ACIT, Panchkula V. Sh. Jagdeep Singh Chandail, Panchkula

ITA 899/CHANDI/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8395 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 15-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: JAGMOHAN SINGH
• Keywords: Bonafide belief; Earning of tax free income; Ignorance of law
• Section: 143(3); 56(2); 56; 28

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L. KARWA, HONBLE VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.899/CHD/2015 ASSESSMENT YEAR:2011-12 THE ACIT VS. SH. JAGDEEP SINGH CHANDAIL PANCHKULA CIRCLE. # 188/6, PANCHKULA PANCHKULA PAN NO. ADQPC6953B (APPELLANT) (RESPONDENT) APPELLANT BY : SH. MANJIT SINGH RESPONDENT BY : SH. JAGMOHAN SINGH DATE OF HEARING : 18/02/2016 DATE OF PRONOUNCEMENT : 08/03/2016 ORDER PER H.L. KARWA V.P THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF CIT(A), PANCHKULA DT. 07/10/2015 IN CANCELLING THE PENALTY OF RS. 73,22,440/- IMPOSED UNDER SECTION 271(1)(C) OF THE ACT 1961 (IN SHORT THE ACT) FOR THE ASSESSMENT YEAR 2011-12. 2. BRIEFLY STATED, THE FACT OF THE CASE ARE THAT TH E ASSESSEE SUBMITTED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2011-12 ON 19 /03/2012, DECLARING TOTAL INCOME AT RS. 13,08,830/- + AGRICULTURAL INCOME OF RS. 1,29,606/-. THE MAIN SOURCE OF INCOME OF THE ASSESSEE IS FROM PROPERTY, INCOME FROM CAPITAL GAIN AND INCOME FROM INTEREST. BESIDE THIS, THE ASSESSEE HAS ALSO DERIVES INCOME FROM AGRICULTURE. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAD R ECEIVED ENHANCED COMPENSATION (PRINCIPAL) AMOUNTING TO RS. 1,68,38,4 38/- AND INTEREST AMOUNTING 2 TO RS. 4,73,94,436/- WHICH WAS CLAIMED EXEMPT BY TH E ASSESSEE. WHILE FRAMING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT, THE A.O MADE THE ADDITION OF RS. 2,36,97,218/- UNDER SECTION 56(2)(VIII) AFTER A LLOWING DEDUCTION @ 50% OF INTEREST COMPONENT RECEIVED UNDER SECTION 57(IV). P ENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WERE INITIATED SEPARAT ELY AT THE TIME OF FRAMING ASSESSMENT. A SHOW CAUSE NOTICE WAS ISSUED TO THE A SSESSEE REQUIRING HIM TO EXPLAIN AS TO WHY AN ORDER IMPOSING PENALTY SHOULD NOT BE MADE UNDER SECTION 271(1)(C) OF THE ACT. IN RESPONSE TO THE SAID NOTIC E THE ASSESSEE SUBMITTED HIS REPLY STATING THAT THE COMPENSATION / ADDITIONAL CO MPENSATION RECEIVED BY A PERSON ON THE ACQUISITION OF AGRICULTURAL LAND HAS BEEN HELD EXEMPT BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. GHANSH AM HUF [2009] 315 ITR 1 (SC). IT WAS FURTHER STATED THAT THE HONBLE SUPREM E COURT HAS HELD THAT THE INTEREST ALLOWED ON THE COMPENSATION WAS PART OF TO TAL COMPENSATION PAID / PAYABLE. AND WAS THUS EXEMPT FROM LEVY OF INCOME TA X. THE ASSESSEE ALSO POINTED OUT TO THE AO THAT IN THIS REGARD HE HAS GI VEN A NOTE IN THE RETURN OF INCOME WHICH IS A PART OF RECORD. THE ASSESSEE FURT HER CONTENDED THAT HE WAS UNDER A BONAFIDE BELIEF THAT THE COMPENSATION INCLU DING INTEREST ALLOWED ON THE COMPENSATION WAS EXEMPT IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT RENDERED IN THE CASE OF CIT VS. GHANSHAM HUF (SUPRA). IT WAS ALSO CONTENDED BY THE ASSESSEE THAT HE WAS NOT AWARE OF THE AMENDMENT MADE IN SECTION 56 & 57 OF THE INCOME TAX ACT, WHEREIN 50% OF THE INTEREST RECEIVED ON THE COMPENSATION ON THE ACQUISITION OF AGRICULTURAL LAND WAS TO BE DEDUCTED ALONGWITH OTHER INCOME. THE REPLY SUBMITTED BY THE ASSESSEE DID NOT FIND FAVOUR WITH THE AO AND THEREFORE HE IMPOSED MINIMUM PENALT Y OF RS. 73,22,440/- UNDER SECTION 271(1)(C) OF THE ACT FOR FURNISHING THE INA CCURATE PARTICULARS OF INCOME. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE C ARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) VID E HIS ORDER DT. 07/10/2015 CANCELLED THE IMPUGNED PENALTY, OBSERVING AS UNDER: 3 5. I HAVE GONE THROUGH THE FACTS OF THE CASE AND W RITTEN SUBMISSION FILED BY THE APPELLANT. IT IS NOTED THAT THE AO HAS IMPOSED PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME AS THE APPELLANT D ID NOT OFFER THE INTEREST ON ENHANCED COMPENSATION UNDER PROVISIONS OF SECTION 5 6(2)(VIII) OF THE ACT. ON THE OTHER HAND, THE APPELLANT HAS SUBMITTED THAT ALL TH E FACTS RELATED TO ADDITIONAL COMPENSATION INCLUDING INTEREST ON COMPENSATION WER E DISCLOSED IN THE RETURN OF INCOME FILED FOR A.Y. 2011-12 AND THE APPELLANT HAD BONAFIDE BELIEF THAT IN VIEW OF THE RULING OF HONBLE SUPREME COURT IN THE CASE OF GHANSHAM HUF (SUPRA), THE COMPENSATION INCLUDING INTEREST BEING PART OF COMPE NSATION FOR THE AGRICULTURAL LAND WAS EXEMPT U/S10(37) OF THE ACT. 5.1 AFTER CONSIDERING THE FACTS AND SUBMISSION AND ON REFERENCE TO THE PROVISIONS OF SECTION 271(1)(C), IT IS FOUND THAT T HE EXPLANATION (1) TO SECTION 271(1) RAISES AN INITIAL PRESUMPTION THAT THE ADDITION REP RESENT CONCEALED INCOME OF ASSESSEE. HOWEVER , THE PRESUMPTION IS REBUTTABLE. THE ASSESSEE HAS TO EXPLAIN THAT THE EXPLANATION OFFERED BY HIM IS BONAFIDE AND ALL MATERIAL RELATED TO THE COMPUTATION OF INCOME HAS BEEN DISCLOSED. SUCH EXPL ANATION NEED TO BE AN ACCEPTABLE EXPLANATION. IN CASE, THE AO DOES NOT AC CEPT THE EXPLANATION THEN AO HAS TO ESTABLISH THAT HOW THE EXPLANATION OFFERE D BY THE ASSESSEE WAS NOT SUBSTANTIATED. IN THE INSTANT CASE, THE APPELLANT H AS RECEIVED ENHANCED COMPENSATION WHICH INCLUDES INTEREST. THE APPELLANT HAS DISCLOSED THE TOTAL COMPENSATION AND CLAIMED EXEMPT IN VIEW OF THE DECI SION OF HONBLE SUPREME COURT IN THE CASE OF GHANSHAM HUF (SUPRA). SUCH DIS CLOSURE OF FACTS IS FOUND IN THE RETURN OF INCOME IN SCHEDULE EI AS WELL AS IN T HE COMPUTATION OF INCOME. ALTHOUGH THE INTEREST COMPONENT IS FOUND TO BE TAXA BLE U/S 56(2)(VIII) WHICH WAS INSERTED W.E.F 01.04.2010 BY AMENDMENT IN SECTION B UT AS THE FACTS WERE DISCLOSED IN THE RETURN OF INCOME, IT IS NOT MANDAT ORY THAT PENALTY U/S 271(1)(C) LIABLE TO BE IMPOSED IN EACH AND EVERY CASE OF ADDI TION OR DISALLOWANCE. THE AO HAS NOT ESTABLISHED THAT WHY THE APPELLANTS EXPLAN ATION WAS NOT ACCEPTABLE AS BONAFIDE. THE AMENDMENT IN SECTION 56(2) FOR TAXATI ON OF INTEREST INCOME AS COMPENSATION WAS BROUGHT IN FROM THE ASSESSMENT YEA R UNDER CONSIDERATION AND THERE IS LIKELIHOOD OF IGNORANCE OF LAW. FURTHER, T HE APPELLANTS BELIEF WAS BASED ON THE JUDGMENT OF APEX COURT WHICH CANNOT BE IGNOR ED AS NOT ACCEPTABLE. IN ORDER TO JUSTIFY LEVY OF PENALTY THE CIRCUMSTANCES MUST SHOW THAT ASSESSEE HAD INTENTION TO CONCEAL INCOME AND TO EVADE PAYMENT OF TAXES. THE FURNISHING OF INACCURATE INFORMATION RELATES TO FURNISHING OF FAC TUALLY INCORRECT DETAILS AND INFORMATION ABOUT THE INCOME. THE ADMISSION OR REJE CTION OF A CLAIM IS SUBJECTIVE EXERCISE AND WHETHER A CLAIM IS ACCEPTED OR REJECTE D HAS NOTHING TO DO WITH FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THE INSTANT CASE, THE APPELLANT HAD BONAFIDE BELIEF THAT IN VIEW OF RULING OF APEX COURT ITS INTEREST INCOME FORMING PART OF THE COMPENSATION WAS AN EXEMPT INCO ME. IN THE CASE OF CHANDER PAL BAGGA VS. ITAT (2003) 128 TAXMAN 632, T HE HONBLE RAJASTHAN HIGH COURT HELD THAT NO PENALTY IS LEVIABLE WHERE THE AS SESSEE HAS DISCLOSED CAPITAL GAINS AND CLAIMED EXEMPTION INCORRECTLY BECAUSE OF IGNORANCE OF LAW EVEN IF THE CLAIM IS DISALLOWED BY THE AO. FURTHER, THE HON BLE P&H HIGH COURT IN THE CASE OF CIT VS. SSP LTD. (2010) 189 TAXMAN 282 HELD THAT A MERE ERRONEOUS CLAIM IN THE ABSENCE OF ANY CONCEALMENT OR GIVING OF INACCURATE PARTICULARS CANNOT BE A GROUND FOR LEVYING PENALTY. 5.2 THEREFORE, IN VIEW OF ABOVE, I AM OF THE VIEW T HAT PENALTY U/S 271(1)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME IS NOT LEVIABLE ON THE FACTS OF THE INSTANT CASE. THUS, THE PENALTY U/S 271(1)(C) OF RS . 73,22,440/- IS CANCELLED. HOWEVER, IT MAY BE CLARIFIED THAT SINCE THE ASSESSM ENT AND PENALTY PROCEEDINGS ARE INDEPENDENT PROCEEDINGS, THEREFORE, ANY FINDING ON CANCELLATION OF PENALTY IS NOT APPLICABLE ON THE FINDING IN THE QUANTUM OF ADDITION AS PER THE ASSESSMENT ORDER AND UPHELD BY COMMISSIONER (APPEALS). THE GRO UNDS OF APPEAL ARE ALLOWED. 4. BEFORE US THE LD. DR RELIED ON THE ORDER OF THE AO AND THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. HE FURTHER RELYIED ON THE DECISION OF THE JURISDICTION AL HIGH COURT IN THE CASE OF CIT 4 VS. SSP LTD. [2010] 189 TAXMAN 282 (P&H), WHEREIN I T HAS BEEN HELD THAT A MERE ERRONEOUS CLAIM IN ABSENCE OF ANY CONCEALMENT OR GI VING OF INACCURATE PARTICULARS OF INCOME CANNOT BE A GROUND FOR LEVY O F PENALTY UNDER SECTION 271 (1)(C). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. 6. THERE IS NO DISPUTE THAT ASSESSEE HAD RECEIVED E NHANCED COMPENSATION OF RS. 1,68,38,438/- (PRINCIPAL) AND INTEREST OF RS . 4,73,94,436/- WHICH WAS CLAIMED EXEMPT AND NOT SHOWN AS TAXABLE INCOME IN THE RETUR N OF INCOME. IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT, THE AO MADE THE ADDITION OF RS. 2,36,97,218/- UNDER SECTION 56(2)(V III) AFTER ALLOWING DEDUCTION @ 50% OF INTEREST COMPONENT RECEIVED AS PER THE PROVI SIONS OF SECTION 57(IV) OF THE ACT. SECTION 56(2)(VIII) OF THE ACT PROVIDES THAT IN GENERAL, AND WITHOUT PREJUDICE TO THE GENERALITY OF THE PROVISIONS OF SUB SECTION (1) THE FOLLOWING INCOME SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD INCOME FROM OTHER SOURCES NAMELY: (VIII)- INCOME BY WAY OF INTEREST RECEIVED ON COMPENSATION OR ON ENHANCED COMPENSATION REFERRED TO IN CLAUSE (B) OF SECTION 145A. FURTHER CLAUSE (IV) OF SECTION 57 PROVIDES THAT IN THE CASE OF THE INCOME OF THE NATURE REFERRED TO IN CLAUSE (VIII) OF SUB SECTION (2) OF SECTION 56, A DEDUCTION OF A SUM EQUAL TO FIFTY PER CENT OF SUCH INCOME AND NO DEDUC TION SHALL BE ALLOWED UNDER ANY CLAUSE OF THIS SECTION. THE ABOVE REFERRED PROVISIONS WERE BROUGHT ON THE S TATUE BY THE FINANCE (2) ACT, 2009, WITH EFFECT FROM 01/04/2010. 5 THERE IS NO DISPUTE THAT THE ABOVE AMENDMENTS WERE BROUGHT ON STATUE FOR TAXATION OF INTEREST CLAIM ON THE COMPLETION FROM T HE ASSESSMENT YEAR 2011-12. HOWEVER, THE FACT REMAINS THAT THE ASSESSE HAD RECE IVED ENHANCED COMPENSATION ON ACCOUNT OF ACQUISITION OF AGRICULTU RAL LAND WHICH INCLUDED INTEREST COMPONENT. THE CASE OF THE ASSESSEE IS THA T HE HAS DISCLOSED THE ENTIRE COMPENSATION WHICH INCLUDED PRINCIPAL AMOUNT AND IN TEREST THEREON AND CLAIMED THE SAME AS EXEMPT IN VIEW OF THE RATIO LAI D DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. GHANSHAM HUF(S UPRA). THE DECISION WAS RENDERED BY THE HONBLE SUPREME COURT ON 16/07/2009 . THE HEAD NOTE OF THE JUDGMENT READS AS UNDER: COMPENSATION, INCLUDING ENHANCED COMPENSATION / CON SIDERATION UNDER THE LAND ACQUISITION ACT, 1894, IS BASED ON THE FULL VA LUE OF THE PROPERTY ON THE DATE OF THE NOTIFICATION UNDER SECTION 4 OF THAT ACT. WH EN THE COURT / TRIBUNAL DIRECTS PAYMENT OF ENHANCED COMPENSATION UNDER SECTION 23(1 A) OR SECTION 23(2) OR UNDER SECTION 28, IT IS ON THE BASIS THAT THE AWARD OF THE COLLECTOR OR THE COURT, UNDER REFERENCE, HAS NOT COMPENSATED THE OWNER FOR THE FULL VALUE OF THE PROPERTY AS ON THE DATE OF THE NOTIFICATION. INTEREST IS DIFFERENT FROM COMPENSATION. INTEREST P AID ON THE EXCESS AMOUNT UNDER SECTION 28 OF THE LAND ACQUISITION ACT, 1894, DEPEN DS UPON A CLAIM MADE BY THE PERSON WHOSE LAND IS ACQUIRED, WHEREAS INTEREST UND ER SECTION 34 IS FOR DELAY IN MAKING PAYMENT; IT POSTULATES AWARD OF INTEREST AT 9 PER CENT PER ANNUM FROM THE DATE OF TAKING POSSESSION ONLY UNTIL IT IS PAID OR DEPOSITED. INTEREST UNDER SECTION 28 WOULD INCLUDE WITHIN ITS AMBIT BOTH THE MARKET VALUATION AND THE SOLATIUM AND IS PART OF THE AMOUNT OF COMPENSATION WHEREAS INTEREST UNDER SECTION 34 IS ONLY FOR DELAY IN MAKING PAYMENT AFTE R THE COMPENSATION AMOUNT IS DETERMINED. INTEREST UNDER SECTION 28 IS A PART OF THE ENHANCED VALUE OF THE LAND, WHICH IS NOT THE CASE IN THE MATTER OF PAYMENT OF I NTEREST UNDER SECTION 34. IN THE ABOVE JUDGMENT THE HONBLE SUPREME COURT HEL D THAT INTEREST UNDER SECTION 28 OF THE LAND ACQUISITION ACT, 1894 WOULD INCLUDE WITHIN ITS AMBIT BOTH THE MARKET VALUATION AND THE SOLATIUM AND IS PART O F THE AMOUNT OF COMPENSATION, WHEREAS INTEREST UNDER SECTION 34 OF THE LAND ACQUISITION ACT, 1894 IS ONLY FOR DELAY IN MAKING PAYMENT AFTER COMP ENSATION AMOUNT IS DETERMINED. THE CONTENTION OF THE ASSESSEE IS THAT THE DECISION RENDERED BY THE HONBLE SUPREME COURT IS BINDING ON ALL COURTS WITH IN THE TERRITORY OF INDIA AS PER ARTICLE 141 OF THE CONSTITUTION OF INDIA. IN THAT V IEW OF THE MATTER THE ASSESSEE UNDER THE BONAFIDE BELIEF CLAIMED WHOLE OF THE COMP ENSATION RECEIVED INCLUDING INTEREST AS EXEMPT FROM TAX. FURTHER ALL THE MATERIALS RELATED TO THE 6 COMPUTATION OF INCOME WERE FURNISHED BEFORE THE ASS ESSING OFFICER. THERE IS NO DISPUTE THAT THE ASSESSEE HAS DISCLOSED TOTAL COMPE NSATION RECEIVED BY HIM ON ACCOUNT OF ACQUISITION OF HIS AGRICULTURE LAND. THI S FACT HAS NOT BEEN DENIED BY THE ASSESSING OFFICER. FURTHERMORE THE ASSESSEE HAD WRITTEN A NOTE IN THE RETURN OF INCOME STATING THAT ENHANCED COMPENSATION IS EXE MPT FROM LEVY OF INCOME TAX WHICH WAS SUBMITTED TOGETHER WITH THE COMPUTATI ON OF INCOME AND THE SAME IS ALREADY ON THE RECORD MAINTAINED BY ASSESSI NG OFFICER. EVEN BEFORE THE AO THE ASSESSEE HAD CATEGORICALLY STATED THAT HE WA S UNDER THE BONAFIDE BELIEF THAT THE COMPENSATION INCLUDING THE INTEREST ALLOWE D ON THE COMPENSATION WAS FULLY EXEMPT FROM TAX IN VIEW OF THE JUDGMENT OF TH E HONBLE SUPREME COURT REFERRED TO ABOVE. WE MAY OBSERVE HERE THAT THERE I S NOTHING ON RECORD TO ESTABLISHED THAT AS TO WHY THE ASSESSEES EXPLANATI ON CANNOT BE ACCEPTED AS BONAFIDE. THERE IS NOTHING ON RECORD TO DENY THIS F ACT THAT THE ASSESSEES BELIEF WAS BASED ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE CIT VS. GHANSHAM HUF (SUPRA). IT IS TRUE THAT THE FURNISHIN G OF INACCURATE INFORMATION RELATES TO FURNISHING OF FACTUALLY INCORRECT DETAIL S AND INFORMATION ABOUT THE INCOME. BUT HEREIN THE ASSESSEE FURNISHED / DISCLOS ED FULL AND FACTUAL INFORMATION ABOUT THE TOTAL AMOUNT RECEIVED ON ACCOUNT OF ENHAN CED COMPENSATION. 7. IN OUR OPINION, WHERE THE ASSESSEE HAS DISCLOSED COMPLETE PARTICULARS IN RESPECT OF ITS CLAIM IN ITS RETURN, THERE CANNOT BE ANY DEFAULT FOR FURNISHING OF INCORRECT PARTICULARS OF INCOME SO AS TO ATTRACT TH E PENALTY UNDER SECTION 271 (1)(C) OF THE ACT. WE ARE IN AGREEMENT WITH THESE O BSERVATIONS OF THE LD. CIT THAT THE ADMISSION AND REJECTION OF A CLAIM IS SUBJ ECTIVE EXERCISE AND WHETHER A CLAIM IS ACCEPTED OR REJECTED HAS NOTHING TO DO WIT H FURNISHING OF INCORRECT PARTICULARS OF INCOME. WE ALSO FULLY AGREE WITH THI S OBSERVATION OF THE LD. CIT THAT IN THIS CASE THE ASSESSEE HAD BONAFIDE BELIEF THAT IN VIEW OF THE JUDGMENT OF THE 7 HONBLE SUPREME COURT IN THE CASE OF CIT VS GHANSHA M HUF (SUPRA) ITS INTEREST INCOME FORMING PART OF THE COMPENSATION WAS EXEMPT INCOME. 8. IN VIEW OF THE ABOVE DISCUSSION WE DECLINE TO IN TERFERE WITH THE ORDER OF LD. CIT AND ACCORDINGLY WE UPHOLD THE SAME. THE APP EAL OF THE REVENUE IS DEVOID OF ANY MERITS DESERVES DISMISSAL. ACCORDINGL Y WE DISMISS THE APPEAL. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/03/2016. SD/- SD/- (RANO JAIN) (H.L. KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 08/03/2016 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR