NOSHIR S. DHABHAR, MUMBAI V. ITO 7(2)(4), MUMBAI

ITA 7533/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83666 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 02-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 20-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIVEK BAIRA
• Keywords: Bonafide belief

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA , A M & SHRI AMIT SHUKLA , J M ITA NO. 7533 / MUM/20 12 ( ASSESSMENT YEAR : 2008 - 09 ) NOSHIR S. DHABHAR, 806 - B. EMPIRE MAHAL, KHODADAD CIRCLE, DADAR, MUMBAI - 14 VS. ITO 7(2)(4), MUMBAI. PAN/GIR NO. : A A CPD 6505 B ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI JITENDRA JAIN /REVENUE BY : SHRI VIVEK BAIRA DATE OF HEARING : 2 ND SEPT. 201 4 DATE OF PRONOUNCEMENT : 2 ND SEPT , 201 4 O R D E R PER R.C.SHARMA ( A .M.) : THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORDER CIT(A ) , DATED 16 - 10 - 2012 FOR ASSESSMENT YEAR 200 8 - 0 9 , IN THE MATTER OF IMPOSITION OF PENALTY U/S. 271(1)(C) OF THE ACT. 2 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT ASSESSEE FILED ITS RETURN OF INCOME DECLARING RENTAL INCOME. THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF SCRUTINY ASSESSMENT THE AO ASKED ASSESSEE TO GIVE COMPLETE DETAILS OF IMMOVABLE PROPERT Y, IF ANY SOLD DURING THE YEAR. THE AO FOUND THAT ASSESSEE HAS SOLD RESIDENTIAL PROPERTY SITUATED AT VAPI INDUSTRIAL ESTATE AND EARNED CAPITAL GAIN OF RS. 43,51,337/ - . THE AO OBSERVED THAT ITA NO 7533 / 12 2 ASSESSEE DID NOT DISCLOSE THE LONG TERM CAPITAL GAIN IN THE RETURN O F INCOME, THEREFORE, IMPOSED PENALTY OF RS. 10,00,000/ - U/S. 271(1)(C) OF THE ACT. 3 . BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE AO AND ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4 . IT WAS CONTENDED BY THE LEARNED AR THAT ASSESSEE HAS FI LED REVISED COMPUTATION OF INCOME BEFORE THE AO AND DECLARED THE ADDITIONAL INCOME IN THE REVISED COMPUTATION OF INCOME. IT WAS FURTHER SUBMITTED THAT ASSESSEE WAS DIRECTOR IN A COMPANY, NAMELY, SUN UP BOTANICS PVT. LTD. THE SAID COMPANY HAD TAKEN LOAN FRO M THE BANK AGAINST MORTGAGE OF VARIOUS FIXED AND CURRENT ASSETS AND PERSONAL GUARANTEE OF THE DIRECTORS INCLUDING THE ASSESSEE. THE ASSESSEE HAD MORTGAGED THIS PROPERTY TO THE BANK AND ENTIRE SALE CONSIDERATION WAS ADJUSTED BY BANK AGAINST THE DUES OF THE COMPANY. IT WAS FURTHER SUBMITTED THAT ASSESSEE IN ORDER TO GET OUT OF THESE MENTAL TRAUMA HAD PLACED HIS TENANCY RIGHTS WITH THE LANDLORD AND THE LANDLORD HAD DIRECTLY PAID TO THE TUNE OF RS. 1,00,00,000/ - TO THE BANK BEFORE 31 - 3 - 2006. THE ASSESSEE HAD ALS O COMPELLED TO SALE HIS RESIDENTIAL HOUSE AT VAPI TO SETTLE THE DUES WITH THE BANK. AS PER LEARNED AR SINCE THE ASSESSEE WAS NOT IN RECEIPT OF ANY SALE CONSIDERATION OF HOUSE, PRACTICALLY NO CAPITAL GAIN WAS EARNED BY THE ASSESSEE, THEREFORE, ASSESSEE WAS UNDER BONAFIDE BELIEF THAT NO CAPITAL GAIN WAS LIABLE TO TAX. 5 . WITH REGARD TO LEGAL GROUND, L EARNED AR INVITED OUR ATTENTION TO THE SATISFACTION RECORDED BY THE AO IN THE ASSESSMENT ORDER TO THE EFFECT THAT, PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT ARE INITIATED ITA NO 7533 / 12 3 SEPARATELY FOR FURNISHING INACCURATE PARTICULARS OF INCOME. AS PER LEARNED AR, IT WAS NOT A PROPER SATISFACTION AND FOR THIS PURPOSE, RELIANCE WAS PLACED ON THE DECISION OF HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MWP LTD., 264 C TR 502 , WHEREIN PENALTY WAS HELD TO BE NOT IMPOSABLE AS THERE WAS NO DIRECTION FOR INITIATION OF PENALTY PROCEEDING IN THE ASSESSMENT ORDER. AS PER LEARNED AR NO SATISFACTION WAS READ OUT IN THE ASSESSMENT ORDER FOR INITIATION OF PENALTY WHICH IS MANDATORY EVEN AFTER INSERTION OF SECTION 271(1B ) OF THE ACT. OUR ATTENTION WAS ALSO INVITED TO THE LETTER FILED BEFORE THE AO, WHEREIN CIRCUMSTANCES WERE EXPLAINED UNDER WHICH HE MISSED OUT TO SHOW THE INCOME IN ITS RETURN OF INCOME AND IMMEDIATELY ON REALIZING TH E SAME FILED REVISED COMPUTATION AND PAID TAX THEREON. FOR THIS PURPOSE, RELIANCE WAS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF PRICEWATERHOUSE COOPERS PVT. LTD. VS. CIT & ANR., REPORTED IN (2012) 348 ITR 306(SC) . 6 . ON THE OTHER HAND , LEARNED DR RELIED ON THE ORDER OF THE AUTHORITIES BELOW AND CONTENDED THAT ASSESSEE HAS CONCEALED PARTICULARS OF INCOME WITH REGARD TO CAPITAL GAINS EARNED ON SALE OF PROPERTY, THEREFORE, THE AO WAS JUSTIFIED IN LEVYING PENALTY U/S. 271(1)(C) OF THE ACT. 7 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT BEFORE THE AO THE ASSESSEE HAS EXPLAINED THE CIRCUMSTANCES UNDER WHICH INCOME FROM CAPITAL GAIN WAS NOT SHOWN IN THE RET URN AND IMMEDIATELY ITA NO 7533 / 12 4 ON REALIZING THE SAME ASSESSEE HAS FILED REVISED COMPUTATION AND PAID TAX THEREON. WE FOUND THAT PROPERTY WAS SOLD TO DISCHARGE LIABILITY AS A GUARANTOR TO A COMPANY WHICH DEFAULTED IN PAYMENT AND THE SAME WAS APPROPRIATED BY THE BANK A GAINST THEIR DUES. UNDER THESE CIRCUMSTANCES, WHETHER ANY CAPITAL GAIN AROSE IN THE HANDS OF THE ASSESSEE, THERE ARE DIVERGENT VIEWS. DECISIONS IN FAVOUR OF THE ASSESSEE HAVE BEEN REPORTED AT 278 ITR 240 & 233 ITR 10. IN THE CASE OF ATTILI NARAYANA RAO, RE PORTED IN 233 ITR 10(AP) , THE HONBLE ANDHRA PRADESH HIGH COURT HELD THAT WHERE MORTGAGED PROPERTY IS SOLD IN PUBLIC AUCTION AND ASSESSEE WAS IN RECEIPT OF PRICE AFTER DEDUCTION OF AMOUNT PAYABLE TO MORTGAGEE, CAPITAL GAIN WAS TO BE REDUCED BY THE AMOUNT R ECOVERED BY MORTGAGEE . THUS, THE ISSUE WITH REGARD TO TAXABILITY OF CAPITAL GAIN IN CASE OF MORTGAGED PROPERTY AND LEVY OF PENALTY THEREON H AS BECOME DEBATABLE. IN CASE OF PENALTY, ONE HAS TO SEE THE OVERALL INTENTION OF THE ASSESSEE AS WELL AS SURROUNDING FACTS AND CIRCUMSTANCES WHICH LED THE FILING OF INACCURATE PARTICULARS. SINCE THE ASSESSEE WAS ALLEGED TO HAVE RECEIVE D NOTHING ON SALE OF PROPERTY AND THE AMOUNT WAS APPR OPRIATED BY THE BANK AGAINST THE GUARANTEE SO PROVIDED BY THE ASSESSEE, PENALTY SHOU LD NOT BE LEVIED UNDER SECTION 271(1)(C) OF THE ACT. IT IS ALSO A MATTER OF RECORD THAT ASSESSEE HAS IMMEDIATELY FILED REVISED COMPUTATION INCORPORATING THE CAPITAL GAINS AND TAXES WERE ALSO PAID THEREON. IN THE INTEREST OF JUSTICE AND FAIR - PLAY, WE RESTOR E THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO FIND OUT THE ACTUAL RECEIPT OF MONEY ON SALE OF PROPERTY, WHETHER THE AMOUNT WAS APPROPRIATED BY THE BANK TO DISCHARGE LIABILITY OF THE ASSESSEE AS A GUARANTOR OR SOMETHING WAS ACTUALLY RECEIVED B Y THE ASSESSEE. IF THE ITA NO 7533 / 12 5 AO FINDS THAT ASSESSEE WAS NOT IN ACTUAL RECEIPT OF ANY MONEY DUE TO ADJUSTMENT OF AMOUNT BY BANK TOWARDS LOAN LIABILITY , NO PENALTY SHOULD BE IMPOSED. WE DIRECT ACCORDINGLY. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 02/09/ 201 4 . 02/09/ 2014 SD/ - SD/ - ( ) ( AMIT SHUKLA ) ( ) ( R.C. SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 02/09 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2 . / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//