Income Tax Appellate Tribunal - Ahmedabad
Income Tax Officer vs Babitaben Rameshbhai Patel on 14 March, 2008
Equivalent citations: (2008)116TTJ(AHD)421
ORDER
R.P. Garg, Vice President
1. These are two appeals by Revenue against two assessees for asst. yr. 2004-05 against order of the CIT(A) dt. 15th Oct., 2007 for deleting levy of penalty under Section 271(1)(c). As both appeals involve common disputes, they are being disposed of by this common order for the sake of convenience.
2. (To dispose of these appeals, we take up facts as appearing in appeal No. 110/Ahd/2008 in the case of Smt. Babitaben Rameshbhai Patel. Assessee is stated to be illiterate and doing tailoring work. She has been declaring income from tailoring, agriculture and investment. She had also filed return on 5th May, 2004 declaring total income at Rs. 92,687 along with copies of receipts and payments account, capital account and balance sheet. Notice under Section 143(2) was issued to scrutinize return requiring assessee to furnish eight different details, but without anything about capital gain. On the first year (sic) on 14th Aug., 2006, assessee had disclosed sale of agricultural land for a sum of Rs. 45,50,500 and paid tax of Rs. 13,04,863 on the said capital gain.
3. Later on, she was advised that the land was beyond 8 kms. of municipal limit, to be precise, 10.5 kms. away from Himatnagar Nagar Palika, which was not liable to capital gain, and she accordingly, again filed revised return, claiming capital gain to be exempt from tax. AO, however, did not agree with contentions of the assessee and brought capital gain to tax. He also initiated proceeding for concealment of income under Section 271(1)(c) and after hearing assessee levied penalty of Rs. 14,89,920 in the cases of both assessees each.
4. Matter was carried by the assessee in first appeal, and CIT(A) deleted penalty by observing in para 5 as under:
5. I have carefully considered the submissions of the assessee and I have also gone through the facts of the case. It is seen that in this case original return was filed showing income of Rs. 92,687 and agricultural income of Rs. 3,98,560. During the relevant accounting period, assessee had sold agricultural land and it was under a bona fide belief that sale of agriculture land was exempt from capital gain tax. The assessee, thereafter filed a revised return and paid tax on 14th Aug., 2006. Assessee was advised that since the land was situated at a distance of more than 10.5 kms. from the boundary of Himmatnagar, such capital gains was not liable to tax. Therefore, under this bona fide belief the assessee claimed that it was not liable to pay any capital gains tax. The same amount has been added by the AO on the basis of revised return and penalty has been levied. It is to be pointed out that assessee's belief was on the basis of certificate issued by Talati-cum-Mantri of Berna Gram Panchayat dt. 28th Sept., 2006 that the land was situated at a distance of 10.5 kms. from Himmatnagar boundary and as such the same would not be considered as capital asset being agriculture land. Thus, it is quite clear that the assessee had not offered capital gains from sale of agriculture land under a bona fide belief which is based on the certificate of Gram Panchayat. Thereafter, the assessee revised its return and paid taxes also. In such circumstances, the explanation furnished by the assessee cannot be summarily rejected because a case of bona fide belief is established. It is also stated that on the facts of the case even tax consultant advised that there would be no liability of capital gains tax. It is thus clear that the addition has been made mainly on the basis of revised return filed by the assessee and as such it cannot be said that there was intentional concealment of income as held in the case of K.C. Builders v. Asstt. CIT . It has been held by the Hon'ble Supreme Court in the case of CIT v. Suresh Chandra Mittal that when assessee offers income even after a search in response to notice under Section 148 to avoid litigation and to buy peace, no penalty for concealment should be levied. The Hon'ble Supreme Court has in fact confirmed the order of Madhya Pradesh High Court in CIT v. Suresh Chandra Mittal in which Hon'ble High Court had held that in this case the surrender was made after persistent queries made by the AO. Still, it was held by the Court that no penalty should be leived. In this case, the assessee was under a bona fide belief that sale of agricultural land was not liable to capital gains tax. The moment there was a doubt, the assessee revised her return suo motu and paid tax to avoid litigation. Therefore, in view of the decisions discussed above, no penalty should be levied in assessee's case and the same is cancelled.
5. The main claim of the Revenue is that the revised return offering capital gain was filed, pursuant to the Inspector's report dt. 12th June, 2006 wherein he reported that assessee and her family members were staying together and have invested funds in purchase of factory viz. Umiya Industries (P) Ltd. AO also stated that "Further it was gathered that the assessee had sold a land and received funds against such sale. Therefore, local inquiry was carried out and information was obtained from the local land authority, which resulted into detection that the assessee and her family members had sold 9 acres of land situated at Survey No. 242 of Bema, Tal : Himatnagar.", which fact has not been disclosed in the return of income. It is, therefore, submitted that it was not a voluntary act, but disclosure was after information received by Revenue and matter was investigated.
6. Learned Counsel for the assessee submitted that it is wrong to state that Inspector's report has stated anything about capital gain. What the report stated was only that family members were staying together and invested funds for purchase of factory viz. Umiya Industries (P) Ltd. The further observation in that assessment order to the effect that "Further it was gathered that the assessee had sold a land and received funds against such sale." was not there in the report and it was only the addition by the AO on the basis of facts disclosed by the assessee herself and subsequent to filing of revised return. He also referred to notices issued under Sections 143(2) and 142(1) of the IT Act, as also Inspector's report wherein no inquiry whatsoever was made or depicting about the capital gain or sale of the property.
7. We have heard both parties and considered rival submissions. From notices issued and Inspector's report we find that there was nothing contemplated about capital gain before filing revised return by the assessee. Furthermore, the fact was also in dispute, whether land was beyond 8 kms. of municipal limit, in view of two versions, one by assessee and other by AO. Assessee's version is based on certificate of Talati Gram Panchayat dt. 28th Sept., 2006 stating that the land was 10.5 kms. away from Himmatnagar, and therefore, no tax was chargeable on the sale of capital asset, whereas AO's claim was that it was within 8 kms. from boundary line of Himmatnagar i.e. Gokulnagar, as depicted in map of Himmatnagar Jilla obtained from Jilla Panchayat Office and consequently the gain arising on the sale of the agriculture land was taxable.
8. Be that as it may, necessary particulars were also already on record and the fact that assessee had sold land and made some capital gains was declared by assessee herself and consequently, it is not a fit case for levy of penalty under Section 271(1)(c), therefore, CIT(A) was justified in deleting the penalty, his order on this issue is upheld. The facts and circumstances in other case are exactly similar, we, therefore, uphold the order of CIT(A) in deleting the penalty in that case as well.
9. In the result, both appeals of the Revenue are dismissed.