ACIT 23(1), MUMBAI V. G.M. FINANCE & TRADING CO., MUMBAI

ITA 936/MUM/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 2111 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2015
• Appeal Filed By: Department
• Bench Allotted: G
• Assessment Year: 2004-2005
• Appeal Filed On: 10-02-2014
• Court: TRIBUNAL
• Department Lawyers: S S KUMARAN
• Keywords: Principle of natural justice; Question of law; Cost of acquisition; Fair market value; Difference of opinion; Valuation report; Change of opinion
• Section: 143(3); 27; 148

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI , , , BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.936/MUM/2014 ASSESSMENT YEAR: 2004-05 & ITA NO.937/MUM/2014 ASSESSMENT YEAR: 2005-06 ACIT 23(1) R.NO.108, C-10 1 ST FLOOR, BKC BANDRA (E) MUMBAI -400051 / VS. G.M. FINANCE & TRADING CO., ITM COMPOUND, L.B.S. MARG, VIKROLI(W) MUMBAI- 400083 (REVENUE) (RESPONDENT ) P.A. NO. AAAFG1367J REVENUE BY SHRI S. S. KUMARAN (DR) RESPONDENT BY SHRI SHEKHAR GUPTA / DATE OF HEARING : 19/09/2015 / DATE OF ORDER: 07/10/2015 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THESE APPEALS HAVE BEEN FILED BY THE REVENUE AGAINS T THE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS) -5, MUMBAI {IN SHORT, CIT(A)}, FOR THE ASSESSMENT YEA RS 2004-05 G.M. FINANCE & TRADING 2 AND 2005-06, BOTH DATED 15.11.2013, DECIDED AGAINST THE PENALTY ORDERS PASSED BY THE ASSESSING OFFICER (IN SHORT AO) U/S 271(1)(C) OF THE ACT. THE REVENUE HAS RAISED FO LLOWING IDENTICAL GROUND IN BOTH THE YEARS: FOR AY 2004-05: WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING PENALTY LEVIED U/S.271(1)(C) OF THE INCOME TAX ACT 1961 OF RS.63,66,835/- WITHOUT APPRECIATING THAT THE ASSESSEE HAS TAKEN EXCESSIVE COST VALUE OF THE LAND WITHOUT ANY EVIDENCE IN ORDER TO REDUCE IT S CAPITAL GAIN TAX LIABILITY. THE LD. CIT(A) FURTHER FAILED TO APPRECIATE THAT THE ASSESSEE HAD FILED INACCURAT E PARTICULARS WHICH HE WAS NOT ABLE TO EXPLAIN DURING THE ASSESSMENT AND PENALTY PROCEEDINGS (REFER PARA 10 OF ITATS ORDER AGAINST QUANTUM APPEAL). FOR AY 2005-06: WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING PENALTY LEVIED U/S.271(1)(C) OF THE INCOME TAX ACT 1961 OF RS.3,09,253/- WITHOUT APPRECIATING THAT THE ASSESSEE HAS TAKEN EXCESSIVE COST VALUE OF THE LAND WITHOUT ANY EVIDENCE IN ORDER TO REDUCE IT S CAPITAL GAIN TAX LIABILITY. THE LD. CIT(A) FURTHER FAILED TO APPRECIATE THAT THE ASSESSEE HAD FILED INACCURAT E PARTICULARS WHICH HE WAS NOT ABLE TO EXPLAIN DURING THE ASSESSMENT AND PENALTY PROCEEDINGS (REFER PARA 10 OF ITATS ORDER AGAINST QUANTUM APPEAL). FIRST WE TAKE UP ITA N0 936/M/2014, AY 2004-05: 2. THE BRIEF BACKGROUND OF THESE CASES IS THAT, PENAL TY U/S 271(1)(C) WAS LEVIED WITH REGARD TO THE ADDITION MA DE BY THE AO IN THE ASSESSMENT PROCEEDINGS ON THE GROUND THAT VALUE, AS ON 01.04.81, OF THE LAND SOLD BY IT DURING THE Y EAR UNDER G.M. FINANCE & TRADING 3 CONSIDERATION, WAS EXCESSIVE AND WAS INFLATED BY TH E ASSESSEE WITH A VIEW TO REDUCE CAPITAL GAIN TAX LIABILITY. T HE ASSESSEE HAD CONTESTED THE MATTER IN FIRST APPEAL BEFORE LD. CIT(A), WHEREIN PART RELIEF WAS GIVEN TO THE ASSESSEE ON TH E COMPUTATION PART ONLY. LD CIT(A), NEITHER ACCEPTED THE RATE AS WAS ADOPTED BY THE AO NOR AS WAS CLAIMED BY THE ASS ESSEE AND HE RECOMPUTED THE TAXABLE AMOUNT OF CAPITAL GAI N. THE ASSESSEE HAD CLAIMED THE AMOUNT OF CAPITAL GAIN OF RS.46,48,295/-. THE AO HAD ASSESSED THE SAME AT RS.3,34,72,902/-, WHEREAS THE LD. CIT(A) WORKED OUT THE SAME AT RS.2,23,95,570/-. THE REVENUE ACCEPTED THE ORDER OF LD. CIT(A), WHEREAS THE ASSESSEE CONTESTED THE MATTER F URTHER IN SECOND APPEAL BEFORE THE HONBLE ITAT, IN THE QUANT UM PROCEEDINGS. THE TRIBUNAL DISMISSED THE APPEAL OF T HE ASSESSEE AND CONFIRMED THE ORDER OF THE LD. CIT(A). THEREAFTER, PENALTY PROCEEDINGS WERE INITIATED BY THE AO AND PE NALTY WAS LEVIED ON THE AMOUNT OF CAPITAL GAIN AS WAS RECOMPU TED BY THE LD. CIT(A), MINUS, THE AMOUNT OF CAPITAL GAIN AS WA S SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME I.E. RS.1,77,47,275/--( RS. RS.2,23,95,570/- MINUS RS.46,48,295/-). LEVY OF THIS PENALTY WAS CONTESTED BY THE ASSESSEE BEFORE LD. CI T(A), BUT SAME WAS CONFIRMED. BEING AGGRIEVED THE ASSESSEE HA S FILED APPEAL BEFORE THE TRIBUNAL, AGAINST THE ORDER OF LD CIT(A), CONFIRMING THE PENALTY. 3. DURING THE COURSE OF HEARING, LD. DR HAS SUPPORTED THE ORDER OF LOWER AUTHORITIES IN LEVYING THE PENALTY. IT WAS SUBMITTED THAT ASSESSEE DID NOT FILE ITS RETURN HON ESTLY, AND G.M. FINANCE & TRADING 4 THATS WHY THERE WAS HUGE VARIATION IN THE RATE OF LAND AS WAS DETERMINED BY THE AO OR AS WAS ADOPTED BY THE LD. C IT(A), IN COMPARISON TO THE RATE AS WAS CLAIMED BY ASSESSEE I N THE RETURN OF INCOME. IT WAS FURTHER SUBMITTED THAT AO HAD ADOPTED THE RATE AFTER MAKING NECESSARY ENQUIRIES T HROUGH SUB-REGISTRAR. IT WAS FURTHER SUBMITTED THAT HONBL E TRIBUNAL HAS CONFIRMED THE ADDITION, AS WAS SUSTAINED BY LD. CIT(A) AND THEREFORE, IT IS A FIT CASE OF LEVY OF PENALTY. 4. ON THE OTHER HAND, LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE HAS VEHEMENTLY CONTESTED THE ORDER OF LOWE R AUTHORITIES IN LEVYING THE PENALTY. IT HAS BEEN SUB MITTED BY HIM THAT IN THIS CASE ADDITIONS HAVE BEEN MADE ON T HE BASIS OF GUESS WORK DONE BY THE LOWER AUTHORITIES, AS WOULD BE EVIDENT FROM THIS FACT THAT EVEN AO AND LD. CIT(A) DIFFER W ITH EACH OTHER WITH RESPECT TO ADOPTION OF RATE OF THE IMPUG NED LAND AS 01.04.1981. IT WAS FURTHER SUBMITTED THAT AO HAD MA DE ADDITION ON THE BASIS OF ESTIMATION ONLY. THIS ADDI TION WAS NOT CONFIRMED BY THE LD. CIT(A) AS IT IS, AND AN ADDITI ON OF A DIFFERENT AMOUNT WAS MADE BY HIM. FURTHER, NO DVOS REPORT WAS OBTAINED BY THE AO BEFORE MAKING THE ADDITION. THUS, RATES HAVE BEEN ADOPTED BY THE AO ON THE BASIS OF S OME GENERAL INQUIRIES, AND NO CONCRETE MATERIAL HAS BEE N USED BY THE AO FOR DETERMINING VALUE OF THE LAND AS ON 1-4- 81. IT WAS FURTHER SUBMITTED THAT NO APPEAL WAS FILED BY THE R EVENUE AGAINST THE ORDER OF THE LD. CIT(A), THUS, THE REVE NUE IS ALSO NOT CLEAR AS TO THE QUANTUM OF INCOME TO BE ASSESSE D IN HANDS OF THE ASSESSEE, ON ACCOUNT OF CAPITAL GAIN ARISING ON SALE OF G.M. FINANCE & TRADING 5 IMPUGNED LAND. IT HAS BEEN FURTHER STATED THAT DETA ILED REPLY WAS FILED BEFORE THE AO DURING THE PENALTY PROCEEDI NGS WHICH IS AVAILABLE AT PAGES NO. 35 TO 41 OF THE PAPER BOOK, THE PENALTY HAS BEEN LEVIED WITHOUT CONSIDERING THE REP LY OF THE ASSESSEE AND THEREFORE, IT IS NOT ONLY CONTRARY TO LAW AND FACTS BUT IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE A LSO. IT WAS FURTHER SUBMITTED THAT THE CHARGE FIXED FOR LEVY OF PENALTY VIZ. WHETHER THERE WAS CONCEALMENT OF INCOME OR FURNISHI NG OF INACCURATE PARTICULARS OF INCOME, IS NOT CLEAR, THE REFORE, PENALTY IS ILLEGAL. RELIANCE WAS PLACED IN THIS REG ARD ON THE JUDGMENTS OF HONBLE GUJARAT HIGH COURT IN THE CASE OF NEW SORATHIA ENG. CO VS CIT 282 ITR 642. LASTLY; IT WAS SUBMITTED THAT QUANTUM APPEAL AGAINST THE ORDER OF HONBLE TR IBUNAL HAS BEEN FILED BY THE ASSESSEE BEFORE HONBLE HIGH COUR T AND THE SAME HAS BEEN ADMITTED BY THE HONBLE HIGH COURT, C OPY OF THE ORDER OF HONBLE HIGH COURT HAS BEEN PLACED IN THE PAPER BOOK AT PAGE NO.7 & 8. RELIANCE WAS PLACED IN THIS REGARD ON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. NAYAN BUILDERS & DEVELOPERS (P) LTD. 368 ITR 722, FOR THE PROPOSITION THAT ONCE APPEAL IS ADMITTED BY THE HIG H COURT, IT SHOWS THAT THE ISSUE INVOLVED IS DISPUTED, IT INVOL VES QUESTION OF LAW AND TWO VIEWS ARE POSSIBLE ON THE ISSUE INVO LVED THEREIN, AND THEREFORE, UNDER SUCH CIRCUMSTANCES PE NALTY SHOULD NOT BE LEVIED. 5. WE HAVE HEARD BOTH THE SIDES VERY CAREFULLY AND GO NE THROUGH THE ORDERS OF LOWERS AUTHORITIES AS WELL AS MATERIAL PLACED BEFORE US FOR OUR CONSIDERATION AND JUDGMENT S RELIED G.M. FINANCE & TRADING 6 UPON BY BOTH THE PARTIES. THE BRIEF FACTS OF THE CA SE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.07.20 04 DECLARING CAPITAL GAIN OF RS.46,48,295/- ON SALE OF 38,670/- SQ. METERS OF LAND AND STRUCTURES SITUATED AT BALKUM VILLAGE, THANE TO M/S. SIDDHI REAL ESTATE DEVELOPERS AND DETERMINED T HE CAPITAL GAIN BASED ON REGISTERED VALUERS REPORT. THE RETUR N OF INCOME FILED BY THE ASSESSEE WAS ACCEPTED BY THE A. O., BY ITS ORDER PASSED U/S 143(3) DATED 27.11.2006. THE ASSES SMENT WAS SUBSEQUENTLY REOPENED BY ISSUE OF NOTICE U/S 14 8 AND IN THE REASSESSMENT ORDER DATED 29.12.2009, THE CAPITA L GAIN WAS DETERMINED AT RS.3,36,63,125/-. IN APPEAL BEFORE LD . CIT(A), THE CAPITAL GAIN WAS RECOMPUTED AT RS.2,23,95,570/ -. THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL, WHICH WAS DISMISSED BY TRIBUNALS ORDER DATED 17.06.2011, THU S CONFIRMING THE ORDER OF LD CIT(A). 5.1. SUBSEQUENTLY, PENALTY PROCEEDINGS WERE INITIATED B Y ISSUING NOTICE U/S 271(1)(C) OF THE INCOME TAX ACT, 1961. IN RESPONSE, THE ASSESSEE SUBMITTED ITS REPLY THROUGH BY LETTER DATED 19.03.2012, WHEREIN IT WAS SUBMITTED THAT THE CAPITAL GAIN AS ON 01.04.1981 WAS DETERMINED AS PER REGISTE RED VALUERS REPORT WHO HAD BASED THE SAME WITH REFEREN CE TO CIRCULAR ISSUED BY THE CHIEF INSPECTOR OF REGISTRAT ION & STAMP DUTY, GOVERNMENT OF MAHARASHTRA, PUNE. IT WAS SUBMI TTED THAT THE ASSESSEE HAS FURNISHED ALL THE MATERIAL FA CTS INCLUDING REPORT FROM A REGISTERED VALUER, WHO IS RECOGNIZED FOR THE PURPOSE OF VALUATION OF PROPERTY AND AS SUCH COULD NOT BE SAID THAT THE ASSESSEE HAD MENS REA , WHICH IS THE SINE QUA NON G.M. FINANCE & TRADING 7 FOR IMPOSITION OF PENALTY. THE ASSESSEE ALSO REFERR ED TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F DILIP N. SHROFF, 291 ITR 519. 5.2. THE AO WITHOUT REFERRING TO THE REPLY SUBMITTED IN RESPONSE TO PENALTY NOTICE DATED 13.03.2012, PASSED AN EX- PARTE ORDER STATING THAT THE ASSESSEE HAS NOT FURN ISHED ANY EXPLANATION IN RESPONSE TO PENALTY NOTICE AND RELY ING ON THE SUPREME COURT DECISION IN THE CASE OF K.P. MADHUSUD ANAN VS. CIT 251 ITR 99 CONCLUDED THAT THE ASSESSEE HAS NOT DISCHARGED THE ONUS AND AS SUCH IMPOSED PENALTY. 5.3. IN APPEAL AGAINST THE PENALTY ORDER, THE ASSESSEE HAD MADE DETAILED SUBMISSION BEFORE THE LD CIT(A) BY IT S LETTER DATED 13.07.2013. IT WAS STATED THAT THE VALUATION WAS DONE BY THE REGISTERED VALUER WHICH WAS ORIGINALLY ACCEP TED BY THE AO IN THE ORDER PASSED U/S 143(3), WHICH IN REASSES SMENT ORDER WAS DETERMINED AT RS.3,36,63,120/-, AND IN FI RST APPEAL, IT WAS REDUCED BY THE LD. CIT(A) TO RS.2,23,95,570/ -. THE VALUATION BY THE AO WAS DETERMINED WITH THE REFEREN CE TO AGRICULTURAL LAND IN WHICH CASE THE VALUE IS LOW AS PER READY RECKONER AGAINST INDUSTRIAL LAND BEING NON AGRICUL TURAL. IN APPEAL, THE VALUE WAS ARRIVED AT BY COMPARING THE A SSESSEES LAND WITH REFERENCE TO DOUBLE ROOM TENEMENTS FOR GR OUND STORIED TEMPORARY CHAWLS WITH BRICKS AND MUD WALL, LOCATED IN SLUM AREA WITHOUT PROPER ACCESS AND CANNOT BE CALLE D AS AUTHORIZED DEVELOPMENT, AND THAT THE OWNERSHIP OF T HE LAND MENTIONED IN ONE OF THE DOCUMENTS IS THAT OF ZOPAD I AND NO G.M. FINANCE & TRADING 8 ELECTRIC SUPPLY. IT WAS SUBMITTED THAT THE ASSESSE E HAD GIVEN THE EXPLANATION BASED ON COGENT AND RELIABLE EVIDEN CE. THUS, THE INITIAL ONUS SHIFTED ON THE REVENUE TO SHOW THA T THE AMOUNT IN QUESTION CONSTITUTED THE INCOME AND NOT O THERWISE. IT WAS ALSO SUBMITTED THE HIGH COURT HAS ADMITTED T HE APPEALS BY ORDER DATED 12.03.2013, BOTH ON THE QUESTION OF LAW AS REGARD REOPENING AND ALSO ON DETERMINATION OF CAPIT AL GAIN. HONBLE HIGH COURT HAS ADMITTED THE APPEAL ON THE F OLLOWING QUESTION OF LAW AND FACTS: (I) WHETHER THE APPELLANT TRIBUNAL IS CORRECT IN LA W IN UPHOLDING THE VALIDITY OF NOTICE ISSUED UNDER SECTI ON 148(1), WHEN THE SAME WAS ISSUED WITHOUT RECORDING VALID RE ASONS? (II) WHETHER THE APPELLATE TRIBUNAL IS CORRECT IN L AW IN UPHOLDING THE VALIDITY OF NOTICE ISSUED UNDER SECTI ON 148(1) MERELY ON CHANGE OF OPINION WHEN THE MARKET VALUE A S ON 01.04.1981 WAS VERIFIED DURING THE COURSE OF ORIGIN AL ASSESSMENT PROCEEDINGS? (III) WHETHER THE APPELLANT TRIBUNAL ERRED IN UPHOL DING THE DETERMINATION OF THE LONG TERM CAPITAL GAIN OF RS.2,23,95,570/- AS AGAINST RS.46,48,295/- DECLARED BY THE APPELLANT? 5.4. THE LD CIT(A), DELETED THE PENALTY AFTER CONSIDERI NG FACTS AND CIRCUMSTANCES OF THE CASE AND APPLICABLE POSITI ON OF LAW. WE FIND THAT FINDINGS OF LD CIT(A) ARE WELL REASONE D AND CORRECT AS PER LAW AND FACTS. IT IS NOW WELL SETTL ED POSITION OF LAW THAT ASSESSMENT PROCEEDINGS AND PENALTY PROCEED INGS ARE INDEPENDENT PROCEEDINGS. FURTHER, THE LEVY OF PENAL TY IS NOT G.M. FINANCE & TRADING 9 AUTOMATIC, AFTER THE ADDITIONS/DISALLOWANCES ARE MA DE IN THE ASSESSMENT ORDER, NOR IT IS MERELY CONSEQUENTIAL TO THE CONFIRMATION BY THE APPELLATE AUTHORITIES OF THE ADDITION/DISALLOWANCES MADE IN THE ASSESSMENT ORDER . THE ASSESSMENT AND PENALTY PROCEEDINGS ARE DIFFERENT. T HE MERE FACT OF CONFIRMATION OF ADDITION CANNOT, PER SE, LE AD TO THE IMPOSITION OF THE PENALTY. IN THE PENALTY PROCEEDIN GS, THE ASSESSEE IS GIVEN CHANCE TO SHOW THAT WHY THE PENAL TY BE NOT IMPOSED WITH REFERENCE TO THE ADDITION MADE OR CONF IRMED IN THE QUANTUM PROCEEDINGS. IF THE ASSESSEE SUCCEEDS I N EXPLAINING HIS CASE, THEN NO PENALTY CAN FOLLOW AND VISE VERSA. IT IS, THEREFORE, AMPLY CLEAR THAT THE CONFIRMATION OF THE ADDITION BY THE TRIBUNAL IN QUANTUM PROCEEDINGS CAN NOT, STRAIGHTAWAY, MEAN THAT THE PENALTY BE AUTOMATICALL Y LEVIED. IN THE PENALTY PROCEEDINGS, AFTER THE EXPLANATION I S RECEIVED FROM THE ASSESSEE, IT IS FOR THE AO MAKE OUT A CASE , CLEARLY, AS TO WHETHER THERE HAS BEEN CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME ON T HE PART OF THE ASSESSEE. LET US, FURTHER ANALYSE THE SITUATION S, WHEREIN, AS PER LAW, PENALTY CAN BE LEVIED. THE NECESSARY IN GREDIENTS FOR ATTRACTING THE EXPLANATION TO SECTION 271(1)(C) ARE AS FOLLOWS: (A) IF A PERSON FAILS TO OFFER THE EXPLANATION, OR (B) HE OFFERS THE EXPLANATION WHICH IS FOUND BY THE AUTHORITIES TO BE FALSE, OR (C) THE PERSON OFFERS EXPLANATION WHICH HE IS NOT A BLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME HA VE BEEN DISCLOSED BY HIM. G.M. FINANCE & TRADING 10 IF THE CASE OF AN ASSESSEE FALLS IN ANY OF THESE TH REE INGREDIENTS, THEN THE DEEMING PROVISION COMES INTO PLAY AND THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOT AL INCOME IS CONSIDERED AS THE INCOME IN RESPECT OF WHICH PAR TICULARS HAVE BEEN CONCEALED FOR THE PURPOSE OF CLAUSE (C) O F SUCH SECTION (1) OF SECTION 271 AND THE PENALTY BECOMES LEVIABLE. IF THE ASSESSEE SUCCESSFULLY COMES OUT OF THE ABOVE TH REE CONSTITUENTS, THEN HE CANNOT BE DEEMED TO HAVE CONC EALED THE PARTICULARS OF HIS INCOME WITH REFERENCE TO THE AMO UNT ADDED OR DISALLOWED IN THE ASSESSMENT ORDER. 5.5. LET US NOW, ANALYSE FACTS OF THE CASE AND EXPLANAT ION OF THE ASSESSEE, IN THE ASSESSMENT PROCEEDINGS AS WELL AS IN PENALTY PROCEEDINGS. AS PER FACTS ON RECORD, THE AS SESSEE FIRM HAD SOLD INDUSTRIAL LAND VIDE TWO AGREEMENTS DATED 30.04.2004 ALONG WITH STRUCTURES THREON TO ONE M/S. SIDHI REAL ESTATE DEVELOPERS FOR A TOTAL CONSIDERATION OF RS.5,06,70,000/-. THE LAND WAS PURCHASED IN 1966 AN D THE ASSESSEE WAS ENTITLED TO ADOPT ITS FAIR MARKET VALU E AS ON 01.04.1981 AS ITS COST. ACCORDINGLY, THE ASSESSEE A DOPTED THE FAIR MARKET 01.04.81 ON THE BASIS OF THE REPORT GIV EN BY ITS REGISTERED VALUER, @ RS.18.80 PER SQ. FT., THE AO H AD ADOPTED THE RATE OF LAND @ RS.2.51 PER SQ. FT., WHEREAS THE CIT(A) ADOPTED THE RATE OF LAND @ RS.5.20 PER SQ. FT. THE ASSESSING OFFICER AND THE LD CIT(A) DID NOT ACCEPT THE VALUER S REPORT. IN THE VALUATION REPORT, DETAILED REASONING WAS GIVEN IN SUPPORT OF THE RATE DETERMINED BY REGISTERED VALUER. THE AS SESSING G.M. FINANCE & TRADING 11 OFFICER WAS OF THE VIEW THAT THIS VALUATION AS HIGH LY EXAGGERATED, AND DEVOID OF ANY BASIS. ON 10 TH DECEMBER, 2010 THE ASSESSING OFFICER WROTE TO THE ASSESSEE POINTIN G OUT THREE COMPARABLE SALE INSTANCES IN THE LOCALITY WHICH IND ICATED THE PRICES BETWEEN RS.5 TO RS.10 PER SQUARE FEET, AS LA TE AS IN 1985, AND IN RESPECT OF HOUSE PROPERTY WHICH ANY DA Y FETCHES HIGHER PRICE THAN A VACANT FACTORY LAND WOULD FETCH . IT WAS ALSO POINTED OUT THAT THE AREAS IN WHICH THESE SALE INST ANCES HAVE TAKEN PLACE ARE ALSO URBAN AREAS ADJACENT TO THE LA ND OF THE ASSESSEE. ON THIS BASIS, AND RELYING UPON THE CIRCU LAR ISSUED BY THE ASST. DIRECTOR, (TOWN PLANNING), THE ASSESSI NG OFFICER REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY 67% O F THE AVERAGE SALES VALUE OF COMPARABLE SALE INSTANCES IN 1985 BE NOT ADOPTED AS FAIR MARKET VALUE AS ON 01.04.1981. THIS SHOW CAUSE NOTICE WAS RESPONDED TO BY THE REGISTERED VAL UER, WHO CHALLENGED THE ASSUMPTIONS MADE BY THE AO. VIDE HIS LETTER DATED 23 RD DECEMBER, 2010, THE REGISTERED VALUER POINTED OUT VARIOUS DISCREPANCIES IN THE ASSUMPTIONS MADE BY TH E AO. THE REGISTERED VALUER CONTENDED THAT THE THREE SAL ES INSTANCES REPORTED BY AIR UNIT ARE NOT OF BUILDABLE PLOT OR O F AUTHORIZED STRUCTURES ALONG WITH LAND, HAVING PROPER ACCESSES AND OTHER SERVICES SUCH AS ELECTRICITY, WATER SUPPLY, DRAINAG E ETC. AND THAT THESE HOUSE ARE NOT SITUATED IN THE VICINITY OR ON THE ROAD ON WHICH THE LAND UNDER VALUATION FRONTS. THE ASSESSING OFFICER WAS CLEARLY NOT IMPRESSED WITH THESE ARGUME NTS, AND HE REJECTED THE VALUATION REPORT. HE MADE A REFERENCE TO THE DVO FOR VALUATION OF THE LAND AS ON 01.04.1981, BUT AS THE DVOS REPORT WAS NOT RECEIVED BY HIM, HE PROCEEDED TO ADO PT THE G.M. FINANCE & TRADING 12 CIRCLE RATES AS ON 01.04.1989 WHICH WAS RS.4.5 LAKH S PER HECTARE FOR PLOTS, EXCEEDING AREA OF 20 ACRE. THIS VALUE THUS CAME TO RS.4.18 PER SQUARE FEET. THE ASSESSING OFFI CER MADE A FURTHER ADJUSTMENT OF 40% OF VALUE, AS THE VALUATIO N WAS TO BE ADOPTED AS ON 01.04.1981. THE VALUE SO ARRIVED AT R S.1.67 PER SQUARE FEET WAS THEN ENHANCED BY 50% ON ACCOUNT OF THE FACT THAT THE LAND WAS FOR USE AS A NON-AGRICULTURAL LAN D. THE VALUE AS ON 01.04.1981 WAS THUS ARRIVED AT RS.2.51 PER SQ UARE FEET. ACCORDINGLY, COST OF ACQUISITIONS OF LAND WAS TAKEN AT BY ADOPTING THE VALUE AT RS.2.51 AS ON 01.04.1981 AND THEN APPLYING THE INDEXATION. IT WAS IN THIS BACKGROUND THAT THE ADDITIONS WERE MADE TO THE CAPITAL GAINS DISCLOSED BY THE ASSESSEE. THE LD CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN PRINCIPLE, BUT RESTRICTED THE VALUATION TO THE HIGHEST RATE WHICH COMPARABLE SALE INSTANCES TOOK PLACE RAT HER THAN TAKING AVERAGE OF THE SAME. THE TRIBUNAL SUSTAINED THE ORDER OF LD. CIT(A). 5.6. IN THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CA SE, AND KEEPING IN VIEW THE NATURE OF ADDITION MADE BY THE AO, QUANTUM OF WHICH WAS MODIFIED BY THE LD CIT(A), AND IN VIEW OF THE EXPLANATIONS GIVEN BY THE ASSESSEE AND THE P ENALTY ORDER PASSED BY THE AO, IT IS SEEN THAT THE NECESSA RY CONDITIONS FOR INVOKING EXPLANATION 1 OF SECTION 27 1(1)(C) ARE MISSING. BOTH OF THE LOWER AUTHORITIES HAVE DETERMI NED THE RATES OF LAND, BY ADOPTING SOME BASIS. THE AO HAD A CCEPTED THE CLAIM OF THE ASSESSEE IN THE ORIGINAL ASSESSMEN T ORDER. HE CHANGED HIS STAND IN THE REASSESSMENT ORDER. THUS, THERE ARE G.M. FINANCE & TRADING 13 THREE DIFFERENT OPINIONS WITH RESPECT TO RATES OF L AND I.E. ONE AS FORMED BY AO IN ORIGINAL ASSESSMENT ORDER, TWO- AS FORMED BY THE AO IN REASSESSMENT ORDER AND THREE- AS ADOPT ED BY LD CIT(A). THE TRIBUNAL HAS APPROVED THE OPINION OF TH E LD CIT(A), WHICH IS AGAIN SUBJECT TO REVIEW BEFORE HON BLE HIGH COURT. IN THESE CIRCUMSTANCES, THE ELEMENT OF GUES SWORK CANNOT BE RULED OUT, THEREIN. THE QUANTUM OF INCOME DETERMINED IS CERTAINLY NOT BEYOND THE SHADOW OF DO UBTS. UNDER THESE CIRCUMSTANCES, WE HAVE STRONG DOUBTS, I F IT CAN BE SAID THAT, WITH CERTAINTY, THAT THERE WAS ANY CONCE ALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME ON THE PART OF THE ASSESSEE. UNDER THE INCOME TAX LAW, PARAMETERS FOR DETERMINATION OF TAXABLE INCOME AND LEVY OF PENALTY ARE DIFFERENT FROM EACH OTHER. BOTH SHOULD NOT BE MIXED OR INTERCHANGED. THE PENAL PROVISIONS ARE QUA SI CRIMINAL IN NATURE, THEREFORE THESE HAVE TO CONSTRU ED AND APPLIED STRICTLY. PENALTY CAN BE LEVIED BY THE AO, ONLY AND ONLY, IF, THE AO IS ABLE TO ESTABLISH THAT CASE OF THE AS SESSEE FALLS WITHIN THE FRAMEWORK OF THE PENAL PROVISIONS, AND A S PER THE GIVEN PARAMETERS. IF WE EXAMINE THE FACTS OF THIS C ASE, WE CAN SAY THAT EVEN IF A DUTY MAY BE ENJOINED ON THE ASSE SSEE TO MAKE CORRECT DISCLOSURE OF INCOME, BUT IF SUCH DISC LOSURE IS BASED ON THE OPINION OF AN EXPERT, WHO IS OTHERWISE ALSO A REGISTERED VALUER, HAVING BEEN APPOINTED IN TERMS O F A STATUTORY SCHEME, THEN ONLY BECAUSE HIS OPINION IS NOT ACCEPTED OR SOME OTHER EXPERT GIVES ANOTHER OPINION , THE SAME BY ITSELF MAY NOT BE SUFFICIENT FOR ARRIVING AT A C ONCLUSION THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS O F INCOME. G.M. FINANCE & TRADING 14 HENCE, IN OUR CONSIDERED OPINION, PENALTY CANNOT BE LEVIED IN THE FACTS AND CIRCUMSTANCES OF THIS CASE, ESPECIALL Y WHEN THE QUANTIFICATION OF THE INCOME ITSELF DOES NOT HAVE S TRONG PILLARS TO STAND. 5.7. LASTLY, THE LD COUNSEL HAS FURTHER CONTENDED THAT THE ASSESSEES APPEAL BEFORE THE BOMBAY HIGH COURT HAS BEEN ADMITTED ON QUESTION OF LAW AND ALSO ON FACTS. IT I S, THEREFORE, CLEAR THAT THE ADDITIONS IN RESPECT OF WHICH PENALT Y WAS CONFIRMED HAVE BEEN ACCEPTED BY THE JURISDICTIONAL HIGH COURT LEADING TO SUBSTANTIAL QUESTION OF LAW. WHEN THE HI GH COURT ADMITS SUBSTANTIAL QUESTION OF LAW ON AN ADDITION, IT BECOMES APPARENT THAT THE ADDITION IS CERTAINLY DEBATABLE. THE ADMISSION OF SUBSTANTIAL QUESTION OF LAW BY THE HON BLE HIGH COURT LENDS CREDENCE TO THE BONA FIDES OF THE CLAIM MADE BY THE ASSESSEE. ONCE IT TURNS OUT THAT THE CLAIM OF T HE ASSESSEE COULD HAVE BEEN CONSIDERED AS PER LAW AND IS NOT CO MPLETELY DEBARRED AT ALL, THE MERE FACT OF CONFIRMATION OF A DDITION WOULD NOT PER SE LEAD TO THE IMPOSITION OF PENALTY. 5.8. HENCE, IN VIEW OF THE AFORESAID DISCUSSION AND FAC TS & CIRCUMSTANCES OF THE CASE AND LEGAL POSITION AS DIS CUSSED ABOVE, IT IS HELD THAT PENALTY HAS BEEN RIGHTLY DEL ETED BY THE LD CIT(A), ORDER OF LD CIT(A) IS CONFIRMED, AND GROUND RAISED BY THE REVENUE IS DISMISSED. G.M. FINANCE & TRADING 15 NOW WE TAKE UP ITA N0 937/M/2014, AY 2005-06: 5.9. IT IS NOTED THAT LD CIT(A) HAS SIMPLY FOLLOWED HIS ORDER FOR AY 2004-05, FOR DELETING THE PENALTY, ON THE GROUND THAT FACTS OF AY 2004-05 AND 2005-06, ARE IDENTICAL. THE GROUN D RAISED BY THE REVENUE ALSO, IS IDENTICAL, IN THIS YEAR. TH US, FACTS AND ISSUE REMAINING THE SAME, WE FOLLOW OUR ORDER FOR C ONFIRMING THE ORDER OF LD CIT(A) IN DELETING THE PENALTY AND DISMISSING THE GROUND RAISED BY THE REVENUE. 5.10 . IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH OCTOBER, 2015. SD/- (AMIT SHUKLA ) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER ' ! / ACCOUNTANT MEMBER MUMBAI; # DATED : 07/10/2015 CTX? P.S/. .. #$%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. % &' / THE APPELLANT 2. ()&' / THE RESPONDENT. 3. * * ( % ) / THE CIT, MUMBAI. 4. * * / CIT(A)- , MUMBAI 5. -. / (01 , * % 012 , / DR, ITAT, MUMBAI 6. / 34 5 / GUARD FILE. / BY ORDER, ) -% ( //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI