Income Tax Appellate Tribunal - Jaipur
Praveen Chand Sanghi, Jaipur vs Department Of Income Tax on 30 November, 2015
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 70/JP/2013
fu/kZkj.k o"kZ@Assessment Years : 2005-06
Income Tax Officer, cuke Praveen Chand Sanghi,
Ward 3(4), Jaipur. Vs. C-98, Subhash Marg,
C-Scheme, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AFPPS 1255 R
vihykFkhZ@Appellant izR;FkhZ@Respondent
jktLo dh vksj ls@ Revenue by : Shri Raj Mehra (JCIT)
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s Assessee by : Shri G.G. Mundra (CA)
lquokbZ dh rkjh[k@ Date of Hearing : 03/11/2015
mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 30/11/2015
vkns'k@ ORDER
PER: R.P. TOLANI, J.M.:
This is an appeal filed by department against the order of ld. CIT (A) - I, Jaipur dated 09-11-2012 for AY 2005-06, sole ground raised is as under:
"Whether on the facts and in the circumstance of the case and in law the Ld. CIT (A) is justified in deleting the penalty of Rs. 4,33,052/- imposed by the A.O. which was based on facts and supported by decisions of various courts."
2 ITA 70/JP/2013_ ITO Vs Praveen Chand Sanghi
2. Brief facts of the case are that Shri Praveen Chand Sanghi (HUF) by virtue of a will of Shri Mangi Lal Sanghi dated 18-10-77, inherited the property C-98, Subhash Marg, C-Scheme, Jaipur. Assessee claims that it was assumed to be HUF property which on 15- 10-87 was partitioned in equal share to each of following persons (each having ¼ share).
Praveen Chand Sanghi Smt. Sushila Devi Shri Pradeep Kumar Jain Shri Rajeev Sanghi It is claimed that by said partition, its status became HUF qua the property as a co-owner having ¼ share in a plot No. C-98, Subhash Marg, Jaipur admeasuring to 1944.44 Sq. yds with old house thereon used for residence. The assessee along with other co-owners entered into a development agreement with M/s Upasana Colonizers & Resorts P. Ltd. on 4-10-97 for construction of a commercial complex on the said plot of land after demolition of old construction. The entire cost of construction was to be borne by developers. 2.1 The assessee treated the date of 4-10-97 i.e. agreement with developer was as date of conversion of capital asset into stock in trade. The cost as on 1-4-81 was further increased by cost index u/s 3 ITA 70/JP/2013_ ITO Vs Praveen Chand Sanghi 48 was deducted from the market value of land as on 4-10-97 as per registered valuer's report and difference was declared as capital gain in accordance with Section 45 (2) of I. T. Act, 61 and remaining sale value was declared as business profit in the return of income from A.Y. 2004-05 onwards.
2.2 For A.Y. 2004-05 Shri Praveen Chand Sanghi filed return of income claiming status of HUF. AO issued notice u/s 143 (2) by ACIT, Cir-6, Jaipur who held that consequent to partition of HUF the property became individual and not HUF property. Ld. AO thus, did not accept the status of HUF and a protective assessment was made holding that the said co ownership property was assessable in the hands of Praveen Chand Sanghi - Individual. The ACIT, Cir-6, Jaipur accordingly intimated to the A.O. of Praveen Chand Individual i.e. I.T.O. WD -3(4), Jaipur to initiate proceedings u/s 148 which was initiated vide notice dated 23-3-07 (served on assessee on 28-3-07). Assessee filed a return in response to notice u/s 148 declaring income from said property in his individual status. 2.3 All other three persons filed appeal(s) against those assessment orders and in course of hearing of appeal Shri Praveen Chand Sanghi admitted that the said income from development from 4 ITA 70/JP/2013_ ITO Vs Praveen Chand Sanghi property is assessable in his Individual capacity and he has filed return of income in response to notice u/s 148 including the income from development of property in his individual hands. 2.4 The CIT (A) - II, Jaipur on these facts cancelled the protective assessments order passed in the case of M/s Praveen Chand Sanghi (HUF) and in other two cases i.e. Sushila Devi - Individual and Rajeev Sanghi - HUF deleted all the additions made in assessment. Thereafter the A.O. WD- 3(4) completed assessment u/s 148 in the status of Individual on 28-12-2007 by including income returned in HUF capacity but made additions repeating the additions made earlier in protective assessment order in case of assessee - HUF and initiated proceedings u/s 271 (1)(c) of I. T. Act, 1961. The assessee against this assessment u/s 148 filed appeal before CIT - (A) - I, which appeals stand dismissed by ITAT vide order dated 8-1- 2010. Thus assessment for A.Y. 2004-05 u/s 148 in case of assessee became final in individual including the income qua this property. The Ld. A.O. however, in A.Y. 2004-05 on the proceedings initiated by him u/s 271 (1) (c) imposed no penalty.
2.5 This course of action was repeated for A.Y. 2005-06 assessment, ld. A.O. in assessment proceedings indicated the same 5 ITA 70/JP/2013_ ITO Vs Praveen Chand Sanghi mistake consequently, assessee submitted revised computation of income including the income from said property. Impugned penalty proceedings were initiated, after hearing the assessee ld. AO levied a penalty of Rs. 4,33,052/- by following observations:
"The revised computation of income was filed during the course of assessment proceedings declaring the income at Rs. 18,10,900/-. The revised computation of income sheet was not filed voluntarily and the assessee was forced to revise the income from (i) house property (ii) business or profession and (iii) capital gains. Here the assessee did not file any revised return surrendering the undisclosed income nor he offered a convincing explanation as to the circumstances leading to revised computation of income and capital gains offered for taxation. In the case of B.A. Bala Subramanian and Bros. Co. Vs CIT (1999) 236 ITR 977 (SC), the Hon'ble Supreme Court to upheld the decision of the Madras High Court holding that the Assessing Officer was justified in imposing penalty uder section 271(1)(c) as the assessee had failed to discharge his onus under the explanation. The Hon'ble Supreme Court has in the case of K.P. Madhusudhanan V CIT (2001) 251 ITR 99 (SC) held that the explanation 1 to Section 271(1)(c) is a part of section 271. When the Assessing Officer issues a notice under section 271, he makes the assessee aware that provisions thereof has to be used against him. These provisions include explanation. The assessee is thereby put to notice that if he does not prove that his failure to return his correct income was not due to framed or neglect, he shall be deemed to have concealed the particulars of his income. In the instant
6 ITA 70/JP/2013_ ITO Vs Praveen Chand Sanghi case, the assessee merely stated that after the appellant decision, the provisions of section are no more applicable. On the other hand, the assessee was required to explain that the revised computation of income disclosing the income of Rs. 18,10,900/- as against the returned income of Rs. 1,50,260/- was not due to fraud or neglect. The assessee has not discharged his duty in his context. IN view of this and on the facts and in the circumstances of the case, the levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961 is held applicable to this case."
3. Aggrieved assessee preferred first appeal, ld. CIT(A) deleted the penalty by following observations:
"I have carefully perused the order of the AO and the submissions of the AR and concur with the submissions of the AR on the following grounds:
i) Partition of the HUF ancestral property whether total or partial, results in distribution of the family property among its coparceners who thus form a separate family unit. Each coparcener gets a part of the family property on its partition and receives the same as ancestral property qua his sons. Thus a partition creates a nucleus of family of ancestral property and a new HUF or a branch is created thereby.
ii) Therefore, on partition of the HUF property the ancestral property devolved on Shri Praveen Chand Sanghi a new HUF or branch was created thereby qua his sons. It is probably because of this law that the appellant declared the income from the transactions of this property in his 7 ITA 70/JP/2013_ ITO Vs Praveen Chand Sanghi HUF capacity. However, when it was decided by the Department that the income from the transaction of this property was required to be taxed in his individual capacity in assessment year 2004-05, he promptly revised his return for assessment year 2005-06 and declared the income from the transaction of this property in his individual capacity.
iii) Moreover, on perusal of the assessment order, it is seen that while computing the income of the assessee, the AR has accepted the income shown by the appellant in his revised return. Since, the AO has accepted the revised return as per the computation of income in the assessment order, it cannot be said that the assessee has concealed his income or furnished inaccurate particulars of income.
iv) Furthermore, in the case of the assessee, it cannot be said that the assessee at any point of time tried to conceal his income. This appears to be a case of interpretation of law regarding inheritance of property, in case of partition of HUF. It is not the case of the AO that the income from the transaction of this property was concealed or was not offered for taxation at all. The only dispute is whether it was required to be taxed in the HUF capacity or in the individual capacity. According to the interpretation of law by the appellant the income was offered for taxation in his HUF capacity while the Department treated the income in his individual capacity. Thus, as per records, there was no attempt by the appellant to conceal his income from the transaction of property.
8 ITA 70/JP/2013_ ITO Vs Praveen Chand Sanghi Therefore, in view of the facts of the case of the assessee and law applicable to these facts, the penalty of Rs. 4,33,052/- imposed u/s 271 (1) (c) is deleted."
4. Aggrieved revenue is before us.
5. Ld. DR vehemently contends that the penalty has been deleted by ld. CIT(A) without appreciating the facts of the case and clear provisions of law. It is admitted by the assessee that the HUF was totally partitioned on 15/1-/87. As per settled law, once the HUF property is totally partitioned the co ownership share becomes individual property of the person who is party to the partition. This is a basic and fundamental tenant of Hindu Law, the assessee's plea that there was mistake in this behalf is unbelievable. Besides the ignorance of law, whose benefit was sought to be enjoyed is no explanation as ignorance of law is no excuse. The assessee has been wheeling dealing in all sorts of commercial and property transaction. The attempt of treating individual property as HUF property was deliberated as it entailed lesser tax in the hands of new entity in the form of taxable income, lower slabs and other benefits which may be known to assessee.
5.1 The imposition of penalty is further justified and order of ld. CIT(A) is assailed on following points:
9 ITA 70/JP/2013_ ITO Vs Praveen Chand Sanghi i. Assessee has not filed any paper book, consequently how and in what facts and circumstances, the penalty for AY 2004-05 did not came to be not levied is not ascertainable.
Thus this plea has no effects on the penalty of this year which is a separate unit of assessment and principles of res judicata do not apply to I T proceedings.
ii. The findings of ;
iii. Ld. CIT(A) giving benefit of doubt to assessee regarding his assumptions of there being a mistake have no legal force or corroboration. Assessee has himself claimed it to be a total partition which implies that there was sufficient knowledge about relevant aspects of Hindu Law. Only to avoid taxes assessee is feigning ignorance to take it as an excuse. Besides it is settled law that penalty also is a civil liability and there is no burden on the department to prove assessee's men rea. The act of claiming the individual property is a deliberate attempt to avoid the taxes by misleading the department based on a return of income of HUF which was based on deliberate furnishing of inaccurate particular. When confronted assessee cut a sorry figure pretending it to be a mistake. Thus assessee gave a patently unreliable explanation to get rid of the inevitable consequences of penalty. Thus impugned exercise of filing wrong return of HUF by making a baseless claim was a grand design by the assessee to avoid taxes. Ld. CIT(A) instead of appreciating these serious facts and issues rewarded the assessee with benefit which ironically means " ignorance of law can be an excuse ". Thus ld CIT(A) has deleted the penalty without any justification which is in ignorance of relevant facts and contrary to various judicial pronouncement. The order of ld. AO imposing the penalty is relied on.
6. Ld. Counsel for the assessee contends that HUF return was filed only due to bonafide legal mistake which has not been found false by Ld. A.O. The fact that same legal mistake was in A.Y. 2004- 05 which continued in AY 2005-06. The Ld. A.O. though initiated 10 ITA 70/JP/2013_ ITO Vs Praveen Chand Sanghi penalty proceedings u/s 271 (1) (c) on similar facts in A.Y. 2004-05 but not imposed any penalty. In these facts and circumstances of the case penalty imposed on assessee on the same facts in this A.Y. 2005-06 is unsustainable. Order of ld. CIT(A) is relied on reliance on the judgement of Hon'ble Supreme Court in case of CIT Vs. Reliance Petroproducts P. Ltd. (2010) 322 ITR 158 wherein it is held that a mere making of claim, which is not sustainable in law, by itself, will not amount to concealment or to furnishing inaccurate particulars of income of assessee. Further reliance for deletion of penalty is placed on:
(i) Pricewater House Coopers P. Ltd. Vs. CIT (2012) 348 ITR 306 (SC)
(ii) CIT Vs. Skyline Products P. Ltd. (2004) 217 ITR 335 (MP) It is submitted that appeal order passed by Ld. CIT (A) is just, reasonable and in accordance with law which deserves to be confirmed.
7. Ld. DR in rejoinder contends that it is only after finding that income has escaped assessment and issuance of 148 notices by AO the assessee realized that his bluff has been called. After realizing the gravity of his acts and omission agreed that the wrongly claimed HUF 11 ITA 70/JP/2013_ ITO Vs Praveen Chand Sanghi income may be included in individual income. Therefore, there is no merit in the plea that mistake was bonafide. Adverting to case laws ld. DR contends that recently Hon'ble Delhi High Court in the recent case of NARESH KUMAR VERMA V. CIT 2014-TIOL-968-HC-DEL-IT has laid down the parameters for application of the Reliance Petroproducts Pvt. Ltd. judgment by following observations:
9. This Court is of the opinion that the assessee's submissions based upon the reading of the provisions of the exim policy are of no assistance. So long as the terms of the statute are clear and they do not allude to or refer to any external document or instrument or even other enactments, the admissibility of benefits in those external documents or enactments cannot automatically be used as aids of construction or read into the provisions of the controlling enactment, which in the present case is the Income Tax Act, 1961. In other words, sans the reference to the exim policy or a pointed reference to admissibility of such reliefs as are given in that policy, under Section 10B, it would not be open to the assessee to claim that transactions, which are not exports in a strict sense of the term and in which the assessee does not receive foreign exchange remittance, be treated as such. The plain text of Section 10B particularly Section 10 B (3) exclude the possibility of a reasonable argument in this regard.
The Revenue is right when it contends that there is some relief to the assessee, to the extent that convertible foreign exchange may be received or brought into India by the assessee. However, that 12 ITA 70/JP/2013_ ITO Vs Praveen Chand Sanghi benefit has not been claimed, the existence of such limited relief in another part of the statute in fact excludes the possibility of being read into in Section 10B having regard to the latter's structure.
10. Explanation to Section 271 (1) (c) underlines that where inaccurate particulars are furnished by the assessee or something which is plainly inadmissible, is claimed, penalty proceedings are warranted. In CIT v. Reliance Petroproducts Pvt. Ltd., (2010) 322 ITR 158 (SC) = 2010-TIOL-21-SC-IT, the Court after reviewing the previous law was of the opinion that the expression "particulars" would embrace the meaning of the details of the claim made. After elaborate examination of the previous precedents, the Court held as follows: -
"We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous."
11. In the circumstances of the case, there can be no shadow of doubt that the claim to Section 10B benefit was inaccurate in a sense as was understood in Reliance Petroproducts' matter (supra). It was plainly erroneous, and neither in accord with the statute nor based on the truth. In these circumstances, the levy of penalty was justified.
7.1 Thus Hon'ble Delhi high Court has held that when the provisions of law are very clear it cannot be eluded by merely calling a mistake. Where inaccurate particulars are furnished by the assessee or something which is plainly inadmissible, is claimed, 13 ITA 70/JP/2013_ ITO Vs Praveen Chand Sanghi penalty proceedings are warranted. The details supplied by assessee in the return of HUF were not accurate, not exact or correct, not according to truth and were simply erroneous. Therefore the explanations to sec. 271(1)(c) are fully applicable. Looking at these peculiar facts and circumstances, the assessee's case is a fit case for imposition of penalty.
8. We have heard that rival submissions and perused the material available on the record. Facts and circumstances have been detailed above. As per settled canons of Hindu Law, HUF having been completely partitioned the share of property became individual property of the assessee by operation of law. Tax advantages derived by the assessee have not been denied. The only explanation oferred is to the effect that it was a mistake about provisions of law. It is axiomatic that "Ignorance of Law is no excuse". Besides assessee has failed to demonstrate that it was a convincible mistake. Looking at the facts it appears to be an attempt to avoid tax. The risk takers have to face the consequences when there act is caught. 8.1 We are not convinced that ld. CIT(A) has cited cogent and convincible reasons to justify the deletion of penalty imposed by ld. AO after detailed observation. The case law of Reliance Petro Product also does not help the cause of the assessee in these peculiar facts of 14 ITA 70/JP/2013_ ITO Vs Praveen Chand Sanghi the case which are distinguishable from the Reliance Petro judgment. Hon'ble Delhi High Court in Naresh Kumar Verma's case (supra) has thrown sufficient light as to what type of claims though made in the return, their disallowance attract penalty u/s 271(1)(c). In our considered view following the guiding light of this case the assessee's potential wrong claim driven by a desire of avoiding taxes deserves imposition of penalty u/s 271(1)(c), which is confirmed. The order of ld. CIT(A) is reversed and that of ld. AO upheld.
9. In the result revenue appeal is allowed.
Order pronounced in the open court on 30/11/2015.
Sd/- Sd/-
¼foØe flag ;kno½ ¼vkj-ih-rksykuh½
(Vikram Singh Yadav) (R.P.Tolani)
ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member
Tk;iqj@Jaipur
fnukad@Dated:- 30th November, 2015
*Ranjan
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- The ITO, Ward 3(4), Jaipur.
2. izR;FkhZ@ The Respondent- Shri Praveen Chand Sanghi, Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 70/JP/2013) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar