CH.Surya Rao, Visakhapatnam V. THE ITO, Visakhapatnam

ITA 88/VIZ/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8899 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 02-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R S NARAYAN
• Keywords: Business income; Depreciation; Bonafide belief; Revised return; Unabsorbed depreciation
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO. 88 / VIZ /201 5 (ASST. YEAR : 20 09 - 1 0 ) CH. SYAMALA L/R OF LATE CH.SURYA RAO, D.NO. 9 - 29 - 20, BALAJINAGAR, SIRIPURAM, VISAKHAPATNAM. V S . IT O , WARD - 1(4), VISAKHAPATNAM. PAN NO. ABXPC 5029 C (APPELLANT) (RESPONDENT) ITA NO. 89 / VIZ /201 5 (ASST. YEAR : 20 09 - 10 ) IT O , WARD - 3(3), VISAKHAPATNAM. VS . CH. SYAMALA L/R OF LATE CH.SURYA RAO, D.NO. 9 - 29 - 20, BALAJINAGAR, SIRIPURAM, VISAKHAPATNAM. PAN NO. ABXPC 5029 C (APPELLANT) (RESPONDENT) C.O.NO. 19/VIZ/2015 ( ITA NO. 89 / VIZ /201 5) (ASST. YEAR : 20 09 - 10 ) CH. SYAMALA L/R OF LATE CH.SURYA RAO, D.NO. 9 - 29 - 20, BALAJINAGAR, SIRIPURAM, VISAKHAPATNAM. VS . IT O , WARD - 3(3), VISAKHAPATNAM. PAN NO. ABXPC 5029 C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SHRI S.R.S. NARAYAN SR. DR DATE OF HEARING : 30 / 05 /2017. DATE OF PRONOUNCEMENT : 30 / 06 /2017 2 ITA NO. 88 & 89/VIZ/2015 C.O.NO. 19/VIZ/2015 O R D E R PER V. DURGA RAO, JUDICIAL MEMBER THESE ARE THE CROSS APPEAL S FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 1 , VISAKHAPATNAM , DATED 20/12 /201 4 FOR THE ASSESSMENT YEAR 200 9 - 10 . CROSS OBJECTION FILED IN ITA NO. 89/VIZ/2015. ITA NO. 88/VIZ/2015 2. THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE READS UNDER: - THE LD. CIT(A) IS NOT JUSTIFIED IN PARTLY SUSTAINING THE PENALTY OF 16,17,699/ - LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 3 . FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE HAS SOLD AN AGRICULTURAL LAND OF 586.22 SQ.YARDS AND THE SALE TRANSACTION WAS NOT REVEALED IN THE RETURN OF INCOME ORIGINALLY FILED. THE ASSESSEE WHILE FILING RETURN OF INCOME HAS ADMITTED CAPITAL GAIN DERIVED ON SALE OF ABOVE LAND OF 14,33,020/ - . SUBSEQUENTLY , ASSESSING OFFICER HAS INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT AND CALLED EXPLANATION FROM THE ASSESSEE. IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF PENALTY PROCEEDINGS THAT BEFORE ISSUING A NOTICE , A REVIS ED RETURN WAS FILED AND THER E FORE, ASSESSEE NEITHER CONCEALED NOR FURNISHED INACCURATE PARTICULARS . HOWEVER, THE ASSESSING OFFICER IS NOT AGREED WITH THE EXPLANATION GIVEN BY THE ASSESSEE FOR THE REASON THAT BECAUSE OF SCRUTINY PROCEEDINGS, THE ASSESSEE H AS FILED REVISED RETURN AND ACCORDINGLY PENALTY IS LEVIED . 3 ITA NO. 88 & 89/VIZ/2015 C.O.NO. 19/VIZ/2015 4 . ON APPEAL, LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER BY OBSERV ING AS UNDER: - 4.11 I HAVE CONSIDERED THE SUBMISSIONS. THE ONLY PLEA RAISED WAS THAT THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT THE CAPITAL GAIN WAS NOT CHARGEABLE ON THE SALE OF AGRICULTURAL LAND. I AM UNABLE TO ACCEPT THIS PLEA AS THE ASSESSEE SHOULD HAVE DECLARED THE TRANSACTION IN THE RETURN AND CLAIMED EXEMPTION IF HE WAS UNDER BONAFIDE BELIEF THAT THE IMP UGNED TRANSACTION IS NOT TAXABLE. I HAVE PERUSED THE ASSESSMENT FOLDER AND I FIND THAT THE ASSESSEE HAS NOT FURNISHED ANY INFORMATION ABOUT THIS TRANSACTION IN THE ORIGINAL RETURN FILED. A PERUSAL OF THE BALANCE SHEET FILED BY THE ASSESSEE AS ON 31.3.2008 & 31.3.2009 SHOWS THAT THERE IS NO DIFFERENCE IN THE ASSET POSITION AS REGARDS THIS AGRICULTURAL LAND. IN OTHER WORDS, IT IS EVIDENT THAT THE ASSESSEE HAS NOT DISCLOSED THIS ASSET IN HIS RETURN OF INCOME AT ALL EITHER FOR THIS YEAR OR FOR THE EARLIER YEAR. HENCE THIS CANNOT BE CONSTRUED AS AN INADVERTENT ERROR OR A CASE OF BONAFIDE BELIEF. BESIDES IT IS SEEN THAT THE AO HAD ALREADY ISSUED NOTICE U/S.142(1) CALLING FOR THE BANK STATEMENTS AND BALANCE SHEETS ON 8.8.2011. THE REVISED RETURN WAS FILED SUBSEQUEN TLY. HENCE, I AM NOT ABLE TO ACCEPT THE PLEA THAT THIS INCOME WAS OFFERED VOLUNTARILY. FURTHER, THE ASSESSEE IS GUIDED BY A CHARTERED ACCOUNTANT IN FILING OF RETURNS AND IS IN THE BUSINESS OF REAL ESTATE FOR QUITE SOME TIME. THEREFORE THE PLEA THAT THIS IN COME WAS NOT OFFERED UNDER A BONAFIDE BELIEF IS NOT ACCEPTABLE. THE CLAIM OF BONAFIDENESS IS ALSO NEGATED BY THE FACT THAT THIS ASSET WAS NOT DISCLOSED AT ALL IN THE BALANCE SHEET EVEN IN THE EARLIER YEAR. THEREFORE, I AM OF THE VIEW THAT THE CONDITIONS SP ECIFIED IN SEC1271(1)(C) ARE SATISFIED AND THE AO IS JUSTIFIED IN LEVYING THE IMPUGNED PENALTY FOR NON DISCLOSURE OF THIS INCOME IN THE ORIGINAL RETURN. ACCORDINGLY, THE IMPUGNED PENALTY LEVIED IN THIS REGARD IS CONFIRMED. 5. ON BEING AGGRIEVED, THE ASSES SEE CARRIED THE MATTER IN APPEAL BEFORE THE T RIBUNAL. 6 . LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE IS UNDER BON A FID E BELIEF THAT THE LAND SOLD BY HER WAS AN AGRICULTURAL LAND AND IT IS EXEMPT FROM TAX AND THEREFORE, IN THE RETURN OF INCOME IT WAS NOT DISCLOSED, HOWEVER, WHILE FILING THE REVISED RETURN IN RESPECT OF OTHER INCOME AFTER DUE ADVICE FROM THE CHARTERED ACCOUNTANT , T HE 4 ITA NO. 88 & 89/VIZ/2015 C.O.NO. 19/VIZ/2015 ASSESSEE HAS OFFERED VOLUNTARILY LONG TERM CAPITA L GAIN OF 14,33,020/ - FOR TAXATION. THEREFORE, ASSESSEE NEITHER CONCEALED NOR FURNISHED INACCURATE PARTICULARS OF INCOME AND SUBMITTED THAT PENALTY MAY BE DELETED. 7 . ON THE OTHER HAND, L EARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT BECAUSE OF S CRUTINY PROCEEDINGS , ASSESSEE HAS DECLARED LONG TERM CAPITAL GAIN , THEREFORE, ASSESSEE HAS CONCEALED INCOME AND THE ASSESSING OFFICER HAS RIGHTLY IMPOSED PENALTY UNDER SECTION 271(1)(C) AND CONFIRMED BY THE LD. CIT(A) AND SUBMITTED THAT THE ORDER PASSED BY THE LD. CIT(A) MAY BE UPHELD. 8 . WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDER S OF THE AUTHORITIES BELOW . THE ASSESSEE HAS SOLD LAND OF 58 6 .22 SQ.YDS AND DERIVED CAPITAL GAIN OF 14,33,020/ - . THE ASSESSEE HAS FILED RETURN OF INCOME ORIGINAL LY ON 31/03/2010, IN WHICH HE HAS NOT DISCLOSED CAPITAL GAIN S HOWEVER, IN THE REVISED RETURN FILED ON 30/09/2011 , HE DISCLOSED THE SAME . THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY NOTICE UNDER SECTION 143(2) WAS ISSUED ON 31/08/2010, WHICH WAS SERVED ON THE ASSESSEE ON 22/09/2010. AGAIN CASE WAS POSTED FOR HEARING BY ISSUING NOTICE UNDER SECTION 142(1) ON 18/08/2011. THE CASE OF THE ASSESSING OFFICER IS THAT BECAUSE OF SCRUTINY PROCEEDINGS , LONG TERM CAPITAL GAIN DERIVED BY THE ASSESSEE HAS BEEN DISCLOSED , OTHERWISE ASSESSEE CONCEALED THE SAME I N THE RETURN OF INCOME. CASE OF THE ASSESSEE IS THAT ASSESSEE HAS FILED A RETURN OF INCOME NOT ONLY IN RESPECT OF LONG TERM CAPITAL GAIN, IT IS ALSO 5 ITA NO. 88 & 89/VIZ/2015 C.O.NO. 19/VIZ/2015 IN RESPECT OF BROUGHT FORWARD LOSSES ON DEPRECIATION, THEREFORE, THE ASSESSEE IS UNDER BONAFIDE BELIEF THA T THE LAND SOLD BY HER IS AN AGRICULTURAL LAND AND IT IS NOT EXIGIBLE TO TAX . REVISED RETURN FILED IN RESPECT OF OTHER ISSUES, THE ASSESSEE HAS DISCLOSED LONG TERM CAPITAL GAIN ON PROPER ADVICE . NO DOUBT THAT THE ASSESSEE HAS DISCLOSED CAPITAL GAIN AFTER SCRUTINY PROCEEDINGS IN I TIATED BY THE ASSESSING OFFICER, HOWEVER, IT HAS BEEN DISCLOSED WITHOUT ASKING ANY SPECIFIC QUERY IN RESPECT OF CAPITAL GAINS. WHEN THE ASSESSEE IS UNDER BONAFIDE BELIEF THAT THE LAND SOLD BY HER IS AN AGRICULTURAL LAND AND EXPLAIN ED THE SAME BEFORE THE ASSESSING OFFICER AND IS OFFERED FOR TAXATION ; IT IS NOT THE CASE OF THE DEPARTMENT THAT THE EXPLANATION GIVEN BY THE ASSESSEE NEITHER FALSE NOR BONAFIDE . THE ASSESSING OFFICER AS WELL AS LD. CIT(A) DISBELIEVED THE EXPLANATIO N GIVEN BY THE ASSESSEE. THEREFORE, BY CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE AND THE EXPLANATION GIVEN BY THE ASSESSEE, WE ARE OF THE OPINION THAT THE ASSESSEE NEITHER CONCEALED THE INCOME NOR FILED INACCURATE PARTICULARS. THUS, SECTI ON 271(1)(C) HAS NO APPLI CA TION TO THIS CASE. TH EREFORE , THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. ITA NO.89/VIZ/2015 9. P ENALTY IN RESPECT OF SET OFF OF BROUGHT FORWARD LOSS IS CONCERNED, THE LD. CIT(A) HAS CONSIDERED THE ISSUE AND OBSERVED AS UNDER: - 4.4 IT WAS STATED THAT AN AMOUNT OF RS.36,05,700/ - WAS TAKEN WITH REFERENCE TO ADDITIONAL INCOME FOR THE PURPOSE OF LEVY OF PENALTY. OUT OF THIS AMOUNT, AN AMOUNT OF RS.25,74,400/ - WAS TAKEN AS THE ADDITIONAL 6 ITA NO. 88 & 89/VIZ/2015 C.O.NO. 19/VIZ/2015 INCOME OFFERED UNDER THE HEAD 'BUSINESS INCOME'. IN THIS CONTEXT, THE AR CONTENDED THAT THE ADDITIONAL INCOME OFFERED WAS ONLY RS.20,81,500/ - AND NOT RS.36,05,700/ - AS THE ASSESSEE CLAIMED UNABSORBED DEPRECIATION ALLOWANCE TO THE TUNE OF RS.15,24,200/ - . IT WAS FURTHER REPRESENTED THAT THE CIT(APPEALS) IN THE ORDER IN ITA NO.664/11 - 12/ITO, WARD - 1(4)/VSP/2012 - 13, DATED 27.32013 HAS DIRECTED THE AO TO ALLOW SUCH CLAIM OF DEPRECIATION ALLOWANCE BUT HOWEVER, THE AO DID NOT CONSIDER SUCH DIRECTION WHILE LEVYING THE IMPUGNED PENALTY. IT W AS ARGUED THAT THE DIFFERENCE IN BUSINESS INCOME WAS ONLY RS.10,50,200/ - AND NOT RS.25,74,400/ - . I HAVE CONSIDERED THE SUBMISSION. THE CIT(APPEALS), WHILE ADJUDICATING THE QUANTUM APPEAL IN ITA NO.664/11 - 12/ITO, WARD - 1(4)/VSP/2012 - 13, DATED 27.3.2013 HAS D IRECTED THE AO TO ALLOW THE ASSESSED'S CLAIM OF UNABSORBED DEPRECIATION ALLOWANCE TO THE TUNE OF RS.15,24,200/ - . THEREFORE, THE AO IS NOT JUSTIFIED IN CONSIDERING THE SAID AMOUNT WHILE LEVYING PENALTY. ACCORDINGLY THE AO IS DIRECTED TO EXCLUDE THE AMOUNT O F RS.15,24,200/ - FROM THE IMPUGNED LEVY OF PENALTY. 10 . WE HAVE CONSIDERED THE ARGUMENTS OF BOTH THE SIDES . WE FIND THAT THE ASSESSING OFFICER GROSSLY COMMITTED AN ERROR IN IMPOSING PENALTY UNDER SECTION 271(1)(C) IN RESPECT OF CLAIM OF UNABSORBED DEPRECIATION. WE FIND THAT THE LD. CIT(A) HAS CONSIDERED ALL THE FACTS AND DECIDED CORRECTLY IN FAVOUR OF THE ASSESSEE. WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). THUS, THIS GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. C.O.NO. 19/VIZ/ 2015 11 . THE CROSS OBJECTION FILED BY THE ASSESSEE IS IN SUPPORT OF THE ORDER OF THE LD. CIT(A). IN VIEW OF OUR DECISION ABOVE, NO SEPARATE ADJUDICATION IS REQUIRED. THEREFORE, C.O. FILED BY THE ASSESSEE IS DISMISSED. 7 ITA NO. 88 & 89/VIZ/2015 C.O.NO. 19/VIZ/2015 12. IN THE RESULT, ITA NO. 88/VIZ/2015 FILED BY THE ASSESSEE IS ALLOWED ; ITA NO. 89/VIZ/2015 FILED BY THE REVENUE IS DISMISSED AND C.O.NO. 19/VIZ/2015 FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON TH IS 30 TH DAY OF JUNE , 201 7 . SD/ - SD/ - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 TH JUNE , 201 7 . VR/ - COPY TO: 1. THE ASSESSEE - CH. SYAMALA L/R OF LATE CH.SURYA RAO, D.NO. 9 - 29 - 20, BALAJINAGAR, SIRIPURAM, VISAKHAPATNAM. 2. THE REVENUE A) ITO, WARD - 3(3), VISAKHAPATNAM. 3. B) ITO, WARD - 1( 4), VISAKHAPATNAM . 4. THE CIT - 1, VISAKHAPATNAM. 5. THE CIT(A) , VISAKHAPATNAM. 6. THE D.R ., VISAKHAPATNAM. 7. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR.PS, ITAT, VISAKHAPATNAM.