Income Tax Appellate Tribunal - Mumbai
Ramchandra D. Thakur (Huf) vs Income-Tax Officer on 31 December, 1996
Equivalent citations: [1997]61ITD279(MUM)
ORDER
1. These are two penalty appeals against the consolidated order of CIT (Appeals)-II, Pune, dated 9-10-1995 confirming the concealment penalty of Rs. 24,570 for assessment year 1989-90 and Rs. 19,895 for assessment year 1990-91 under section 271(1)(c) of the IT Act. The facts necessary for disposal of these two appeals are briefly stated as follows.
2. The assessee is a HUF. R.D. Thakur (assessee-HUF), S.D. Thakur (HUF) and P.D. Thakur (HUF) together sold land admeasuring 3060 sq. yds. during the period relevant to assessment year 1989-90. The kartas of these HUFs are real brothers. R.D. Thakur is stated to be a literate person and the land sold was stated to be ancestral property in nature and the sale was by all the three brothers who are heading their respective HUFs as mentioned above. It was sold to be firm of M/s. Vaibhav Construction Co., in which R.D. Thakur was a partner in his individual capacity.
3. The original returns for assessment years 1989-90 and 1990-91 were filed on 27-9-1990 by the assessee-HUF. In those returns, no capital gains said to have been derived by the assessee were shown. Notices under section 148 were issued on 20-12-1990 for assessment year 1989-90 and 6-8-1991 for assessment year 1990-91. In pursuance of those notices, the assessee-HUF filed revised returns of income on 7-3-1991 for assessment year 1989-90 and on 22-3-1991 for assessment year 1990-91 declaring income of Rs. 31,370 and Rs. 34,730 respectively. The Income-tax Officer felt that the cost of the plot as on 1-4-1974 was inflated @ Rs. 135 per sq. yard when, in fact, the price of the land was Rs. 34 sq. yd. and for that reason the ITO felt that the capital gains arising on the sale of the property were shown at a lesser amount than computed by the ITO.
4. The original income-tax returns for these years were filed with the ITO, Ward 1(3), Thane. At the same time, the case of P.D. Thakur (HUF) was under scrutiny with ITO, Ward 1(5), Thane, and during the investigation of the case, it was noticed there were three HUFs of R.D. Thakur, S.D. Thakur and P.D. Thakur who had sold the land admeasuring 3060 sq. yds. during the period relevant for assessment year 1989-90. Therefore, the ITO, Ward 1(5), issued notices under section 148 in the cases of these three HUFs and they were duly served. Thus, it can be seen that in the case of R.D. Thakur, the original income-tax returns were filed on 27-9-1990 for assessment years 1989-90 and 1990-91, whereas the revised returns were filed on 7-3-1991 for assessment year 1989-90 and on 22-3-1991 for assessment year 1990-91. However, the assessee received notices under section 148 for these two years on 6-8-1991. Therefore, the assessee-HUF before us filed income-tax returns for assessment years 1989-90 and 1990-91 without disclosing any income from capital gains. It had filed revised returns subsequently on 7-3-1991 and 22-3-1991 as stated above. The assessee's statement was recorded on oath on 5-9-1991. In the revised returns, the assessee declared income from capital gains and while computing the capital gains took the cost of land as on 1-4-1974 at Rs. 135 per sq. yard. During the course of the statement recorded under section 131 on 5-9-1991, the assessee admitted that it had sold a nearby piece of land to the land now under consideration in the year 1975 to Shri Sanjiv M. Shinde and Shri V.M. Marathe @ Rs. 34 per sq. yd. The land thus sold as well as the present land were situated at Kalwa locality. They were near to each other. However, in the revised return, the assessee showed the cost of acquisition at Rs. 135 per sq. yd. while under examination a question was asked as to why the assessee had mentioned the higher cost in the revised return, when the assessee replied that he cold not recollect the transaction of the year 1975 due to his old age. Shri S.D. Thakur, one of the brothers of the assessee, in his income-tax assessment, had agreed for the cost of acquisition of the land sold at Rs. 30 per sq. yd. as on 1-4-1974. Thus, the ITO felt that whereas the market prices of the land sold was only Rs. 30 per sq. yd. as on 1-4-1974, in the revised return for assessment year 1989-90 as well as 1990-91 the cost of the land as on 1-4-1974 was shown at Rs. 135 per sq. yd. only in order to reduce the capital gains tax. Thus, the ITO felt that the assessee was guilty of furnishing inaccurate particulars of income by inflating the cost of acquisition. The assessment for 1989-90 was completed on 25-9-1991 on the taxable income of Rs. 83,310. Penalty proceedings for concealment of income were initiated under section 271(1)(c).
5. For assessment year 1990-91, the income-tax return was filed on 27-9-1990 declaring a total income of Rs. 13,730. It was processed under section 143(1)(a) on 19-3-1991. On 22-3-1991, the assessee filed revised return showing additional income of Rs. 21,000 on account of capital gains. For regularising the revised return and since by the time of filing of revised return the original return was already processed under section 143(1)(a), notice under section 148 was issued to the assessee and it was served on the assessee on 6-8-1991. The assessment for assessment year 1990-91 was completed on a total income of Rs. 76,730. Since the value of the land as on 1-4-1974 was shown at Rs. 135 per sq. yd. for the purpose of computing capital gains and since the assessee itself sold the land near to the land in question at Rs. 35 per sq. yd. and one of his brothers, S.D. Thakur, had agreed during this assessment to take the price of the land sold at Rs. 30 per sq. yd. as on 1-4-1974, the ITO determined the real value of the land as on 1-4-1974 at only Rs. 30 and computed the capital gains at Rs. 63,000 and the total income at Rs. 76,730 for assessment year 1990-91 and completed the assessment for assessment year 1990-91 on 16-10-1991. The additions made by the ITO while computing the capital gains for assessment years 1989-90 and 1990-91 were accepted by the assessee and no appeals were referred on quantum side. The taxes and interest were all paid by the assessee. Penalty proceedings were started against the assessee. The assessee submitted detailed explanation by its letter dated 28-11-1991 both for assessment years 1989-90 and 1990-91 in answer to the show-cause notices issued to it under section 271(1)(c). In the penalty proceedings, the ITO, while rejecting the arguments of the assessee, held that having full knowledge of the prevailing market rate of the plot and having himself sold the nearby land at Rs. 34 per sq. yd. even in 1975 and having not declared any capital gains in the original returns and declaring the cost of the plot as on 1-4-1974 at an inflationary price of Rs. 134 per sq. yd., and S.D. Thakur, the assessee's own brother, having valued the cost of acquisition at Rs. 50 per sq. yd. in the first return itself, the assessee's intention of furnishing inaccurate particulars of income is clearly proved to be suppression of real income and evading taxes and thus he levied Rs. 24,570 as penalty for assessment year 1989-90 and Rs. 19,895 for assessment year 1990-91. Penalty orders for assessment years 1989-90 and 1990-91 were passed on 24-3-1992.
6. Aggrieved against the penalties levied, the assessee appealed before the CIT (Appeals)-II, Pune. Consolidating both the appeals, the ld. CIT (Appeals) disposed them of by a common order dated 9-10-1995, whereby he dismissed the appeals and confirmed the penalties and against the CIT (Appeals)'s order, the present appeals are filed and thus the question of concealment, penalties stands before this Tribunal.
7. I have heard Shri P. Daniel, ld. advocate for the assessee, and Shri M.P. Kotwal, ld. Departmental Representative. The submissions made on behalf of the assessee in these appeals are the following : The assessee had sold a plot of land along with his two brothers. The assessee's share of sale proceeds was Rs. 2,04,087. The ITO did not disturb the sale price as declared by the assessee. The land sold was part of ancestral property. The question was what was its market value as on 1-4-1974. The assessee had dictated to its accountant that the cost of the property was Rs. 35 per sq. yd., whereas the accountant of the assessee had wrongly taken the figure at Rs. 135 per sq. yd. and he had worked out the capital gains on the basis of Rs. 135 per sq. yd. The assessee came to know about the error only when the ITO informed him about the mistake. The assessee is an old man and his memory was fading. He could not exactly recollect his own mistake. The same mistake was also committed in the subsequent year when the plot of land was sold to the firm of M/s. Vaibhav Construction Co., wherein the assessee was a partner in his individual capacity. In view of the mistake, the additional income assessed was Rs. 53,579 for assessment years 1989-90 and Rs. 42,000 for assessment year 1990-91. There was no intention on the part of the assessee to conceal any particulars of income or to furnish any inaccurate particulars of income and, therefore, penalty under section 271(1)(c) is not leviable. All these material particulars to details were correctly placed before the ITO. The value of the land can be this way or that way. A particular land can be more valuable, whereas another land in the said vicinity is less valuable. The fixation price of the land is based on various factors and the assessee cold not recollect everything which had happened in 1974. The value of the land as on 1-4-1974 is an hypothetical value and adopted on estimate. The estimated price made by the ITO was accepted by the assessee, and merely because of this it could not amount to concealment. Under section 271(1)(c), penalty can be levied only when the ITO is satisfied that the assessee concealed particulars of his income or furnished inaccurate particulars of such income. The satisfaction of the ITO cannot be imaginary or based on fiction. The satisfaction should be based on some solid evidence. Unless the explanation offered by the assessee is said to be clearly false, penalty cannot be levied. Explanation 1 to section 271(1)(c) does not relieve the department from its primary duty to establish on the basis of material or circumstances on record that the disputed income/addition represented the concealed income of the assessee. The ITO had not proved that the assessee had furnished inaccurate particulars of his income. The assessee relied upon the decision of the Hon'ble Supreme Court in CWT v. P.N. Sikand [1977] 107 ITR 922. He also relied upon the information furnished from the Supreme Court in 209 ITR 89 (Statutes) about the disposal of a S.L.P. preferred by the department in a wealth-tax case. The information given was about the order passed by the Hon'ble Supreme court on 12-7-1994 while disposing of the S.L.P. (Civil) Nos. 15761-15762 of 1994 filed in CWT v. Viswanath. It is stated that Their Lordships J.S. Verma and K.S. Paripoornan, JJ. dismissed the SLP by the department to appeal against the order dated 15-1-1990 of the Punjab & Haryana High Court in WTC No. 51/89 rejecting a reference application on the question whether the Commissioner (Appeals) had rightly cancelled the penalty imposed on the assessee holding that the difference in the valuation as assessed and as returned arose only because of a difference of opinion as to valuation and not as a result on concealment on the part of the assessee.
8. Countering the arguments thus advanced by the learned counsel for the assessee, the learned Departmental Representative argued the following : Firstly, the assessee had not shown or returned any capital gains whatsoever in the original returns filed for assessment years 1989-90 and 1990-91 even though separate bits of land were sold in each of these assessment years and when admittedly the sales effected yielded capital gains. It is, no doubt, true that the land extent sold was ancestral property belonging to the assessee and his two brothers; still there is a definite admission by the assessee that a nearby land belonging to their own joint family was sold @ Rs. 34 per sq. yard in 1975. That land and the bits of land sold in the accounting years relevant to assessment years 1989-90 and 1990-91 were all situated in Kalwa area. When in 1975 the assessee himself sold the land @ Rs. 35 per yard, by no stretch of imagination the valuation of the impugned land would be as high as Rs. 135 per sq. yard as on 1-4-1974. Further, the brother of the assessee (S.D. Thakur) even in his income-tax returns for assessment years 1989-90 and 1990-91 admitted the value of the impugned land as on 1-4-1974 at Rs. 30 per sq. yd., computed the capital gains thereon from out of his share of sale consideration and returned the same for income-tax assessment. It is contended that the karta of the assessee (R.D. Thakur) is one of the partners of M/s. Vaibhav Construction Co., a firm, to which the impugned land was sold in the accounting year relevant to the assessment year 1990-91. Thus, it is proved that the assessee is a businessman engaged in construction activities. It is quite unlikely that for such a businessman there would be forgetfulness about the cost of land which he himself sold in 1975 especially when the said land is situated near to the impugned land. The statement of the assessee that due to old age he forgot what happened in 1975 cannot be believed. Further, the version of the assessee that at the time of filing the income-tax returns he dictated to has accountant that the value of the land as on 1-4-1974 was Rs. 35 per sq. yd. but instead he had wrongly taken it at Rs. 135 per sq. yd. and computed capital gains on that basis cannot be accepted as true. Income-tax return is to be filed by carefully verifying by the assessee and being a businessman it is quite unlikely that the same type of mistake would be committed both for assessment year 1989-90 and 1990-91 especially when two separate bits in the same land were sold during two succeeding assessment years. Thus, the ld. Departmental Representative contended that there is an intentional concealment on the part of the assessee brought out by the fact that, firstly, he attempted not to return the whole of the capital gains in his original return and, secondly, though he tried to return the capital gains arising out of the sale of land effected by him, there is an attempt of concealment while giving full particulars about the sale of this land, especially while giving the estimated value of the land as on 1-4-1974. Therefore, the concealment stood proved. The appreciation of the evidence on record both by the ITO and the CIT (Appeals) cannot be easily brushed aside. Hence, according to the ld. Departmental representative, the penalties deserve to be confirmed and the appeals are liable to be dismissed.
9. After hearing both sides, I feel that there is preponderance of evidence which points towards contumacious conduct of concealment on the part of the assessee and, therefore, the penalties imposed for assessment years 1989-90 and 1990-91 deserve to be confirmed. My reasons are as follows : In the original returns filed for assessment years 1989-90 and 1990-91, no capital gains were returned at all, even though the assessee is fully aware that he sold separate bits of land alone with his two brothers for substantial amount of more than Rs. 6 lakhs and his share in it is more than Rs. 2 lakhs for the first year and Rs. 1,60,000 for the second year. It is, no doubt, true that the revised returns were filed on 7-3-1991 and 22-3-1991 disclosing capital gains. The question whether the particulars constituting the capital gains were fully disclosed in the revised returns will be dealt with a little later. Now, the question falls for my consideration is whether the conduct of concealment which is contumacious conduct will be exonerated by the mere fact of filing the revised returns in which capital gains were shown, i.e., the blame-worthiness attached to the assessee with reference to the original returns can be voided by filing fresh returns after concealment was detected by the ITO. In this case, the original returns were filed both for assessment years 1989-90 and 1990-91 on 27-9-1990. The returns were filed before ITO, Ward 1(3), Thane. At the same time, the case of P.D. Thakur (HUF), who is one of the brothers of the assessee, was under scrutiny with ITO, Ward 1(5), Thane and during the investigation of that case it was noticed that the HUFs headed by the three brothers respectively have sold a land admeasuring 33,060 sq. yds. during the period relevant to the assessment year 1989-90 and that factor made the ITO Ward 1(5), Thane, issue notices under section 148. It was contended on behalf of the assessee that the revised return dated 7-3-1991 was filed even before the receipt of 148 notice on 6-8-1991 and, therefore, the revised return was not filed in pursuance of 148 notice. 148 notice was issued to all the three HUFs. The dates of receipt of 148 notices by the three HUFs. may be on different dates. Even if one of them knows about the issue of 148 notice, it is easy for the other brothers to get knowledge about it. Therefore, unless there is specific evidence produced as to the dates on which 148 notices were served on the three HUFs, it is not possible to accept the contention that the revised return of the assessee for assessment year 1989-90 was filed before the receipt of 148 notice itself. Be that as it may, for assessment year 1990-91, though the original return was filed on 27-9-1990, no capital gains were returned in it and the income-tax return was accepted under section 143(1)(a) on 19-3-1991. After the acceptance of the income returned, the assessee filed the revised return on 22-3-1991 declaring total income of Rs. 34,730 and showing additional income of Rs. 21,000 on account of capital gains. The question is whether filing of a revised return exonerates the contumacious conduct on the part of the assessee in not having disclosed true income in the originally filed return and whether the revised return mitigates the default. In this connection, I feel that the rations of the following decisions are important to bear in mind :
(1) Vadilal Ichhachand v. CIT [1957] 32 ITR 569 (Bom.).
In that case, after filing of the return, the ITO began examining the books of the assessee and discovered that the assessee had not disclosed an income of Rs. 17,548. The authorities came to the conclusion that income had been deliberately, concealed by the assessee in his return and imposed a penalty for concealment. In the said case, the Hon'ble Bombay High Court held the following :-
"Held, (i) that the return that had to be taken into account under section 28(1)(c) of the Indian Income-tax Act, 1922, was the return which if accepted would have avoided tax and which was not accepted; therefore, the penalty had to be calculated on the basis of the original return and the Tribunal erred in holding that the revised return of October 18 had to be taken into account and that the assessee was not liable to a penalty."
(2) Another case, which I came across, is decided by the Bombay High Court itself in Dayabhai Girdharbhai v. CIT [1957] 32 ITR 677. In the headnote of the decision, the following is what is held :-
"Where the omission to include in item of income in the original return is deliberate the results of such deliberate omission cannot be got rid of by merely filing a revised return. If the omission is deliberate then in respect of the original return the provisions of section 28(1)(c) of the Indian Income-tax Act apply, and the assessee may be subjected to a penalty. The penalty is attracted notwithstanding the fact that the return has been subsequently corrected.
The question whether the concealment of income brought about the result that some portion of the income escaped assessment or that income did not escape assessment and was brought to tax under the proviso to section 13 have nothing whatever to do with the question whether a return as furnished had concealed the particulars of the income or deliberately furnished inaccurate particulars of the income of the assessee.
The actual result of the assessment had nothing whatever to do with an attempt made by the assessee to conceal particulars of his income by his first return by which he deliberately furnished inaccurate particulars of his income."
(3) In 180 ITR 40 (Statutes), the information with regard to the disposal of a S.L.P. filed against the Kerala High Court's decision in Calicut Trading Co. v. CIT [1989] 178 ITR 430/47 Taxman 27 was given and it is as follows :-
"Penalty for concealment :
25-9-1989 : Their Lordships Sabyasachi Mukharji and S. Ranganathan, JJ. dismissed the assessee's special leave petition against the order dated 10-2-1989 of the Kerala High Court in O.P. No. 7979 of 1988-S reported in 178 ITR 430, whereby the High Court rejected the assessee's reference application on the question whether penalty was rightly imposed on the assessee under section 271(1)(c) of the Income-tax Act, 1961, when the assessee filed a revised return disclosing an income of Rs. 2,50,000 after inquiries were made by the Officer asking the assessee to explain certain cash credits."
Thus, it will be seem that it is only the first return filed by the assessee with reference to which concealment is to be found out and not the revised return or the ultimate assessment made against the assessee.
10. Assuming that I have to find out the contumacious conduct even with reference to the revised return, the case of the assessee was that the revised returns were filed disclosing capital gains. However, it is essential to remember that the revised return for assessment year 1989-90 was filed on 7-3-1991 and for assessment year 1990-91 it was filed on 22-3-1991. The case of the assessee was that the dictated to his accountant that the market price of the land as on 1-4-1974 was Rs. 35 but mistakenly it was taken to be Rs. 135 per sq. yd. as on 1-4-1974. This mistake led to the return of less capital gains. I have to see whether this version is true or not. The mistake would be committed once but I can't believe that the mistake would be committed consistently both for the assessment years 1989-90 and 1990-91 as well especially when the revised returns were filed on two different dates for each of the these years. It is highly improbable that a businessman like the karta of the assessee-HUF would allow the mistake to continue in the revised returns especially because the revised returns must be verified returns and it is quite unlikely that being a businessman he would allow the mistake to continue or to persist in his income-tax returns. Further, the brothers of the assessee-HUF have returned the capital gains correctly. Therefore, the version put forward by the assessee that mistakenly the market price was returned at Rs. 135 instead of at Rs. 35 per sq. yd. as on 1-4-1974 cannot be believed and it appears to be a later concoction. In this connection, the fact that the karta of the assessee-HUF is a partner in M/s. Vaibhav Construction Co., which is one of the companies to which portions of the land were sold, cannot be lost sight of.
11. Having regard to all the above, I hold that by the date the revised return was filed, the assessee-HUF must have got scent of the 148 notices through his brothers and that must have promoted to file his so-called returns dated 7-3-1991 and 22-3-1991 and there is sufficient material on record to satisfy that in all probability the assessee must have filed the revised return on 7-3-1991 and 22-3-1991 only after its concealment was found out or detected by the department. Under the circumstances, the culpability of the assessee in concealing the particulars of his income cannot be mitigated or treated lightly on the ground that concealment, if any, reflects only the difference of opinion as to valuation and it does not justify and penalty. Admittedly, even according to the assessee, the market price of the land sold as on 1-4-1974 was Rs. 35 per sq. yd. but admittedly he had computed the capital gains on the basis that it was Rs. 135 per sq. yd. In my humble opinion, the difference between Rs. 35 and Rs. 135 per sq. yard. is big a figure to admit any valid explanation. I, therefore, hold that the assessee is guilty of concealment and the penalty is rightly levied on the assessee both for assessment years 1989-90 and 1990-91.
12. The appeals, therefore, fail and are dismissed.