Income Tax Appellate Tribunal - Panji
The Income Tax Officer, Muktsar vs Sh. Harinderpal Singh, Muktsar on 31 October, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR
BEFORE SH.T.S. KAPOOR, ACCOUNTANT MEMBER AND
SH.N.K.CHOUDHRY, JUDICIAL MEMBER
I.T.A. No.617(Asr)/2015
Assessment Year:2007-08
Income Tax Officer, Vs. Bhai Harnirpal Singh
Ward-II(2), Muktsar. C/o Bhai Narinder Singh
Sudarshan Kumar,
New Grain Market, Muktsar.
PAN:ARHPS-4295F
(Appellant) (Respondent)
Appellant by: Sh. Rahul Dhawan (Ld. DR)
Respondent by: Sh. Ashwani Kumar (Ld. CA.)
Date of hearing:17.08.2017
Date of pronouncement:31.10.2017
ORDER
PER N. K. CHOUDHRY :
The instant appeal has been preferred by the Revenue Department, on feeling aggrieved against the order dated 18.09.2015 passed in Appeal No.20-IT/CIT(A)/BTI/2014-15 by the Ld. CIT(A), Bathinda for Asst. Year 2007-08.
2. The Revenue Department has raised the following grounds of appeal.
"1. The Ld. CIT(A) has e rre d in de le ting pe nalty imposed U/s 217(1)(c) in case , ignoring the fact that the asse ssee faile d to disclose d the amount of sale conside ration re ceive d by him during the ye ar on actual trans fe r of proportionate share of land to the de ve lope r.
2. The Ld. CIT(A) has e rre d in failing to take into account that pe nalty u/s 271(l)(c) has bee n he ld to be a civil liability by the Hon'ble Supre me Court in Union of Indi a Vs . Dharme ndra Te xtile proce ssors and Ors (166 Taxman 65) and 2 ITA No. 617(Asr)/2015 Asst. Year: 2007-08 this be ing the case, the AO has discharge the burden on him of e stablishing ne ce ssary ingre die nts of se ction 271(1)(C) and has corre ctly le vied pe nalty.
3. The CIT (A) h as e rre d in failing to conside r that the addition made by the A.O. on the issue stands confirme d up to ITAT and also by Hon'ble High Court to the e xte nt of proportionate sale conside ration accruing to the asse ssee on actual transfe r of land du ring the ye ar.
4. The CIT (A) has erred on failing to consider that the Punjab and Haryana High Court while deciding the case of C.S. Atwal Vs. CIT, Ludhiana & another's with which assessee's case was linked has noted the admission made on behalf of the assessees that capital gain was exigible on proportionate sale consideration and also recorded their undertaking to pay balance capital gain tax and in the light of such admission it was a clear case of concealment of income and penalty had been rightly imposed.
5. The CIT(A) has e rre d in holding that the issue involved was de batable and subje cte d to litigation with varie d re sults and, the re fore , no pe nalty could be le vie d and in so holding faile d to appre ciate that e ve ry issue is de batable and me re ly be cause asse ssee choose to litigate and litigation has varie d re sults would not de tract fo rm pe nal provisions of the statute provide d the nece ssary ingre die nts for invoking such provision we re e stablishe d as the se we re in the instant case ."
3. The brief facts of the case are as under:
That the assessee was being a member of the Punjabi Co- operative House Building Society (in short 'society') was assessed u/s 147/143(3) on 24.12.2010 for A.Y.2007-08, whereby hitherto undeclared Long Term Capital Gains of Rs.1,63,25,982/-, pursuant to the transfer of land was assessed to tax. Subsequently, invoking the provisions of Explanation 1(A) appended to section 271(1)(c) of the Income Tax Act, 1961. The penalty of Rs.36,63,550/- vide order dated 24.03.2014, which is equivalent to 100% of the amount of tax sought to be evaded by reason of the purported concealment of the particulars of income arising on account of Long Term Capital Gains.3 ITA No. 617(Asr)/2015
Asst. Year: 2007-08
4. On feeling aggrieved against the penalty order, the assessee preferred the first appeal before the Ld. CIT(A), who while relying upon the order passed by the jurisdictional High Court deleted the penalty by holding as under:
"22. After a detailed deliberation on the aforesaid issues, the Hon'ble High Court summarized their conclusion in para 46 of their order dated 22nd of July, 2015. It would not be inappropriate to look at the said conclusion in order to adjudicate the issue of imposition of penalty.
"We summarize our conclusions as under:-
1. Perusal of the JDA dated 25.02.2007 read with sale deeds j dated 02.03.2007 and 25.04.2007 in respect of 3.08 acres and 4.62 acres respectively would reveal that the parties had agreed for pro-rata transfer of land.
2. No possession had been given by the transferor to the transferee of the entire land in part performance of JDA dated 25.02.2007 so as to fall within the domain of section 53-A of 1882 Act.
3. The possession delivered, if at all, was a licensee for the development of the property and not in the capacity of a transferee.
4. Further section 53-A of 1882 Act, by incorporation, stood embodied in section 2(47)(v) of the Act and all the essential ingredients of section 53-A of 1882 Act were required to be fulfilled.
In the absence of registration of JDA dated 25.02.2007 having been executed after 24.09.2001, the agreement does not fall under section 53-A of 1882 Act and consequently section 2(47)(v) of the Act does not apply.
5. It was submitted by learned counsel for the assessee- appellant that whatever amount was received from the developer, capital gains tax has already been paid on that and sale deeds have also been executed. In view of cancellation of JDA dated 25.02.207, no further amount has been received and no action thereon have been taken. It was urged that as and when any amount is received, capital gains tax shall be discharged thereon in accordance with law. In view of the aforesaid stand, while disposing of the appeals, we observe that the assessee appellant shall remain bound by the said stand.
6. The issue of exigibility to capital gains tax having been decided in favour of the assessee, the question of exemption under 4 ITA No. 617(Asr)/2015 Asst. Year: 2007-08 section 54F of the Act would not survive any longer and has been rendered academic.
7. The Tribunal and the authorities below were not right in holding the assessee- appellant to be liable to capital gains tax in respect of remaining land measuring 13.5 acres for which no consideration had been received and which stood cancelled and incapable of performance at present due to various orders passed by the Supreme Curt and the High Court in PILs. Therefore, the appeals area allowed."
23. The aforesaid judgment/decision of the Hon'ble Punjab and Haryana High Court makes it quite clear that the appellant was not obliged to pay tax on the amount/consideration which had not been received by the appellant during the year under consideration. This was the stand of the appellant in not disclosing the accrual of capital gains in his return of income. However since the Hon'ble High Court has held that the appellant had agreed for pro-rata transfer of land, capital gains tax has to be paid on whatever amount has been received and that whenever further amounts are received, it shall be taxable. The Assessing Officer shall look into this aspect of the instant case. The appellant is required to pay tax on the amount of consideration received and do the same whenever any further amount is received in respect of transfer of his part of land in the society as per the decision of the Hon'ble High Court.
24. Adverting now to the issue of exigibility of penalty after the issue in dispute stands decided by the Hon'ble High Court of Punjab and Haryana, it needs no elaboration to say that the matter was clearly debatable in as much as the decision of the Hon'ble Tribunal was overturned by the judgment of the Hon'ble High Court. The appellant cannot, therefore, be said to have given or offered an explanation for not including the purported capital gains in his return of income as false or indicating of an act of fraud, or gross or willful negligence. The appellant, during the reassessment proceedings, had raised a legal contention raising a bonafide claim that the amount of consideration received by the developer was only an advance and not taxable till the entire consideration was received. Merely because such a claim of the appellant was rejected successively by the Assessing Officer, the then Id. CIT (A) and the Hon'ble ITAT, the appellant's explanation cannot be said to be fanciful, baseless or unacceptable, branding the same as an act of concealment. Concealment of income for which penalty under the provisions of section 271(1)(c) of the Act is levied, cannot be inferred from the act of the appellant only because the Assessing Officer, on a strenuous reasoning came to a conclusion that Long Term Capital Gains had accrued to the appellant. It is apparent, post the decision of the Hon'ble High Court of Punjab and Haryana that the explanation/claim/conduct of the appellant was reasonable on human probabilities and was definitely not in the nature of violating settled legal position on the matter. The interpretation of the appellant in treating the receipt of consideration amount as only an advance pending final payment of the entire consideration including the built up flat was thus not wholly unknown to law or contrary to all known propositions. It has been consistently held by various High Courts including the 5 ITA No. 617(Asr)/2015 Asst. Year: 2007-08 jurisdictional High Court that concealment penalty is not leviable on issues of addition which are debatable or capable of having two views on the matter. In fact, it has been held in many cases that the moment the impugned issues are admitted by the Hon'ble High Court under the provisions of section 260A of the Act on grounds of substantial question of law, the debatablity of the impugned issues get endorsed and credence is lent to the bonafides of the claim of the assessee. In the instant case, the findings returned in the judgment of the Hon'ble High Court almost concurs with the explanation/claim of the appellant. In this view of the matter, imposition of concealment penalty on the appellant cannot be held to be justified. The Assessing Officer is directed to delete the penalty."
5. On feeling aggrieved against the order passed by the Ld. CIT(A), the Revenue Department preferred the instant appeal and submitted the following statements of facts.
"The assessee filed his return declaring income of Rs.4,37,050/- on 31.03.2008 for the A.Y. 2007-08. The source of income were shown by the assessee as "Pension" and "Bank interest". Subsequently, a revised return was filed by the assessee on 27.11.2009 declaring income of Rs.18,46,910/- which cannot be "revised u/s 139(5) and as such, the revised return filed by the assessee was not a valid return in the eyes of law. Subsequently certain tangible information came to the notice of the then AO that the long term capital gain arose to the assessee consequent upon transfer of certain land belonging to the assessee, was not disclosed in the return of income. Accordingly, recourse to the proceedings u/s 147 of the Act was taken and notice u/s 148 of the Act was issued on 31.12.2009. On completion of the assessment proceedings u/s 143(3) read with section 148 of the Act by the then AO vide order dated 24.12.2010, total income was assessed at Rs.1,81,72,890/- making an addition of Rs.1,83,75,000/- on account of long term capital gain. The assessee was a member of the Punjabi Cooperative House Building Society Limited, Mohali which was owner of 21.2 acres of land in village kansal, Distt. SAS Nagar, Punjab. Later on the Society entered into a tripartite agreement with M/s Tata Housing Development Company Ltd., and M/s HASH Builders Pvt. Ltd., on 25.02.2007. Under the Joint Development Agreement (JDA) dated 25.02.2007, it was agreed that HASH and THDC (the developers) shall undertake development of 21.2 acres of land owned and registered in the name of the society and agreed consideration will be disbursed by THDC through HASH to each individual member of the society having plot size of 2250 sq. yard partly in monetary terms (Rs.82,50,000/-) and partly in the shape of furnished plot measuring 2250 sq.ft to be constructed by M/s Tata Housing Development Company Ltd. The cost of furnished flat @ Rs.4500 per sq. ft. having area of 2250 sq.ft. each was determined at Rs.1,01,25,000/-. Out of the total consideration, an amount of Rs.15,00,000/- was received by the assessee on 25.02.2007 during the year under consideration. While framing assessment, the assessing officer held that as per JDA, the owner had transferred all the rights which an owner have in an 6 ITA No. 617(Asr)/2015 Asst. Year: 2007-08 immovable property. Accordingly, the AO consideration the entire amount of Rs.82,50,000/- as well as the market value of plot at Rs.1,01,25,000/- as sale consideration within the meaning of clauses (ii)
(v) and (vi) of section 2(47) of the Act and worked out the capital gains accordingly for the A.Y. 2007-08.
1.2 Invoking the provisions of section 271(l)(c) of the Income Tax Act, 1961. Penalty proceedings were initiated for concealment of income vide penalty notice dated 24.12.2010 by then AO.
2.1 The assessee's 1 st and 2 nd appeal against the order passed u/s 147/143(3) was dismissed- both by Id. CIT(A), Bathinda and ITAT, Amritsar respectively. Keeping in view the provisions of Section 275, penalty proceeded were decided by imposing a penalty of Rs.36,63,550/- for concealment of income in the shape of STCGs, vide order dated 24.03.2014.
2.2 Aggrieved with the order passed u/s 271 (1 )(c) of the Income Tax Act, 1961, the assessee preferred an appeal before the Ld. CIT(A), Bathinda, who vide his order passed in appeal No. 20/IT/CIT(A)/BTI/14- 15 dated 18.09.2015 allowed appeal of the assessee by observing that concealment penalty is not leviable on issues of additions which are debatable or capable of having two views on the matter. The Ld. C1T(A) held that the Tribunal was overturned by the judgment of Hon'ble High Court. Therefore the assessee cannot be paid said to have given or offered an explanation for not including the purported capital gains in his return of income as false or indicating of an act of fraud or gross or willful negligence.
2.3. The order of the Ld. CIT(A) does not seem to be acceptable as the addition made by AO on account of capital gain accrued to the assessee has been confirmed by Ld. CIT(A) as well as by the Hon'ble ITAT.
2.4 For the sake of convenience, it is submitted that the Hon'ble High Court also confirmed the addition to the extent a proportionate sale consideration accrued to the assessee while deciding the case of C.S. Atwal Vs. CIT. The department is filling SLP before the Hon'ble Supreme Court separately against the verdict of Hon'ble High Court.
3.1 The Ld. CIT(A) has not appreciated the fact that the assessee had received an amount of Rs.15,00,000/- on 25.02.2007 on actual transfer of proportionate share of land in favour of the developer during the relevant financial year and hence the amount of sale consideration received by the assessee cannot be termed as advance by any stretch of imagination.
3.2 The quantum addition made by AO on account of capital gain accrued to the assessee has been confirmed by Ld. C1T(A) as well as by the Hon'ble ITAT, Amritsar. The Hon'ble High Court, in the case of assessee, while deciding the case of C.S. Atwal vs. Ludhiana has confirmed the addition to the extent of proportionate sale consideration accrued to the assessee on actual transfer of land during the year. Therefore, the observation of the Ld. CIT(A) that the issue of addition in the case of the assessee is debatable does not appear to be correct. The only debatable issue in the matter is whether capital gain tax is exigible on the balance portion of land which was not transferred in the name of developer and possession thereof was, according to the AO handed over to the developer in part performance of JDA dated 25.02.2007.
7 ITA No. 617(Asr)/2015Asst. Year: 2007-08 In view of the foregoing facts, it is prayed that the order of the CIT(A). Bathinda may kindly be set aside and that of the Assessing Officer may kindly be restored back."
6. On the other hand, the Ld. AR submitted that in the similar and identical cases, the jurisdictional High Court vide order dated 22nd July, 2015 in para No.46 in the case of C.S. Atwal Vs. CIT, Ludhiana & Anors. analyzed the position and determined that the capital gains tax has to be paid on whatever amount has been received and that whenever further amounts are received, it shall be taxable subsequently.
7. As in the instant case, although the Revenue Department has taken the stand that in the instant case, the return was filed only on 31st March, 2008 by declaring income of Rs.4,37,050/- for the A.Y. 2007-08, however, the same was subsequently revised on dated 27.11.2009 declaring income of Rs.18,46,910/-, in fact the belated return cannot be revised and therefore, cannot be treated as valid return in the eyes of law.
We have gone thoughtful consideration to the aforesaid contention of the Revenue Department as the Hon'ble ITAT, Delhi Bench, in the case of ACIT, Panipat vs. Ashok Raj Nath, in its order dated 31.08.2012 has held that where a revised return was found to be invalid but the explanation made by assessee in his revised return was bonafide, no penalty u/s 271(1)(c) can be made.
8 ITA No. 617(Asr)/2015Asst. Year: 2007-08 Further, we find that Hon'ble Punjab & Haryana High Court in the case of Sh. Ranjit Singh Brahampura, in ITA No.250 of 2017 vide its order dated 18.07.2017, under similar facts and circumstances has deleted the penalty by holding as under:
"3. We have heard learned counsel for the appellant.
4. The matter is no longer res integra. In C.S. Atwal's case (supra) in ITA No. 200 of 2013 decided on July 22, 2015, the issue involved in this appeal stands decided by this Court. In the said case, the following issues emerged for consideration:-
(i) Scope and legislative intent of Section 2(47)(ii), (v) and (vi) of the Act;
(ii) The essential ingredients for applicability of Section 53A of 1882 Act;
(iii) Meaning to be assigned to the term "possession"?
(iv) Whether in the facts and circumstances, any taxable capital gains arises from the transaction entered by the assessee?
After considering the relevant statutory provisions and the case law, the following conclusions were drawn:-
"(1) Perusal of the JDA dated 25.02.2007 read with sale deeds dated 2.03.2007 and 25.04.2007 in respect of 3.08 acres and 4.62 acres respectively would reveal that the parties had agreed for pro-
rata transfer of land.
(2) No possession had been given by the transferor to the transferee of the entire land in part performance of JDA dated 25.02.2007 so as to fall within the domain of Section 53A of 1882 Act.
(3) The possession delivered, if at all, was as a licensee for the development of the property and not in the capacity of a transferee.
(4) Further Section 53A of 1882 Act, by incorporation, stood embodied in section 2(47)(v) of the Act and all the essential ingredients of Section 53A of 1882 Act were required to be fulfilled. In the absence of registration of JDA dated 25.02.2007 having been executed after 24.09.2001, the agreement does not fall under Section 53A of 1882 Act and consequently Section 2(47)(v) of the Act does not apply.
9 ITA No. 617(Asr)/2015Asst. Year: 2007-08 (5) It was submitted by learned counsel for the assessee-appellant that whatever amount was received from the developer, capital gains tax has already been paid on that and sale deeds have also been executed. In view of cancellation of JDA dated 25.02.2007, no further amount has been received and no action thereon has been taken. It was urged that as and when any amount is received capital gains tax shall be discharged thereon in accordance with law. In view of the aforesaid stand, while disposing of the appeals, we observe that the assessee appellants shall remain bound by their said stand.
(6) The issue of exigibility to capital gains tax having been decided in favour of the assessee, the question of exemption under Section 54F of the Act would not survive any longer and has been rendered academic.
(7) The Tribunal and the authorities below were not right in holding the assessee-appellant to be liable to capital gains tax in respect of remaining land measuring 13.5 acres for which no consideration had been received and which stood cancelled and incapable of performance at present due to various orders passed by the Supreme Court and the High Court in PILs. Therefore, the appeals are allowed."
5. Learned counsel for the appellant has not been able to controvert the applicability of the decision rendered in C.S. Atwal's case (supra) and that no capital gains on unrealized amount would accrue or arise to the assessee. Once that is so, no penalty under Section 271(1) (c) of the Act would be exigible. The substantial questions of law claimed in this appeal are answered accordingly. Consequently, the appeal stands dismissed."
As it is well settled law that assessment proceedings and penalty proceedings are entirely distinct from each other, therefore, we are of the considered view that although, the revised return cannot be taken into consideration as valid return, however, the same is having importance for adjudicating the issue related to the penalty proceedings.
As the Jurisdictional High Court in the similar and identical cases clearly held that the actual receipt can be subject to the capital gain, 10 ITA No. 617(Asr)/2015 Asst. Year: 2007-08 but not on the accrual basis which may or may not comes to the end of the hands of the assessee.
Resultantly, as in the instant case, the assessee has shown the received amount in its revised return of income, therefore, it cannot be treated as concealment of the particulars of income. Hence, we are inclined to dismiss the appeal of the Revenue Department.
7. In the result, the appeal filed by the Revenue Department stands dismissed.
Order pronounced in the open Court on 31.10.2017.
Sd/- Sd/-
(T. S. KAPOOR) (N.K.CHOUDHRY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated:31.10.2017.
/PK/ Ps.
Copy of the order forwarded to:
(1) The Assessee:
(2) The
(3) The CIT(A),
(4) The CIT,
(5) The SR DR, I.T.A.T.,
True copy
By Order