAKRISHNA , HYDERABAD AS HE IS SURRENDERING A PART OF THE LAND IN LIEU OF THE UNDIVIDED SHARE OF LAND AND THAT HE WAS GETTING THE PROPERTY OF EQUAL VALUE BY SURRENDERING CERTAIN PART OF THE LAND. THE APPELLANT WAS ALSO OF THE VIEW THAT THERE WAS NO TRANSFER AS IT IS A DEVELOPMENT OF THE LAND THROUGH DEVELOPER AND DOES NOT INVOLVE ANY TRANSFER OR CAPITAL GAIN. THE APPELLANT WAS NOT IN A POSITION TO GET PROPER ADVICE AS TO WHEN THE CAPITAL ARISES AND AS TO HOW THE CAPITAL GAIN BE COMPUTED IN RESPECT OF DEVELOPMENT AGREEMENT. AN OPINION WAS SOUGHT AFTER THE SURVEY. IT IS ADVISED THAT THE ISSUE HAS BEEN THE SUBJECT MATTER OF JUDICIAL SCRUTINY AT VARIOUS STAGES AND EVEN NOW THE MATTER IS NOT CLEAR. SOME OF THE JUDGMENTS LAID DOWN THAT THE CAPITAL GAIN ARISES ON THE DAY ON WHICH THE PROPERTY WAS HANDED OVER TO THE DEVELOPER. IF SUCH PROPOSITION WERE TO BE TRUE, THE ASSESSING OFFICER IN THE ASSESSMENT ORDER MENTIONED THAT THE DEVELOPER INCURRED CERTAIN EXPENDITURE IN THE YEAR 2004 - 05 ALSO WHICH CLEARLY INDICATES THAT THE CAPITAL GAIN ARISES FOR THE ASSESSMENT YEAR 2005 - 06 AND N OT FOR THE ASSESSMENT YEAR 2006 - 07. SOME OF THE JUDGEMENTS LAID DOWN THE YEAR OF AGREEMENT. THE ITAT, BENCH 'B', HYDERABAD IN THE CASE OF S. RAGHURAMI REDDY VS. ITO, HELD THAT THE CAPITAL GAIN ARISES IN THE YEAR IN WHICH THE CONSTRUCTED AREA WAS HANDED OV ER WHICH FELL IN THE LATER YEAR. THEREFORE, THE ISSUE OF DETERMINATION OF CAPITAL GAIN IN A SITUATION WHERE A DEVELOPMENT AGREEMENT WAS ENTERED INTO IS NOT STILL FREE FROM DOUBT AS DIVERGENT VIEW WERE EXPRESSED AS MENTIONED IN THE OPINION OBTAINED BY THE A PPELLANT. THEREFORE, INSPITE OF THE FACT THAT THE APPELLANT PAID RS. 60 LAKHS TOWARDS SELF ASSESSMENT TAX, H E WAS NOT IN A POSITION TO FILE THE RETURN OF INCOME CORRECTLY. HOWEVER, WHEN THE ASSESSING OFFICER PROPOSED TO TAX THE CAPITAL GAIN ARISING ON ENTE RING INTO THE DEVELOPMENT 10 ITA.NO. 668 /HYD/2013 BADAM BALAKRISHNA , HYDERABAD AGREEMENT FOR THE ASSESSMENT YEAR 2006 - 07 THE APPELLANT READILY AGREED AND DID NOT CONTEST. .... 7 . THE CIT(A) WAS NOT CONVINCED WITH TH E ARGUMENTS OF THE ASSESSEE AGAINST THE PENALTY LEVIED. HE NOTED THAT N OTICE U/S 148 WAS ISSUED BY THE DEPARTMENT. HOWEVER, E VEN WHILE FILING THE RETURN IN RESPONSE TO THE SAID NOTICE U/S 148, THE ASSESSEE HAS NOT TAKEN INTO ACCOUNT THE CAPITAL GAINS ARISING ON ACCOUNT OF TRANSFER OF THE UNDIVIDED SHARE OF LAND IN LIEU OF BUI LT UP AREA AND IT WAS ONLY WHEN THE AO DURING THE ASSESSMENT PROCEEDINGS RAISED THE ISSUE OF CAPITAL GAINS ON THE TRANSFER THE ASSESSEE HAS ADMITTED THE CAPITAL GAINS ARISING ON ACCOUNT OF TRANSFER OF THE LAND TO THE DEVELOPER IN LIEU OF THE BUILT UP AREA . AS FOR THE CONTENTION S THAT T HE ASSESSEE WAS UNAWARE THAT THERE WAS A TAX LIABILITY ON THE DEVELOPMENT OF THE PROPERTY AND HE WAS ADVISED THAT THE MATTER WAS NOT CLEAR BECAUSE THERE WERE CONTRASTING DECISIONS OF THE HYDERABAD ITAT ON THE TAXATION OF THE SAME CANNOT BE ACCEPTED IN ABSENCE OF ANY EVIDENCE , THE CIT(A) OBSERVED THAT THE SAID CONTENTIONS APPEAR TO BE EVASIVE AND GENERAL IN NATURE. HE NOTED THAT THE ASSESSEE DURING THE PENALTY PROCEEDINGS, BEFORE THE ASSESSING OFFICER HAS GIVEN ENTIRELY A DIFFE RENT REASON FOR THE DEFAULT COMMITTED BY HIM. THIS , ACCORDING TO THE CIT(A), SHOWS THAT THE APPELLANT DID NOT COME OUT CLEAN WITH ALL THE FACTS AND PARTICULARS OF THE INCOME EVEN IN THE RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE IT ACT, WHICH SHOW S THAT THE APPELLANT HAS DELIBERATELY TRIED TO EVADE TAX ON CAPITAL GAINS. FURTHER OBSERVATIONS OF THE CIT(A), IN PARAS 6.1 AND 6.2 OF THE IMPUGNED ORDER ARE AS FOLLOWS - 11 ITA.NO. 668 /HYD/2013 BADAM BALAKRISHNA , HYDERABAD 6.1 .... IT IS PERTINENT TO MENTION THAT WHEN THERE IS A SURVEY OR SEARCH, ANY ASSESSEES WOULD CONSULT TAX CONSULTANTS OR EXPERTS AND SEEK ADVICE AND DISCLOSE THE TRUE AND CORRECT INCOME AND FILE THE RETURN OF INCOME ACCORDINGLY. BUT, THE APPELLANT DID NOT DO SO. DURING THE SURVEY, THE ISSUE OF DEVELOPMENT AGREEMENT AN D HIS SHARE OF BUILT UP AREA HAVE COME UP AND ALSO THE APARTMENT WHICH HE SOLD IN THE PREVIOUS YEAR CONCERNED ON WHICH THERE IS CAPITAL GAINS. BUT, HOWEVER, THE APPELLANT CHOSE NOT TO FILE RETURN OF INCOME TILL BE RECEIVED A NOTICE U/S 148 AND EVEN AFTER T HAT ALSO HE TRIED TO CONCEAL INCOME BY NOT FURNISHING COMPLETE PARTICULARS. IT MAY ALSO BE NOTED THAT THE APPELLANT DID NOT PREFER ANY APPEAL AGAINST THE ASSESSMENT ORDER AND THE FACT THAT IT HAS ADMITTED THE CAPITAL GAINS DURING THE ASSESSMENT PROCEEDINGS WILL NOT EXPATIATE THE CONTUMACIOUS CONDUCT OF THE APPELLANT IN NOT HAVING FILED THE RETURN WITHIN THE SPECIFIED TIME AND IN NOT HAVING DISCLOSED THE INCOME IN THE RETURN FILED U/S 148. RELIANCE IS PLACED ON THE DECISION OF MUMBAI ITAT IN THE CASE OF CHAR UDUTT H. DARGAT VS ITO (2010) 132 ITR TTJ (MUMBAI) 687 WHERE IT HAS BEEN HELD THAT WHERE THE ASSESSEE HAD NOT SHOWN IN THE RETURN THE INVESTMENT IN MUTUAL FUNDS BUT ACCEPTED THE AMOUNT OF INVESTMENT ONLY WHEN THE AIR INFORMATION ON THE SITUATION WHERE THER E IS AVOIDANCE OR EVASION OF TAX, IT COULD BE LEGITIMATELY INFERRED THAT HE IS GUILTY OF CONSCIOUS CONCEALMENT. 6 . 2 THE QUESTION OF CONCEALMENT OF INCOME AND FILING OF TRUE AND COMPLETE PARTICULARS OF INCOME IS A QUESTION OF FACT TO BE EXAMINED AND DECI DED UPON THE FACTS AND CIRCUMSTANCES OF EACH CASE, AND FROM THE CONDUCT OF THE APPELLANT AS DISCUSSED ABOVE, THERE APPEARS GROSS NEGLIGENCE ON HIS PART IN NOT FILING THE RETURN TILL SURVEY TOOK PLACE AND EVEN THEREAFTER TILL NOTICE U/S 148 WAS ISSUED AND A DDED TO THAT, NOT OFFERING FULL AND TRUE DISCLOSURE OF INCOME. HENCE, THE AO, IS JUSTIFIED IN LEVYING THE PENALTY U/S. 271(1)(C) OF THE IT ACT, AND THE SAME IS ACCORDINGLY CONFIRMED. 8 . AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US . 9 . L EARNED COUNSEL FOR THE ASSESSEE REITERAT ING THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES, SUBMITTED THAT IT IS NOT A FIT CASE FOR THE LEVY OF PENALTY FOR CONCEALMENT. HE SUBMITTED THAT 12 ITA.NO. 668 /HYD/2013 BADAM BALAKRISHNA , HYDERABAD THE ASSESSEE WAS UNDER A BONA FIDE IMPRESSION THAT THE LONG TERM CAPITAL GAINS ON TRANSFER OF UNDIVIDED SHARE OF LAND TRANSFERRED ARE NOT LIABLE TO ASSESSMENT IN THE YEAR UNDER APPEAL. HE SUBMITTED TH A T THERE WERE DIVERGENT VIEWS ON THIS ISSUE PRONOUNCED BY VARIOUS COURTS AND BENCHES OF THE TRIBUNAL, AND THE ISSUE, THEREFORE, BEING OF A DEBATABLE NATURE, NO PENALTY CAN BE IMPOSED ON THE ASSESSEE FOR CONCEALMENT, QUESTIONING THE BONA FIDE BELIEF OF THE ASSESSEE. IN THIS CONTEXT, THE LEARNED COUNSEL ALSO SUBMITTED THAT THERE WERE DIVERGENT LEGAL VIEWS ON THE SUBJECT AND IN TH E CASE OF CIT V/S. SMT. NAJOO DARA DABOO (2013) 38 TAXMANN.COM 258 (ALLAHABAD), IT HAS BEEN HELD THAT THE TAXABILITY OF CAPITAL GAINS IS ONLY ON COMPLETION OF THE CONSTRUCTION. HE ALSO PLACED RELIANCE ON THE DECISION OF THE HYDERABAD BENCH B OF THE TRIB UNAL IN THE CASE OF S.RAGHURAMI REDDY, PRODDATUR V/S. ITO, WARD - 1, PRODDATUR IN ITA NO.296/HYD/2003 FOR ASSESSMENT YEAR 1990 - 91, DULY FURNISHING A COPY THEREOF BEFORE US. IT HAS BEEN HELD IN THAT CASE THAT THE YEAR OF TAXABILITY CAN ONLY BE THE ASSESSME NT YEAR 1992 - 93 IN THAT CASE, VIZ. THE YEAR IN WHICH THE FLATS WERE HANDED OVER BY THE BUILDER TO THE ASSESSEE, AND NOT THE YEAR IN WHICH THE JOINT VENTURE OR DEVELOPMENT AGREEMENT WAS ENTERED INTO. IN THIS VIEW OF THE MATTER, IT IS SUBMITTED THAT THE IS SUE WAS DEBATABLE AND THERE WAS NO CONCLUSIVE FINDING ON THE MATTER , AND CONSEQUENTLY, NO PENALTY COULD BE IMPOSED IN RELATION TO ADDITIONS MADE WITH REGARD TO SUCH DEBATABLE ISSUES . 10 . EVEN WITH REGARD TO THE ISSUE OF PENALTY LEVIABLE IN RELATION TO D IFFERENTIAL AMOUNT OF ASSESSEES CLAIM FOR RELIEF UNDER S.54F, IT IS SUBMITTED THAT THE ISSUE WHETHER THE ASSESSEE IS ELIGIBLE FOR RELIEF UNDER S.54F ONLY IN RELATION TO ONE FLAT OR OTHERWISE, IS A DEBATABLE, AND THERE 13 ITA.NO. 668 /HYD/2013 BADAM BALAKRISHNA , HYDERABAD ARE DECISIONS ON THAT ASPECT IN FAVOU R OF THE ASSESSEE. IN THIS CONTEXT, HE REFERRED TO THE DECISION OF THE HYDERABAD B ENCH A OF TH E T RIBUNAL IN TH E CA S E OF V ITTAL KRISHNA CONJEEVARAM V/S. ITO, WARD 10(4), HYD ERABA D (2013) 36 TAXMANN.COM.542(HYD TRIBUNAL.) , AND THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT V/S. GEETA DUGGAL (ITA NO.1237/2011 DATED 21.2.2013 FOR ASSESSMENT YEAR 2007 - 08, WHEREIN IT WAS HELD THAT SO LONG AS THE BUILDING IS OF A RESIDENTIAL NATURE, RELIEF UNDER S.54F COULD BE ALLOWED EVEN IN RESPECT OF MORE THAN ONE RESIDENTIAL FLAT, AND THE WORD A SHOULD NOT BE UNDERSTOOD TO INDICATE A SINGULAR NUMBER. 1 1 . THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND, STATED THAT BUT FOR THE SURVEY ACTION WHICH TOOK PLACE ON THE BUS INESS PREMISES OF THE ASSESSEE, THE ASSESSEE WOULD NOT HAVE FILED A RETURN OF INCOME DECLARING THE CAPITAL GAINS . T HE ASSESSEE HAD NOT COME FORTH WITH THE REASON S F OR THE DEFAULT AS SUBMITTED BEFORE THE CIT(A) , VIZ. THE ISSUE OF TAXABILITY DEBATABLE , IN HI S EXPLANATIONS AND ARGUMENTS BEFORE THE ASSESSING OFFICER IN THE PENALTY PROCEEDINGS, BUT HAD STATED SOME OTHER REASON AND HENCE, THE ASSESSEES INTENTION WAS CLEARLY TO CONCEAL THE INCOME IN ORDER TO AVOID PAYMENT OF TAX. 1 2 . WE HAVE HEARD BOTH THE PAR TIES AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND OTHER MATERIAL AVAILABLE ON RECORD, INCLUDING THE DECISIONS CITED BY THE PARTIES BEFORE US . ADMITTEDLY, ASSESSEE HAS NOT BEEN FILING RETURNS OF INCOME SINCE 2002 - 03, AND CONSEQUENT UPON ON THE SURVEY AC TION ON THE BUSINESS PREMISES OF THE ASSESSEE, WHEN THE DEVELOPMENT AGREEMENT IN QUESTION WAS FOUND, NOTICE UNDER S.148 WAS 14 ITA.NO. 668 /HYD/2013 BADAM BALAKRISHNA , HYDERABAD ISSUED TO THE ASSESSEE. EVEN IN THE RETURN FILED IN RESPONSE TO THE SAID NOTICE, ASSESSEE HAS NOT DISCLOSED THE CAPITAL GAINS ARISI NG ON THE TRANSFER OF THE UNDIVIDED SHARE OF LAND BELONG TO THE ASSESSEE, THOUGH THE SAME IN RESPECT OF AN APARTMENT ADMEASURING 2757 SQ. FT. WAS CLAIMED, DULY CLAIMING EXEMPTION UNDER S.54F IN RESPECT THEREOF. I T WAS ONLY WHEN THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS RAISED THE ISSUE OF CAPITAL GAINS ON THE TRANSFER THE ASSESSEE HAS ADMITTED THE CAPITAL GAINS ARISING ON ACCOUNT OF TRANSFER OF THE LAND TO THE DEVELOPER IN LIEU OF THE BUILT UP AREA . THOUGH THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER, BRINGING TO TAX THE CAPITAL GAINS IN RESPECT OF TRANSFER OF UNDIVIDED SHARE OF LAND BELONGING TO THE ASSESSEE, MAKING ADDITION TO THE CAPITAL GAINS ADMITTED IN RESPECT OF APARTMENT IN RESPECT OF WHICH EXEMPTION UNDER S.54F WAS CLAIMED ON RECOMPUTATION THEREOF, THE ASSESSEE DID NOT PREFER ANY APPEAL SUCH ASSESSMENT, AND THE ADDITIONS MADE THEREIN HAVE ATTAINED FINALITY. VIEWED IN THIS LIGHT, THE CONTENTIONS OF THE ASSESSEE BEFORE US AS TO THE DEBATABLE NATURE OF TAXABILITY OF THE CAPITAL GAINS IN RESPECT OF UNDIVIDED SHARE OF LAND IN THE YEAR UNDER APPEAL, AS ALSO DEBATABLE NATURE OF THE COMPUTATION OF EXEMPTION UNDER S.54F OF THE ACT, HAS TO BE CONSIDERED AS MERE AFTERTHOUGHTS. IF NON - DISCLOSURE OF THE CAPITAL GAINS WAS ON ACCOUNT OF DE BATABLE NATURE OF THE ASSESSABILITY IN THE YEAR UNDER APP E AL, THE ASSESSEE OBVIOUSLY WOULD HAVE FILED APPEAL AGAINST THE ACTION OF THE ASSESSING OFFICER, CONTESTING THE VIEW TAKEN BY THE ASSESSING OFFICER. THE PLEA OF BONA FIDE VIEW NURSED BY THE ASSESSEE ABOUT THE NON - TAXABILITY IN THE YEAR OF SIGNING THE DEVELOPMENT AGREEMENT ALSO STANDS DEFEATED IN VIEW OF THE CONTENTION AS TO THE EXISTENCE OF TWO VIEWS ON THESE ISSUES. WE, THEREFORE, AGREE WITH THE 15 ITA.NO. 668 /HYD/2013 BADAM BALAKRISHNA , HYDERABAD CIT(A) THAT BUT FOR THE SURVEY ACTION, THE CAPITAL GA INS IN QUESTION, WOULD HAVE ESCAPED ASSESSMENT, AND THE CONTENTION S OF THE ASSESSEE THAT T HE ASSESSEE WAS UNAWARE THAT THERE WAS A TAX LIABILITY ON THE DEVELOPMENT OF THE PROPERTY . THERE IS NO MERIT IN THE PLEA OF THE ASSESSEE THAT HE WAS ADVISED THAT THE MATTER WAS NOT CLEAR BECAUSE THERE WERE CONTRASTING DECISIONS OF THE HYDERABAD ITAT ON THE TAXATION OF THE SAME CANNOT BE ACCEPTED , IN THE ABSENCE OF ANY EVIDENCE IN THAT BEHALF AND CONTENTIONS OF THE ASSESSEE APPEAR TO BE EVASIVE AND GENERAL IN NATURE. THE FACT THAT AS COMPARED TO THE REASONS GIVEN BY THE ASSESSEE BEFORE THE CIT(A) AND THIS TRIBUNAL FOR THE DEFAULTS RESULTING IN THE IMPUGNED PENALTY, THE ASSESSEE DURING THE PENALTY PROCEEDINGS BEFORE THE ASSESSING OFFICER HAS GIVEN ENTIRELY DIFFERENT RE ASON FOR THE DEFAULT COMMITTED BY HIM , CLEARLY SHOWS THAT DID NOT COME OUT CLEAN WITH ALL THE FACTS AND PARTICULARS OF THE INCOME EVEN IN THE RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE I NCOME - TAX ACT, OR IN THE ASSESSMENT PROCEEDINGS THEREAFTER, WHICH SHOWS THAT THE ASSESSEE HAS DELIBERATELY TRIED TO EVADE TAX ON CAPITAL GAINS . I T WAS A CLEAR CUT CASE OF CONCEALMENT BY THE ASSESSEE TO EVADE TAX . WE ARE IN AGREEMENT WITH THE DETAILED REASONS DISCUSSED BY THE CIT(A) IN PARAS 6.1 AND 6.2 OF THE IM PUGNED ORDER, WHICH WE HAVE EXTRACTED HEREINABOVE, FOR CONF I RMING THE IMPUGNED PENALTY. IN THIS VIEW OF OUR FINDING AS TO THE CONCEALMENT ON THE PART OF THE ASSESSEE, THE CASE - LAW RELIED UPON BY THE ASSESSEE WITH REGARD TO DEBATABLE NATURE EITHER WITH REG ARD TO ASSESSABILITY OF CAPITAL GAINS IN THE YEAR UNDER APPEAL, OR QUANTIFICATION OF RELIEF UNDER S.54F HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE. WE ACCORDINGLY UPHOLD 16 ITA.NO. 668 /HYD/2013 BADAM BALAKRISHNA , HYDERABAD THE ORDER OF THE CIT(A) AND REJECT THE GROUNDS OF THE ASSESSEE IN THIS APPEA L. 1 3 . IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.1.2014 S D / - SD/ - (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATE D 14TH JANU ARY, 201 4 VBP/ BVS COPY TO : 1. BADAM BALAKRISHNA, HYDERABAD C/O. S.RAMA RAO, FLAT NO.102, SHRIYAS ELEGANCE, ROAD NO.9, HIMAYATHNAGAR, HYDERABAD - 29. 2. DCIT, CIRCLE 1(3), TIRUPATI. 3. CIT - II, HYDERABAD. 4. CIT - 1, HYDERABAD 5. D.R. ITAT A BENCH, HYDERABAD.
