M/S Patidar Builders Private Limited, Bhopal V. THE ACIT 2(1), Bhopal

ITA 931/IND/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2248 (ITAT-INDORE)
• Duration Of Justice: 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 07-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHMD JAVED
• Assessee Lawyers: P K JAIN
• Keywords: Capital asset; Business income; Question of law; Capital receipt
• Section: 260A

Judgement Text

PATIDAR BUILDERS PVT. LTD./ I.T.A. NO.931/IND/2016/ A.Y.:07-08 PAGE 1 OF 9 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER PATIDAR BUILDERS PRIVATE LIMITED, E-4/382, ARERA COLONY, BHOPAL V. ACIT- 2(1) / APPELLANT / RESPONDENT . . ./ PAN:AAACP8931A / APPELLANT BY SHRI P.K. JAIN, CA / RESPONDENT BY SHRI MOHMD. JAVED, SR. (DR) / DATE OF HEARING 02.05.2017 / DATE OF PRONOUNCEMENT 04.05.2017 / O R D E R PER O.P.MEENA, ACCOUNTANT MEMBER: 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEAL S)-I, BHOPAL, [IN SHORT REFERRED TO AS THE CIT (A)] DATED 01.07.2 016 PERTAINING TO ASSESSMENT YEAR 2007-08. WHICH HAS ARISEN FROM T HE PENALTY ORDER PASSED UNDER SECTION 271(1) (C) OF INCOME TAX ACT, 1961(HEREIN AFTER REFERRED TO AS THE ACT) BY THE ACIT 2(1) BHOPAL (HEREINAFTER REFERRED AS THE AO) DATED 30.03.2013 O N FOLLOWING GROUNDS OF APPEAL:- . . ./ I.T.A. NO.931/IND/2016 &(( / ASSESSMENT YEAR: 2007-08 PATIDAR BUILDERS PVT. LTD./ I.T.A. NO.931/IND/2016/ A.Y.:07-08 PAGE 2 OF 9 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN LAW AND NOT JU STIFIED IN CONFIRMING PENALTY OF RS. 9,00,000/-, AS LEVIED U/S. 271(1)(C) OF THE ACT. 2. SUCCINCTLY, FACTS AS CULLED OUT FROM THE ORDERS OF LOWER AUTHORITIES ARE THAT THE ASSESSEE IS A PRIVATE LIMI TED COMPANY ENGAGED IN THE BUSINESS OF DEVELOPING OF REAL ESTAT E AND SALE OF ROW HOUSES. THE ASSESSEE HAS FILED RETURN OF INCOME ON 19-11- 2007 DECLARING TOTAL INCOME OF RS. 6,13,514/-. THE ASSESSMENT WAS MADE UNDER SECTION 143 (3) ON 24.12.2009 BY ASS ESSING TOTAL INCOME AT RS. 32,83,510/- WHICH INTER-ALIA INCLUDED ADDITION OF RS. 24,20,000/- ON ACCOUNT OF TREATING EXEMPT INCOM E OF CAPITAL RECIPTS AS BUSINESS INCOME. THE ADDITION SO MADE WA S CAME TO BE CONFIRMED BY CIT(A) VIDE ORDER DATED 11-01-2012 [I. T.A. NO. CIT(A)-I/BPL/IT-280/09-10]. SINCE THE SAID INCOME WAS NOT DECLARED IN THE RETURN FILED U/S 139, HENCE, THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1) (C) OF THE ACT. THE SUBMISSIONS FILED BY THE ASSESSEE HAS BEEN REPRODUCED BY THE A O IN THE PENALTY ORDER. IT WAS SUBMITTED BY THE ASSESSEE THA T THE INFORMATION ON THE BASIS OF WHICH DISALLOWANCE HAVE BEEN MADE WAS SUBMITTED BY THE ASSESSEE COMPANY DURING THE CO URSE OF ASSESSMENT PROCEEDINGS AND IT WAS NOT SOMETHING THA T THE AO FOUND HER OWN. THUS, THE ASSESSEE COMPANY HAS NOT C ONCEALED PARTICULARS OF INCOME AND THE ASSESSEE ALSO SUPPORT ED HIS STAND BY RELYING CERTAIN CASE LAWS. HOWEVER, THE AO WAS O F THE VIEW THAT IT IS NOT NECESSARY THAT THE AO MAKE INDEPENDE NT ENQUIRY TO FIND CONCEALMENT OF INCOME AND IT IS SUFFICIENT IF CONCEALMENT IF FOUND BASED ON RETURN OF INCOME OR SUBMISSIONS. THE AO ALSO PATIDAR BUILDERS PVT. LTD./ I.T.A. NO.931/IND/2016/ A.Y.:07-08 PAGE 3 OF 9 OBSERVED THAT CASE LAWS RELIED BY THE ASSESSEE ARE NOT SQUARELY APPLICABLE. CONSIDERING THESE FACTS, THE AO COMPUTE D MINIMUM PENALTY @100% OF TAX SOUGHT TO BE EVADED AT RS. 8,1 4,572/-. HOWEVER, THE AO IMPOSED PENALTY OF RS. 9,00,000/- U NDER SECTION 271(1)(C) OF THE ACT. 3. BEING, AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT (A). HOWEVER, LD. CIT (A) OBSERVED THAT THE ADD ITION MADE IS CONFIRMED BY THE ITAT WHEREIN IT WAS HELD THAT LAND IN QUESTION WAS NEVER TRANSFERRED IN FAVOUR OF THE ASSESSEE AND IT WAS STANDING ONLY IN NAME OF KANHA GRIH NIRMAN SAHKARI SAMITI ONLY. THE ASSESSEE WAS SHOWN AS SELLER OF PROPERTY AND ACTED MERE CONSENTER TO THE TRANSACTION OF SALE. THUS, T HE ITAT HAS REJECTED THE CONTENTION OF THE ASSESSEE, THEREFORE, THE CIT(A) HELD THAT THE AO HAS RIGHTLY LEVIED PENALTY. 4. THE LD. AR SUBMITTED THAT THE ASSESSEE COMPANY HAS EXECUTED AGREEMENT TO SALE ON 10.5.1998 TO BUY 8 AC RES OF RURAL AGRICULTURAL LAND SITUATED AT KHASRA NO. 230 AT GRA M RATANPUR SADAK, FROM KANHA GRIH NIRMAN SAHAKARI SAMITI, MISR OD WHO ARE THE OWNERS OF THIS LAND FOR A CONSIDERATION OF RS. 18,30,000/- . THE ENTIRE SALE OF CONSIDERATION OF RS. 18,30,000 /- HAS BEEN DULY RECEIVED BY THE SAID SELLER SAMITI FROM THE AS SESSEE COMPANY ON OR BEFORE 10.5.1998 ITSELF AS SUCH THE T RANSACTION WAS COVERED BY THE EXTENDED DEFINITION OF THE TERM TRANSFER U/S 2(47)(V) OF THE ACT, AS IT EXISTED ON THE STATUTE B OOK AFTER ITS AMENDMENT BY THE FINANCE ACT, 1987 W.E.F. 01.04.198 8. THUS, THE ASSESSEE COMPANY BECAME THE OWNER OF THE ABOVE LAND, NOTWITHSTANDING THE FACTS THAT (A) ITS NAME WAS NOT RECORDED IN THE REVENUE RECORDS WHEREIN THE OWNERSHIP OF THE AB OVE SAID LAND PATIDAR BUILDERS PVT. LTD./ I.T.A. NO.931/IND/2016/ A.Y.:07-08 PAGE 4 OF 9 CONTINUED WITH THE SELLERS (B) FORMAL SALE DEED HAS NOT BEEN EXECUTED AND REGISTERED FOR THE PURCHASE OF ABOVE L AND. THE ASSESSEE COMPANY HAS SOLD THE ABOVE RURAL AGRICULTU RAL LAND BY EXECUTING TWO SALE DEEDS DATED 26.9.2006 AND 16.10. 2006 RESPECTIVELY AND DERIVE SURPLUS OF RS. 24,20,000/- WHICH IS TRANSFER OF CAPITAL ASSET WITHIN THE MEANING OF SEC TION 2(47)(V) OF THE ACT AND AS SUCH TRANSFER IS SPECIFICALLY EXCLUD ED FROM THE PURVIEW OF THE DEFINITION OF TERM CAPITAL ASSET U /S 2(14)(III) OF THE ACT, HENCE, THE RECEIPT IS IN THE NATURE OF CAP ITAL RECEIPT NOT LIABLE TO TAX UNDER HEAD CAPITAL GAINS. HOWEVER, TH E AO AND APPELLATE AUTHORITIES AND THE TRIBUNAL HAVE TREATED THE SAME AS BUSINESS INCOME. IN SUPPORT OF ITS CLAIM, THAT THE ASSESSEE HAS BECOME DEEMED OWNER OF THE LAND, THE AR REFERRED T HE DEFINITION OF TRANSFER AS CONTAINED IN SECTION 2(47)(V) OF THE ACT, BY VIRTUE OF WHICH REGISTRATION OF DOCUMENTS IS NOT REQUIRED. TH E AR ALSO PLACED RELIANCE IN THE CASE OF CIT V. PODAR CEMENTS PVT. LTD. ETC. (1997) 226 ITR 625 (SC), CIT V. MORMASJI MANCHARJI VAID (2001) 250 ITR 542 (GUJ) (FB), CIT V. RAJASTHAN MIRROR MFG . CO. (2003) 260 ITR 503 (RAJ)., CIT VS. VISHNU TRADING & INVESTM ENT CO. (2003) 259 ITR 724 (RAJ) TO CONTEND THAT REGISTRATI ON IS SINE QUA NON FOR BECOMING OWNER OF THE LAND. THE AR FURTHER SUBMITTED THAT THE ASSESSEE COMPANY HAS FULLY AND TRULY DISCL OSED THIS IN ITS INCOME AND DETERMINED IN ACCORDANCE WITH ENTRIE S WHICH HAVE BEEN DULY AUDITED BY CA, WHICH ARE RECORDED IN BOOK S OF ACCOUNTS. THE ASSESSEE ALSO DISCLOSED THE TRANSACTI ON RESULTING ON ACCOUNT OF SALE OF RURAL AGRICULTURAL LAND WHICH IS EXEMPT FROM CAPITAL GAIN U/S 2(14)(III) OF THE ACT, THEREFORE, PENALTY U/S 271(1)(C) IS NOT ATTRACTED. THE AR HAS PLACED RELIA NCE IN THE CASE PATIDAR BUILDERS PVT. LTD./ I.T.A. NO.931/IND/2016/ A.Y.:07-08 PAGE 5 OF 9 OF CIT V. RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC) WHEREIN IT WAS HELD THAT PENALTY U/S 271(1)(C) WILL NOT LIE MERELY IF AN INCORRECT INADMISSIBLE CLAIM HAS BEEN MADE IN THE RETURN AND WHEN ALL MATERIAL FACTS HAVING BEEN DISCLOSED I N THE RETURN OF INCOME. 5. THE LD. AR HAS BROUGHT TO OUR NOTICE THAT THE ASSES SEE COMPANY HAS FILED AN INCOME TAX APPEAL U/S 260A OF THE INCOME- TAX ACT, 1961 BEFORE THE HON'BLE HIGH COURT OF MADH YA PRADESH, PRINCIPAL SEAT AT JABALPUR WHEREIN THE HON'BLE HIGH COURT HAS PLEASED TO ADMIT FOR CONSIDERATION THE SUBSTANTIVE QUESTION OF LAW ON THE ISSUE UNDER CONSIDERATION THEREFORE, THE ISS UE BECOMES DEBATABLE AND NO PENALTY IS LEVIABLE U/S 271(1)(C) OF THE ACT. IN SUPPORT OF THIS CONTENTION THE LD. AR HAS PLACED RE LIANCE IN THE CASE OF RUPAM MERCANTILE VS. DCIT (2004) 91 ITD 237 (AHD) & SMT. RAMILA RATILAL SHAH VS. ACIT (1998) 60 TTJ (AH D) 171, CIT V. NAYAN BUILDERS & DEVELOPERS (2014) 368 ITR 722 (B OMBAY) AND I.T.A. NO. 415 OF 2012 DATED 8.7.2014 OF HON'BL E BOMBAY HIGH COURT, CIT VS. LIQUID INVESTMENT & TRADING COMP ANY (2013) 21 ITJ 335 (DEL), SHRI YUGOL KISHORE JAJOO V S. DCIT (2013) 21 ITJ 329 (IND) AND DECISION OF THE HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF PR. CIT V. R.K. GUPTA CON TRACTORS & ENGINEERS PVT. LTD. (2017) 30 ITJ 294 (MP) AND LATE MD. ANWAR KHAN V. ITO, BHOPAL IN I.T.A. NO. 342/IN/2011 DATED 31.01.2013, INDORE, I.T.A.T. 6. ON THE OTHER HAND, THE LD. SENIOR DR SUPPORTED THE ORDER OF CIT APPEAL AND SUBMITTED THAT THE TRIBUNAL HAS A LREADY CONFIRMED THE ADDITION MADE BY THE AO THEREFORE, TH E PENALTY IS AUTOMATIC AND THE SAME MAY BE SUSTAINED. PATIDAR BUILDERS PVT. LTD./ I.T.A. NO.931/IND/2016/ A.Y.:07-08 PAGE 6 OF 9 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE G ONE THROUGH THE ORDER OF THE AUTHORITIES BELOW. WE FIND THAT THE AO HAS ASSESSED THE SURPLUS OF RS. 24,20,000/- AS BUSI NESS INCOME WHICH ACCORDING TO THE ASSESSEE WAS A CAPITAL RECEI PT NOT LIABLE TO TAX HOWEVER, THE AO WAS OF THE VIEW THAT THE ASSESS EE HAS NOT BECOME THE LEGAL OWNER OF THE LAND IN QUESTION THER EFORE, THE SURPLUS RECEIPT ON ACCOUNT OF TRANSFER IS TAXABLE O F BUSINESS INCOME. THIS ADDITION WAS CONFIRMED BY THE TRIBUNA L ALSO AGAINST THIS QUANTUM OF ORDER THE ASSESSEE HAS APPR OACHED TO THE HON'BLE HIGH COURT. THE HON'BLE HIGH COURT VIDE ORDER DATED 27.6.2014 IN I.T.A. NO. 230 OF 2012 HAS ADMITTED SU BSTANTIVE QUESTION OF LAW WHICH READS AS UNDER: THIS APPEAL IS ADMITTED FOR CONSIDERATION ON FOLLO WING SUBSTANTIAL QUESTION OF LAW: WHETHER, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT APPELLANT IS LIABLE TO PAY TAX ON AGRICULTURAL LAND ON THE PR ETEXT THAT IT WAS MERELY ON CONSENTER IN THE SALE DEEDS DATED 25. 9.2006 & 6.10.2006 WHILE COMPLETELY IGNORING THE ANUBHANDH PATRA DATED 10.5.1998 IN WHICH KANHA GRIH NIRMAN SAHKARI SAMITI SOLD THE LAND IN QUESTION TO THE APPELLANT AFTER RE CEIVING ENTIRE CONSIDERATION OF RS. 18,40,000/- AND HANDED OVER THE POSSESSION AND TRANSFERRED THE OWNERSHIP TO THE AP PELLANT COMPANY AND THUS THE TRIBUNAL FAILED TO APPRECIATE THE PROVISIONS OF SECTION 2(47)(V) OF INCOME-TAX ACT, 1 961 READ WITH SECTION 53A OF TRANSFER OF PROPERTY ACT, 1882 W HEREBY THE TRANSACTION DATED 10.5.1998 WAS FOR ALL PURPOSE S COMPLETE AND THE APPELLANT HAD BECOME THE OWNER OF THE SAID LAND? PATIDAR BUILDERS PVT. LTD./ I.T.A. NO.931/IND/2016/ A.Y.:07-08 PAGE 7 OF 9 SHRI S.M. LAL, PANEL LAWYER APPEARED FOR RESPONDENT . A COPY OF THE APPEAL MEMO ALONG WITH THE ANNEXURES B E GIVEN TO SHRI LAL. HE MAY SEEK INSTRUCTIONS IN THE MATTER . 8. IT IS CLEAR FROM THE ORDER OF THE HON'BLE HIGH COUR T THAT THEY HAVE ACCEPTED SUBSTANTIAL QUESTION OF LAW WITH RESP ECT TO THE ADDITION MADE ON ACCOUNT OF CAPITAL RECIEPTS. IN TE RMS OF DECISION OF AHMEDABAD BENCH IN THE CASE OF RUPAM MERCHANTILE , 91 ITD 1273, WHERE A PLEA FOR CLAIM WHICH IS HELD BY THE H IGH COURT COULD HAVE GIVEN RISE TO A SUBSTANTIAL QUESTION OF LAW, CANNOT BE TREATED TO BE FRIVOLOUS OR MALA FIDE SO AS TO ATTRA CT LEVY OF PENALTY U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961. SIMILAR VIEW WAS TAKEN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF NAY AN BUILDERS AND DEVELOPERS PRIVATE LIMITED (2014) 368 UTR 722 ( BOM), WHEREIN IT WAS HELD THAT WHEN HON'BLE HIGH COURT AD MITS SUBSTANTIAL QUESTION OF LAW ON AN ADDITION, IT BECO ME APPARENT THAT ADDITION IS CERTAINLY DEBATED AND UNDER SUCH C IRCUMSTANCES PENALTY CANNOT BE LEVIED U/S 271(1)(C) OF THE INCOM E-TAX ACT, 1961. THE ADMISSION OF SUBSTANTIAL QUESTION OF LAW LEADS CREDENCE TO THE BONA FIDES OF THE ASSESSEE. BY FOLL OWING THESE DECISIONS, SIMILAR VIEW HAS BEEN TAKEN BY THE I.T.A .T., INDORE BENCH, IN THE CASE OF KUSUM OSWAL I.T(SS).A. NO. 10 1/IND/2009 DATED 20 TH APRIL, 2011. SIMILAR VIEW ALSO TAKEN BY THE HON'BL E JURISDICTIONAL HIGH COURT OF M.P., JABALPUR BENCH I N THE CASE OF PR. COMMISSIONER OF INCOME TAX V. R.K. GUPTA CONTRA CTOR & ENGINEERS PVT. LTD. (2017) 30 ITJ 294 (MP) WHEREIN IT WAS OBSERVED THAT: 4. THE FINDINGS RECORDED BY THE COMMISSIONER, INCO ME TAX APPEAL WAS TO THE EXTENT THAT AS THE QUESTION OF DE DUCTION WAS PATIDAR BUILDERS PVT. LTD./ I.T.A. NO.931/IND/2016/ A.Y.:07-08 PAGE 8 OF 9 PENDING CONSIDERATION IN THE APPELLATE FORUM, THERE FORE, PENALTY IMPOSED SHOULD BE CANCELLED. 5. WE FIND THAT THE AFORESAID VIEW TAKEN BY THE TRIBUN AL, TO SAY THAT TILL DECISION ON THE APPEAL BY THE HIGH CO URT THE BONA FIDE OF THE ASSESSEE IN CLAIMING THE DEDUCTION CANNOT BE DISPUTED, THE COMMISSIONER, INCOME TAX APPEALS AND THE TRIBUNAL H AVE NOT COMMITTED ANY ERROR AND IN DISMISSING THE APPEAL OF REVENUE ON SUCH CONSIDERATION, NO ERROR HAS BEEN COMMITTED NOR ANY SUBSTANTIAL QUESTION OF LAW ARISES WARRANTING CONSI DERATION. 9. SINCE THE QUANTUM APPEAL HAS BEEN ADMITTED BY THE H ON'BLE HIGH COURT OF MADHYA PRADESH, PRINCIPAL SEAT AT JAB ALPUR, AND SUBSTANTIAL QUESTION OF LAW HAS BEEN ADMITTED, THE PENALTY IN THIS CASE CANNOT BE LEVIED AS THE ISSUE IS OF DEBATABLE IN NATURE, AND MERELY THE CLAIM WAS NOT ACCEPTED BY DEPARTMENT IN THE LIGHT OF DECISION IN THE CASE OF CIT VS. RELIANCE PETROPRODU CTS PVT. LTD. 322 ITR 158 (SC). IN VIEW OF ABOVE, RESPECTFULLY FO LLOWING THE DECISION OF THE HON`BLE JURISDICTIONAL HIGH COURT O F MADHYA PRADESH IN THE CASE OF PRINCIPAL CIT V. R. K. GUPTA CONTRACTORS AND ENGINEERS PVT. LTD. AND OTHERS [2017] 30 ITJ 2 94 (MP) AND HON`BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. NA YAN BUILDERS AND DEVELOPERS [2014] 368 ITR 7222 (BOM) AND CIT V. ADITYA BIRLA POWER CO LTD. I.T. ACT, 851 OF 2014 DTD. 2 ND DECEMBER 2015 (BOMBAY HIGH COURT) AND CIT V. ADVAITA ESTATE DEVEL OPMENT PVT. LTD. I.T.A. NO. 1498 OF 2014 DTD. 17 TH FEBRUARY 2017, RUPAM MERCANTILE V. DCIT [2004] 91 ITD 237 (AHD) AND SMT . RAMILA RATILAL SHAH V. ACIT [1998] 60 TTJ (AHD) 171 AS NAR RATED ABOVE, WE DIRECT THE AO TO CANCEL THE PENALTY IN RESPECT O F ADDITION CONFIRMED ON ACCOUNT OF CAPITAL RECEIPTS TREATED AS BUSINESS INCOME. PATIDAR BUILDERS PVT. LTD./ I.T.A. NO.931/IND/2016/ A.Y.:07-08 PAGE 9 OF 9 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 04.05.2017. SD/- (..) /(C.M. GARG) SD/- (..) /(O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER DATED: 04.05.2017 SB*