Income Tax Appellate Tribunal - Delhi
Ashok Raj Nath, Panipat vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI 'A' BENCH
BEFORE SHRI A.D. JAIN, JM & SHRI A.N. PAHUJA, AM
ITA No.2970/Del/2012
Assessment year:2006-07
Assistant CIT, V/s. Ashok Raj Nath, C/o
Panipat Circle, M/s Deepak W oolen Mills,
Panipat G.T. Road, Panipat
[PAN : AAPPN 8330 P]
(Appellant) (Respondent)
Assessee by None
Revenue by Mrs. Anusha Khurana, DR
Date of hearing 22-08-2012
Date of pronouncement 31-08-2012
ORDER
A.N.Pahuja:- This appeal filed on 14.06.2012 by the Revenue against an order dated 01.03.2012 of the learned CIT(A)-Karnal, raises the following grounds:-
"1) On the facts and in the circumstances of the case, the ld. CIT(A) has erred in law in cancelling penalty of ``10,77,190/- levied u/s 271(1)(c) on account of non-
disclosure of short term and long term capital gain in the return originally filed without appreciating the fact that the so called revised return filed including the amount of capital gains was subsequent to the receipt of notices u/s 143(2)/142(1) issued by the department.
2. The appellant craves leave to add or amend the grounds of appeal before the appeal is heard or disposed of. "
2. At the outset, none appeared before us on behalf of the assessee nor submitted any request for adjournment. Considering the nature of issue and 2 ITA No.2970/Del./2012 findings of the ld. CIT(A), the Bench proceeded to dispose of the appeal after hearing the ld. DR.
3.. Facts, in brief, as per relevant orders are that return declaring income of ```73,73,806/- filed on 31.10.2006 by the assessee, was selected for scrutiny with the service of a notice u/s 143(2) of the Income-tax Act, 1961, (hereinafter referred to as the Act) issued on 11th October, 2007. None responded to this notice. In response to a show cause notice alongwith notice u/s 143(2) and 142(1) of the Act, the ld. AR on behalf of the assessee sought adjournment for 18th August, 2008 ,when none appeared. In response to subsequent show cause notice dated 3rd September, 2008, the assessee submitted a detailed reply along with revised return declaring income of ``1,28,20,913/-. Since the revised return was beyond the time prescribed u/s 139(5) of the Act, i.e. beyond the period of one year from the end of the relevant assessment year, this return was treated as invalid return. During the course of assessment proceedings, the Assessing Officer (A.O. in short) noticed that the assessee declared gross rental income of ``9,05,071/- whereas certificate issued in Form No.16A by Unitech Ltd., New Delhi and M/s Iquara Telcoms India Ltd., reflected rental income of ``14,47,319/- and ``1,87,833/- respectively. To a query by the AO,seeking details of properties and reconciliation of rental income vis-à-vis amount reflected in the TDS certificates, the assessee replied that rent of Unit No.206, Cyber Park, Gurgaon was received to the extent of ``14,47,319/- and in respect of unit no.201 -``1,73,003/-) and unit no.206-``12,74,316/-. Out of rent of ``12,74,316/- for unit No.206, a sum of ``4,63,388/- was given to M/s P.J. Associates vide cheque No.618356 dated 8.6.2006 as per mutual understanding as advance of ``47 lacs was received from M/s P.J. Associates on account of sale of the said unit no.206 to them. Though advance of ``47 lacs had been received by the assessee on 29.12.2005, the assessee did not furnish any evidence in the shape of agreement regarding the sale of unit no.206 to P.J. Associates or for returning rent of ``4,63,388/- to them. In response to another show cause notice dated 10.09.2008 the assessee replied as under:-3 ITA No.2970/Del./2012
"The assessee did not bonafidely claim TDS on the basis of certificate as rent for four months was refundable which he actually did in the immediately succeeding year. An assessee has to be taxed on real income and not on hypothetical basis. It is understandable that an assessee who was honoured by Hon'ble CBDT Chairman at Chandigarh as one of the 16 assessees of NWR in the category of assesses in higher bracket of income, is being questioned vide your show cause to add what has to come to him as his real income."
3.1 After considering the aforesaid reply and in the absence of any evidence of agreement to sell or return of rent, the AO denied deduction of ``4,63,388/-. Inter alia, penalty proceedings u/s 271(1)(c) of the Act were also initiated.
3.2 The AO further noticed that the assessee declared short term capital gain on sale of three properties at ``13,93,279/- (8,49,979+19,000+5,24,250/-) beside from sale of shares at ``47,10,726/-. In response to `a show cause notice issued by the AO, seeking details of the properties sold and copies of their sale deeds as also details of shares, the assessee submitted the following details:-
"Property styled Unit No.201, Cybre Park, Gurgaon:
Sale price 77,24,250/-
Cost price 72,00,000/-
Capital Gain 5,24,250/-
Land at V. Kheri Sadh (Rohtak)
Sale price 53,13,379/-
Cost price 33,90,400/-
Capital Gain 19,19,979/-"
3.3 Since total capital gain on sale of properties as pr the aforesaid
computation worked out to ``24,44,229/- as against ``13,93,279/- shown in the 4 ITA No.2970/Del./2012 return, the AO added the difference and initiating penalty u/s 271(1)(c) of the Act for furnishing inaccurate particulars of capital gain.
3.4 Though, the assessee reflected short term capital gain on sale of shares to the extent of ``47,10,726/-,in response to show cause notice, the assessee reflected following working of short term capital gain:-
Gain on sale of shares (STT Paid) ``47,09,951/- Add Dividend u/s 94(7) `` 1,61,278/- Total: ``48,71,229/- 3.5 Beside in the return filed on 31st October, 2006, the assessee
claimed exemption of long term capital gain to the extent of ``1,17,67,514/- u/s 10(38) of the Income-tax Act, 1961. However, in response to show cause notice, the assessee revised the claim of exemption to ``76,68,595/- ,resulting in taxable long term capital gain of ``40,98,919/-. Inter alia, penalty proceedings were also initiated u/s 271(1)© of the Act for furnishing inaccurate particulars of income.
3.6 Apart from above, the AO disallowed interest of `2,51,507/- claimed by way of deduction from interest income of `9,87,808/-
4. On appeal, the ld.CIT(A) upheld the addition towards rental income while reducing the disallowance of interest by `29,166/- as against disallowance of ``2,51,507/- made by the AO. On further appeal, the ITAT vide their order dated 18th March, 2011 adjudicated the issue of two additions on account of rental income and interest, in the following terms:-
" We have heard the rival submissions and have gone through the material available on record. We find that there is no dispute on this factual aspect that advance of `47 lakhs was received by the assessee from M/s PJ Associates on account of sale of the impugned property by the assessee to that party. The dispute is regarding the rental income from the month of December, 2005 to March, 2006 i.e. for four months. It is also admitted factual position 5 ITA No.2970/Del./2012 that under similar circumstances, the assessee received rental income for the month of April and May, 2006 and the same was also passed on to the buyer by way of the same cheque of dated 8.6.2006 because as per the details available on page No.3 and 4 of the paper book, one cheque No.618356 for `5,72,806/- was received by that party from the assessee on 5.6.2006. As per the details of this amount, it is on account of rental income received by the assessee from December, 2005 to May, 2006 after deducting TDS of Rs.l,21,076/-. As per the order for assessment year 2007- 08 submitted by the assessee before us, it is seen that the Assessing Officer has not made any addition in the income of the assessee on account of rent for the month of April & May, 2006 Hence, it is seen that the Assessing Officer has accepted the claim of the assessee in the subsequent year that the rental income from this property does not belong to the assessee although the property in question was registered in the name of the buyer after May, 2006. Hence, it is seen that the claim of the assessee has been accepted by the Assessing Officer in the subsequent year under similar facts and circumstances. Hence, in the present year, whether this claim of the assessee deserves to be accepted or not is to be decided by us. When we examine the facts of the present case in its entirety. We find that this is admitted position that capital gain on sale of this property was declared by the assessee in the next year and hence, as per the assessee also, ownership of the property was with the assessee in this year and hence, if we apply the legal position strictly rental income for the period from December, 2005 to March, 2006 is also taxable in the hands of this assessee only but we find that three other aspects are also very much important. One aspect is the tax impact. As per the tax impact of the impugned addition of Rs.4,63,388/- in the present year, it is worked out by the assessee at Rs.l,09,184/- after deducting 30% as per the provisions of section 24 of the Act and the tax was determined at Rs.97,312/- @ 30% of Rs.3,24,372/-and after making addition of surcharge and education cess, total tax payable is of `1,09,184/-. It is the submission of the Ld AR of the assessee that in case, we decide this issue in favour of the assessee, the Assessing Officer may be directed to disallow credit of TDS from the rental income of these four months from December, 2005 to March, 2006 which is amounting to Rs.82,482/ - . Hence, the net tax impact comes to Rs.26,702/ -. The second important aspect is that the claim of the assessee has been accepted by the Assessing Officer also in the subsequent year because in spite of completing the assessment of assessment year 2007-08 u/s 143(3), no addition has been made by the Assessing Officer on account of rental income for the month of April & May, 2006 although the same was also refunded by the assessee to Shri 6 ITA No.2970/Del./2012 PJ Singh by way of same cheque N0.618356 dated 5.6.2006 and the property in question was transferred by the assessee to the buyer after that date only. Hence, it is seen that under similar circumstances, the revenue has accepted the claim of the assessee in the subsequent year. As per the judgment of Hon'ble Punjab & Haryana High Court rendered in the case of CIT v. Reita Biscuits Co. Pvt. Ltd. (supra), if the issue is being decided in subsequent year in favour of the assessee and against the revenue, different view cannot be taken in the preceding year. Hence, this judgment of Hon'ble Punjab & Haryana High· Court becomes applicable under these facts of the present case and as per the same, the claim of the assessee has to be accepted in the present year also that rental income from December, 2005 to March, 2006 also did not accrue to the assessee. The third important point is that even if it is held that rental income is assessable in the hands of the assessee then this amount of Rs.4,63,338/ - paid by the assessee to Shri P.J. Singh has to be reduced from the capital gain tax in the hands of the assessee in the subsequent year I.e. assessment year 2007-08 and as a result, the short term capital gain of Rs.3, 77, 756/ - declared by the assessee in that year will be converted into short term capital loss of Rs.85,632/-and the difference in tax in that year will work out to Rs.1,36,764/ - in assessment year 2007-08. Tax payable by the assessee in that year will go down by this amount whereas the tax liability created by the Assessing Officer in the present year is only of Rs.1,09,184/-. This is because of this reason that on account of rental Income of Rs.4,63,388/ -, the assessee is getting deduction of 30% u/s 24 and hence this tax liability is going down to this amount to Rs.1, 09,184/ - whereas the consequent relief from short term capital gain will be on the full amount of Rs.4,63,388/ -. If we consider these factors, we feel that the revenue is not gainer by rejecting the treatment given by the assessee and various consequential orders are to be passed i.e., in the case of the. assessee in next year and also in the hands of the buyer for the present year because rent income cannot be assessed in the hands of both i.e, the present assessee and the buyer to whom rent is transferred by this assessee but one aspect is not clear as to whether that assessee has included this amount in his taxable income or not because as per the certificate on page No.3-4 of the paper book, that party is certifying that they have received the net amount of Rs.572806/ - and did not claim TDS credit but there is no mention that they had included this amount in taxable income as per the return of income filed. Hence, we find that if this amount has been declared as income by that party , than the same should not be added in the hands of this present assessee to avoid multiple consequential rectifications without any tax gain to the revenue and 7 ITA No.2970/Del./2012 also because the revenue has accepted this claim in next year and as per the decision of Hon'ble Punjab & Haryana High Court in the case of CIT v. Reita Biscuits Co. (supra), different stand cannot be taken in this year but for this, the Assessing Officer has to find out as to whether the buyer has declared this income or not in its return of income. We, therefore, set aside the order of Ld CIT(A) on this issue and restore this matter back to the file of the Assessing Officer for a decision afresh. The Assessing Officer should find out as to whether the buyer, to whom this rental income is transferred by this assessee has declared this income in its return of income or not in the present year, If the buyer has declared this income in the return of income filed by the buyer for the present year, then no addition should be made in the hands of this assessee on account of rent for December, 2005 to March, 2006 and the Assessing Officer should withdraw the credit of TDS of Rs.82,482/- on rental income for December, 2005 to March, 2006 because if the income is not taxed in the hands of this assessee, credit for TDS cannot be allowed. But if this rental income for December, 2005 to March, 2006 has not been declared by the buyer in its return of income then such rental income has to be taxed in the hands of this assessee. The Assessing Officer should pass necessary order as per law as per above discussion after providing adequate opportunity of being heard to the assessee and to make it clear that burden is on the assessee to bring evidence on record establishing that the buyer has declared this income in its return of income for this assessment year. This ground is allowed for statistical purposes.
.........................................................................................
We have heard the rival submissions and have gone through the material available on record. We find that Ld. CIT(A} has worked out the interest income on account of this deposit of Rs.1 crore in Savings Bank A/c of the assessee by applying 3.5% of bank interest rate and he has held that the assessee has earned interest income for one month only on this basis that the bank has credited interest up to 31.1.2006 only on 4.2.2006 although there was credit balance after that also up to 31.3.2006. Under this factual position, we find that on this amount of Rs.1 crore, the assessee was earning interest income from the 1st day of credit in the same Savings Bank A/c i.e. on 20.12.005. Even for the period after 31.1.2006, interest income must be there on this account although the same is not credited by the bank till 31.3.2006. Interest for the period from 1.2.2006 up to 31.3.2006 must have been credited by bank in the next year being interest for 1.2.2006 to 31. 7.2006. The Assessing Officer could have brought to tax such interest income in the present year for 1.2.2006 to 31.3.2006 but this was not done even 8 ITA No.2970/Del./2012 than, it cannot be said that the assessee was not earning income in this period. Now, the question is whether for the interest bearing borrowed funds which was utilized for earning interest income, deduction on account of interest payment is allowable only to the extent of actual interest income thereon or the whole amount of interest payment should be allowed. In our considered opinion, when the interest bearing borrowed funds have been utilized by the assessee for earning interest income which is taxable under the head income from other sources, deduction on account of full payment of interest is allowable to the assessee and it cannot be restricted to the extent of actual interest income only. Hence, we delete the disallowance of interest expenditure confirmed by learned CIT(A). This ground of the assessee is allowed."
5. Meanwhile on receipt of order of the ld. CIT(A), in response to a show cause notice before levy of penalty, the assessee pleaded that return was revised voluntarily without any show cause notice, with a following note in the computation sheet:-
"Return of income is being revised voluntarily to correct the figure of capital gain in respect of land at Kheri Sadh (Rohtak) as also to correct the interest income wherein interest paid was wrongly claimed against interest income inadvertently. The return of income is being also revised to include short term capital gain in acquisition of land at Bahadurgarh which was earlier wrongly credited to land at Panchkula."
Since the return was revised voluntarily, relying upon decisions in Cheap Cycle Stores vs. CIT,196 CTR 173 (All.); CIT vs. SV Electricals Pvt. Ltd.,274 ITR 334 (MP);CIT vs. Mrs. Roshan D Rehman,295 ITR 280 (Bom.) and CIT vs. SSP P Ltd.,302 ITR 43 (P&H),the assessee pleaded that penalty proceedings should be dropped. However, the AO did not accept the explanation of the assessee and imposed a penalty of ``10,77,190/- for furnishing inaccurate particulars of income of ``60,39,824/- while observing that since the revised return had been filed on 10.9.2008 while notice u/s 143(2) of the Act was issued on 11.10.2007,revised return was not voluntary nor valid.
6. On appeal, the ld. CIT(A) cancelled the penalty, in the following terms:-
9 ITA No.2970/Del./2012"1.9 The issue is examined. As discussed above that the appellant declared further income on account of short term and long term capital gain by filing a revised return of income. The appellant impressed upon that no information was available with the department in this regard and the assessment was made by adopting the figures declared by him in the revised return of income. In view of this fact, it is noted that the additional income offered and assessed for capital gain heads was provided by the appellant only and the same was assessed as such besides the fact that the other two additions made by the Assessing Officer was deleted by the ITAT in as far as one of the issues was restored back to the Assessing Officer with the specific directions for verifying the facts and the other one was deleted. In view of these facts, both the additions do not stand as on date. At most, the Assessing Officer is free to take necessary action as per law with reference to first addition if the facts are found otherwise."
7. The Revenue is now in appeal before us against the findings of learned CIT(A).The ld. DR supported the order of the AO, levying penalty.
8. We have heard the ld. DR and gone through the facts of the case. As is apparent from the aforesaid facts, the AO levied penalty u/s 271(1)(c) of the Act in respect of an amount of `60,39,824/-comprising addition on account of rental income-`4,63,388/-;disallowance of interest-`2,51,507/-,addition towards short term capital gains on sale of properties-`10,50,950/-;short term capital gains on sale of shares-`1,60,503/- and long term capital gains-`40,98,919/-. The ld. CIT(A) cancelled the penalty on the ground that disallowance of interest was deleted by the ITAT while issue relating to addition towards rental income had been restored to the file of the AO and additional income towards capital gains on sale of properties and shares was disclosed by the assessee suo motu during the course of assessment proceeding. The assessee submitted revised return since in the original return long term capital gain on UTI liquid plus fund institution plan was claimed exempt u/s 10(38) of the Act as also to reflect correct figures of sale of land at Kheri Sadh and rental income. Merely because the assessee disclosed additional income suo motu after issue of a notice u/s 143(2) 10 ITA No.2970/Del./2012 of the Act, does not amount to detection of concealment by the AO. Apparently, the assessee had given all particulars of his income and had disclosed all facts to the AO during the assessment proceedings.. It is not the case of the AO that in reply to a query of the AO, some new facts were discovered or the AO had dug out some information which was not furnished by the assessee. In such circumstances, we are of the opinion that no penalty is leviable. It is well settled that assessment proceedings and penalty proceedings are separate and distinct and as held by Hon'ble Supreme Court in the case of Ananthraman Veerasinghaiah & Co. Vs. CIT, 123 ITR 457, the finding in the assessment proceedings cannot be regarded as conclusive for the purposes of the penalty proceedings. It is, therefore, necessary to reappreciate and reconsider the matter so as to find out as to whether the addition made in the quantum proceedings actually represents the concealment on the part of the assessee as envisaged in sec. 271(1 )(c) of the Act and whether it is a fit case to impose the penalty by invoking the said provisions. It is also well settled that the criterion and yardsticks for the purpose of imposing penalty u/s 271(1)(c) of the Act are different than those applied for making or confirming the additions. The Hon'ble Kerala High Court in the case of CIT v. M. George & Bros. [1986] 160 ITR 511 held that where the assessee for one reason or the other agrees or surrenders certain amounts for assessment, the imposition of penalty solely on the basis of the surrender will not be well-founded. Hon'ble Punjab and Haryana High Court in the case of CIT v. Suraj Bhan [2007] 159 Taxman 26 while following the decision in CIT v. Suresh Chandra Mittal [2001] 251 ITR 9(SC), held that when an assessee files a revised return showing higher income and gives an explanation that he offered higher income to buy peace of mind and avoid litigation, penalty cannot be imposed merely on account of higher income having been subsequently declared. The Hon'ble Apex Court in CIT v. Suresh Chandra Mittal, [2001] 251 ITR 9/119 Taxman 433, upheld the decision of the Hon'ble Madhya Pradesh High Court rendered in the case of CIT vs. Suresh Chandra Mittal [2000] 241 ITR 124, where in similar circumstances it was held that the initial burden lies on the revenue to establish that the assessee had concealed 11 ITA No.2970/Del./2012 the income had furnished inaccurate particulars of such income. The burden shifts to the assessee only if he fails to offer any explanation for the undisclosed income or offers an explanation which is found to be false by the Assessing Officer.
8.1 In Qudai International vs. Income Tax Officer 2009 (13) MTC 622 (Trib), the ITAT Lucknow Bench 'A' held that "mere raising of query by the Assessing Officer did not amount to detection of concealment. It cannot therefore, be said that the revised return was filed after detection of concealment and was not voluntary. The term "detection" itself implies the Assessing Officer had reached a conclusion but the query raised by the Assessing Officer was only first step in detection of concealment. If the assessee voluntarily revised the return, it could not be said that it does not fulfill requirements of section 139(5) of the Act." The facts of the present case are also similar to the facts of the aforesaid referred to case.
8.2 Similarly, in the case of Dy. CIT vs. Tarun Agarwal 2009 (13) MTC 831, the ITAT Lucknow Bench 'A' held that "the assessee had surrendered the amount before any specific detection of undisclosed income or even before the issue of notice. Even though a general enquiry was going on and notices had been issued to some of his relatives and the amount might have been surrendered because of compulsion of circumstances, it was not sufficient to penalise the assessee as the factum of detection was not there." In the instant case also, nothing is brought on record that there was any detection at the level of the AO to suggest that the assessee concealed the income on account of capital gains, which was offered for taxation suo motu in the revised return.
8.3 Merely because a notice u/s 143(2) had already been issued and the assessee filed revised return thereafter, disclosing additional income towards capital gains, which was not correctly shown in the original return, does not tantamount to detection of concealment of income u/s. 271(1)(c) of the Act .
12 ITA No.2970/Del./2012Hon'ble Madhya Pradesh High Court in the case of CIT v. S.V. Electricals P. Ltd., 155 Taxman 158 and Hon'ble Jharkhand High Court in CIT v. Ashim Kumar Agarwal, 153 Taxman 226 held that where the assessee surrenders his full income, though at a later stage, there was no question of any concealment on his part and consequently, no penalty under Section 271(1)(c) was leviable, and that a omission from return of income did not amount to concealment. Hon'ble jurisdictional High Court while adjudicating the issue of levy of penalty u/s 271(1)(c) of the Act in the case of CIT vs. Harnarain in their decision dated 31st October,2011 in ITA no.2072/2010 concluded that "surrender of the amount by the assessee after receipt of the questionnaire could not lead to an inference that it was not voluntary, in the absence of any material on record to suggest that it was bogus or untrue. It is further evident that there was neither any detection nor any information in the possession of the Revenue which might lead to a conclusion that there was a detection by the Revenue of concealment. Accordingly, the question of law framed is answered against the Revenue and in favour of the assessee."
9.. In the instant case, the assessee voluntary disclosed additional income during the course of assessment proceedings and paid tax thereon. In the light of view taken in the aforesaid decisions, it cannot be said in the case before us, additional income disclosed during the course of assessment proceedings was not voluntary or that the assessee wanted to conceal the income. Even though the revised return was found to be invalid, the AO accepted the income as declared in the revised return and computation. The AO did not bring any material on record that the declaration of income made by the assessee in his revised return or his explanation was not bonafide. In these circumstances, there appears to be no basis for imposition of penalty on the ground that the assessee furnished inaccurate particulars of income. Since the Revenue have not placed before us any material nor brought to our notice any 13 ITA No.2970/Del./2012 contrary decision so as to enable us to take a different view in the matter, we are not inclined to interfere. Therefore, ground no.1 in the appeal is dismissed.
10.. No additional ground having been raised in terms of residuary ground no.2 in the appeal; accordingly, this ground is also dismissed.
11. No other plea or argument was made before us.
12. In the result, appeal is dismissed.
Order pronounced in open Court
Sd/- Sd/-
(A.D. JAIN) (A.N. PAHUJA)
(Judicial Member) (Accountant Member)
NS
Copy of the Order forwarded to:-
1. Assessee
2. Assistant CIT,Panipat Circle,Panipat
3. CIT concerned
4. CIT(A)- Karnal.
5. DR, ITAT 'A' Bench, New Delhi
6. Guard File.
By Order,
Deputy/Asstt.Registrar
ITAT, Delhi