Income Tax Appellate Tribunal - Ahmedabad
Balvantrai S Contractor , Surat vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "D" AHMEDABAD
Before Shri Mahavir Singh, Judicial Member, and
Shri D. C. Agrawal, Accountant Member
IT A No.2128-2131/Ahd/2010
Assessm ent Years :2002-03 to 2005-06
Date of hearing:19.11.10 Drafted:24.11.10
Shri Balvantrai S, V/s. Income Tax Officer,
Contractor 2/714, Udhna W ard-2(4), Aa ykar
Darwaja, Ring Road, Bhavwan, Majura Gate,
Surat - 395 002 Surat
PAN No. ACVPC3171A
(Appellant) .. (Respondent)
Appellant by :- Shri Sapnesh Sheth, AR
Respondent by:- Smt. Shailaja Rai, DR
ORDER
PER Mahavir Singh, Judicial Member:-
These four appeals by the assessee are arising out of different orders of Commissioner of Income-tax (Appeals)-II, Surat in appeal Nos.CAS/II/127-130/09-10 of even date 31-03-2010. The assessments were framed by ITO Ward-2(4), Surat u/s143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') vide his orders of even date 16-12-2008 for assessment years 2002-03 to 2005-06 respectively. The penalties under dispute were levied by ITO Ward-2(4) Surat u/s.271(1)© of the Act vide his orders of even date 29-06-2009.
2. The only common issue in all four appeals of assessee is against the order of CIT(A) confirming levy of penalties by Assessing Officer u/s 271(1)(c) of the Act. The facts and circumstances are exactly similar in all the appeals and for the sake of convenience & brevity we will take up the facts from appeal in ITA ITA No.2129-31/Ahd/2010 A.Ys.02-03 2 to 05-06 Sh. Balvantrais Contractor v. ITO Wd-2($) SRT Page 2 No.2128/Ahd/2010 for the assessment year 2002-03 and decide the issue. The assessee has raised the following ground No.01:-
ITA No.2128/Ahd/2010"01. On the facts and circumstances of the case as well as law on the subject, the learned CIT(Appeals) has erred in confirming the action of the Assessing Officer in levying the penalty U/s. 271(1)© of Rs.8,18,251/-"
3. The brief facts leading to the above issue are that the assessee is an individual and filed its return of income for the assessment year 2002-03 on 09-08- 2002 declaring total income at Rs.98,259/-. The assessee is regular income tax assessee and is filing returns of income since past several years and is assessed with ITO Ward-2(4), Surat in individual status. The assessee has earned income from sources such as textile business, rental income etc. and the same is duly reflected in the regular return of income filed. The returns of income filed for each of the assessment years 2002-03 to 2005-06 have been accepted u/s.143(1)(a) of the Act. The assessee filed an application u/s.273A of the Act for the assessment years 2002-03 to 2005-06 before CIT, Surat on 07-01-2008, wherein he has filed revised computation of income including the land transactions carried out and long term capital gain earned on sale of ancestral property, which was not shown in the original return of income. This information was passed on by CIT Surat to the Assessing Officer of the assessee and accordingly, a notice u/s 148 of the act was issued on 28-03-2008 and in response to the same, assessee filed return of income on 23-04- 2008 declaring total income at Rs.41,09,296/-. The Assessing Officer noted the reason for issuance of notice that the information received from CIT Surat revealed that assessee has inherited land situated at RS No.57/1, 57/2, 58 and 62 admeasuring 28021 sq.mt. from his father in his individual name. Further land at RS No.63 admeasuring 33790 sq.mt. was inherited from his father to the assessee and his brother Late Shri Harshadrai S Contractor in equal share. Therefore total area of land and share of assessee in this inherited land is worked out by the Assessing Officer as under:-
Name RS No.57/1, RS Total
No.63 Land
57/2, 58 & 63
(sq.mt)
(sq.mt)
Balvantrai S Contractor 28021 16895 44916
ITA No.2129-31/Ahd/2010 A.Ys.02-03
2 to 05-06
Sh. Balvantrais Contractor v. ITO Wd-2($) SRT Page 3
Harshadrai S Contractor -- 16895 16895
Total 28021 33790 61811
4. The assessee vide his application u/s.273 of the Act dated 07-01-2008 submitted as under:-
(i) The land aggregating to 72,130 sq.mt. divided x 358 plots, each admeasuring 119 sq.mt.. Out of 358 plots, 118 plots were sold in various years up to financial year 2000-01. For the period relevant to assessment years 2002-03 to 2007-08, the balance 195 plots have been sold and now 45 plots remain with the assessee up to 31-03-2007. Detail of plots sold in each of the assessment years is as under:-
A.Y. Opening plot of land Sold Closing plot of land
RS RS RS RS RS No.571, RS No
No.571/, No. No.57/1, No. 57/2, 58, 62 .64
57/2, 58, 62 64 57/2, 58, 62 64 & 63
& 63 & 63
2002-03 193 -- 36 -- 157 --
2003-04 157 47 28 13 129 34
2004-05 129 34 22 11 107 23
2005-06 107 23 8 5 99 18
2006-07 99 18 14 12 85 6
2007-08 85 6 40 6 45 --
Total 148 47 45 --
(ii) The assessee has compute the year-wise and RS No. wise capital gain as mentioned in below table "A" & "B"
CALCULATION OF CAPITAL GAIN (R.S. No.57/1, 57/2, 58, 62 & 63) Table-A F.Y. Purchase Development Total Index Sale LTCG cost Cost Cost Cost Value 2001-02 7,24,014 Nil 7,24,014 30,84,300 70,95,337 40,11,037 2002-03 5,47,281 1,75,941 7,23,222 26,22,287 53,63,354 27,41,067 2003-04 4,30,007 6,36,932 10,66,939 26,31,812 42,,14,064 15,82,252 2004-05 1,56,366 3,17,161 4,73,527 10,78,074 15,32,387 5,54,313 ITA No.2129-31/Ahd/2010 A.Ys.02-03 2 to 05-06 Sh. Balvantrais Contractor v. ITO Wd-2($) SRT Page 4 (RS No.64) Table-B F.Y. Purchase Development Total Index Sale LTCG cost Cost Cost Cost Value 2002-03 4,95,040 1,11,899 6,06,939 17,75,680 34,11,135 16,35,455 2003-04 4,18,880 4,35,570 8,54,450 18,93,776 28,86,345 9,89,180 2004-05 1,90,400 2,71,542 4,61,942 9,67,566 13,11,975 3,44,409
5. The Assessing Officer in view of the above submissions worked out the capital gain for the year under consideration as under:-
A.Y. R.S. Total Index Cost Sale Value LTCG
cost
2002-03 57/1,57/2,58,62& 7,24,014 30,84,300 70,95,337 40,11,037
63
Total 40,11,037
He further noted that the assessee failed to offer this longer term capital gain of Rs.40,11,037/- in the original return of income. Therefore, this long term capital gain (LTCG for short) was to be added to the total income of the assessee and accordingly notice u/s.148 was issued. The assessee offered this amount of LTCG in the return of income filed in response to Notice u/s.148 of the Act. The Assessing Officer accepted this LTCG offered by the assessee in the return filed in response to u/s.148 of the Act but initiated penalty proceedings u/s.271(1)© of the Act for furnishing inaccurate particulars of income and of concealment of income by giving following findings in para-13 of his assessment order:-
"13. Since assessee was filing his regular return of income and has filed original return of income on 09.08.2002 for the year under consideration showing income from partnership firm, proprietary business of construction, truck plying in, income from house property, income from other sources etc. which clearly indicate that assessee is well verse with the provisions of Income Tax and having sufficient experience and age of 56 years to conversant with the requirement of law. However, assessee deliberately conceal the land transaction done by him beside he was also doing the business of construction etc. With a view to suppress his income to avoid the ITA No.2129-31/Ahd/2010 A.Ys.02-03 2 to 05-06 Sh. Balvantrais Contractor v. ITO Wd-2($) SRT Page 5 tax and file inaccurate particulars of income. This act of the assessee was not bonafide as the assessee himself has admitted that he along with his relatives have sold various plots at S.K. Industrial; Co.Op. Society Ltd. and same were not disclosed while filing regular income-tax returns. Therefore penalty proceedings u/s.274 r.w.s. 271(1)(c) of the Act are being initiated separately for the deliberate act of the assessee for furnishing inaccurate particulars and thereby concealing the income."
6. The Assessing Officer started the penalty proceedings u/s.271(1)© of the Act, on the amount of LTCG which was not declared in the original return of income, by issuing show cause Notice u/s.271(1)© of the Act. The assessee replied to this show cause Notice vide letter received in the office of the Assessing Officer on 23-02-2009 stating that an application u/s.273(A) was filed before the CIT, Surat to drop the penalty proceedings. The AO further issued show cause Notice dated 24-04-2009 to assessee as to why an order imposing the penalty u/s.271(1)c) should not be passed. The Ld counsel for the assessee vie his letter dated 01-05-2009 stated that the application u/s.273(A) has been filed before the CIT-I, Surat by assessee voluntarily and in good faith disclosing full and true particulars of his income and has truly discharged his tax liabilities and requested to drop the penalty proceedings. But the AO levied the penalty by stating that he is of the considered view that the assessee is liable to be penalized u/s 271(1)(c) of the Act as the assessee has committed mistake by not offering an amount of Rs.40,11,037/- being LTCG in the original return furnished and for this he placed reliance on the decision of Hon'ble Kerala High Court in the case of Anand Liquors v. CIT (1998) 232 ITR 35 (Ker). Aggrieved, assessee preferred appeal before CIT(A) and CIT(A) confirmed the levy of penalty by giving following findings in para-6 to 6.2 of his appellate order:-
6. I have carefully considered both the positions. The fact remains that the Assessee had failed to disclose the LTCG earned by him over a period of four years including the year under consideration, which meant that his case was squarely covered by clause© to section 271(1) of the IT Act. He had thus "concealed the particulars of income or furnished inaccurate particulars of such income, ..." Penalty therefore, was clearly leviable on the LTCG concealed by the Assessee during the year. It has been argued by the AR that the LTCG had been disclosed voluntarily and in good faith through the petition filed u/s.273A of the IT Act before the CIT-I, Surat. This is snot correct. If the Assessee was to voluntarily offer such capital gain to tax, he ought to have included the same in the original return of income or could have even furnished a revised return of income within the stipulated time, which the Assessee failed to do. In fact, the Assessee had concealed the capital gain earned on land transactions for four years. If there was any noble and ITA No.2129-31/Ahd/2010 A.Ys.02-03 2 to 05-06 Sh. Balvantrais Contractor v. ITO Wd-2($) SRT Page 6 honourable intention on the part of the Assessee to disclose the true and correct income earned by him during this period, he would not have concealed such substantial capital gain for such a long period of time. The correct factual position is that, the Assessee was constrained to file the petition u/s.273A out of fear of getting detected by the Investigation wing who during the relevant period had conduced inquiries and investigation into the undervaluations in land transactions emerging from the valuations made by the Stamp Valuation Authority (SVA), and the additional stamp duty charged by them, which was relevant for purposes of the application of the provisions of section 50C of the IT Act. It was as a fall-out of such inquiries and investigation with the Land Registrar and the SVA that the Assessee was forced to disclose such transactions. However, since, the time for filing a revised return had already lapsed, the Assessee found no other option but to move the petition u/s.273A even though no penalty had been levied upto that point of time. at was thus an attempt to secure the Assessee's defense against the expected fallout of the inquiries made by the Investigation Wing in Surat, into the land transactions inn the financial years 2007-08 and 2008-09.
Against such background facts of the case, it cannot be accepted that the LTCG was disclosed voluntarily and in good faith by the Assessee.
6.1 Most of the case-laws relied upon by the AR deal with the levy of penalty on agreed additions. Given the facts of the Assessee's case, it cannot be accepted that the penalty was levied on an agreed addition. For that to be the case, the Assessee would have had to make the surrender in course of the original assessment proceedings or should have fled a revised return. Notwithstanding such a position, even if it is to be treated as an agreed addition penalty u/s.271(1)© was still exigible. This brings us to the issue of whether penalty u/s.271(1)© can be levied with regard to an agreed addition. The Hon'ble Supreme Court , while deciding the case of K.P.Madhusudan V/s CIT (2001) 251 ITR 99 reversed the view taken in Shadilal Sugar & General Mills. In the case of K.P. Madhusudan, the Assessee had taken certain loans which he could not prove with sufficient evidence. He therefore, offered the same sum as addition al income. Penalty u/s.271(1)© was levied. The ITAT deleted the penalty but the High Court held that the imposition of penalty was valid. "The Explanation to section 271(1)(c) is a apart of section 271. When the AOO or the Appellate Assistant Commissioner issues a notice under section 271, he makes the Assessee aware that the provisions thereof are to be used against him. These provisions include the Explanation. By virtue of the notice under section 271 the Assessee is put to notice that, if does not prove, in the circumstances stated in the Explanation, that his failure to return his correct income was not due to fraud or neglect, he shall be deemed to have concealed the particulars of his since or furnished inaccurate particulars thereof, and, consequently be liable to the penalty under the section. No express invocation of the Explanation to section 271 in the notice under section 271 is necessary before the provisions of the Explanation are applied." In response to the Assessee's reliance on the case of Sir Shadilal Sugar & General Mills Ltd, and the claim that the agreed addition could not lead to the conclusion of concealed income since, the Revenue had been unable to prove mens rea, the Hon'ble Court observed, "But it was because of the view take in this and other judgments that the Explanation to section 271 ITA No.2129-31/Ahd/2010 A.Ys.02-03 2 to 05-06 Sh. Balvantrais Contractor v. ITO Wd-2($) SRT Page 7 was added. By reason of the addition of that Explanation, the view taken in this case can no longer be said to be applicable". Thus, even though the Assessee may have 'agreed' to the addition, penalty for concealment u/s.271(1)© was still leviable. Reliance is also placed on the case of Pawan Construction V/s ITO 2001 78 ITD 176 (Raj).
6.2 Given such facts and circumstances of the case as discussed above, it is held that the AO was fully justified in levying the penalty of the sum of Rs.8,18,251 being 100% of the tax sought to be evaded. The same is fully sustained."
Aggrieved against the confirmation of levy of penalty by the Assessing Officer u/s 271(1)© of the Act by the CIT(A), the assessee preferred second appeal before the Tribunal.
7. Before us, the Ld. counsel for the assessee, Shri Sapnesh Seth, in view of the above facts, argued that the assessee filed an application u/s.273A of the Act before CIT-Surat relating to all four assessment years, which was a voluntary offer and there is no question of treating the income declared u/s.273A of the Act as concealed income. The assessee stated that this offer made was conditional offer with the condition attached to it that no penalty ought to be levied and now Revenue cannot have both to accept the voluntary offer and thereby levy the penalty also. He stated that the voluntary offer of income by the assessee is by way of petition u/s 273A of the Act and the additional income thus offered voluntarily was merely regularized by issuing Notice u/s148 of the Act and this additional income offered was accepted and assessed to tax. He stated that this additional income offered was voluntary offer and there was no detection of the said income by the Department and even there was no pendency of the assessment proceedings but the assessee himself came forward and offered the income to the Department and hence, in such scenario, there ought to be no question of levy of penalty and the penalty thus levied is without any justification and liable to be deleted. The Ld counsel for the assessee referred to various case laws of Hon'ble High Courts and of Hon'ble Supreme Court, which we will deal with when we will give our findings on this issue.
ITA No.2129-31/Ahd/2010 A.Ys.02-03
2 to 05-06
Sh. Balvantrais Contractor v. ITO Wd-2($) SRT Page 8
8. On the other hand, the Ld SR-DR, Smt. Shilaja Rai supported the orders of the lower authorities and stated that the assessee has concealed the capital gain earned from land transactions for four years as the original return filed by him, the assessee has not declared these transactions. She stated that in case of voluntary offer the assessee ought to have included the same in the original return of income or could have revised the return of income within the stipulated time. According to her, the assessee was under constant fear of detection by the Investigation Wing of the Department, who during the relevant period has conducted inquiries and investigations into under valuation of land transactions emerging from Stamp Valuation Authority i.e. the Registrar or Sub-register registering the land transactions. She further stated that the assessee made an attempt to secure defense against the expected fall-out of inquiries made by Investigation Wing during the years 2007-08 and 2008-09. She further argued that even otherwise merely filing an application before CIT u/s.273A does not absolve the assessee but the Assessing Officer has started the process of issuing Notice u/s.148 for framing re-assessment u/s.147 of the Act for escapement of income on account of land transaction of the assessee as he has not declared any capital gain in the original returns of income. Accordingly, she stated that the penalty levied and confirmed by CIT(A) u/s.271(1)(c) of the Act be upheld.
9. We have heard rival contentions and gone through the facts and circumstances of the case. First of all, the dates are very relevant. As noted above, the assessee filed his returns of income almost on due dates i.e. the original returns in which he has not declared the LTCG arising out the land transactions entered during the respective assessment years. Subsequently, the assessee moved a petition u/s 273A of the Act before CIT-Surat for all these four assessment years vide application dated 07-01-2008 declaring LTCG arising on the land transactions entered during the assessment years giving complete particulars and declaring true income. For all these assessment years, the CIT-Surat passed on information to the Assessing Officer along with enclosures and computation of income of LTCG, the AO issued notices u/s 148 of the Act dated 23-08-2008. In response to these notices, the assessee declare the complete land transactions and also declared the same computation of income, which was filed before CIT, Surat in the proceedings u/s.273A of the Act. The assessments u/s.147 r.w.s. 143(3) of the Act was ITA No.2129-31/Ahd/2010 A.Ys.02-03 2 to 05-06 Sh. Balvantrais Contractor v. ITO Wd-2($) SRT Page 9 completed vide Assessing Officer's orders dated 16-12-2008 and penalties u/s.271(1)© was levied vide orders dated 29-06-2009. By these dates, no order was passed by CIT, Surat on application filed u/s.273A of the Act and the assessee withdraw this application vide letter dated 30-03-2010.
10. In view of the above facts, now we have to go through the application filed by the assessee u/s.273A of the Act dated 07-01-2008 before CIT, Surat. The relevant application reads as under:-
"Sub: Application u/s.273A of the I.T. Act Asst. Years 2002-03 to 2005-06 THIS HUMBLE APPLICATION OF THE APPLICATNT ABOVE NAMED MADE U/S 273A OF THE INCOME TAX ACT, 1961 FOR ASSESSMENT YEARS 2002-03 TO 2005-06 MOST RESPECTFULLY SHEWETH;
1. The Applicant is regular income tax assessee and is filing return of income since past several years and is assessed to Income tax with ITO ward 2(4), Surat having PAN No.ACYPC3171A in the capacity of individual.
2. The Applicant has earned income from sources such as Textile Business, Rental Income etc. and the same is duly reflected in the regular return of income filed. The return of income filed for each of the assessment years 2002-03 to 2005-06 have been accepted u/s.143(1)(a) of the Act accepting the returned income. The details of filing of the return of income for each of the above assessment years and subsequent years is as under:-
Asst. Date of Filing Returned Returned
Year Return Income filed with
ITO
2002-03 02.08.2002 98,259 Ward 2(4)
2003-04 25.03.2004 1,00,866 Ward 2(4)
2004-05 24.03.2005 1,26,900 Ward 2(4)
2005-06 28.03.2006 1,25,340 Ward 2(4)
2006-07 02.01.2008 14,72,124 Ward 2(4)
(Revised)
2007-08 02.01.2008 8,13,974 Ward 2(4)
Back ground & history of the Applicant:
3. The Applicant is an individual aged 56 years, residing at 2/716, Bhandariwad, Sagrampura, Surat. The Applicant is having wife named Smt. Shashikala and has 4 children. The Late father of the applicant Shri Somabhai Contactor and mother of the applicant Late Smt. Laxmiben Contractor had two sons namely the applicant i.e. Balvantrai Contractor and Harshadrai Contractor. The brother of the applicant Shri Harshadri Contractor expired in the year 2002 and was survived by his two sons namely Shri Paresh Contractor & Shri Devendra Contractor.
4. In the course of time, the father of the applicant purchased land from time to time, the description of which is an under:-
ITA No.2129-31/Ahd/2010 A.Ys.02-03
2 to 05-06
Sh. Balvantrais Contractor v. ITO Wd-2($) SRT Page 10
"A) Khatodara (Surat) Land 7668 sq.mt.
Land at Khatodara RS No.30 Paiki was purchased by Shri Sombhai Contractor long back in 1956 and the same was later divided in 1969-70 among Shri Somabhai Contractor, his wife Smt. Laxmiben Contractor & Sons Shri Balvantrai & Shri Harshadrain in the year 1972. Thereafter a society named S.K. Industrial Co-op. Service Society was formed in the year 1974 and the entire piece of land was given to this society by an unregistered Satakhat (Agreement of sale). This land was given to S.K. Ind. Co-op. Service Society for development in the year 1974. From 1974 to 1976 plot Nos. 1 to 33 were sold to certain members of society (none of the family embers or relatives of the applicant were members of the society). On the sale of the aforesaid plots, the owners of land i.e. Shri Somabhai Contractor, Smt. Laxmiben Cotractor, Shri Balvantrai & Shri Hareshadrai paid capital gain tax in the year 1976.
B) Majura (Surat) Land: 28021 sq.mts.
RS No.57/1, 57/2 & 58 at Majura was purchased by Somabhai Kanjibhai by registered sale deed on 04.09.1948 R.S No.62 was already owned by Shri Somabhai Contractor from the beginning. Thereafter, the father of the Applicant Shri Somabhai Contractor by entry of division entered on 21.02.1958 this lands were given singly to the applicant who was minor at that time. Thus, this land solely belonged to the applicant.
C) Majura (Surat) Land : 33790 sq. Mts.
RS No.63 was purchased by Shri Somabhai contractor by entry dated 05.06.1961. By his Will dated 15.06.1976, this land was distributed between both his sons i.e. Shri Balvantrai & Shri Harshadrai in the ratio of 50:50 respectively. Shri Harshadrai Contractor, brother of the applicant by Will dated 28.03.2002 gave his share of land to his sons Shri Paresh & Shri Devendra. Shri Harshaddrai Contractor expired on 11.07.2002 and thus, his share in RS No.63 was then given to his sons Shri Paresh & Shri Devendra. The respective share in the land is worked out as under:-
Division of share As certain piece of land i.e. RS No.57/1, 57/2, 58 & 62 are owned by the applicant Balvantrai solely and other land RS No.63 jointly with applicants brother Harshadrai and that the development work of the land was under
taken as a combined single entity for the whole land for all above R.S. Nos. the respective share in the land has been determined in the ratio of their respective holding in the total volume of the land.
Name RS No.57/1, RS No 63 Total Land
57/2m 58 &
62
B.S. Contractor 28,021 sq.mt. 16,895 44,916
H.S. Contractor -- 16,895 16,895
28,021 33,790 61,811
ITA No.2129-31/Ahd/2010 A.Ys.02-03
2 to 05-06
Sh. Balvantrais Contractor v. ITO Wd-2($) SRT Page 11
After the death of Harshadbhai Contractor on 11.07.2002 his share of land has gone to his two sons Paresh & Devendra in equal ratio. Accordingly the year-wise ownership ratio will be as follows:-
F.Y. 2001-02 735 Balvantrai
27% Late Harshadrai
From F.Y. 2002-03 73% Balvantrai Contractor
Onwards 13.5% Paresh Contractor
13.5% Devendra Contractor
D) Majaura (Surat) Land: 10319 sq.mt.
RS No.64 was owned by one Gamanbhai Parbhubhai from the beginning for which Satakhat (agreement for sale) was executed with the applicant *& society and the RS No.64 was acquired in 1985 @ Rs.320/- per sq.mts.
The applicant solely owns the responsibility for this piece of land i.e. RS No.64 also and for capital gain purposes the 100% shares of gain related to RS No.64 is taken into applicants calculations.
As explained above, a Satakhat was executed with the proposed society named S.K. Industrial Co-Op. Service Society Ltd. in the year 1974 for the different pieces of land such as Khatodara RS No.30 paiki, Majura RS No.57/1, 57/2, 58, 62 & 63 by the applicants family. Out of above the land bearing RS No.30 Paiki Khatodara was divided into 33 plots and the plots were sold to certain members of the society on which the applicant's family paid capital gain tax in the year 1976.
As per as all other pieces of land such as RS No.57/1, 57/2, 58, 62 & 63 are concerned the title of the land continued to remain with the Vendors in all Govt. records despite having executed a Satakhat with the Society and there is no conveyance or registration done by the Vendors in favour of the society nor sale consideration was received at the time of execution of satakhat in 1974.
True & Full disclosure of income not disclosed:
5. The applicant submits that the Majura Land aggregating to 72130 sq.mts.
divided into 358 plots the area of each plot is around 119 sq.mtrs. The applicant submits that out of the total number of 358 plots, plots totaling to 118 were sold in various years upto 2000-01. The applicant submits that during the period relevant to Asst. Year 2002-03 to 2007-08, 195 plots have been sold to various parties and 45 plots are still remaining to be sold and are with the applicant & their coo-owners upto 31.03.2007.
6. The applicant gives hereunder the break-up of the plots sold in each of the above Asst. Years:
Asst. Year 1981 Mjura Land 1985 Majura Land
ITA No.2129-31/Ahd/2010 A.Ys.02-03
2 to 05-06
Sh. Balvantrais Contractor v. ITO Wd-2($) SRT Page 12
(RS No.64)
2002-03 36 --
2003-04 28 13
2004-05 22 11
2005-06 8 5
2006-07 14 12
2007-08 40 6
Total 148 47
7. The applicant submits that as stated above, the land was purchased by his father and thereafter by way of succession was received by the applicant and his brother. The applicant submits that since the land was purchased prior to the year 1981, the cost of the land is taken as the fair market value as at 1/4/1981 as per the provisions of section 55(2) of the I.T Act.
The applicant submits that the fair market value as at 1/4/1981 as per the Approved Valuer is Rs.225/- per sq.mtr. Thus, the applicant has considered the said value as cost of acquisition of the plots of land for the land owned prior to 1981 and @ Rs.320 p.s.m. being the actual cost of acquisition in the year 1985 for the land bearing RS No.64.
8. The applicant further submits that certain expenses were incurred for the improvement of land towards the development of the plots and for electricity from assessment year 2003-04, per putting necessary infrastructure in place at the site which is also taken into consideration while determining and computing the total capital gains. The details of thee total cost of land along with details of cost of improvement are enclosed as per Annexure-I.
9. The applicant submits that possession of different plots was given in the above assessment years and the agreements to sale were made with each party for these plot @ Rs,.6500/- to Rs.8500- per plot. Over and above this, the development charges and electricity charges were also recovered separately.
10. The applicant submits that in the regular returns of income field for the above assessment years bearing A.Y 2007-08, the transactions of sale of plots are not reflected. The applicant submits that the plots are sold to various parties at the rate ranging from 1500/- per sq. mt. to 2200/- per sq.mtr. and that the applicant has not maintained the exact details of the rate at which each of the plot is sold in different years.
11. Since the exact details are not available with the applicant, the applicant has decided and considered the rate adopted by the stamp duty ready reckoner (Jantri) at Rs.2205/- per sq.mtr. as its sale rate for the purposes of computing the capital gains tax even though the provisions of section 50C of the Act has been introduced for and from A.Y. 2003-04. Thus, even for AY 2002-03, the rate adopted by the stamp duty ready reckoner is adopted.
12. In view of the above, the applicant submits that the Long Term Capital Gains is computed taking into consideration the indexed cost of acquisition ITA No.2129-31/Ahd/2010 A.Ys.02-03 2 to 05-06 Sh. Balvantrais Contractor v. ITO Wd-2($) SRT Page 13 and indexed cost of improvement. The detailed chart working out the indexed cost and the long term capital gains & its apportionment among different co- owners in the ratio already given above is appended with this application.
13. By virtue of the above computation, the applicant submits that the total long term capital gains works out to Rs.1,76,00,404/- for the Assessment Years 202-03 to 2007-08. The applicant submits that revised return of income are separately filed for Assessment Year 2006-07 since there is time available for furnishing the revised return of income. The applicant submits that in respect of the four assessment years i.e. AY 2002-03 to 2005-06, the total long term capital gains amounts to Rs.1,50,41,518/- in which the applicant share works out to Rs.1,17,85,258/- which the applicant voluntarily offers herewith this petition before your honours.
14. The applicant submits that in his case, no enquiry or investigation is in progress nor any action taken. Motivated by desire to make a clean breast of his affairs and a desire to lead a peaceful life in old age, voluntarily and in good faith, the applicant hereby makes a full and true disclosure of his income and has truly discharged his tax liabilities.
15. The Applicant through this application prays for the waiver of penalty imposable u/s 271(1)© of the Act. The applicant submits that it has satisfied and prescribed conditions for the waiver of the penalty as per the provision of section 273A i.e.
i) The non-exercise of the power for waiver of penalty would cause genuine hardship to the applicant;
ii) The applicant has always co-operated with the department;
iii) The applicant has willingly paid the entire tax with interest and has always cooperated and there is no amount of tax due and recoverable from the applicant;
iv) The applicant has as stated above, voluntarily and in good faith prior to any detection by the Assessing Officer made full and true disclosure of income.
16. The applicant submits that he is an individual and old aged and poor health and the non-waiver of penalty imposable u/s.271(1)© would cause genuine hardship to the assessee.
17. As the applicant satisfies the requisite conditions, it is submitted that the Commissioner in exercise of the powers conferred upon him my in the circumstances of the case kindly waive the penalty leviable u/s 27(1)© of the Income-tax Act.
18. The applicant submits that no application u/s.273A of the Act was made earlier and thus no benefit whatsoever was obtained under provisions of Section 273A of the Act earlier.
19. The applicant craves leave to pursue remedies legitimately available under the various provisions of I.T. Act.
ITA No.2129-31/Ahd/2010 A.Ys.02-03
2 to 05-06
Sh. Balvantrais Contractor v. ITO Wd-2($) SRT Page 14
20. In view of the above detailed application, your honour may kindly waive the penalty leviable. Your applicant would be pleased to furnish any other information and clarification that may be required by your honour."
11. It is a fact that the assessee has paid entire capital gains taxes for all the relevant assessment years and declared LTCG arising out of land transactions fully and truly in application u/s.273A of the Act and also co-operated in the assessment proceedings complete u/s 147 r.w.s.143(3) of the Act. It is also a fact that no inquiry or investigation is pending against the assessee for any of the above assessment years in respect land transactions or any other relating to him. The assessee's disclosure u/s.273A seems to be voluntary disclosure as the Revenue before us could not adduce anything, which is pending against the assessee in any income-tax proceedings, even though a specific query was put to Ld. SR-DR regarding this. She replied in negative and specifically stated that no inquiry against the assessee is pending either with the assessment wing or investigation wing of the Income-tax Department. It is also a fact that the computation made by the assessee of LTCG arising out of land transactions has been accepted by the Assessing Officer during the course of assessment proceedings u/s.143(3) r.w.s 147 of the Act and no tinkering has been made by the AO of the computation filed by the assessee either before the CIT, Surat u/s.273A of the Act or in the returns filed in response to Notices u/s.148 of the Act. We further find the facts from the records that the CIT, Surat has forwarded this information filed u/s.273A of the Act to the Assessing Officer without deciding this application for waiver of penalty and has not taken any action from the date of filing of application u/s.273A by the assessee till the levy of penalty by the AO u/s.271(1)© of the Act and even till the withdrawal vide letter dated 30-03-2010. The relevant text of the letter of withdrawal reads as under:-
"To Date 30-03-2010
The Commissioner of Income-tax-1,
Aaykar Bhavan,
Majura Gate
Surat
Sub : Withdrawal of Application filed U/s.273A for waiver of penalty for the A.Y.2002-03 to 2005-06 PAN ACYPC3171A Respected Sir, ITA No.2129-31/Ahd/2010 A.Ys.02-03 2 to 05-06 Sh. Balvantrais Contractor v. ITO Wd-2($) SRT Page 15 As We are pursuing the appeal against penalty imposed U/s.271(1)© for A.Y 2002-03 to 2005-06 by ITO Ward 2(4) before C.I.T. (Appeals)II. We wish to withdraw the application filed by us u/s.273A.
Thanking You Yours faithfully, Sd/-
(BALVANTRAI CONTRACTOR)"
12. Now, we have to go to the assessment order framed by the Assessing Officer u/s.143(3) r.w.s. 147/148 of the Act. The very basis of the assessment order and reasons for reopening u/s.148 of the Act are that, the assessee has filed an application u/s 273A for waiver of penalty on land transactions which gave rise to LTCG to the assessee and not disclosed in the regular returns of income, the CIT, Surat passed on the information to the Assessing Officer. The relevant para-2 and 3 of the assessment order reads as under:-
I"2. In this case an application U/s.273A of the Income-Tax Act for the Assessment Years 2002-03 to 2005-06 was filed by the assessee before the Commission of Income Tax-I, Suat on 07.01.2008 for waiver of penalty to be leviable u/s.271(1)(© of the Act. With the application assessee had filed revised computation of total income. The same was field due to the land transaction carried out by the assessee during F.Y 2001-02 to 2005-06 and earned the Long Term Capital Gain on sale of ancestral property which was not shown at the time of filing regular return of income.
3. This information was received from the C.UI.T.I, Surat. After receiving this information alongwith its enclosures and on perusal of the same., it reveals that there was an escapement of income for A.Y. 2002-2003 and after recording proper reasons in writing, the case was reopen u/s148 of the Act to regularize the revised income offered by the assessee. A notice u/s 148 of the It Act was issued on 28.03.2008 and served upon the assessee on the same date calling for return of income to be filed within 30 days from the date of service of this notice. In pursuance to notice issued u/s. 148 of the Act assessee had filed return of income on 23.04.2008 declaring therein total income of Rs.31,09,296/-."
13. Now the question arises, whether, in the given facts and circumstances, the voluntary disclosure made by the assessee before CIT, Surat u/s.273A of the Act can be used for levy of penalty u/s.271(1)© of the Act or not? The Ld. counsel for the assessee before us, on this proposition relied on case law under old Section 271(4A), which was inserted by the Income-tax (Amendment) Act, 1965 with the ITA No.2129-31/Ahd/2010 A.Ys.02-03 2 to 05-06 Sh. Balvantrais Contractor v. ITO Wd-2($) SRT Page 16 object to encourage voluntary disclosures of undisclosed income, and for promoting to allay fears about imposition of penalties for concealment or holding back such income from the Department, which is para materia to new Section 273A as inserted by the Taxation Laws (Amendment) Act, 1975, case law of Hon'ble Madhya Pradesh High Court in the case of Addl. CIT v. Kanhaiyalal Jessaram (1977) 106 ITR 168 (MP) at Page 170 held as under:-
" It is clear that this provision is made to persuade the evaders of tax to make full disclosure of income voluntarily and in good faith. In that case the Commissioner has been empowered to reduce or waive the amount of minimum penalty. The entire offer and acceptance has to be considered as one part and what the department tried to do was to dissect the offer and acceptance and to treat the so-called admission made in the offer binding on the assessee. Although the offer may not be accepted by the department, we would no permit such dissection of the offer and acceptance which, in our opinion, would go together. If the offer is not accepted and if the department insists on deciding the assessment case on merits, any facts said to be disclosed in such offer have altogether to be excluded and then it becomes incumbent on the department to resort to the usual assessment or the best judgment assessment, as the case ma be, and in that event the department would be empowered to impose the minimum penalty impossible under the section. The attempt of the department was on the lines "heads I win tails you lose". Such an interpretation of section 271(4A) of the Act can evidently not be permitted and we feel that the Appellate Assistant Commissioner and he appellate Tribunal were correct in holding that in the event of there being no settlement, the disclosures made in the offer ought to be excluded from consideration altogether. If the department's contention were to be accepted, it would defeat the very purpose of enacting section 271(4A) of the Act. We may observe that unless the offer is accepted and acted upon by the department, the other sub-sections of section 271 will be attracted in the matter of imposition of penalty and the two provisions cannot be allowed to be mixed up to the entire advantage of the department and disadvantage of an assessee. We, therefore, do not think that the present case is one in which we should call upon the Appellate Tribunal to refer any question to us, as we are fully satisfied that even though the main question posed might be one of law, there can be no other interpretation except the one put by the Appellant Assistant Commissioner and the Appellate Tribunal."
We find from the arguments from the Ld. counsel for the assessee that the offer made u/s273A before CIT, Surat was conditional offer with the condition attached to it that no penalty ought to be levied. We find that the assessee has made voluntary offer motivated by desire to clean his affair and this offer is in good faith and bona fide as the assessee has made a full and true disclosure of his income and has truly ITA No.2129-31/Ahd/2010 A.Ys.02-03 2 to 05-06 Sh. Balvantrais Contractor v. ITO Wd-2($) SRT Page 17 discharged his liabilities as claimed in application made before CIT, Surat u/s 273A of the Act. The CIT, Surat has not passed the order on application u/s. 273A till levy of penalty u/s.271(1)© of the Act vide order dated 29-06-2009 and confirmed by CIT(A) vide order dated 31-03-2010. Whether for the inaction of the Department, can the assessee be punished by levying penalty u/s 271(1)(c) particularly when the disclosure is voluntary, assessee has co-operated with the Department, entire tax with interest has been paid, the disclosure is voluntary and in good faith and bona fide? This fact is supported by assessment orders passed by the Assessing Officer u/s.143(3) r.w.s. 147/148 of the Act as there is no detection by the Department or no inquiry or investigation was pending against this assessee.
14. Further, penalty u/s.271(1)© of the Act for concealment cannot be levied where voluntary disclosure is made. Hon'ble Madras High Court in the case of CIT v. Popular Lunghi Co. (1998) 147 CTR 467 (Mad) has held that on inspection of assessee's premises by the department did not reveal any material regarding money landing business. The Hon'ble Madras High Court further noted the facts that, it would be clear from the tenor of the inspection report as well as the order of the ITO that the whole matter was a voluntary disclosure on the part of the assessee. But for the letter dt. 29th Sept.1972, to the CIT, the Department had no knowledge about the money lending business. The IAC's satisfaction was based on the fact that it was a search that brought about the disclosure, which fact is clearly proved to be false. In the inspection report, it was clearly pointed out that no materials relating to the money lending business was found out. This fact was admitted even by the Departmental Representative. It was also admitted by the Department that the information came from the assessee without any suggestion or detection from the Department. A notice under s. 143(2) was issued fixing the date of hearing on 7th Oct.1972 which is long after the settlement petition to the CIT. This would show that no enquiry was made with reference to the return filed and no question was asked by the ITO as to the basis he is going to adopt for distributing the total income of Rs.4 lakhs for determining the income for the respective assessment years. The Explanation was acting as a rule of evidence. Simply because there is an arithmetical difference between the returned income and the assessed income, penalty under s. 271(1)© is not warranted. It is always open to the assessee to prove that the failure to return the correct income did not arise from any fraud or any gross ITA No.2129-31/Ahd/2010 A.Ys.02-03 2 to 05-06 Sh. Balvantrais Contractor v. ITO Wd-2($) SRT Page 18 or willful neglect on this part. In the present case, the ITO did not detect any concealment while completing the assessment. So also the inspection report does not reveal that the inspection party has found out any concealed income from the money lending business. The Department came to know the income from the money lending business only after it was disclosed by the assessee. Therefore, on facts, the assessee established that the failure to return the correct income did not arise from any fraud or any gross or willful neglect on his part. Further, in a given case, whether there is any concealment of income or not depends upon the facts arising in that case. On appraising the facts, the Tribunal came to conclusion that there was no concealment of income regarding the money lending business. The conclusion arrived at by the Tribunal that there is no concealment of income on the part of the assessee with regard to the money lending business, is based upon proper and valid materials. Therefore there is no infirmity in the order passed by the Tribunal, while canceling the penalty levied under s. 271(1)(c) for the assessment year under consideration. In view of these facts, Hon'ble Madras High Court held that the declaration was voluntary and it was not detection by the Department and no penalty can be levied accordingly.
15. Further Full Bench of Allahabad High Court in the case of Bhairav Lal Verma v. Union of India((1998) 230 ITR 855(All) (FB) has considered the full and true disclosure vis-à-vis voluntary disclosure, while deciding penalty u/s.18B of the WT Act, 1957 stating that full and true disclosure of income particulars made voluntarily and in good faith by the assessee is condition precedent for waiver of penalty under s. 273A. The word 'voluntarily' in Section 273A means out of free will without any compulsion. Disclosure of concealed income after the Department has seized the incriminating material with regard to the income disclosed, cannot be voluntary disclosure, because it was made under the constraint of exposure to adverse action by the Department. But it cannot be held as a principle of law that the disclosure of income made after the search / raid cannot be voluntary. It is a question which has to be decided by the Department in each case on the basis of the material on the record. If on record there is incriminating material with regard to the disclosed income, the disclosure cannot be voluntary. But if the Department has no incriminating material with regard to the income disclosed, the disclosure is liable to be treated as voluntary having been made without any compulsion or constraint of ITA No.2129-31/Ahd/2010 A.Ys.02-03 2 to 05-06 Sh. Balvantrais Contractor v. ITO Wd-2($) SRT Page 19 exposure to adverse action by the Department. In a case where the assessee has disclosed not only the income regarding which the Department has incriminating material, but has also disclosed the income with regard to which no incriminating material was seized by the Department, the disclosure of the income with regard to which the Department has no incriminating material, is liable to be treated as voluntary. For example, if an assessee is having five accounts and the Department has incriminating material with regard to one of those accounts only, the disclosure of income relating to four accounts with regard to which the Department has no incriminating material, is voluntary, because it was made without any constraint or compulsion, even though the disclosure of the income relating to the account regarding which the Department has incriminating material, is liable to be treated as non-voluntary. The same principle will apply to the disclosure made under s. 18B of the WT Act, because under the said section also the disclosure must be made voluntarily and in good faith. Word "voluntarily'" in Section 273A means ou9t of free will without any compulsion;' disclosure of concealed income after Department has seized incriminating material with regard to the income disclosed, the disclosure is liable to be treated as voluntary even if it was made after raid / search
16. We further are of the view that even Explanation to s. 271(1)(c) is not applicable to the facts of this case. Even if Explanation to s. 271(1)© is made applicable to the facts of this case, the explanation offered by the assessee, would go to show that the assessee discharged the burden placed upon it. Thus, in as much as on merits, the assessee had already declared the correct income before detection by the department by filing an application u/s273A of the act. The assessee moved a petition u/s 273A of the Act before CIT-Surat for all these four assessment years vide application dated 07-01-2008 declaring LTCG arising on the land transactions entered during the assessment years giving complete particulars and declaring true income but CIT-Surat passed on information to the Assessing Officer along with enclosures and computation of income of LTCG and the AO issued notices u/s 148 of the Act dated 23-08-2008. The assessments u/s.147 r.w.s. 143(3) of the Act was completed vide Assessing Officer's orders dated 16-12-2008 and penalties u/s.271(1)© was levied vide orders dated 29-06-2009. By these dates, no order was passed by CIT, Surat on application filed u/s.273A of the Act and the assessee withdraw this application vide letter dated 30-03-2010. We find that it was ITA No.2129-31/Ahd/2010 A.Ys.02-03 2 to 05-06 Sh. Balvantrais Contractor v. ITO Wd-2($) SRT Page 20 admitted by the Department that the information came from the assessee without any suggestion or detection from the Department and notice under s. 148 of the Act was issued long after the settlement petition to the CIT. This would show that no enquiry was made with reference to the declaration filed u/s 273A of the Act by the assessee and no question was asked by the ITO as to the basis he is going to adopt for distributing the total income declared in the computation of income filed before CIT, Surat and determination made by the Assessing Officer for the respective assessment years. The Explanation was acting as a rule of evidence. It is always open to the assessee to prove that the failure to return the correct income did not arise from any fraud or any gross or willful neglect on this part. In the present case, the Assessing Officer did not detect any concealment while completing the assessment rather the assessee himself the land transactions revealing LTCG arising out of the said transactions. The Department came to know the income from the land transactions only after it was disclosed by the assessee. Therefore, on facts, the assessee established that the failure to return the correct income did not arise from any fraud or any gross or willful neglect on his part and accordingly, we delete the penalty levied by the Assessing Officer and confirmed by CIT(A).
17. In the result, assessee's appeals are allowed.
Order pronounced in Open Court on 30/11/2010
Sd/- Sd/-
(D.C.Agrawal) (Mahavir Singh)
(Accountant Member) (Judicial Member)
Ahmedabad,
Dated : 30/11/2010
*Dkp
Copy of the Order forwarded to:-
1. The Assessee.
2. The Revenue.
3. The CIT(Appeals)-II, Surat
4. The CIT concerns.
5. The DR, ITAT, Ahmedabad
6. Guard File.
BY ORDER,
/True copy/
Deputy/Asstt.Registrar
ITAT, Ahmedabad