ITO 19(1)(4), MUMBAI V. TEJPAL SINGH CHADHA, MUMBAI

ITA 7403/MUM/2010

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1856 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 27-10-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 29-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HEMANT BAHEDIA
• Keywords: Capital asset; Bonafide belief; Assessment record
• Section: 143(3)

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 7403 /MUM/2010 ( / ASSESSMENT YEAR : 2006-07) THE INCOME TAX OFFICER 19(1)(4), ROOM NO. 308, PIRAMAL CHAMBERS, LALBAUG, MUMBAI 400 012. / V. MR. TEJPAL SINGH CHADHA, EKTA HEIGHTS, 101, OPP. KHAR GYMKHANA 16 TH ROAD, KHAR (W), MUMBAI 400 052. ./ PAN : AADPC2529B ( / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY SHRI RAKESH RANJAN APPELLANT BY : SHRI HEMANT BAHEDIA / DATE OF HEARING : 1-12-2015 / DATE OF PRONOUNCEMENT : / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER : THIS APPEAL, FILED BY THE REVENUE, BEING ITA NO. 74 03/MUM/2010, IS DIRECTED AGAINST THE ORDER DATED 25.08.2010 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 30, MUMBAI (H EREINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2006-07. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN T HE MEMO OF APPEAL FILED READ AS UNDER:- ITA 7403/M/10 2 I. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING PENALTY U/S 271(1)(C) O F THE I.T. ACT HOLDING THAT THE ASSESSEE CANNOT BE SAID TO HAVE COMMITTED DEFA ULT WITH THE MEANING OF SECTION 271(1)(C) OF THE I.T. ACT. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (APPEA LS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RES TORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF SALE OF CAR BATTERIES. IN THE RETURN OF INCOME FILED WITH REVENUE , THE ASSESSEE HAS DECLARED LONG TERM CAPITAL GAINS(LTCG) AMOUNTING TO RS. 39,82,993/- ON SALE OF FLAT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED BY THE LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) TO FURNISH THE DETAILS OF THE CAPITAL GAINS EA RNED BY THE ASSESSEE . THE ASSESSEE SUBMITTED THAT HE HAD GIVEN PROPERTY OWNED BY THE ASSESSEE AND HIS FAMILY MEMBERS KNOWN AS CHADHA NIWAS FOR REDEVELO PMENT AND IN LIEU OF THE SAME, ASSESSEE ALONG WITH HIS FAMILY MEMBERS HA D RECEIVED SIX FLATS ON OWNERSHIP BASIS. THE ASSESSEE HAD SOLD ONE FLAT ON 25.5.2005 I.E. WITHIN A PERIOD OF THREE YEARS FROM THE DATE OF ACQUISITION I.E. 18-9-2002, ACCORDINGLY , THE A.O. COMPUTED SHORT TERM CAPITAL GAINS (STCG) A MOUNTING TO RS. 44,79,320/- IN THE QUANTUM ASSESSMENTS WHICH WAS AC CEPTED BY THE ASSESSEE AND THE SAME ATTAINED FINALITY WITH DUE TA XES PAID TO THE REVENUE. IN THE PENALTY PROCEEDINGS, IT WAS HELD BY THE AO A S UNDER:- (1) THE CONTENTION RAISED BY THE ASSESSEE THAT ALL FACTS AND FIGURES WERE DISCLOSED CANNOT BE ACCEPTED AS CORREC T BECAUSE THE ASSESSEE HAD DECLARED LTCG OF RS.39,82,993/- WHEREA S THE A.O. HAS MADE AN ADDITION OF RS.44,79 ,320/- ON A/C OF S TCG ON SALE OF FLAT. THUS THERE IS DIFFERENCE IN THE FIGURES OF FERED FOR TAXATION AS WELL AS THE INCOME HEAD. (2) THERE IS NO MISINTERPRETATION OF LAW AS ARGUED BY THE ASSESSEE SINCE THE CAPITAL ASSET IN QUESTION HAD BE EN ACQUIRED ON 18/09/2002 AND SOLD ON 25/05/2005 AND HENCE APPLYIN G THE PROVISIONS OF S. 45 R.W.S. 2(42A) THE PROFITS ARISI NG OUT OF THE' TRANSACTIONS DEFINITELY CONSTITUTE STCG. ITA 7403/M/10 3 (3) THE ASSESSEE HAD FAILED TO BRING ON RECORD ANY EVIDENCE IN THE FORM OF SOME LEGAL ADVICE WHICH PROMPTED HIM TO DECLARE LTCG ON SALE OF FLAT INSTEAD OF DECLARING STCG. (4) THE CONTENTION RAISED THAT 'THERE WAS NO INTENS ION ON OUR SIDE TO HIDE ANY FACTS DOES NOT HOLD TRUE SINCE PER USAL OF THE ASSESSMENT RECORDS SHOWS THAT DESPITE BEING GIVEN S EVERAL OPPORTUNITIES ENUMERATED BELOW, ASSESSEE HAS FAILED TO DECLARED THE STCG WHICH WAS LATER ON COMPUTED BY THE A.O. IN THE ASSESSMENT ORDER U/S. 143(3). THE A.O. HELD THAT THE ASSESSEE HAS FURNISHED INACC URATE PARTICULARS OF INCOME BY CLAIMING LTCG ON THE SALE OF FLAT ALTHOUG H IT WAS STCG ON THE SALE OF FLAT AND NO EVIDENCE IS PRODUCED BY THE ASSESSEE . THE AMOUNT OF TAX SOUGHT TO BE EVADED COMES TO RS. 5,77,784/-, THEREF ORE, THE MINIMUM PENALTY LEVIABLE IS RS. 5,77,784/- U/S 271(1)(C) OF THE ACT BEING 100% OF TAX SOUGHT TO BE EVADED AND ACCORDINGLY LEVIED THE SAME. 4. AGGRIEVED BY THE PENALTY ORDERS DATED 25.06.2009 PASSED U/S 271(1)(C) BY THE AO , THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) AND SUBMITTED THAT ALL THE DETAILS WERE SUBMITTED BEFORE THE A.O. DURI NG THE ASSESSMENT PROCEEDINGS. THE A.O. HAS REACHED THE CONCLUSION TH AT THE CAPITAL GAIN ARISING FROM THE SALE OF FLAT NO. 701, EKTA HEIGHTS, OPP. K HAR GYMKHANA, 16 TH ROAD, KHAR(W) , MUMBAI-400 052 IS STCG AND NOT LTCG BASED UPON THE INFORMATION FURNISHED BY THE ASSESSEE. THE ASSESSE E SUBMITTED BEFORE THE CIT(A) THAT IN THE RETURN OF INCOME ALL THE DETAILS WERE FURNISHED. THE ASSESSEE RELIED UPON THE JUDGMENT OF HONBLE SUPREM E COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. (2010) 322 ITR 15 8 (SC) AND PLEADED THAT IF THE CLAIM HAS BEEN FOUND TO BE UNSUSTAINABLE BY THE A.O., IT DOES NOT LEAD TO ANY CONCEALMENT OR FURNISHING OF INACCURATE PARTICU LARS OF INCOME, HENCE, PENALTY CANNOT BE IMPOSED U/S 271(1)(C) OF THE ACT EVEN FOR MAKING UNSUSTAINABLE CLAIMS. THERE IS NO FINDING BY THE A .O. THAT DETAILS FURNISHED ITA 7403/M/10 4 BY THE ASSESSEE WERE INACCURATE, FALSE , ERRONEOUS OR INCORRECT, HENCE, PENALTY CANNOT BE IMPOSED. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION MADE BY THE ASSESSEE, ASSESSMENT ORDERS, PENALTY ORDER CAM E TO THE CONCLUSION THAT THE ASSESSEE HAS FILED ALL THE DETAILS RELATING TO THE WHOLE TRANSACTION OF REDEVELOPMENT OF CHADHA NIWAS AND SALE OF FLAT NO. 701, EKTA HEIGHTS AND THE ASSESSEE HAS NOT FURNISHED INACCURATE PARTICULA RS OF INCOME. THE CASE LAW IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD . (SUPRA) CITED BY THE ASSESSEE IS CLEARLY APPLICABLE TO THE FACTS AND CIR CUMSTANCES OF THIS CASE AND ACCORDINGLY THE CIT(A) DELETED THE PENALTY LEVIED U /S 271(1)(C) OF THE ACT. 5.AGGRIEVED BY THE ABOVE DECISION OF LD. CIT(A), TH E REVENUE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 6. THE LD. D.R. SUBMITTED THAT THE ASSESSEE HAS WRO NGLY OFFERED THE LTCG INSTEAD OF STCG EARNED BY THE ASSESSEE IN THE RETUR N OF INCOME FILED WITH THE REVENUE. THE LD. DR RELIED UPON THE PENALTY ORDERS PASSED U/S 271(1)(C) OF THE ACT BY THE AO. THE LD. DR SUBMITTED THAT IN TH E QUANTUM ASSESSMENT ORDER, THE AMOUNT WAS CONSIDERED AS STCG AND THE AS SESSEE HAS ACCEPTED THE SAME TO BE STCG AND DUE TAXES HAVE BEEN PAID AL THOUGH THE ASSESSEE IN HIS RETURN OF INCOME FILED WITH THE REVENUE HAS SHO WN THE SAME AS LTCG. THE LD. D.R. SUBMITTED THAT THE MISTAKE IN DECLARIN G THE INCOME AS LTCG INSTEAD OF STCG IS COMMITTED ALTHOUGH THERE WAS NO COMPLEXITY IN THE TRANSACTION. THE ASSESSEE HAS ALSO NOT FILED ANY R EVISED RETURN TO RECTIFY THE MISTAKE AS CLAIMED BY THE ASSESSEE. THE FACTS IN T HIS CASE ARE DIFFERENT FROM THE FACTS OF RELIANCE PETRO PRODUCTS PVT. LTD.(SUPR A) AS THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THE LD . D.R. RELIED ON THE JUDGMENT OF UOI V. DHARMENDRA TEXTILE PROCESSORS, 3 06 ITR 277 (SC) AND ZOOM COMMUNICATIONS PRIVATE LIMITED(2010) 191 TAXMA N 179 (DELHI) ITA 7403/M/10 5 7. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE ALONG WITH FAMILY MEMBER OWNS AN ANCESTRAL PROPERTY KNOWN AS CHADHA NIWAS BEARING PLOT NO 660 IN THE TOWN PLANNING SCHEME NO 111 BAND RA ADMEASURING 800 SQUARE YARDS WHICH WAS ACQUIRED IN THE YEAR 1958 AN D THERE WAS A REDEVELOPMENT IN YEAR 2002 WHEREBY THE AGREEMENT DA TED 18.09.2002 FOR DEVELOPMENT OF CHADHA NIWAS WAS ENTERED INTO WITH EKTA BUILDERS BY THE ASSESSEE AND FAMILY MEMBERS. AS PER AGREEMENT EKTA BUILDERS WAS TO DEVELOP THE PLOT BY DEMOLISHING THE EXISTING STRUCTURE , WH ICH WAS OCCUPIED BY OWNERS AND TENANTS . AS PER AGREEMENT WITH THE SAID DEVELOPER , THE DEVELOPER WAS TO VACATE THE TENANTS AT HIS EXPENSE AND CONSTR UCT THE BUILDING ON BEHALF OF THE OWNERS . THE DEVELOPER WAS TO RETAIN 50% ARE A AFTER HANDING OVER 50% AREA TO THE OWNERS . THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE AND FAMILY MEMBERS WAS OWNING 6 FLATS OF 850 SQUARE FEET AREA EACH AND AFTER DEVELOPMENT THE ASSESSEE AND FAMILY MEMBERS GOT SIX FLATS OF 1586 SQUARE FEET EACH . THE ASSESSEE HAS SOLD THE FLAT NO. 701, EKTA HEIGHTS VIDE AGREEMENT DATED 25.05.2005 WHICH WAS RECEIVED AS PE R DEVELOPMENT AGREEMENT DATED 18.09.2002 AND CAPITAL GAIN ARISING THERE FROM THE SALE OF SAID FLAT WAS OFFERED FOR TAXATION AS LTCG ALTHOUGH THE REVENUE HAS TREATED THE SAME AS STCG WHICH IS ACCEPTED BY THE ASSESSEE AND DUE TAXES PAID TO THE REVENUE IN ORDER TO BUY PEACE. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE CHADHA NIWAS WHICH WAS BEING DEVELOPED A ND OUT OF WHICH THE ASSESSEE AND FAMILY MEMBERS GOT SIX FLAT FROM THE D EVELOPER , WAS ACQUIRED ORIGINALLY IN THE YEAR 1958 WHICH WAS ANCESTRAL PRO PERTY AND THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT THE CAPITAL GAIN ARI SING FROM SALE OF FLAT NO 701,EKTA HEIGHTS IS LTCG AS THE SAME WAS RECEIVED U NDER DEVELOPMENT AGREEMENT WITH EKTA BUILDER W.R.T. DEVELOPMENT OF CHADHA NIWAS WHICH IS AN ANCESTRAL PROPERTY ACQUIRED IN 1958 AND IT IS A MISTAKE IN INTERPRETATION OF LAW .THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE IS A BUSINESSMAN AND HE DOES NOT KNOW THE PROVISIONS OF THE INCOME TAX ACT, 1961. THE ASSESSEE SOLD THE FLAT WHICH HE GOT FROM THE DEVELOPER. AS SOON A S THE ASSESSMENT ORDER WAS ITA 7403/M/10 6 FRAMED U/S 143(3) OF THE ACT READ WITH SECTION 143( 2) OF THE ACT, WHEREBY THE A.O. HAS CONSIDERED THE GAIN ARISING FROM THE SALE OF FLAT TO BE STCG, THE ASSESSEE ACCEPTED THE SAME AND PAID THE FULL TAX TO REVENUE IN ORDER TO BUY PEACE. THE LD. COUNSEL OF THE ASSESSEE RELIED UPON THE JUDGMENT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA) AND SU BMITTED THAT THE ASSESSEE HAS NEITHER CONCEALED ANY INCOME NOR PROVIDED ANY I NACCURATE PARTICULARS OF INCOME, HENCE, THE PENALTY U/S 271(1)( C) OF THE AC T SO LEVIED SHOULD BE DELETED. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND PERU SED THE RELEVANT MATERIAL PLACED ON RECORD INCLUDING CASE LAWS RELIE D UPON. THE A.O. OBSERVED THAT THE ASSESSEE HAS SOLD THE FLAT NO. 701, EKTA H EIGHTS, WHICH WAS ACQUIRED BY THE ASSESSEE IN THE YEAR 2002. THE ASSESSEE HAS DECLARED THE GAIN ARISEN FROM THE SALE OF THE SAID FLAT AS LTCG IN THE RETUR N OF INCOME FILED WITH THE REVENUE ON A BELIEF THAT THE GAINS ARISING FROM SAL E OF FLAT WHICH WAS RECEIVED FROM THE DEVELOPER IN PURSUANCE OF THE DEVELOPMENT OF ANCESTRAL PROPERTY OF THE ASSESSEE AND FAMILY MEMBERS WHICH WAS ACQUIRED IN 1958 IS LTCG AND PAID DUE TAXES TO THE REVENUE INSTEAD OF STCG AS TH E FLAT WAS ACQUIRED ON 18.9.2002 I.E. DATE OF AGREEMENT WITH THE DEVELOPER AND SOLD ON 25.05.2005 I.E. WITHIN A PERIOD OF THREE YEARS. THE ASSESSEE HAS FILED THE FULL DETAILS IN THE RETURN OF INCOME FILED WITH REVENUE WHICH HAS B EEN NOT DISPUTED BY THE REVENUE ALTHOUGH THE GAIN ARISEN THERE FROM THE SAL E OF FLAT WAS DULY DECLARED AS LTCG INSTEAD OF STCG . IN OUR CONSIDERED VIEW, THE ASSESSEE HAS NOT FURNISHED ANY INACCURATE PARTICULARS OF INCOME ALTH OUGH THE ASSESSEE HAS MISTAKENLY CLAIMED THE GAIN ARISEN FROM SALE OF FLA T AS LTCG UNDER A BELIEF THAT THE GAIN ARISEN FROM SALE OF FLAT WHICH IS REC EIVED IN PURSUANCE OF DEVELOPMENT AGREEMENT W.R.T. DEVELOPMENT OF ANCESTR AL PROPERTY ACQUIRED IN 1958 IS LTCG AND DULY PAID THE TAXES TO THE REVENUE . THE A.O. HAS DETECTED THE MISTAKE FROM THE RETURN OF INCOME FILED WITH TH E REVENUE . IN OUR OPINION, THE CASE LAW IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA) ITA 7403/M/10 7 CITED BY THE ASSESSEE IS CLEARLY APPLICABLE IN THE PRESENT CASE. THE ASSESSEE HAS OFFERED BONE FIDE EXPLANATION AND MORE SO THE A SSESSEE HAS GOT THE FLAT FROM THE DEVELOPER WHO IS DEVELOPING THE PROPERTY O F THE ASSESSEE WHICH WAS AN ANCESTRAL PROPERTY ACQUIRED IN YEAR 1958 AND THE ASSESSEE AND FAMILY MEMBERS HAVE INTEREST IN THE SAID FAMILY PROPERTY S INCE 1958. THE RELIANCE PLACED BY THE LD. D.R. IN THE CASE OF UOI VS. DHAR MENDRA TEXTILE PROCESSORS, 306 ITR 277 (SC) IS DEVOID OF MERIT BECAUSE IN THI S CASES IT HAS BEEN HELD THAT NO MENS-REA IS REQUIRED TO BE PROVED FOR LEVYI NG THE PENALTY AS IT IS A CIVIL LIABILITY AND WHERE IN THE CASE OF ZOOM COMMUNICATI ONS (2010) 191 TAXMAN 179(DEL.), IT IS HELD THAT IF THE TAXPAYER MADE ANY INCORRECT CLAIM AND SUBSTANTIATE THE CLAIM OR OFFERS EXPLANATION WHICH IS BONA-FIDE , NO PENALTY IS LEVIABLE. IN THIS CASE, THE ASSESSEE HAS OFFERED FO R TAXATION LTCG , GAINS ARISING ON SALE OF FLAT INSTEAD OF STCG ON THE BO NA-FIDE BELIEF THAT THE PROPERTY WHICH IS BEING DEVELOPED BY THE BUILDER IS AN ANCESTRAL PROPERTY OF THE ASSESSSEE ACQUIRED IN THE YEAR 1958 AND THE GAI N ARISEN FROM THE SALE OF FLAT RECEIVED FROM DEVELOPER AS PER RE-DEVELOPMENT AGREEMENT IS LTCG WHICH WAS RETURNED BY THE ASSESSEE IN THE RETURN OF INCOM E FILED WITH THE REVENUE AND DUE TAXES PAID TO THE REVENUE BUT THE SAID CLAI M DID NOT FOUND FAVOUR WITH REVENUE IN QUANTUM ASSESSMENT PROCEEDINGS AND WAS HELD AS STCG AND ONCE THE SAME WAS HELD TO BE STCG, THE ASSESSEE ACCEPTED THE SAME AND PAID THE TAXES TO REVENUE IN ORDER TO BUY PEACE. TH US, IN OUR CONSIDERED VIEW THE ASSESSEE HAS OFFERED BONA-FIDE EXPLANATION FOR MAKING SUCH CLAIM IN THE RETURN OF INCOME FILED WITH REVENUE BUT WHICH CLAIM WAS HELD NOT ALLOWABLE BY THE REVENUE ALTHOUGH THE EXPLANATION OFFERED BY THE BONAFIDE AND IN OUR CONSIDERED VIEW THE ASSESSEE CASE DID NOT FALL WITH IN THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT FOR LEVYING PENALTY ON THE ASS ESSEE . WE DO NOT FIND ANY INFIRMITY IN THE WELL REASONED ORDER PASSED BY THE CIT(A) DELETING THE PENALTY SO LEVIED BY THE A.O. U/S 271(1)(C) OF THE ACT AND WE UPHOLD THE ORDERS OF THE CIT(A). WE ORDER ACCORDINGLY. ITA 7403/M/10 8 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH DECEMBER, 2015. # $% &' 16-12-2015 ( ) SD/- SD/- (SAKTIJIT DEY) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 16-12-2015 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI H BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI