Income Tax Appellate Tribunal - Pune
Vinay A Joneja, Pune vs Department Of Income Tax on 12 February, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
Before Shri Shailendra Kumar Yadav, Judicial Member,
and Shri R.K. Panda, Accountant Member.
ITA.No.1133/PN/2012
(Assessment Year 2007-08)
ACIT, Circle-4, Pune .. Appellant
Vs.
Vinay A. Joneja,
88, Porwal Plaza, 2421,
East Street, Camp, Pune - 411001 .. Respondent
PAN No.ABKPJ8047M
Assessee by : Shri Sunil Ganoo
Revenue by : Shri A.K. Modi
Date of Hearing : 12-02-2014
Date of Pronouncement : 11-04-2014
ORDER
PER R.K. PANDA, AM:
This appeal filed by the Revenue is directed against the order dated 30-01-2012 of the CIT(A)-II, Pune relating to Assessment Year 2007-08.
2. Facts of the case, in brief, are that the assessee is a Civil Contractor engaged in the business of Road Construction. He filed his return of income on 31-12-2007 declaring total income of Rs.5,98,210/-. During the course of assessment proceedings the Assessing Officer observed from the statement of total income submitted along with return of income that the assessee had worked out capital gain of Rs.62,57,587/- and after adjusting the brought forward capital loss of Rs.21,410/- had declared net capital gain at Rs.62,35,890/-. From the above capital gain the assessee had deducted an amount of Rs.63 lakhs being Agricultural land purchased as per agreement.
22.1 The Assessing Officer asked the assessee to give the details of the transaction. The assessee vide letter dated 24-12-2009 filed the requisite details as called for by the Assessing Officer which are as under :
"(i) Index-II dated 11/04/2004 Giving details of Purhase of Land at Mohamadwadi Bearing S.No.14/Hissa No.11/admeasuring total area of 31.5 R (i.e. 2927.5 Sq.Mtr.)
(ii) Index-II dated 06/10/2006 Giving details of Sale of Land at S.No.14/Hissa No.11/admeasuring total area of 31.5R.
(iii) Copy of Articles of Agreement dated 28/03/2007 entered by the assessee with Mr. Ashwini G. Joneja, for purchase of Land at Mohamadwadi, S.No.14/Hissa No.5B+6D+6A+7A with development rights for an agreed amount of Rs.63,00,000/-.
(iv) 7/12 Extract of the Property at S.No.14/Hissa No.11 area 0.49 R
(v) Village Form No.7 dated 15/5/006."
2.2 The assessee claimed that the land sold and subsequently purchased along with development rights are agricultural land and are liable for capital gain tax. However, the Assessing Officer did not accept the contention of the assessee on the following grounds :
"1. The lands in question at Mohamawadi is within 8 Kms. Of Pune Municipal Corporation.
2. Form No.7 dated 15/5/2006 clarifies that the land at S.No.14/Hissa No.11 at Mohamadwadi was not cultivated since the year 2002-03 being a barren land.
3. Enquiries with the Pune Municipal Corporation, Zonal Section, Town Planning Department, revealed that the said lands are in Residential Zone and there are some Reservation for Development as per the Development Projects."
2.3 The Assessing Officer accordingly calculated the short term capital gain as under :
Total Sale Consideration as per sale deed Registered under No.17628/006/Dt.6/10/2006 Rs.75,00,000 Less : Cost of Property Sold Rs.12,00,000 (Purchased on 13/4/2004 (as per Index-II)
----------------
Short Term Capital Gain Rs.63,00,000
----------------
3
2.4 The Assessing Officer further noted that the assessee had wrongly
applied the indexation method treating the same as long term capital gain although the property was sold within 2 years from the date of the purchase.
The Assessing Officer accordingly determined the short term capital gain at Rs.63 lakhs. The assessee did not file any appeal. In the meantime the Assessing Officer initiated penalty proceedings u/s.271(1)(c) of the I.T. Act.
2.5 The assessee during the penalty proceedings submitted that he had filed his return of income voluntarily and has not concealed the income.
The entire particulars/details in respect of transfer of property was duly disclosed. He had no taxation knowledge and his return of income was prepared and filed without any malafide intention and the deduction was claimed through oversight. It was argued that the entire capital receipts has been reflected in the regular books of account. It was further submitted that during the assessment proceedings when the mistake was pointed out the assessee suo-moto agreed and has paid the tax. Relying on the decision of the Hon'ble Supreme Court in the case of CIT Vs. Reliance Petro Products Pvt. Ltd., reported in 322 ITR 158 and the decision of the Hon'ble Rajasthan High Court in the case of CIT Vs. Haresh wardha Chemicals and Minerals Pvt. Ltd. it was argued that the penalty u/s.271(1)(c) is not leviable.
2.6 However, the Assessing Officer was not satisfied with the explanation given by the assessee. Distinguishing the various decisions cited before him and observing that the assessee has furnished inaccurate particulars and therefore Explanation-1 to section 271(1)(c) is clearly 4 applicable the Assessing Officer levied penalty of Rs.21,20,580/- being 100% of the tax sought to be evaded.
3. Before the CIT(A) the assessee reiterated the same submissions as made before the Assessing Officer. It was submitted that the assessee has sold/transferred his land at Mohamadwadi for total consideration of Rs.75,00,000/-. The assessee has acquired/purchased the said land on 13- 04-2004 for total consideration of Rs.12,29,380/- including stamp duty and registration charges from Salim Sadruddin Khoja & Others and the same has already been reflected in the books of accounts. The assessee has received net gain of Rs.62,70,620/- on sale of the aforementioned land. During the filing of income tax return for the year under consideration, the consultant of the assessee inadvertently and through oversight claimed the exemption u/s.54(B)of I.T Act and shown the income from capital gain at NIL even though the assessee had short term capital gain of Rs.62,70,620/. 3.1 It was argued that the assessee voluntarily accepted for the agreed addition in respect of deduction wrongly claimed by his consultant in the above said transfer of property during the assessment proceedings. The assessee has already paid the income tax of Rs.8,50,000/- against the above said Income Tax Dues and is ready to pay the balance entire dues along with interest. The assessee during the assessment proceedings Suo moto and Voluntarily had agreed for the addition of short term Capital- Gain of Rs.62,70,620/- for sale of land at Mohamadwadi. It was argued that the assessee did not have taxation knowledge and his return of income has been prepared by Chartered Accountant and his chartered accountant has submitted the entire particulars in respect of property and inadvertently and 5 without any malafide intention and through oversight claimed the deduction. However, the entire capital receipts has already been reflected in the regular books of accounts and return of income filed. Further during the assessment preceding the assessee sumoto and voluntarily stated and declared that, he is withdrawing the deductions claimed u/s 54B and sumoto voluntarily accepted the agreed addition in respect of deduction claimed inadvertently & through oversight on account of the transfer of property. 3.2 It was argued that the AO has wrongly levied the penalty in spite of the fact that, the assessee neither intentionally concealed the income nor furnished inaccurate particulars of the income during the assessment proceeding and therefore the said penalty is not justified. The assessee has already declared in the return of his income particulars of the capital gain in respect of the sale of land at Mohamadwadi and the books of accounts of the assessee already reflects the above said transaction and therefore the said penalty is not justified. It was argued that the assessee has co-operated in the assessment proceeding and that there was no conscious breach of law. The assessee did not conceal any income or facts and neither intentionally furnished any inaccurate particulars of income nor was there any concealment. It was accordingly argued that the penalty levied by the AO be deleted.
4. Based on the arguments advanced by the assessee the Ld.CIT(A) deleted the penalty levied by the Assessing Officer u/s.271(1)(c) of the I.T. Act by holding as under :
6
"3.3 I have carefully considered the submission of the appellant and the material on record. The appellant has raised two grounds of appeal and in ground No.1 the appellant has contested the penalty levied u/s.271(1)(c) of Rs.21,20,580/-. It has been contended by the appellant that the entire particulars in respect of transfer of agricultural land at Mohamadwadi was furnished while filing the return of income. The appellant has further stated that, however, while calculating the capital gains in respect of the above property, inadvertently and having no malafide intention through oversight the tax consultant claimed the deduction. Though the appellant, submits that the same when found to be incorrect, the additions made by the A.O. was voluntarily agreed in respect of wrong claim of exemption u/s 54B and the taxes due thereon has also been paid subsequently. It has also been stated that the capital receipts in respect of the aforesaid property sold have been reflected in the regular books of account and the return of income filed. It has also been submitted that the appellant did not have taxation knowledge and that his return of income had been prepared by the Chartered Accountant and the entire particulars were furnished by him inadvertently and without any malafide intention and through oversight claimed the exemption. However, during the assessment proceedings the appellant submits that suo moto the claim of exemption u/s 54B was withdrawn and also voluntarily agreed to the addition. It has also been submitted that the detail of the purchase of the land on 13.04.2004 for a total consideration of Rs.12,29,380/-including stamp duty and registration charges had been reflected in the books of accounts and copies of the purchase and sale details were also submitted before the Assessing officer. Thus, the entire transaction of purchase and sale of land and capital gains thereon had been reflected in the regular books of accounts, audited balance sheet and statement of the computation of income. The appellant has also stated on the contention of the Assessing Officer referred in the penalty order that the reference made by the Assessing Officer of the year of purchase of land as 1999 is not correct as the year of acquisition was 2004 and it was because of inadvertent typographical error that the year of acquisition was incorrectly mentioned as 1999 instead of 2004 being the correct year. The appellant had, however, calculated the cost of index of 480 by considering the actual year of acquisition of 2004/05 and not 1999 as is clearly evident from the statement of compensation of total income. Therefore, the inference drawn by the Assessing officer is not correct so far as the contention of the Assessing officer regarding urban land and agricultural land and the claim of deduction u/s. 54B of the IT. Act, is concerned, the appellant has contended that the exemption claimed by the consultant was inadvertent and through oversight and which was corrected during the assessment proceedings by suo moto voluntarily admitting for agreed addition of short-term capital gain on sale of the said land. It has thus been contended that there was no conscious breach of law and the appellant did not conceal any income or fact and neither intentionally furnished any inaccurate particulars. It has also been contended that the A.O. had wrongly levied the penalty as the appellant had neither intentionally concealed the income nor furnished inaccurate particulars. The appellant has relied on the following case laws in support of his claim:
1) Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158 (SC)
2) Kanbay Software India (P) Ltd. (2009) 122 TTJ 721 (Pune)
3) CIT Vs Hareshwardha Chemical and Mineral Ltd (2004) 186 CTR (RAJ) 552
4) CIT Vs Caplin Point Laboratories Ltd (2007) 212 CTR MAD 58
5) Devidas Sukhani Vs ITO (2006) 101 TTJ (JD) 551
6) Rajendra Kumar Vs ITO (2005) 94 TTJ (JD) 280
7) Hindustan Steel Ltd Vs State of Orissa (1972) 63 ITR 26 (SC) 7 3.4 In the present case, it is undisputed that during the regular assessment it was pointed out to the assessee that the ownership for the Mohamadwadi property by assessee being less than 36 months, the capital gains earned was short-term capital gain and thus was not entitled for exemption u/s 54B of the Act. Therefore, the disallowance made by the A.O, on this account was accepted by the assessee and was not further contested in appeal, The appellant has submitted that due to inadvertent typographical / clerical error, the year of acquisition was mentioned in the statement of computation as 1999 instead of the correct year i.e. 2004, though the appellant has calculated the cost of index by considering the actual year of acquisition as 2004-05 and not 1999 is also a point which cannot be ignored and prima facie indicates the bonafide conduct of the appellant. The appellant has also not concealed the details of purchase / sale of the property from the Department as the details of the sales and purchases have been provided though the exemption claimed u/s 54B has been stated to be inadvertent and through oversight and once noticed and found to be incorrect, the appellant has voluntarily admitted for the agreed addition of short-term capital gain on sale of land. Therefore, this is not a case where the information of the earnings on account of capital gains had been concealed by the appellant as the information pertaining to the arriving of income from capital gains have been duly disclosed by the appellant in the return of income. Neither this case involves any enquiry or detection of the concealment which led to the disclosure of the information.
In the present case disclosure of the information is voluntary. A mere omission or negligence would not prima facie constitute a deliberate act and conscious breach of law on the part of the appellant. During the assessment proceedings the assessee has accepted this mistake and has also explained that it had happened inadvertently or through oversight and that it as a genuine clerical / typographical mistake with no malafide intentions, therefore, could not be held as concealment. Therefore, where there is nothing to suggest gross or willful neglect, the explanation to section 271(1)(c) cannot be of help to justify penalty. In the case of CIT Vs Mehta Engineers Ltd. (2008) 300 ITR 308 ( P & H) it was held that where the facts are disclosed but, inference is different, there is no case for penalty. 3.5 Coming to the judgment of the Hon'ble Apex Court in the case of CIT Vs. Reliance Petroproducts Ltd., (2010) 322 ITR 158 (S.C) it was held as under:
"Reading the words "inaccurate" and "particulars" in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. In this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty u/s. 271(1)(c). A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. The assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part."
This judgement of the Hon'ble Apex Court therefore, emphasizes that mere making of a claim of deduction which was not allowable by itself would not amount to furnishing inaccurate particulars of income. In fact, every legal disallowance under the provisions of the Act cannot lead to the conclusion that there was furnishing of inaccurate particulars of income on the part of the assessee.
83.5.1 The appellant has also cited the decision in the case of Kanbay Software India (P) Ltd. v DCIT (2009) 122 TTJ 721 (Pune). In the aforesaid judgement it was held that "By no stretch of logic or rationale it could be said that imposition of penalty under s. 271(1)(c) has a cause and effect relationship with addition being made to the returned income per se. An addition being made to income does, because of impact of Expln. I, effectively raise a presumption against the assessee but that is an entirely rebuttable presumption and the scheme of rebuttal is provided in the Explanation itself. The scheme of s. 271(1)(c) visualizes imposition of penalty when the assessee has concealed income or when the assessee has furnished inaccurate particulars of income. In addition to these two situations, penalty can also be imposed, inter alia, when assessee is deemed to have concealed particulars of income under Expln. 1 to s. 271(1)(c), This Explanation provides that the assessee will be deemed to have concealed particulars of income where in respect of any facts material to the computation of the total income of any person under this Act, (i) when the assessee fails to provide an explanation, (ii) when the assessee provides an explanation which is found to be false, and (iii) when the assessee provides an explanation which he fails, to substantiate and he fails to prove that the explanation was. bonafide and that all the facts necessary for the same and material for computation of income have been duly disclosed by the The Tribunal also held that as long as penalty is for default, an innocent violation may merit compensation but not penalty. The Tribunal concluded after an elaborate discussion on the subject as under:
"With mens rea or without mens rea, a penalty can only be imposed where there is failure deemed failure, to discharge an obligation."
3.5.2 In the case of Devi Dass Subhani Vs 1TO (2006) 10 TTJ 551 (Jd), the ITAT Jodhpur, on the assessee having wrongly claimed exemption u/s 54 in the relevant assessment year after withdrawing such claim made in an earlier year under bonafide misconception and belief, held penalty u/s 271(1)© could not be levied in the absence of any evidence to establish that the assessee had deliberately furnished inaccurate particulars or had consciously concealed taxable income.
3.5.3 Cancellation of penalty for a wrong claim of deduction in computation of non-agricultural income bonafide made and for a wrong claim of relief u/s 80P were found to be decisions on fact on which no question of law would arise as held in CIT Vs Shahabad Coop. Sugar Mills Ltd. (2010) 322 ITR 73 (P & H). The High Court in the case referred to the decision inter alia to Hindustan Steel Ltd. Vs State of Orissa (1972) 83 ITR 76 (SC) in a sales-tax case, where penalty was not found leviable in the absence of a conscious breach of law. In fact, it was observed that deliberate defiance of law is what would merit penalty. A wrong claim as business income of what should be treated as short term capital gains on the advice of assessee's counsel it was held, cannot be treated as an instance of deliberate defiant in CIT Vs Siddharth enterprises (2010) 322 ITR 80 (P & H).
3.5.4 In the case of CIT Vs Caplin Point Laboratories Ltd. (2007) 293 ITR 524 (Mad) it was held that the wrong claimed deduction u/s 80HHC & 80I by showing the interest income as 'business income' instead of Income from other sources' cannot be held as concealment of income or furnish of 9 inaccurate particulars of income and accordingly the penalty u/s 271(1)(c) was deleted.
3.5.5 Following Reliance Petro Products cited supra, it was held in CIT Vs SAS Pharmaceuticals (2011) 335 ITR 259 (Del) that there is no concealment or non-disclosure as the assessee had made a complete disclosure in the I.T. return. It further held that unless it is found that there is actually a concealment or non-disclosure of the particulars of income, penalty cannot be imposed. There is no such concealment or non-disclosure as the assessee had made a complete disclosure in the IT. return. Similarly in the case of CIT Vs Dharampal Premchand Ltd. (2010) 329 ITR 572 (Del) also, it has held merely because the assessee had claimed deduction u/s 80IA and 80IB, which claim was not acceptable to the revenue, that by itself would not attract the penalty proceedings as the same cannot be construed as furnishing inaccurate particulars of income u/s 271(1)(c). 3.5.6 It has been a long established practice that the taxpayers agree to certain additions during assessment proceedings not always because they are convinced that such addition is warranted or otherwise justified, but with a view to bring finality to the whole matter to buy peace and avoid litigation the general view has always been that mere admission by itself need not offer immunity to the taxpayer, where the admission had been extorted from him after concealment had been brought home. In the case of CIT Vs D & H Secheron Electrodes Ltd. (2008) 296 ITR 193 (MP) wherein the assessee had surrendered income and explanation of assessee given in factual version was acceptable, it was held that there existed no mens rea as contemplated u/s 271(1)(c), penalty would not be leviable. The appellant has also cited the Jodhpur ITAT decision in the case of Rajendra Kumar Vs ITO (2005) 94 TTJ (JD) 280 where in it has been held that mere non filing of appeal against the assessment order does not ipso facto lead to levy of penalty u/s 271(1)(c) on similar fact when assessee agreed to addition, it was held to be bonafide explanation where no penalty was leviable as held in Permindar Kumar Gupta Vs 100 (1988) 32 TTJ 549 (Del). 3.5 In view of the above facts and the decisions cited supra including that of the Apex Court in the case of CIT Vs Reliance Petroproducts Pvt. Ltd. (supra), the penalty levied u/s 271(1)(c) is not sustainable and is deleted. Grounds of appeal Nos. a, b, c & d raised by the appellant are treated to be allowed."
5. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us with the following grounds :
"1. The order of the learned Commissioner of Income-tax (Appeals) is contrary to law and to the facts and circumstances of the case.
2. The learned Commissioner of Income-tax (Appeals) grossly erred in deleting the penalty of Rs.21,20,580/- levied on the assessee u/s 271(1)(c) of the Income-tax Act, 1961 instead of confirming the said penalty.
3. The learned Commissioner of Income-tax (Appeals) grossly erred in failing to appreciate that as the assessee had erroneously claimed deduction u/s 54B even though the capital gains arising in his hands were in the nature of Short Term Capital Gains and not Long Term Capital Gains, and also as the assessee had no valid or bonafide explanation in support of such erroneous claim, penalty u/s 271(1)(c) was patently eligible.10
4. The learned Commissioner of Income-tax (Appeals) grossly erred in inferring that possibly the assessee agreed to the addition only with a view to buying peace and avoiding litigation without appreciating that the assessee had agreed to the said addition without any choice and only after the Assessing Officer brought to his notice the unambiguous provisions of the Act in this regard.
5. The learned Commissioner of Income-tax (Appeals) grossly erred in failing to appreciate that in the facts and circumstances of the case, the conduct of the assessee in claiming deduction u/s 54B, which would have resulted in evasion of tax but for detection by the Assessing Officer could by no means be routinely treated as inadvertent and bonafide.
6. The learned Commissioner of Income-tax (Appeals) grossly erred in giving any credence to the assessee's plea that the return had been prepared by the Chartered Accountant who had claimed the deduction without any malafide intention. It ought to have been appreciated by the Commissioner of Income-tax (Appeals) that the assessee had himself verified the return to be true and, therefore, even assuming without conceding that the claim had been made by the Chartered Accountant who could only have done so in a representative capacity, the assessee cannot be resolved of the misconduct.
7. The Learned Commissioner of Income-tax (Appeals) grossly erred in failing to appreciate that the assessee had furnished inaccurate particulars of income in as far as the land was bought in the year 2004 and not in the year 1999 as had been claimed by the assessee. Moreover, the assessee was well aware of the fact that the land which was sold was an urban land and also the transaction in respect of the land claimed to have been purchased was merely an Article of Agreement for transfer of the Development Rights, which was not even registered, neither any consideration had been paid nor the possession of the land had been taken.
8. The learned Commissioner of Income-tax (Appeals) grossly erred in accepting the assessee's contention that he had no knowledge of Act without appreciating that the assessee had been in the business for a long time and had assistance of the qualified professional.
9. The learned Commissioner of Income-tax (Appeals) grossly erred in failing to appreciate that while every legal disallowance may not lead to penalty, a disallowance based on an incontesibe provision would justifiably lead to levy of penalty.
10. For these and such other grounds as may be urged at the time of the hearing, the order of the learned Commissioner of Income-tax (Appeals) may be vacated and that of the Assessing Officer be restored.
11. The appellant craves leave to add, alter or amend any or all the grounds of appeal."
6. The Ld. Departmental Representative heavily relied on the order of the Assessing Officer. He submitted that knowing fully well that the asset sold is held for a period of less than 3 years the assessee claimed capital 11 gain as long term capital gain and claimed deduction u/s.54B. He submitted that the assessee has not filed any revised return prior to the detection by the Department and only when he was confronted by the Assessing Officer that he agreed for the addition. He submitted that even in agreed addition penalty can be levied.
6.1 Referring to the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Zoom Communication Pvt. Ltd. reported in 327 ITR 510 he submitted that the Hon'ble High Court after considering the decision of the Hon'ble Supreme Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd. reported in 322 ITR 158 has upheld the penalty levied by the Assessing Officer under similar circumstances and the order of the Tribunal was reversed.
6.2 Referring to the decision of the Hon'ble Supreme Court in the case of Mak data Pvt. Ltd. Vs. CIT vide Civil Appeal No.9772/2013 he submitted that the Hon'ble Supreme Court in the said decision has held that the statute does not recognise defects such as voluntary disclosure, buy peace, avoid litigation, amicable settlement etc. under the Explanation 1 to section 271(1)(c) of the I.T. Act. It has been held in the said decision that the voluntary disclosure does not release the assessee from the mischief of penalty proceedings u/s.271(1)(c) and the law does not provide that when an assessee makes a voluntary disclosure of his concealed income he had to be absolved from penalty proceedings. He accordingly submitted that the order of the CIT(A) being contrary to law should be reversed and that of the Assessing Officer be restored.
12
7. The Ld. Counsel for the assessee on the other hand heavily relied on the order of the CIT(A). He submitted that it is not an agreed addition but was an erroneous claim and therefore, the decision of the Hon'ble Supreme Court in the case of Mak data Pvt. Ltd. (Supra) is not applicable. He submitted that due to typographical error the mistake has happened and assessee had no malafide intention. He submitted that although in the statement of computation the year of acquisition was mentioned as 1999, however, the assessee has considered the indexed cost at 496 which itself shows that there was some confusion while making the calculation. He submitted that when the mistake was brought to the notice of the assessee he accepted the same. He further submitted that provisions of section 54B grants the assessee the exemption if he sells the agricultural land situated at Pune.
7.1 Referring to the decision of the Hon'ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd. Vs. CIT reported in 348 ITR 306 (SC) he submitted that penalty was deleted on account of inadvertent mistake. He submitted that mistake in the instant case has happened in the office of the Chartered Accountant. Therefore, in view of the decision of the Hon'ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd. (Supra), the penalty deleted by the Ld.CIT(A) is justified. He accordingly submitted that the grounds raised by the Revenue should be dismissed.
8. We have considered rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that the asset in the instant 13 case was purchased on 13-04-2004 for a consideration of Rs.12 lakhs and sold on 06-10-2006 for a consideration of Rs.75 lakhs, the details of which are at page 5 of the assessment order. The assessee filed the return of income on 31-12-2007 claiming the year of acquisition of the asset as 1999 instead of the correct year as 2004. The notice issued u/s.143(2) of the Act dated 11-09-2008 was issued and served on the assessee on 16-09-2008 and the final order was passed on 30-12-2009. Even though the period of holding of the asset sold was for less than 36 months and therefore the income does not fall within the long term capital gain, we find the assessee never filed any revised return before the issue of notice u/s.143(2). Further, the assessee before the CIT(A) vide letter dated 20-01-2012 had stated that he had voluntarily accepted for the agreed addition in respect of deduction wrongly claimed by his consultant. The relevant observation of the CIT(A) at para 3.2 of the order reads as under:
"3.2 During the course of appellate proceedings, vide letter dated 20-01- 2012 following written submission was filed by the appellant in this regard :
a. Note on sale of Land & Capital Gain on sale of land During the year under review, the appellant has sold/transferred his land at Mohammadwadi for total consideration of Rs.75,00,000/-. The appellant has acquired/purchased the said land on 13/04/2004 for total consideration of Rs.12,29,380/- including stamp duty and registration charges from Salim Sadruddin Khoja & Others and same has already been reflected in the books of accounts. Xerox of purchase and sale deed is enclosed herewith for your kind perusal.
The appellant wish to draw your kind attention to the fact that, the appellant has received net gain on sale of above said of Rs.62,70,620/- and during the filing of income tax return for the year under review, the consultant of the appellant inadvertently through oversight claimed the exemption u/s.54(B) of I.T. Act and shown the income from capital gain has NIL. Inspite of the fact that, the appellant having short term capital gain of Rs.62,70,620/-.
b. The appellant voluntarily accepted for the agreed addition in respect of deduction wrongly claimed by his consultant in the above said transfer or property during the assessment proceedings. The appellant has already paid the income tax of Rs.8,50,000/- against 14 the above said Income Tax Dues and ready to pay the balance entire dues along with interest.
The appellant wish to draw your kind attention to the fact that, during the assessment proceedings, the appellant suo moto & voluntarily agreed addition of short term capital gain of Rs.62,70,620/- for sale of land at Mohammadwadi.
.......................
. . . . . . . . . . . . . . . . . . . . . . ."
8.1 From the above, it is clear that the addition made by the Assessing Officer is an agreed addition and therefore the submission of the Ld. Counsel for the assessee that it is not an agreed addition is not correct. 8.2 We find the Hon'ble Delhi High Court in the case of Zoom Communication Pvt. Ltd. (Supra) after considering the decision of Hon'ble Supreme Court in the case of Reliance petroproducts Pvt. Ltd. (Supra) has observed as under (Short notes) :
"Held, that admittedly, in view of the provisions contained in section 40(a)(ii) of the Act, the amount of income-tax could not have been claimed as a deduction while computing income of the assessee. As regards the amount claimed on account of unusable and discarded assets, the Tribunal, was entirely incorrect in taking the view that the deduction claimed by the assessee was admissible to it u/s.32(1)(iii). Clause (i) of sub-section (1) of section 32 relates to assets of an undertaking engaged in generation and/or distribution of power. Admittedly, the assessee-company was not engaged in generation and for distribution of power, during the relevant year. Thus, the provisions, of clause (i) of sub-section (1) of section 32 would not apply in respect of the assets claimed to have become unusable and written off. Therefore, the assessee had no justification to claim this amount of Rs.13,24,539/- as a revenue expenditure. In fact, the assessee did not claim, either before the Assessing Officer or before the Commissioner (Appeals) that such a deduction was permissible u/s.32(1)(iii). It was also not the case of the assessee that it was under a bona fide belief that these two amounts could be claimed as revenue expenditure. The assessee was a company which must be having professional assistance in computation of its income, and its accounts were compulsorily subjected to audit. The Tribunal erred in law in deleting the penalty in respect of the amount of Rs.1 lakh claimed as deduction on account of payment of income-tax and the amount of Rs.13,24,539/- debited under the head " equipment written off", in the profit and loss account of the assessee".15
8.3 We find the Hon'ble Supreme Court in the case of Mak data Pvt. Ltd. vide Civil Appeal No.9772/2013 has observed as under :
"6. We have heard counsel on either side. We fully concur with the view of the High Court that the Tribunal has not properly understood or appreciated the scope of Explanation 1 to Section 271(1)(c) of the Act, which reads as follows :-
"Explanation 1 - Where in respect of any facts material to the computation of the total income of any person under this Act, --
(A) Such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or (B) Such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed."
7. The AO, in our view, shall not be carried away by the plea of the assessee like "voluntary disclosure", "buy peace", "avoid litigation", "amicable settlement", etc. to explain away its conduct. The question is whether the assessee has offered any explanation for concealment of particulars of income or furnishing inaccurate particulars of income. Explanation to Section 271(1) raises a presumption of concealment, when a difference is noticed by the AO, between reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence. When the initial onus placed by the explanation, has been discharged by him, the onus shifts on the Revenue to show that the amount in question constituted the income and not otherwise.
8. Assessee has only stated that he had surrendered the additional sum of Rs.40,74,000/- with a view to avoid litigation, buy peace and to channelize the energy and resources towards productive work and to make amicable settlement with the income tax department. Statute does not recognize those types of defences under the explanation 1 to Section 271(1)(c) of the Act. It is trite law that the voluntary disclosure does not release the Appellant-assessee from the mischief of penal proceedings. The law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he had to be absolved from penalty.
9. We are of the view that the surrender of income in this case is not voluntary in the sense that the offer of surrender was made in view of detection made by the AO in the search conducted in the sister concern of the assessee. In that situation, it cannot be said that the surrender of income was voluntary. AO during the course of assessment proceedings has noticed that certain documents comprising of share application forms, bank 16 statements, memorandum of association of companies, affidavits, copies of Income Tax Returns and assessment orders and blank share transfer deeds duly signed, have been impounded in the course of survey proceedings under Section 133A conducted on 16.12.2003, in the case of a sister concern of the assessee. The survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Consequently, it is clear that the assessee had no intention to declare its true income. It is the statutory duty of the assessee to record all its transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year. The AO, in our view, has recorded a categorical finding that he was satisfied that the assessee had concealed true particulars of income and is liable for penalty proceedings under Section 271 read with Section 274 of the Income Tax Act, 1961.
10. The AO has to satisfy whether the penalty proceedings be initiated or not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing. The scope of Section 271(1)(c) has also been elaborately discussed by this Court in Union of India vs. Dharmendra Textile Processors (2008) 13 SCC 369 and CIT vs. Atul Mohan Bindal (2009) 9 SCC 589.
11. The principle laid down by this Court, in our view, has been correctly followed by the Revenue and we find no illegality in the department initiating penalty proceedings in the instant case. We, therefore, fully agree with the view of the High Court. Hence, the appeal lacks merit and is dismissed. There shall be no order as to costs."
8.4 Since the gain on sale of the land was short term which has been wrongly claimed by the assessee as long term by substituting the year of acquisition as 1999 instead as 2004 and since no revised return was filed nor the mistake was brought to the notice of the Assessing Officer suo moto before it was detected by the Department for which the assessee had to finally surrender the addition, therefore, following the decision of the Hon'ble Supreme Court in the case of Mak Data Pvt. Ltd., (Supra) and the decision of Hon'ble Delhi High Court in the case of Zoom Communications Pvt. Ltd., (Supra) we hold that the Ld.CIT(A) was not justified in deleting the penalty levied by the Assessing Officer.
178.5 So far as the decision of the Hon'ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd. (Supra) is concerned the same in our opinion was under different context and not applicable to the facts of the present case. In that case, the assessee provided multi disciplinary management consultancy services. For the A.Y. 200-01 it filed its return of income u/s.139(6) r.w.s. 139(6A) of the I.T. Act, 1961 accompanied by tax audit report u/s.44AB of the Act and statement of particulars in Form 3CD. Even though the statement indicated that the provision towards payment of gratuity was not allowable, the assessee claimed the same as deduction in its return of income on the basis of the return and the said assessment order was passed u/s.143(3) of the I.T. Act. Subsequently, the Assessing Officer reopened the assessment by issuing notice u/s.148 on the ground that provision for gratuity was not allowable u/s.40A(7) and was required to be added back which has not been added by the assessee thereby leading to under assessment of income. Under these circumstances when penalty was levied by the Assessing Officer and confirmed by the High Court, the Hon'ble Supreme Court deleted the penalty by observing as under (Short notes) :
"Held, allowing the appeal, that the facts of the case were peculiar and somewhat unique. Notwithstanding that the assessee was a reputed firm and had great expertise available with it, it was possible that even the assessee could make a "silly mistake". That fact that the tax audit report was filed along with the return and that it unequivocally stated that the provision for payment was not allowable u/s.40A(7) of the Act indicated that the assessee made a computation error in its return of income. The contents of the tax audit report suggested that there was no question of the assessee concealing its income or of the assessee furnishing any inaccurate particulars. Apart from the fact that the assessee did not notice the error, it was not even noticed even by the Assessing Officer who framed the assessment order. All that had happened was that though a bonafide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. The assessee should have been careful but the absence of due care, in a case such as the present, did not mean that the assessee was guilty of either furnishing inaccurate particulars 18 or attempting to conceal its income. On the peculiar facts of this case, the imposition of penalty on the assessee was not justified"
8.6 Thus, in the abovementioned case the auditors had mentioned in the Form 3CD stating that provision towards payment of gratuity was not an allowable deduction and the Assessing Officer in the original assessment proceedings also could not notice the error committed by the assessee. 8.7 However, in the instant case, the asset purchased in the year 2004 has been taken as 1999 to treat the profit on sale of the asset as long term capital gain and assessee has neither filed any revised return nor brought the mistake to the notice of the Assessing Officer before the same was detected. Therefore, the decision relied on by the Ld. Counsel for the assessee is not applicable to the facts of the present case. In this view of the matter, we set-aside the order of the CIT(A) and confirm the penalty levied by the Assessing Officer. Grounds raised by the Revenue are accordingly allowed.
9. In the result, the appeal filed by the Revenue is allowed.
Pronounced in the Open Court on 11-04-2014.
Sd/- Sd/-
(SHAILENDRA KUMAR YADAV ) ( R.K. PANDA )
JUDICIAL MEMBER ACCOUNTANT MEMBER
satish
Pune, dated 11th April, 2014
Copy of the order is forwarded to:
1. The Assessee
2. The Department
3. The CIT(A)-II, Pune
4. The CIT-II, Pune
5. The DR "A" Bench, Pune.
6. Guard File
By Order
// True Copy //
Senior Private Secretary,
Income Tax Appellate Tribunal, Pune