Income Tax Appellate Tribunal - Delhi
Deepak Verma, New Delhi vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'B' NEW DELHI
BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER
AND
SHRI J. S. REDDY, ACCOUNTANT MEMBER
W.T.A .Nos.-17 To 22/Del/2011
ASSESSMENT YEARs: 1995 to 2002
Deepak Verma Vs. Wealth Tax Officer,
S/o Late Sh. Vijendra Verma Ward-1,
Moh. Maniram. Shamli Shamli Distt. Muzaffar Nagar,
Distt. Muzaffar Nagar (U.P.) (U.P.)
PAN: ABFPV3085Q
(APPELLANT) (RESPONDENT)
Assessee by:-Sh. K. L. Aneja, Adv.
Revenue by:-Ms. Shumana Sen, Sr. DR
ORDER
PER BENCH.
All these appeals are filed by the assessee. WTA No. 17 & 18/Del/ 2011 are directed against the common order passed by the Commissioner of Wealth Tax (Appeals), Muzaffar Nagar dated 11.7.2011 for the A.Y. 1995- 96 and 1996-97. WTA No. 19 to 22/Del/2011 are appeals directed against the common order passed by the Commissioner of Wealth Tax (Appeals), Muzaffar Nagar, dated 19.7.2011 for the A.Y. 1997-98, 1999-00 and 2000- 2 W.T.A .Nos.-17 To 22/Del/2011 01 and 2001-02. As the issues arising in all these appeals are common, for the sake of convenience they are heard together and disposed off by way of this common order.
2. The assessee is in individual. He files his income tax returns regularly. The assessee filed his wealth tax returns up to the A.Y. 1995-96. Thereafter, as the assessee was of the opinion that his net wealth is below taxable limit, he stopped filing wealth tax returns.
3. Nevertheless the assessee had filed a statement of chargeable wealth, along with the income tax returns. The AO issued a notice u/s 17 of the Wealth Tax Act. In response the assessee filed return of wealth on 5.08.2002. The assessment was made u/s 16(3) r.w.s. 17 determining total taxable wealth at a figure higher than that which was returned by the assessee.
4. Aggrieved the assessee filed an appeal before the CIT (A), Muzaffar Nagar. The ld. CIT (A) Muzaffar Nagar, granted part relief. Further aggrieved the assessee carried the matter before the ITAT New Delhi, which restored the appeal to the file of the ld. CIT (A), Muzaffar Nagar.
5. Ld. CIT (A) Muzaffar Nagar, re-adjudicated the issue and confirmed part of the additions made by the AO.
3 W.T.A .Nos.-17 To 22/Del/2011
6. On receipt of the order of ld. CIT (A), the AO issued a show cause notice to the assessee calling for an explanation as to why penalty u/s 18(1)
(c) of the WT Act should not be levied. The assessee filed the reply, the AO rejected the explanation filed by the assessee and came to conclusion that the assessee furnished inaccurate particulars of wealth. He levied penalty u/s 18(1) (c) of the W.T. Act. Aggrieved the assessee filed an appeal before the ld. CIT (A) without success. Further aggrieved the assessee by filed this appeal.
Appeals for the A.Y. 1995-96 and 1996-97 are on common issues. The facts are brought out by the ld. CIT (A) at Para 3 page 2 of his order which is extracted for ready reference.
"3. A.Y. 1995-96:
Ground of appeal Nos. 1 and 2 are against imposition of penalty u/s 18(1) (c) at Rs.33,000/-. In the grounds of appeal it was claimed by the appellant that difference of valuation of the property was explained by him and such explanation being bona fide, the appellant has rebutted the presumption that such difference in wealth returned and wealth assessed was because of concealment of true particulars. During the appellate proceedings it was submitted that wealth declared in both the 4 W.T.A .Nos.-17 To 22/Del/2011 years was below taxable limit and was submitted in conformity with the notices issued u/s 17 by the AO. As per the appellant he along with his grandfather & other family members used to file regular income tax/ wealth tax returns in time as provided u/s 139 (1) 14(1) upto A.Y. 1994-95. The wealth returned in A.Y. 1993-94 was below taxable limit because of amendment in wealth-tax provisions of chargeable wealth with effect from A.Y. 1993-94, wherein the definition of the word "Assets" u/s 2(ea) was inserted. The appellant did not submit wealth-tax return for the years under consideration independently, though used to append computation of taxable wealth for the years, under appeal, along with return of income-tax and the AO did not take cognizance, nor issued any notice calling for return.
The AO however issued notices u/s 17 in both the years under consideration and in compliance thereof the appellant submitted return for both the years showing taxable wealth to be below taxable limit. The appellant has also enclosed computations of wealth for the aforesaid assessment years. The AO made assessments in both the years taxing the lands in Kamla Colony as well as ½ share in lands adjacent to 5 W.T.A .Nos.-17 To 22/Del/2011 Hanuman Till at abnormally high figure by rejecting appellant's claim that the lands were not taxable in conformity with the past record available for assessment years 1993-94 & 1994-95 from where the wealth was challenged. The wealth assessed by the AO has Colony and Hanuman Till was on account of change of opinion because of passage of time involving no omission of filing the assets owned by the appellant in the wealth tax returns but becoming taxable because of non-grant of exemption claimed which was in the appellant's mind when no returns were filed earlier and when filed u/s 17 exemption was claimed. In the circumstances simply because the wealth has been assessed at a positive figure and there is no change of omissions of any chargeable wealth is on account of difference of opinion and variation of rates offered/applied and as such the appellant cannot be held liable for penalty u/s 17 which in both the years deserves to be deleted."These contentions were rejected by the ld. C.W.T.(A).
7. While adjudicating the appeal for the A.Y. 1996-97, the ld. CIT (A) applied his findings in the A.Y. 1995-96.
6 W.T.A .Nos.-17 To 22/Del/2011
8. For the A.Ys. 1997-98, 1999-00, 2000-01 and 2001-02 certain other issues arise. The facts have been brought out from page 2 onward in the CIT(A)'s order dated 19.7.2011. These are extracted for ready reference:
"4. A.Y. 1997-98:
Ground of appeal Nos. 1 and 2 are against imposition of penalty u/s 18(1) (c) at Rs.35,000/-. In the grounds of appeal it was claimed by the appellant that difference of valuation of the property was explained by him and such explanation being bona fide, the appellant has rebutted the presumption that such difference in wealth returned and wealth assessed was because of concealment of true particulars. Mainly on the valuation of half share in Khata No. 184, Kamla Colony land, the value of which was shown at 'NIL' by the appellant claiming exemption u/s 2(ea) of W.T.Act. However, the same was valued at Rs.46,03,500/- by the AO and confirmed by the appellant authorities.
In the appellant proceedings it was pleaded that the appellant's half share in land situated in Khata No. 184 received from Sh. Jitendra Verma was converted into 'stock-in- trade'. However, such conversion was not accepted by the AO since the appellant could not substantiate the claim of conversion. It has been contended that the perusal of computation of wealth returned and finally assessed will reveal that variation in the wealth finally assessed over returned in the amount of Rs.53,39,371/- which has been considered by the AO for purpose of levy of penalty as according to the AO the 7 W.T.A .Nos.-17 To 22/Del/2011 appellant had concealed particulars of wealth / assets and has levied penalty of Rs.35,000/- which is nearly 104% of the alleged tax sought to be evaded. As per the appellant the AO has treated all the difference between the above figures as concealed wealth. Even in respect of wealth, where there is variation in the value offered by the appellant and assessed by the AO at an estimated figure, but his estimate having been turned to be much below by the Hon'ble ITAT in cross appeal involving no element of mens-rea or otherwise. The appellant has also placed reliance on the decision of the Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC) wherein the cases earlier reported in respect of Dilip & Shroff vs. JCIT 291 ITR 519 (SC) & Union of India vs. Dharmendra Textiles 306 ITR 277 (SC) have been discussed. As per the appellant Further, the following submissions have been made-
".........The law duly recognized the conversion of "capital asset" to "stock-in-trade" and no format is given in the Act or otherwise, the only method left to the appellant is to show some evidence of conversion. The appellant had duly disclosed and placed before the AO the copies of declarations of conversion of such assets in the year of declaration which were not claimed for technical reason when the exemption claimed was denied and such assets treated as "capital assets" as against "business assets" which did not mean that there has been furnishing of inaccurate particulars of wealth, so as to come within the clutches of Wealth-tax Act. Bonafides of the 8 W.T.A .Nos.-17 To 22/Del/2011 appellant of conversion of few capital assets to 'stock - in- trade' is evident from the appellant's own action that he offered the difference of selling price over the cost of conversion in the A.Y. 2004-05 submitted on 15-03-2005, even before the matter came up for consideration before the 1st appellate authority in appeal preferred u/s 23 of the Wealth -tax Act. The perusal of Income-tax return for A.Y. 2004-05 (computation attached comprising of statement of assessable income, accounts, computation of chart showing capital gain as well as surplus in respect of lands sold which were held in stock) and also of the revision of such returns made before the AO in the assessment u/s 143(3) made by the AO on 28-06-2006, where full details have been mentioned.
The perusal of above will reveal that the sale proceeds of lands in the year depicted at Rs.51,55,000/- comprised of the followings:-
Rs.28,05,000/- Sale proceeds of 4 portions of lands converted into 'stock -in-trade" in earlier years. Rs.23,50,000/- sale proceeds of lands situated at by-pass Rs.51,55,000/- Total The perusal of above will show that the appellant in the Income
-tax return offered capital gain at Nil because of exemption u/s 54EC and taxable business income at Rs.2,04,378/- forming part of total income returned in the year at Rs.4,21,010/-. As a result, revision of income-tax return in conformity with action under the wealth-tax wherein claim in "stock-in-trade" given up, there will be no business income liable to tax, whereas, the 9 W.T.A .Nos.-17 To 22/Del/2011 capital gain increased to Rs.37,04,425/- all being exempt because of investment in section 54EC. The resultant position as a result of this was for income offered in the return under the head "business income" in the amount of Rs.2,04,378/- resulted into Nil in the finally assessed income and the appellant had taken refund of taxes paid under self assessment or otherwise in preference to Wealth-tax Act in excess.
The perusal of common part as aforesaid will reveal that apart from payment of regular taxes in A.Ys. 1997-98, 1999-00 & 2001-02 amounting to Rs.5,09,786/- (41,840 + 95,990 + 1,60,815 + 2,02,341), the appellant also paid interest u/s 234B, which can be treated as sufficient compensation to the Government for delay in filing Wealth -tax for the A.Ys. 1997- 98, 1999-2000, 2000-01 & 2001-02.
Under the circumstances, the AO's action in levying penalties of Rs.35,00/- in A.Y. 1997-98, Rs.1,00,000/- in A.Y. 99-2000, Rs.2,00,000/- in A.Y. 2000-01 and Rs.1,89,200/- in A.Y. 2001-02 is excess and great hit and deserves to be dismissed. Even the penalty levied in assessment year 2000-01 at Rs.2,00,000/- as against minimum penalty leviable works out to Rs.1,57,199/- and is in excess...." The ld. C.W.T. (A) rejected the contentions of the assessee.
9. The ld. counsel for the assessee Shri K. L. Aneja, reiterated the contentions raised by him before the first appellate authority. He filed a paper book running into 101 pages as well as small note giving particulars of 10 W.T.A .Nos.-17 To 22/Del/2011 the assets considered as concealed wealth. The sum and substance of Mr. Aneja's contentions are :
(a) There is no concealment of any asset and it is only the valuation of the asset which is in dispute.
(b) The assessee has valued the assets by adopting the cost index prescribed for computation of long term capital gains and whereas the AO adopted circle rate applicable to the area for valuation.
(c) That the CIT (A) has not fully approved the valuation done by the AO and had partly reduced the same and that the ITAT further reduced the value, and that this shows that there is a difference in opinion on the issue of valuation and that levy of penalty on such difference in valuation is not warranted.
(d) That no penalty can be levied when there is mere variation in the valuation as all the assets were disclosed and there was no concealed assets.
(e) That penalty has been levied on the ground that inaccurate particulars of wealth has been furnished and that the same is bad in law in view of the judgment in the case of CIT vs. Reliance Petroproduct Pvt. Ltd. 322 ITR 158 (SC).
(f) On the second issue on which penalty was levied i.e. conversion of capital assets into stock-in-trade he submitted that assessment of the 11 W.T.A .Nos.-17 To 22/Del/2011 proceeds of sale as capital gains was due to mutual agreement with the revenue authorities and hence no penalty can be levied.
(g) The decision of the Tribunal in the case of Devendra Verma is not applicable for the reasons that the assessee had sold lands which were held as stock, and whereas Mr. Devendra Verma has not sold any land.
(h) That the assessee had made full disclosure of all the assets and that there is no new asset discovered by the AO and that the explanation given is bona fide and hence no penalty can be levied.
(j) Relied on the submissions made before the CIT (A).
10. The ld. DR Ms. Shumana Sen took this bench through the orders of the ld. CIT (A) and submitted that returns of wealth were filed in pursuance to a notice u/s 17 and that the assessee was fully aware of the value of his assets and on those circumstances non-furnishing of proper valuation of the assets warrants levy of penalty. She submitted that ld. CIT (A) has pointed out that at the time of partition of the properties among all the family members, the value of the property so devolved is supposed to be known to the assessee. On the issue of conversion of capital asset into stock-in-trade, she pointed out that the assessee had declared the sale proceeds under the head capital gains and also claimed Exemption u/s 54(EC) of the Act, which demonstrated that no such conversion has taken place. On the note appended 12 W.T.A .Nos.-17 To 22/Del/2011 below the computation she submitted that it is a self serving explanation and that there is no other evidence, and that the argument of agreement between the officers of the revenue and the assessee is not evidenced by record.
11. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and a perusal of the papers on record and the orders of the authorities below, we hold as follows:
Penalty in this case have been levied on two issues.
(1) The first issue is the variation of the valuation of (a) two plots in Kamla Colony;
(b) Half share in lands or Nala Road adjacent to Hanuman Tilla which was received by the assessee on partition.
(2) The second issue is a half share of land transferred from Jitendra Kumar in Khata No. 184 on 29.07.1998 and half share of agricultural land received from grand father by inheritance, both of which have been claimed as being originally capital assets, which were converted into stock-in-trade and held as such and thus not an asset within the meaning of section 2(ea) of the Wealth Tax Act 1957.
On the first category i.e. variation in the valuation of capital assets, we find that the assessee has adopted valuation by applying the cost index prescribed for computation of capital gains and whereas the AO has adopted 13 W.T.A .Nos.-17 To 22/Del/2011 the circle rate fixed by the registrating authority for stamp duty purposes, for the purpose of valuation. When the matter travelled to the ld. CIT (A), the valuation done by the AO was reduced for the reasons given in his order. The Tribunal further reduced the valuation confirmed by the ld. CIT (A), Be it as it may, valuation is an opinion. The valuation done by the assessee, in our view, was a bona fide exercise. If an assessee values his assets as per the cost index prescribed by the Rules for the purpose of computation of capital gains, no fault can be found with the same. Though the assessee had not filed a wealth tax return suo-motto, he had in fact filed statement of chargeable wealth along with the income tax return. This shows the bona fide of the assessee. When the taxable wealth of the assessee was assessed by the AO at Rs.1,16,42,500/-, the value of wealth determined subsequent to the order of the ITAT was Rs.47,12,620/- for the A.Y. 1995-96. The valuation done by the AO was not confirmed by the appellate authorites and it is found that there is huge variation.
12. When all the assets have been fully and truly disclosed and when there is a bona fide method adopted by the assessee for arriving at the value of such assets, just because there is a difference in opinion in the method of valuation and subsequent variation in valuation, we are of the opinion that such variation in valuation would not tantamount to furnishing of inaccurate 14 W.T.A .Nos.-17 To 22/Del/2011 particulars of wealth authorising levy of penalty u/s 18 (1) (c) of the W.T. Act. The propositions laid down by Hon'ble Supreme Court in the case of Reliance Petro Products Ltd. (Supra) is applicable to the facts of this case. The explanation given by the assessee in our view is bona fide. Thus we delete the penalty as confirmed by the ld. CIT (A) on the issue of difference in valuation of two plots in Kamla Colony and half shares of land and Nala Road adjacent to Hanuman Tilla. To this extent the assessee gets relief.
13. Coming to the claim of the assessee of having converted capital assets into stock -in-trade, we find that the assessee has on the sale of these lands declared income as capital gains and claimed Exemption u/s 54 EC of the Act. Thus the theory that the capital asset is converted into stock-in-trade is not correct. The first appellate authority has applied the decision of the Coordinate bench of the Tribunal in the case of Shri Devendra Verma in ITA No. 127, 128 and 129/08-09 NZR dated 23.8.2010 and confirmed the penalty. We find no infirmity in the same.
14. Though the ld. counsel for the assessee sought to distinguish this decision of the coordinate bench, we are of the considered opinion that the same applies on all fours to the facts of the case. Even though there is sale of land, the income was disclosed as capital gains. Thus respectfully following the coordinate bench order on this issue, we uphold the findings of the ld. 15 W.T.A .Nos.-17 To 22/Del/2011 CIT (A) given at page 4 to 7 of his order dated 19.7.2011. In the result this issue is decided against the assessee and the penalty on this aspect is confirmed.
15. Thus the appeal of the assessee for the A.Ys. 1995-96, 1996-97 as well as 1997-98 are allowed and whereas the appeals of the assessee for the A.Y. 1999-00, 2000-01, 2001-02 are allowed in part.
Order pronounced in the open Court on 23/8/2013.
Sd/- Sd/-
(DIVA SINGH ) (J. S. REDDY)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated:23/08/2013
*AK VERMA*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR