Income Tax Appellate Tribunal - Pune
Gulabbai Tupe , Pune vs Department Of Income Tax on 15 April, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCHES "B", PUNE
BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER
AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER
ITA Nos. 804 to 809/PN/2012
(Assessment Years: 2003-04 to 2008-09)
Shri Mangesh Tupe
147, Magarpatta
Hadapsar, Pune - 411 028
PAN : AELPT 5216 G .... Appellant
Vs.
Asst. Commissioner of Income Tax
Central Circle 2 (3)
Pune .... Respondent
ITA Nos. 771 to 776/PN/2012
(Assessment Years: 2003-04 to 2008-09)
Asst. Commissioner of Income Tax
Circle 1 (2)
Pune .... Appellant
Vs.
Shri Mangesh Tupe
147, Magarpatta
Hadapsar, Pune - 411 028
PAN : AELPT 5216 G .... Respondent
ITA Nos. 766 to 770/PN/2012
(Assessment Years: 2004-05 to 2008-09)
Asst. Commissioner of Income Tax
Circle 1 (2)
Pune .... Appellant
Vs.
Smt. Gulabbai Tupe
147, Magarpatta
Hadapsar, Pune - 411 028
PAN : AELPT 9275 P .... Respondent
ITA Nos. 804 to 809/PN/2012
2 ITA Nos. 771 to 776/PN/2012
ITA Nos. 766 to 770/PN/2012
ITA Nos. 800 to 803/PN/2012
ITA Nos. 777 to 780/PN/2012
ITA Nos. 800 to 803/PN/2012
(Assessment Years: 2003-04 & 2005-06 to 2007-08)
Smt. Varsha Tupe
147, Magarpatta
Hadapsar, Pune - 411 028
PAN : AELPT 9274 N .... Appellant
Vs.
Asst. Commissioner of Income Tax
Central Circle 2 (3)
Pune .... Respondent
ITA Nos. 777 to 780/PN/2012
(Assessment Years: 2004-05 to 2007-08)
Asst. Commissioner of Income Tax
Circle 1 (2)
Pune .... Appellant
Vs.
Shri Varsha Tupe
147, Magarpatta
Hadapsar, Pune - 411 028
PAN : AELPT 9274 N .... Respondent
Appellant by : Mr. Nikhil Pathak
Respondent by : Mr. Achal Sharma
Date of hearing : 15-04-2013
Date of pronouncement : 30-04-2013
ORDER
PER G. S. PANNU, AM
The captioned appeals relate to three assessees belonging to the same family and involve certain common issues and therefore, they have been clubbed and heard together and a common order is being passed for the sake of convenience and brevity.
2. In all the appeals the common issue relates to penalty imposed by the Assessing Officer under Section 271(1)(c) of the Income Tax Act, 1961 (in short "the Act"). It was a common point between the parties that the ITA Nos. 804 to 809/PN/2012 3 ITA Nos. 771 to 776/PN/2012 ITA Nos. 766 to 770/PN/2012 ITA Nos. 800 to 803/PN/2012 ITA Nos. 777 to 780/PN/2012 penalties have been levied in the captioned cases as a result of assessments made consequent to a search action undertaken by the Department on 21.02.2008. In the above background the learned counsels have made their submission.
3. The appeal in the case of Shri Mangesh Tupe in ITA No. 804/PN/2012 pertaining to the assessment year 2003-04 is taken up as the lead case. This appeal by the assessee pertaining to the assessment year 2003-04 is directed against the order of the CIT(A) dated 26.12.2011 which, in turn, has arisen from an order dated 30.06.2010 passed by the Assessing Officer levying penalty of Rs. 13,64,540/- under Section 271(1)(c) of the Act.
4. Briefly put the facts are that a search action under Section 132(1) of the Act was conducted on the assessee on 21.02.2008. In response to a notice issued under Section 153A of the Act for assessment year 2003-04, assessee filed a return of income on 08.10.2009 declaring 'Nil' income and agricultural income of Rs. 5,04,200/-. An assessment under Section 143(3) read with Section 153A of the Act was finalized by the Assessing Officer on 31.12.2009 determining total income of Rs. 53,86,150/- wherein additions were made on account of Long Term Capital Gain (LTCG), undisclosed investment in bank deposits and agricultural income treated as undisclosed income, amounting to Rs. 30,12,878/-, Rs. 18,69,073/- and Rs. 5,04,200/- respectively. The assessee has accepted the additions made in the assessment order dated 30.12.2009. Subsequently, the Assessing Officer held the assessee guilty of having concealed the income and furnished inaccurate particulars of income in respect of the aforestated three additions, within the meaning of Section 271(1)(c) of the Act and levied penalty of Rs. 13,64,540/- equivalent to 100% of tax sought to be evaded vide order dated 30th June, 2010. The assessee carried the matter in appeal before the CIT(A), who vide his impugned order dated 26.12.2011 deleted the penalty levied in relation to the LTCG of ITA Nos. 804 to 809/PN/2012 4 ITA Nos. 771 to 776/PN/2012 ITA Nos. 766 to 770/PN/2012 ITA Nos. 800 to 803/PN/2012 ITA Nos. 777 to 780/PN/2012 Rs. 30,12,878/- while sustaining the penalty with respect to the other two additions made on account of undisclosed investment in bank deposits and treating of agricultural income as undisclosed income amounting to Rs. 18,69,073/- and Rs. 5,04,200/- respectively. The assessee as well as the Revenue are in appeal before us by way of cross-appeals. Whereas the assessee vide ITA No. 804/PN/2012 is aggrieved with the order of the CIT(A) sustaining the penalties with respect to the additions on account of undisclosed investment in bank deposits and treating of agricultural income as undisclosed income, on the other hand, the Revenue in its cross appeal vide ITA No. 771/PN/2012 is aggrieved with the order of the CIT(A) in deleting the penalty with respect to the addition made on account of LTCG on sale of land. Accordingly, the cross-appeals are taken up together.
5. In this background, we take up for discussion, the penalty levied with respect to the addition of Rs. 18,69,073 representing unexplained investment in the bank account, which is the first issue raised by the assessee in its appeal in ITA No. 804/PN/2012 (supra). During the course of search action under Section 132(1) of the Act, the assessee was found in possession of bank passbooks of two bank accounts namely SB A/c No. 20341 in Canara Bank, Hadapsar Branch, Pune and SB A/c No. 1044257903 in Central Bank of India, Hadapsar Branch, Pune; such accounts stood in the name of the assessee's driver, one Mr. Anand S. Bhope. The assessee in his statement recorded at the time of search and also thereafter in the post-search enquiries admitted that the cash deposits made in the aforesaid bank accounts were made by him and that the same belonged to the assessee. The Assessing Officer in the course of assessment proceedings noticed that during the previous year relevant to the assessment year 2003-04 under consideration, assessee had made cash deposits of Rs. 18,69,073/- which was considered as unexplained investment of the assessee. The Assessing Officer has further recorded in the assessment order dated 31.12.2009 that assessee agreed to ITA Nos. 804 to 809/PN/2012 5 ITA Nos. 771 to 776/PN/2012 ITA Nos. 766 to 770/PN/2012 ITA Nos. 800 to 803/PN/2012 ITA Nos. 777 to 780/PN/2012 the said addition vide order sheet noting dated 08.12.2009. Subsequently, when the assessee was show-caused as to why penalty under Section 271(1)(c) of the Act be not levied for the said additions, the claim of the assessee was that he agreed to such additions merely in order to buy peace and that the Department had no evidence to show that assessee had actually earned such income. However, the Assessing Officer held that assessee had concealed and furnished inaccurate particulars of income qua the aforesaid addition and that the assessee's case was covered by Explanation- 5A to Section 271(1)(c) of the Act. Before the CIT(A), assessee reiterated the aforesaid argument and also pointed out that because of mere admission and in the absence of any concrete evidence, penalty was not leviable. Further, assessee contended that the level of addition made was unwarranted and pointed out that in the impugned bank account there are not only cash deposits but also cash withdrawal; thus, the addition was maintainable only with regard to the peak amount of deposits net of withdrawals made. The assessee submitted alternatively that the penalty be retained with respect to the aforesaid addition only on the amount of peak deposits i.e. after considering the cash withdrawals also. The CIT(A) has however upheld the levy of penalty on the ground that the deposits in question were admitted by the assessee as his own undisclosed income and therefore the penalty was justifiably imposed. The alternative plea has been rejected by the CIT(A) by observing that there was no co-relation between the deposits and withdrawals and that such a new plea could not be raised during penalty proceedings. Against the sustenance of penalty, assessee is in appeal before us.
6. Before us, learned counsel for the assessee has not disputed the assertion of the Assessing Officer that the provisions of Explanation- 5A to Section 271(1)(c) of the Act are attracted in the present situation, so however, it is stated that the penalty be retained only with respect to the addition quantified on the basis of peak net credit appearing in the bank account.
ITA Nos. 804 to 809/PN/2012 6 ITA Nos. 771 to 776/PN/2012 ITA Nos. 766 to 770/PN/2012 ITA Nos. 800 to 803/PN/2012 ITA Nos. 777 to 780/PN/2012
7. On the other hand, the learned Departmental Representative appearing for the Revenue, has defended the imposition of penalty on the basis of the points raised in the order of the authorities below, which we have already adverted to in the earlier portion of the order, and the same are not being repeated for the sake of brevity.
8. We have carefully considered the rival submissions. In the present case, a search action under Section 132(1) of the Act was carried out on 21.02.2008 and assessee was found to be owner of two bank accounts, detailed earlier, which stood in the name of one Mr. Anand S. Bhope. The assessee also accepted that the cash deposits made in the impugned bank accounts belonged to him and accordingly an amount of Rs. 18,69,073/- representing cash deposits during the year under consideration have been considered as undisclosed investment of the assessee. Ostensibly, the provisions of such Explanation 5A to Section 271(1)(c) of the Act are applicable in the present case and in terms thereof the assessee is deemed to have concealed the impugned income or furnished inaccurate particulars of such income i.e. Rs. 18,69,073/- representing undisclosed investment in the two impugned bank accounts standing in the name of Mr. Anand S. Bhope. It is also factually emerging that no return of income for assessment year 2003- 04 was filed by the assessee prior to the search action carried under Section 132 (1) of the Act. The alternative plea of the assessee with regard to the quantum of penalty levied, in our view, is also misplaced. As per the assessee, the addition of Rs. 18,69,073/- represents only the cash deposit/entries in the impugned bank account whereas cash withdrawal entries are also there, and thus addition was warranted only with regard to the peak balance during the year, after netting the cash withdrawals. In this connection the CIT(A) has observed that assessee failed to establish any co-relation between the cash deposits and withdrawals. Even before us, there is no material referred to by ITA Nos. 804 to 809/PN/2012 7 ITA Nos. 771 to 776/PN/2012 ITA Nos. 766 to 770/PN/2012 ITA Nos. 800 to 803/PN/2012 ITA Nos. 777 to 780/PN/2012 the assessee to show any co-relation between the deposits and withdrawals and therefore the aforesaid plea of the assessee has been rightly rejected by the CIT(A), which we hereby affirm. Therefore, the action of the lower authorities in imposing the penalty under Section 271(1)(c) of the Act in relation to income of Rs. 18,69,073/- representing undisclosed investment in the bank accounts standing in the name of Mr. Anand S. Bhope is hereby affirmed. Accordingly, assessee fails on this aspect.
9. The second issue raised by the assessee is to the effect that no penalty under Section 271(1)(c) is leviable with respect to the addition of Rs. 5,04,200/-. In the return of income filed in response to notice under Section 153A of the Act, assessee declared agricultural income of Rs. 5,04,200/-, which has been treated by the Assessing Officer as unexplained in the assessment order dated 31.12.2009. During the assessment proceedings, assessee was asked to explain the source of certain deposits in the bank and the same were explained as the deposit of the sale proceeds of agricultural produce. The appellant further explained that his family owned agricultural land at Kolwadi, Theur admeasuring 13 acres and that he was also cultivating another 13 acres of land owned by his uncle. The Assessing Officer conducted enquiries and has recorded a finding in the assessment order that no agricultural activity was carried out in the stated land for the last 10 years; the Assessing Officer has also noted that assessee did not submit any evidence in support of his agricultural income except the ownership of land. On being confronted, it is noted in the assessment order that vide order sheet noting dated 08.12.2009 assessee admitted that the agricultural income claimed at Rs. 5,04,200/- was unexplained. The Assessing Officer has levied penalty on the aforesaid addition, which has been upheld by the CIT(A) on the ground that there was no material to negate the finding of the Assessing Officer that the agricultural income shown by the assessee was bogus.
ITA Nos. 804 to 809/PN/2012 8 ITA Nos. 771 to 776/PN/2012 ITA Nos. 766 to 770/PN/2012 ITA Nos. 800 to 803/PN/2012 ITA Nos. 777 to 780/PN/2012
10. Before us, learned counsel for the assessee has submitted that the penalty has been sustained by the CIT(A) without appreciating the fact that even during search action, assessee had explained that he was carrying on agricultural activities and the said aspect could not be disputed. Merely because the assessee could not substantiate the quantum of agricultural income declared, cannot be treated as concealment or furnishing of inaccurate particulars of income under Section 271(1)(c) of the Act. According to the learned counsel, the assessee had duly explained the cash deposits appearing in the bank account as being out of agricultural income and that the said explanation was consistently furnished right from the time of search and during the assessment proceedings. The learned counsel pointed out that there was no evidence with the Department to show that the agricultural income declared was false, and the addition was accepted by the assessee only to buy peace and avoid litigation. At the time of hearing, the learned counsel relied upon the judgement of the Hon'ble Bombay High Court in the case of Bhimji Bhanjee & Co. 146 ITR 144 (Bom.) for the proposition that mere agreement to an addition does not mean that there was concealment or furnishing inaccurate particulars of income within the meaning of Section 271(1)(c) of the Act.
11. On the other hand, the learned Departmental Representative appearing for the Revenue has pointed out that the CIT(A) has rightly upheld the levy of penalty by considering the findings of the Assessing Officer contained in the assessment order, which clearly show that no agricultural activity was carried out in the stated land, and this aspect has not been rebutted by the assessee on the basis of any evidence. It was thus, contended that the penalty has been rightly imposed.
ITA Nos. 804 to 809/PN/2012 9 ITA Nos. 771 to 776/PN/2012 ITA Nos. 766 to 770/PN/2012 ITA Nos. 800 to 803/PN/2012 ITA Nos. 777 to 780/PN/2012
12. We have carefully considered the rival submissions. During the assessment proceedings, assessee was asked to explain certain deposits in bank account amounting to Rs. 5,04,200/-, which the assessee explained as income from agriculture. The assessee had disclosed Rs. 5,04,200/- as agricultural income in the return of income filed in response to notice under Section 153A of the Act for the assessment under consideration. The Assessing Officer however did not accept the claim of the assessee and instead held that amount of Rs. 5,04,200/- was income from undisclosed sources. The assessee has accepted such addition. The plea of the assessee is that he was owing agricultural lands admeasuring 13 acres and also claimed to have cultivated 13 acres of land belonging to his uncle. It has also been submitted that even in the course of statement recorded on 17.04.2008, assessee had explained that he was carrying on agricultural activities. A copy of such statement has been placed in the Paper Book at pages 50 to 68 wherein assessee stated that he was involved in agricultural activities from 1983 onwards and that he was a B.Sc. (Agri.) Graduate. Before us, the learned counsel has emphasized that the explanation of the assessee of being engaged in agricultural activities was bonafide, and that merely because assessee could not substantiate the quantum of income or the fact that he agreed to the said addition, cannot be construed as concealment or furnishing of inaccurate particulars of income within the meaning of Section 271(1)(c) of the Act.
13. In our considered opinion, in order to test the charge of concealment made by the Revenue, it is necessary to examine the manner in which the impugned addition has been made by the Assessing Officer. In the assessment order, the Assessing Officer has categorically asserted that as a result of the enquiries conducted no agricultural activity was found to have been carried out on the stated lands in the last 10 years. The aforesaid assertion of the Assessing Officer is uncontroverted. Ostensibly there is no ITA Nos. 804 to 809/PN/2012 10 ITA Nos. 771 to 776/PN/2012 ITA Nos. 766 to 770/PN/2012 ITA Nos. 800 to 803/PN/2012 ITA Nos. 777 to 780/PN/2012 evidence that assessee has carried out any agricultural activity and the assessee admitted that the agricultural income declared in the return of income was undisclosed income. Having regard to the facts and circumstances, the stand of the assessee of having carried out any agricultural activity stands disproved and accordingly concealment and furnishing of inaccurate particulars of income qua the stated agricultural income stands established within the meaning of Section 271(1)(c) of the Act. Therefore the CIT(A) was justified in upholding the action of the Assessing Officer in imposing penalty under Section 271(1)(c) of the Act and the assessee has to fail on this aspect also.
14. In the result, the appeal of the assessee in ITA No. 804/PN/2012 is hereby dismissed.
15. Now, we may take up the cross appeal preferred by the Revenue for the assessment year 2003-04 vide ITA No. 771/PN/2012. As noted earlier the grievance of the Revenue is with regard to the action of the CIT(A) in deleting the penalty imposed by the Assessing Officer under Section 271(1)(c) of the Act with respect to the addition of Rs. 30,12,878/- made on account of LTCG on sale of lands.
16. In order to appreciate the controversy, it would be appropriate to briefly touch upon the facts regarding the impugned addition. The assessee and his family members owned around 18 acres of land in Hadapsar. The assessee and his family members alongwith a number of other agriculturists gave their land to one Magarpatta Township Development Corporation Ltd. (MTDCL) for development in terms of an MOU dated 26.03.1999. The MTDCL was to undertake development in phases and accordingly it took possession of the pieces of land belonging to various agriculturists over the years, it did not take over the entire land in one go, similarly, the consideration was along being ITA Nos. 804 to 809/PN/2012 11 ITA Nos. 771 to 776/PN/2012 ITA Nos. 766 to 770/PN/2012 ITA Nos. 800 to 803/PN/2012 ITA Nos. 777 to 780/PN/2012 paid in installments. The Assessing Officer noted that at the end of each year, MTDCL was issuing land cost certificates on the basis of pro-rata share of the landowner in the total land developed and sold in a particular year. The Assessing Officer had noticed that on perusal of the land cost certificates issued by MTDCL for the year under consideration it was found that assessee had accrued sale consideration of Rs. 2,92,722/-. The assessee had not disclosed any capital gain for the year under consideration in the return of income filed response to a notice under Section 153A of the Act. The assessee had explained that he had disclosed the corresponding capital gain on actual receipt basis and not on the basis of the land cost certificates issued by the MTDCL as no amount was actually received during the year under consideration. However, the assessee agreed to taxing of capital gains on accrual basis during the assessment proceedings. Accordingly, the Assessing Officer computed Long Term Capital Gain (LTCG) at Rs. 30,12,878/- as detailed in para 6.3 of the assessment order dated 31.12.2009 which also included the capital gain belonging to assessee's two minor children as per the provisions of Section 64 (1A) of the Act. The assessee accepted the addition and no appeal was preferred against the same. Subsequently, the Assessing Officer held the assessee guilty of concealment and furnishing of inaccurate particulars of income within the meaning of Section 271(10)(c) of the Act with respect of the aforesaid income. The CIT(A) has since deleted the penalty imposed by the Assessing Officer on the ground that having regard to the clauses of the MOU dated 26.03.1999 (supra) the transfer of land took place in the financial year 1998-99 relevant to the assessment year 1999-2000 itself and therefore, the impugned capital gain was liable to be taxed in assessment year 1999-2000 and not in the assessment year under consideration in the light of the judgement of the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia 260 ITR 491 (Bom.). As per the CIT(A), even during the penalty proceedings assessee could agitate that an income subject to penalty was indeed not taxable at all, and accordingly CIT(A) found merit in ITA Nos. 804 to 809/PN/2012 12 ITA Nos. 771 to 776/PN/2012 ITA Nos. 766 to 770/PN/2012 ITA Nos. 800 to 803/PN/2012 ITA Nos. 777 to 780/PN/2012 assessee's plea that impugned income by way of LTCG on sale of land was not taxable in the instant year and therefore it could not be said that there was any concealment or furnishing of inaccurate particulars in order to levy penalty under Section 271(1)(c) of the Act. Against the aforesaid decision, Revenue is in appeal before us.
17. Before us, the learned Departmental Representative has submitted that plea of the assessee that impugned capital gain was not taxable during the year under consideration was a fresh plea raised only in the proceedings before the CIT(A) and the same was neither raised during the assessment proceedings and nor in the penalty proceedings before the Assessing Officer. As per the Departmental Representative, the CIT(A) was wrong in considering such a plea while dealing with the penalty imposed under Section 271(1)(c) of the Act as the same would amount to reopening of the assessment which was not permissible.
18. Apart therefrom, it has also been contended that having regard to the terms and conditions of the MOU dated 26.03.1999 the consideration accruing with to the assessee could not be quantified or computed in assessment year 1999-2000 and therefore CIT(A) erred in accepting the plea of the assessee that the capital gain was assessable in assessment year 1999-2000 and not in assessment year under consideration.
19. We have carefully considered the rival submissions. Section 271(1)(c) of the Act empowers the Assessing Officer to impose penalty if he is satisfied that the assessee has concealed the particulars of his income or has furnished inaccurate particulars of such income. Ostensibly, the essential pre-requisites of Section 271(1)(c) of the Act are that the assessee should have either concealed the income or furnished inaccurate particulars of such income. Accordingly, in order to test the efficacy of the penalty imposed by the ITA Nos. 804 to 809/PN/2012 13 ITA Nos. 771 to 776/PN/2012 ITA Nos. 766 to 770/PN/2012 ITA Nos. 800 to 803/PN/2012 ITA Nos. 777 to 780/PN/2012 Assessing Officer in this case, it would have to be examined as to whether the assessee had concealed or furnished inaccurate particulars of income relating to capital gains on transfer/sale of land to MTDCL. The charge made by the Assessing officer is that the assessee has concealed and furnished inaccurate particulars of income with respect to the LTCG assessed at Rs. 30,12,878/- on account of sale of land to MTDCL.
20. In order to adjudicate the controversy, it would be appropriate to briefly cull out the relevant facts and the background in which the charge of concealment and furnishing of inaccurate particulars of income has been made against the assessee. The assessee and his family members owned around 18 acres of land at Hadapsar and as per an MOU dated 26.03.1999 entered into with MTDCL, assessee, his family members along with a number of other agriculturists gave the land for development to MTDCL, a copy of the said MOU has been placed in the Paper Book at pages 1 to 18. Prior to the search action, assessee had not filed any return of income and it was only in the course of search, assessee submitted the transfer of land to MTDCL and in a statement recorded under Section 132(4) of the Act, assessee agreed to offer the capital gain on sale of land in respective years. In the return of income filed in pursuance to notice under Section 153A of the Act for the assessment year 2003-04, no capital gain was declared on the ground that the same would be offered to tax in the years when the consideration would be actually received. In fact, we find that in the return of income filed, assessee appended the following note : -
"The assessee and his family owned around 18 acres in Hadapsar, Magarpatta City, Pune. The assessee had entered into a Memorandum of Understanding as per which the assessee family had agreed to give the said land for development and the consideration would be paid on the basis of the land developed and sold by Magarpatta Township Development Co. Ltd. (MTDCL). Accordingly, MTDCL has issued land cost certificate giving details ITA Nos. 804 to 809/PN/2012 14 ITA Nos. 771 to 776/PN/2012 ITA Nos. 766 to 770/PN/2012 ITA Nos. 800 to 803/PN/2012 ITA Nos. 777 to 780/PN/2012 of the amount payable to the assessee. However, during the year, the assessee has received much lesser sale consideration and hence, the capital gain is offered to tax on the basis of the sale consideration actually received and not on the basis of the amount shown in the land cost certificate issued by MTDCL"
21. The Assessing Officer confronted the assessee that the capital gains be taxed on accrual basis, on the basis of land cost certificate issued by the MTDCL from year to year. Notably, since MTDCL had taken over a large chunk of land for development, the same was developed in phases over a number of years. In terms of the MOU, MTDCL issued land cost certificates from year to year to different landowners, which indicated the amount payable to the respective owners (i.e. the assessee) on the basis of the overall land developed and sold during the respective years. The land cost certificates so issued only indicated the consideration receivable by the assessee proportionate to his portion of land developed by the MTDCL in a given year. The assessee explained to the Assessing Officer that during the year under consideration no amount was received from MTDCL even though as per the land cost certificates issued, assessee was entitled to a certain sum. The Assessing Officer, however taxed the capital gains on the basis of the yearly land cost certificates issued by MTDCL, as the same reflected consideration accruing to the assessee. The assessee did not contest the said decision of the Assessing Officer in bringing to tax the capital gains on the basis of land cost certificates issued by MTDCL considering that the transaction in question was unique and a complex matter, whereby the land owners who had transferred the land to MTDCL for development were to receive consideration over the period when MTDCL undertook actual development of land. It may also be noteworthy that the Assessing Officer has noted in para 6.1 of the assessment order that in fact the assessee had not given the actual possession of his portion of land to MTDCL in this year, but was obtaining the land cost certificates on pro-rata basis and the explanation for the aforesaid ITA Nos. 804 to 809/PN/2012 15 ITA Nos. 771 to 776/PN/2012 ITA Nos. 766 to 770/PN/2012 ITA Nos. 800 to 803/PN/2012 ITA Nos. 777 to 780/PN/2012 feature is that the development of land was being carried out by MTDCL as per MOU over an extended period of time and in a phased manner.
22. Pertinently, at this point we may notice that before the lower authorities assessee pointed out the complexity in taxing the impugned transaction in the hands of the agriculturists. It was explained that the manner of taxation of capital gain adopted by the Assessing officer was accepted by the assessee only considering the complexity involved but all the same it was ad-hocism and that such proposal was indeed accepted by all the agriculturists who were to receive consideration from MTDCL. Nevertheless the assessee had still not handed over the possession of his share of land but was receiving the land cost certificates issued by the MTDCL, indicating his share in the consideration for the lands developed and sold during the year, and it did not indicate amounts actually paid to the assessee in different years. It was in this background, the assessee explained that in the statement recorded under Section 132(4) of the Act, assessee agreed to offer capital gains on the basis of the amounts actually received from year to year. In the returns of income filed after the search, assessee disclosed the capital gains on the basis of consideration actually received and not on the basis of the consideration shown payable by MTDCL from year to year.
23. The moot point to consider is whether merely because the Assessing Officer has chosen to bring to tax capital gain on the basis of the amounts payable to the assessee year to year as per the land cost certificates issued by MTDCL as against the disclosure of capital gains made by the assessee on the basis of the actual amounts received from MTDCL, would it constitute concealment or furnishing of inaccurate particulars of such income within the meaning of Section 271(1)(c) of the Act. At the outset, it would be appropriate to observe that so far as the bonafides of the manner of offering capital gains in the return of income by the assessee is concerned, there is no infirmity. In ITA Nos. 804 to 809/PN/2012 16 ITA Nos. 771 to 776/PN/2012 ITA Nos. 766 to 770/PN/2012 ITA Nos. 800 to 803/PN/2012 ITA Nos. 777 to 780/PN/2012 fact, the Note appended to the return filed by the assessee in pursuance to notice under Section 153A of the Act, and which has been reproduced by us elsewhere in the order, clearly brings out that the assessee fully disclosed the manner in which the capital gain was being offered. In the said Note, assessee disclosed that in terms of MOU, MTDCL had issued land cost certificates giving details of the amount payable to the assessee; it was also explained that the amounts actually received from MTDCL was much lesser and therefore, the capital gains were being offered to tax in respective years on the basis of sale consideration actually received and not on the amounts shown payable to the assessee in the land cost certificates issued by MTDCL. In the said Note, assessee not only disclosed the manner of declaring capital gains but also the rationale for the same. It is another matter that the Assessing Officer did not agree to assessee's plea that the capital gains be taxed on actual receipt basis. The point is that the claim made by the assessee was a bonafide claim and merely because it has not been ultimately upheld by the Assessing Officer, it cannot be ipso facto construed as concealment or furnishing of inaccurate particulars of income within the meaning of Section 271(1)(c) of the Act.
24. At this point we may briefly touch upon the plea raised by the assessee that having regard to the number of agriculturists involved and the peculiar nature of MOU whereby the benefits from the development of the land accrue to the agriculturists over the years, the same was peculiar and a complex transaction. Pertinently, the development of land was undertaken by MTDCL in phases over the years and the benefits were accruing to the agriculturists from year to year including the benefit of escalation in price of the developed saleable units. The assessee claimed that an adhoc formula has been adopted by the Department in taxing the capital gains in the hands of the agriculturists on the basis of the amounts disclosed as payable to the respective agriculturists in the land cost certificates issued by MTDCL.
ITA Nos. 804 to 809/PN/2012 17 ITA Nos. 771 to 776/PN/2012 ITA Nos. 766 to 770/PN/2012 ITA Nos. 800 to 803/PN/2012 ITA Nos. 777 to 780/PN/2012 Elaborating on this point, the learned Representative for the assessee submitted that the manner of taxing the impugned capital gains was contrary to the prevailing legal position. It is sought to be made out that if one was go by legal position, and which is supported by the judgement of the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia (supra), the entire capital gain accrued in the assessment year 1999-2000 and no capital gain was assessable during the under consideration. It is submitted that having regard to the aforesaid, the assessment may have been completed on a different basis but if as per the legal position the particular addition/assessment was not warranted, the levy of penalty under Section 271(1)(c) of the Act would have to fail. We find that the CIT(A) has accepted the aforesaid plea of the assessee and has accordingly, deleted the penalty levied under Section 271(1)(c) of the Act.
25. The plea of the assessee is that Section 45(1) of the Act provides for taxability of capital gains in the year of the 'transfer' of capital asset. In the present case, the MOU with MTDCL was entered on 26.03.1999 and in terms thereof the agriculturists/landowners gave an irrecoverable licence to MTDCL for development of land. In support of the aforesaid, out attention was invited to clause 2 of the MOU which read as under :-
"On the execution of these presents the Second Party, their representatives and workmen have been permitted to enter the "said property"
by way of irrevocable permissive license to commence and complete development and construction/s work thereon as contemplated by this Indenture and for implementing other purposes of this Indenture such as accepting bookings in terms hereof, raising finance etc., for the development and construction and all other purposes for the lawful and effectual construction upon and sale of the "said property". The said permissive license being coupled with monetary interest shall be irrevocable."
ITA Nos. 804 to 809/PN/2012 18 ITA Nos. 771 to 776/PN/2012 ITA Nos. 766 to 770/PN/2012 ITA Nos. 800 to 803/PN/2012 ITA Nos. 777 to 780/PN/2012
26. The point made out by the assessee is that having regard to the aforesaid, whereby MTDCL was granted irrecoverable license to commence development of the land on 26.03.1999 itself, then as per the decision of the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia (supra), 'transfer' within the meaning of Section 2(47) of the Act takes place and the corresponding capital gain become taxable in assessment year 1999-2000 in terms of Section 45(i) of the Act. The Hon'ble Bombay High in the aforesaid judgement had an occasion to consider the import of the expression 'transfer' as per the Section 2(47) of the Act in case of a 'development agreement' between the land owner and a developer. As per the Hon'ble Bombay High Court, if a transaction involved the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to under Section 53A of the Transfer of Property Act, 1882 (4 of 1882) or any transaction which has effect of transferring or enabling in enjoyment of transfer property then having regard to the Clauses (v) and (vi) of Section 2(47) of the Act, transfer takes place in the year in which such agreement is entered into. The MOU dated 26.03.1999 between assessee and MTDCL clearly provides for permitting MTDCL to irrecoverably enter and commence and complete development of the land owned by assessee and therefore, there is substantial force in the plea of the assessee that the on date of entering of MOU i.e. 26.03.1999, an event of 'transfer' within the meaning of Section 2(47) of the Act has taken place and therefore the capital gain is liable to be taxed in assessment year 1999-2000. We are conscious that the present proceedings are not in relation to substantive taxation of the impugned amounts but the aforesaid proposition is being considered only to examine whether legally speaking is there justification in the plea of the assessee that the taxability of the impugned capital gain was not legally conclusive in the manner made by the Assessing Officer and that in the eyes of law, the impugned capital gain was taxable in an another manner.
ITA Nos. 804 to 809/PN/2012 19 ITA Nos. 771 to 776/PN/2012 ITA Nos. 766 to 770/PN/2012 ITA Nos. 800 to 803/PN/2012 ITA Nos. 777 to 780/PN/2012
27. It is well settled proposition that the assessment proceedings and penalty proceedings under Section 271(1)(c) of the Act are independent proceedings and that the conclusions reached in the assessment proceedings are not conclusive so far as the penal provisions are concerned. No doubt a conclusion arrived at in the assessment proceedings is good evidence but the same cannot be considered as conclusive for the purpose of penalty proceedings in as much as the two proceedings are independent proceedings, and, in this connection gainful reference can be made to the judgement of the Hon'ble Supreme Court in the case Khuday Eswara & Sons 83 ITR 639 (SC) and also to the judgement of the Hon'ble Allahabad and Madras High Court in the cases of Raja Mohd. Amir Ahmad Khan 100 ITR 433 (All.) and B. Muniappa Gounder 102 ITR 787 (Mad.) respectively. In case the assessee in the course of penalty proceedings is able to demonstrate with certain degree of certainty that the addition made in the assessment proceedings was not warranted then the findings in the assessment proceedings cannot be considered as conclusive so as to fasten penal liability under Section 271(1)(c) on the assessee. In support of the aforesaid proposition, we may rely upon the ratio of judgement of the Hon'ble Bombay High Court in the case of Jainarayan Babulal vs. CIT 170 ITR 399 (Bom.) In view of the aforesaid discussion, in our considered opinion, the CIT(A) made no mistake in deleting the penalty imposed by the Assessing Officer with respect to the income by way of Long Term Capital Gain of Rs. 30,12,878/- on sale of land. Accordingly, the order of the CIT(A) is affirmed and the appeal of the Revenue in ITA No. 771/PN/2012 is dismissed.
28. In the result, appeal of the Revenue i.e. ITA Nos. 771/PN/2012 is hereby dismissed.
29. In so far as the appeals of the assessee in ITA Nos. 805 to 807/PN/2012 pertaining to assessment years 2004-05 to 2006-07 respectively ITA Nos. 804 to 809/PN/2012 20 ITA Nos. 771 to 776/PN/2012 ITA Nos. 766 to 770/PN/2012 ITA Nos. 800 to 803/PN/2012 ITA Nos. 777 to 780/PN/2012 are concerned the same involve issues which have been dealt with by us in ITA No. 804/PN/2012 for assessment year 2003-04, and therefore our decision in ITA No. 804/PN/2012 for the assessment year 2003-04 would apply mutatis mutandis in ITA Nos. 805 to 807/PN/2012 pertaining to assessment years 2004-05 to 2006-07 respectively. As a result the appeals of the assessee in ITA Nos.805 to 807/PN/2012 are hereby dismissed.
30. In so far as the appeals of the Revenue in ITA Nos. 772 to 776/PN/2012 pertaining to assessment year 2004-05 to 2008-09 is concerned, the issue raised is similar to that considered in ITA No. 771/PN/2012 for assessment year 2003-04, and accordingly our decision therein would mutatis mutandis apply to the other appeals also. Accordingly, the appeals of the Revenue in ITA No.s 772 to 776/PN/2012 are also dismissed.
31. Now, in the case of Shri Mangesh Tupe, the only other appeals remain are ITA Nos. 808 to 809/PN/2012 pertaining to assessment years 2007-08 and 2008-09 respectively. In this appeal, assessee is agitated the levy of penalty under Section 271(1)(c) of the Act on an amount of Rs. 43,09,784/- representing income from the sources, which was declared in the return filed in pursuance to notice under Section 153A(a) of the Act post-search and the same was not declared originally in the return filed under Section 139(1) of the Act for the assessment year 2007-08.
32. In this connection, it is notable that in this case search was initiated under Section 132 of the Act on 21.02.2008 and therefore the provision of Explanation 5A to Section 271(1)(c) of the Act are applicable. In terms of sub-clause (a) of Explanation 5A to Section 271(1)(c) of the Act, the assessee is deemed to have concealed the particulars of impugned income and therefore, we find no error in the order of the CIT(A) sustaining the penalty imposed by the Assessing Officer.
ITA Nos. 804 to 809/PN/2012 21 ITA Nos. 771 to 776/PN/2012 ITA Nos. 766 to 770/PN/2012 ITA Nos. 800 to 803/PN/2012 ITA Nos. 777 to 780/PN/2012
33. In the result, appeal of the assess in ITA No. 808/PN/2013 pertaining to assessment year 2007-08 is hereby dismissed.
34. Insofar assessment year 2008-09 is concerned, a preliminary issue has been raised by the assessee, which is to the effect that the order passed by the Assessing Officer levying penalty under Section 271(1)(c) of the Act is null and void. The aforesaid plea is raised on the basis of Section 271AAA of the Act.
35. Section 271AAA deals with levy of penalty on the "undisclosed income"
of the "specified previous year" in the case of an assessee where search under Section 132 of the Act has been initiated on or after 01.06.2007. In the present case, the search has been initiated under Section 132 of the Act on 21.02.2008 and accordingly the 'specified previous year' as per Explanation
(b) (ii) of Section 271AAA of the Act is the previous year ending on 31.03.2008 corresponding to the assessment year 2008-09. Moreover, it is also clear that the income assessed by the Assessing Officer falls within the meaning of 'undisclosed income' defined in Explanation (a)(i) to Section 271AAA of the Act. Thus, the provisions of Section 271AAA of the Act govern the levy of penalty for the assessment year 2008-09, and accordingly in view of Sub-section (3) of Section 271AAA of the Act, no penalty under Section 271(1)(c) of the Act can be levied in respect of the impugned income.
36. In view of the aforesaid legal position, we hold that the impugned order of the Assessing Officer dated 30.06.2010 levying penalty under Section 271(1)(c) of the Act is untenable. We hold so. Accordingly, the order of the CIT(A) for assessment year 2008-09 is set aside and the Assessing Officer is directed to delete the penalty imposed under Section 271(1)(c) of the Act.
ITA Nos. 804 to 809/PN/2012 22 ITA Nos. 771 to 776/PN/2012 ITA Nos. 766 to 770/PN/2012 ITA Nos. 800 to 803/PN/2012 ITA Nos. 777 to 780/PN/2012
37. In the result, appeal of the assessee in ITA No. 809/PN/2012 for assessment year 2008-09 is allowed.
38. The other captioned appeals in the cases of Smt. Gulabbai Tupe (ITA Nos. 766 to 770/PN/2012), Smt. Versa Tupe (ITA Nos. 777 to 780/PN/2012 and ITA No. 800 to 803/PN/2012) for the respective assessment year, contain issues similar to those considered in the case of Shri Mangesh Tupe in the above paragraphs. The said appeals are also disposed-off in the light of decision in the case of Shri Mangesh Tupe, as above.
Order pronounced in the open Court on 30 th April, 2013.
Sd/- Sd/-
(R.S. PADVEKAR) (G.S. PANNU)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune, Dated: 30 th April, 2013
Sujeet
Copy of the order is forwarded to: -
1) The Assessee;
2) The Department;
3) The CIT(A)-Central, Pune;
4) The CIT, Central, Pune;
5) The DR, "B" Bench, I.T.A.T., Pune;
6) Guard File.
By Order
//True Copy//
Private Secretary
I.T.A.T., Pune