ITO 16(3)(2), MUMBAI V. VIJAY HARILAL WADHA, MUMBAI

ITA 763/MUM/2011

• Counselvise Citation: 76319914 RSA 2011
• Duration Of Justice: 4 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 20-01-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 27-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K BIRLA
• Assessee Lawyers: BIREN GABHAW ALA
• Keywords: Cost of acquisition; Revised return; Ignorance of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI , ,, , BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. : 763/MUM/2011 (ASSESSMENT YEAR: 2005-06) ITO -16(3)(2), 16(3)(2), MATRU MANDIR, MUMBAI VS SHRI VIJAY HARILAL WADHWA, 12-13, BENHAM HALL LANE, DR. D D SATHE MARG, MUMBAI -400 004 .: PAN: AAAPW 3250 A (APPELLANT) !' (RESPONDENT) APPELLANT BY : SHRI P K BIRLA RESPONDENT BY : SHRI BIREN GABHAWALA #$ % &' /DATE OF HEARING : 14-01-2015 ()* % &' / DATE OF PRONOUNCEMENT : 18-02-2015 ORDER , , , , PER VIVEK VARMA, JM: INSTANT APPEAL IS FIELD BY THE DEPARTMENT AGAINST THE ORD ER OF CIT(A)-27, MUMBAI, DATED 05.10.2010, WHEREIN THE SOLE GROUN D PERTAINS TO CANCELLING OF PENALTY OF RS. 4,15,246/- LEVIED BY THE AO U/S 271(1)(C). 2. THE FACTS ARE THAT THE AO THROUGH AIR INFORMATION SE LECTED THE CASE OF THE ASSESSEE FOR SCRUTINY, WHEN IT WAS FOUND THAT THE ASSESSEE HAD INVESTED RS. 15,00,000/- IN BONDS ISSUED BY NATIONAL HOUSING BOARD. THIS WAS A RESULT OF THE SALE PROCEEDS OF PLOT OF LAND AT KANDIVALI AND A DEDUCTION U/S 54EC WAS CLAIMED ON THE CAPITAL GAINS. SINCE ACCORDING TO THE ASSESSEE, THE ASSESS EE WAS NOT REQUIRED TO FILE HIS RETURN OF INCOME, NO RETURN WAS FILE D. BUT ITA 763/M/2011 SHRI VIJAY HARILAL WADHWA 2 AS A CONSEQUENCE OF AIR INFORMATION, THE AO ISSUED NOTICE U/S 148, AGAINST WHICH THE ASSESSEE FILED HIS RETURN. 3. IN THE ASSESSMENT PROCEEDINGS, 4. IN THE REVISED RETURN FILED IN RESPONSE TO NOTI CE U/S.148, THE APPELLANT OFFERED CAPITAL GAINS ON SALE OF THE SAID IMPUGNED PROPERTY TO TAX. HOWEVER, WHILE SCRUTINIZI NG THE ASSESSMENT FOR THE A.Y.2005-06, THE A.O. NOTICED TH AT THE APPELLANT IS NOT ENTITLED FOR DEDUCTION U/S.54EC SI NCE, THE INVESTMENT IN BONDS ISSUED BY NATIONAL HOUSING BANK WAS MADE ON 6.9.2005, WHEREAS THE APPELLANT SOLD THE PL OT ON 20.9.2004 I.E. AFTER THE LAPSE OF ABOUT ONE YEAR FR OM THE DATE OF THE TRANSACTION. THUS THE A.O. HELD THAT IN VESTMENT IN ELIGIBLE BONDS WAS MADE BEYOND 6 MONTHS FROM THE DATE OF TRANSFER OF PROPERTY AND ACCORDINGLY, THE DEDUCT ION THEREOF WAS NOT ALLOWABLE. FURTHER, THE COST OF ACQ UISITION OF THE PROPERTY WAS TAKEN BY THE APPELLANT AT RS. 4,05 ,000/- FOR THE PURPOSE OF INDEXATION AGAINST THE ACTUAL VA LUE OF RS.3,50,000/- IN THE BACKGROUND THAT : (A) THE IMPU GNED PROPERTY WAS SHOWN AT RS. 3,50,000/- IN THE BALANCE SHEETS FILED BY THE APPELLANT FOR DIFFERENT YEARS U PTO 31.3.2004 (B) THE AMOUNT OF RS 55,000/- BEING THE S TAMP DUTY PAID UNDER AMNESTY SCHEME FOR ANOTHER FLAT DUR ING THE F Y RELEVANT TO THE A Y 2005-06, WAS ADDED TO T HE COST OF THE IMPUGNED PROPERTY BY MISTAKE AND ACCORDINGLY , VALUE OF THE SAID PROPERTY WAS SHOWN AT RS. 4,05,00 0/- IN THE BALANCE SHEET AS ON 31.3.2005 FILED ALONG WITH THE ORIGINAL RETURN. (C) THE SAID VALUE OF RS. 4,05,000 /- WAS CONSIDERED AS COST OF ACQUISITION FOR THE PURPOSE O F INDEXATION INSTEAD OF THE ACTUAL COST OF ACQUISITIO N AT RS. 3,50,000/- HAVING REGARD TO THE BALANCE SHEET AS ON 31.3.2005. THE AO REWORKED OUT THE TAXABLE CAPITAL GAINS OF THE APPELLANT FOR THE A.Y.2005-06 ON THE BASIS O F THE ABOVE INFORMATION. THE ASSESSMENT MADE BY THE AO WA S ACCEPTED BY THE APPELLANT AND TAXES WERE DULY PAID THEREON. AND AS A RESULT THEREOF THE AO INITIATED PENALTY PROCEEDIN GS AND LEVIED THE PENALTY OF RS. 4,15,246/-. 4. AGAINST THIS PENALTY ORDER BY THE AO, THE ASSESSEE APPROACHED THE CIT(A) AND SUBMITTED THAT THE LEVY OF PEN ALTY WAS WRONG IN THE PRESENT SET OF CIRCUMSTANCES. 5. THE CIT(A), ON CONSIDERING THE SUBMISSIONS OF THE ASSESS EE HELD, THE APPELLANT'S A.R. SUBMITTED THAT AT THE OUTSET THERE IS NEITHER ANY INTENTION ON THE PART OF THE APPELLANT TO CONCEAL THE IMPUGNED TRANSACTION, NOR TO EVADE TAXES ON THE CAPITAL ITA 763/M/2011 SHRI VIJAY HARILAL WADHWA 3 GAINS EARNED BY THE APPELLANT. THE FACT RELATING TO SALE OF THE IMPUGNED PROPERTY AND THE INVESTMENT IN BONDS I SSUED BY THE NATIONAL HOUSING BANK WAS DULY SHOWN BY THE APPELLANT IN HIS RETURN OF INCOME FOR THE A.Y.2006- 07. THE APPELLANT EXPLAINED THAT THE INCOME WAS WRONGLY OFF ERED TO TAX IN THE A.Y.2006-07 ON ACCOUNT OF INCORRECT LEGA L ADVICE GIVEN BY HIS CHARTERED ACCOUNTANT, MR. KETAN SHAH, WHO WAS FILING THE APPELLANT'S INCOME TAX RETURNS, THAT THE SALE PROCEEDS OF THE PROPERTY CAN BE INVESTED IN BONDS I SSUED BY NATIONAL HOUSING BANK WITHIN ONE YEAR OF ITS SALE F OR CLAIMING EXEMPTION ULS.54EC. HAVING REGARD TO THE S AID ADVICE, THE SALE PROCEEDS WERE DEPOSITED IN THE APP ELLANT'S SAVING ACCOUNT IN CANARA BANK AND THE FUNDS CONTINU ED TO REMAIN IN THE BANK ACCOUNT AS ON 31.3.2005 AND THER EAFTER, TILL THE DATE OF INVESTING IN NATIONAL HOUSING BANK BONDS. BASED ON SUCH INCORRECT ADVICE THAT INVESTMENT IN E LIGIBLE BONDS CAN BE MADE UPTO THE PERIOD OF ONE YEAR FROM THE DATE OF SALE OF THE PROPERTY, THE DEDUCTION ULS.54E C WAS CLAIMED IN THE REVISED RETURN FILED FOR THE A.Y.200 5-06 ALSO. SIMILARLY, HAVING REGARD TO THE WRONG INCLUSION OF RS. 55,000/- TO THE COST OF APPELLANT HIMSELF. APPARENT LY, IT IS ONLY A CASE OF CLAIMING SUCH WRONG DEDUCTIONS WHICH ARE NOT ALLOWABLE UNDER LAW DUE TO INCORRECT PROFESSION AL ADVICE FOR WHICH THE APPELLANT CANNOT BE PENALIZED. IT IS AN ADMITTED FACT THAT NO INFORMATION GIVEN IN THE RETU RN OR IN THE DETAILS FURNISHED TO THE A.O. WERE FOUND TO BE FACTUALLY INCORRECT. AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROL PRODUCTS LTD. 322 ITR 15 8 MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURN ISHING OF INACCURATE PARTICULARS. A MERE MAKING OF CLAIM WHIC H IS NOT SUSTAINABLE IN LAW BY ITSELF DO NOT AMOUNT TO FURNI SHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE APPELLANT AS HELD IN THE ABOVE CITED CASE. FURTHER, IT IS NOT A CASE WHERE CERTAIN RECEIPTS WERE HELD ALTOGETHER OUTSIDE THE BOOKS OF ACCOUNTS/RETURN FILED BY THE APPELLANT AND THUS CONCEALING THE INCOME. AS STATED ALREADY, IT IS A M ERE IGNORANCE OF LAW ON THE PART OF THE APPELLANT WHICH WAS AGGRAVATED BY AN INCORRECT LEGAL ADVICE GIVEN TO HI M. THE HON'BLE SUPREME COURT IN THE CASE OF MOTILAL PADAMP AD SUGAR MILLS CO. LTD. VS. STATE OF UTTARPRADHESH 118 ITR 326 HELD THAT THERE IS A RULE THAT IGNORANCE OF LAW IS NO EXCUSE, BUT THERE IS NO PRESUMPTION THAT EVERYONE KNOWS THE LAW AND OBSERVED AS UNDER: MOREOVER, IT MUST BE REMEMBERED THAT THERE IS NO PRESUMPTION THAT EVERY PERSON KNOWS THE LAW. IT IS OFTEN SAID THAT EVERYONE IS PRESUMED TO KNOW THE LAW, BUT THAT IS NOT A CORRECT STATEMENT THERE IS NO SUCH MAXIM KNOW N TO THE LAW. OVER A HUNDRED AND THIRTY YEARS AGO, MAULA J. POINTED OUT IN MARTINDALE V. FALKNER [1846] 2CB 706 : 'THERE IS NO PRESUMPTION IN THIS COUNTRY THAT EVERY PERSON KNOWS THE LAW: IT WOULD BE CONTRARY TO COMMON SENSE AND R EASON IF IT WERE SO... 'SCRUTTON L.J. ALSO ONCE SAID: 'IT IS IMPOSSIBLE TO KNOW ALL THE STATUTORY LAW, AND NOT VERY POSSIBL E TO KNOW ALL THE COMMON LAW.' BUT IT WAS LORD ATKIN WHO , AS IN SO MANY OTHER SPHERES, PUT THE POINT IN ITS PROPER CONTEXT WHEN HE SAID IN EVANS V. BARTLAM [1937] AC 473 (HL) '.... THE FACT IS THAT THERE IS NOT AND NEVER HAS BEEN A PRES UMPTION THAT EVERY ONE KNOWS THE LAW. THERE IS THE RULE THA T ITA 763/M/2011 SHRI VIJAY HARILAL WADHWA 4 IGNORANCE OF THE LAW DOES NOT EXCUSE, A MAXIM OF VE RY DIFFERENT SCOPE AND APPLICATION.' FOLLOWING THE ABOVE DECISION OF SUPREME COURT, THE HONB'LE MUMBAI HIGH COURT IN THE CASE OF CIT VS. SCHEIL INTERNATIONAL 278 ITR 630 UPHELD THE QUASHING ORDER OF PENALTY LEVIED FOR NON FILING OF STATEMENTS IN FORM NO.52A. IN THE PRESENT CASE ALSO, THE APPELLANT HAS EXPLAIN ED THAT HE WAS IGNORANT OF THE LEGAL PROVISIONS, NOT HAVING KNOWLEDGE OF THE SAME AND THEREFORE, RELIED UPON TH E PROFESSIONAL ADVICE WHICH TURNED TO BE INCORRECT AT THE END OF THE DAY. IN VIEW OF THE FACTS NARRATED ABOVE AND THE DECISION OF THE HON'BLE SUPREME COURT IN THE ABOVE CITED CASES, I AM OF THE CONSIDERED OPINION THAT THIS IS NOT A FIT CASE FOR LEVYING OF PENALTY U/S.271(1)(C). ACCORDIN GLY, THE PENALTY LEVIED U/S.271(1)(C) IS CANCELLED.' 6. AGAINST THIS ORDER OF THE CIT(A), CANCELLING THE PENALTY, T HE DEPARTMENT IS IN APPEAL BEFORE THE ITAT. 7. BEFORE US, THE DR RELIED ON THE ORDER OF THE AO, WHERE AS THE AR RELIED ON THE ORDER OF THE CIT(A). 8. AFTER HEARING THE ARGUMENTS, WE ARE OF THE VIEW THAT THERE IS NO INFIRMITY IN THE ORDER OF THE CIT(A) AND WE ALSO FIND THAT THERE WAS NO ATTEMPT BY THE ASSESSEE TO CONCEAL ANY FACT, PE RTAINING TO CAPITAL GAINS ON THE SALE OF PROPERTY AT KANDIVALI. SINCE ALL T HE MATERIAL FACTS HAD BEEN DISCLOSED, AND CONSIDERING THE PLEA OF THE ASSESSEE THAT, HE WAS UNAWARE OF THE PREVAILING LAW, WE DO NOT FIND ANY REASON TO DISTURB THE ORDER OF THE CIT(A), CANCELLING T HE PENALTY, WHICH WE SUSTAIN AND CONSEQUENTIALLY THE PENALTY LEVIED BY THE AO IS CANCELLED. 9. IN THE RESULT, THE APPEAL AS FILED BY THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH FEBRUARY, 2015. SD/- SD/- ( ) ( ) (R C SHARMA) ( VIVEK VARMA ) ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 18 TH FEBRUARY, 2015 ITA 763/M/2011 SHRI VIJAY HARILAL WADHWA 5 !&/ COPY TO:- 1) / THE APPELLANT. 2) !' / THE RESPONDENT. 3) THE CIT(A) -27, MUMBAI. 4) THE CIT-16, MUMBAI/CIT 16, MUMBAI. 5) .$/0 !&# , , / THE D.R. F BENCH, MUMBAI. 6) 012 3 COPY TO GUARD FILE. 45# / BY ORDER / / TRUE COPY / / 6 / 7 8 , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN, SR.PS