Income Tax Appellate Tribunal - Pune
Sunita Premkumar Luthra, , Nashik vs Deputy Commissioner Of Income-Tax,, on 17 March, 2017
आयकर अपील य अ धकरण, पुणे यायपीठ "ए" पुणे म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
सु ी सष
ु मा चावला, या यक सद य एवं ी आर. के. पांडा, लेखा सद य के सम#
BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM
आयकर अपील सं. / ITA No.305/PUN/2014
नधा%रण वष% / Assessment Year : 2006-07
Premkumar Arjundas Luthra (HUF), .......... अपीलाथ / Appellant
Kanak Villa, Gangapur Road,
Lokmanya Nagar,
Nashik - 422 002
PAN : AADHP3687B
बनाम v/s
The Deputy Commissioner of .......... यथ /Respondent
Income Tax,
Circle-1, Nashik
आयकर अपील सं. / ITA No.306/PUN/2014
नधा%रण वष% / Assessment Year : 2006-07
Sunita Premkumar Luthra .......... अपीलाथ / Appellant
Kanak Villa, Gangapur Road,
Lokmanya Nagar,
Nashik - 422002
PAN : AAEPL8602K
बनाम v/s
The Deputy Commissioner of
Income Tax,
Circle-1, Nashik .......... यथ /Respondent
अपीलाथ क ओर से / Appellants by : Shri Pramod Shingte
यथ क ओर से / Respondent by : Shri Suhas Kulkarni
सन
ु वाई क तार ख / घोषणा क तार ख /
Date of Hearing :16.03.2017 Date of Pronouncement:17.03.2017
आदे श / ORDER
PER SUSHMA CHOWLA, JM :
Both these appeals are filed by the connected persons against separate orders of CIT(A)-I, Nashik dated 23-12-2013 relating to Assessment Year 2006-07 against penalty levied under section 271(1)(c) of the Income-tax Act, 1961 (in short 'the Act').
2
ITA Nos.305 & 306/PUN/2014
2. The issue raised in both the appeals is identical and we proceed to decide the present appeal after referring to the facts in ITA No.305/PUN/2014. The appeals are being disposed of by this consolidated order for the sake of convenience.
3. Ground of appeal No.1 raised by the assessees reads as under :
"1. On the basis of facts and in the circumstances of the case and as per law, the Commissioner of Income Tax (Appeals)-I, Nashik is not justified in confirming penalty of Rs.25,25,570/- (ITA No.305/PUN/2014) and Rs.12,36,240/- (ITA No.306/PUN/2014) u/s.271(1)(c) of the Act levied by the Assessing Officer."
4. The only issue raised in the present appeal is against levy of penalty under section 271(1)(c) of the Act. Briefly in the facts of the case search and seizure action under section 132 of the Act was carried out on the premises of the assessee on 28-09-2006. During the course of search various documents were seized from the residence of the assessee which reflected that assessee along with four co-owners had received cash component on account of sale proceeds for a piece of land in Adgaon, Nashik. The assessee had executed a development agreement on 16-03-2006 and had also executed General Power of Attorney. The transaction was in respect of the land situated at Gat Nos. 556,558, 560, 567 and 559 at Adgaon, Taluka and District Nashik. The said land was divided into two parts, i.e. retention land and excess land. The Assessing Officer during the course of assessment proceedings elaborated on the various facets of the said transaction and held the assessee liable to tax the income under the head long term capital gains. The 1/5th share in the said land was assessed in the hands of assessee and also addition was made on account of long term capital gains arising on the sale of retention of land. While concluding the Assessing Officer observed that since the assessee had not filed its original return under section 139(1) or 139(4), therefore, the 3 ITA Nos.305 & 306/PUN/2014 assessee HUF was deemed to have concealed the particulars of income in view of Explanation 5 to section 271(1)(c) of the Act. Thereafter, during the penalty proceedings, the Assessing Officer held the assessee to have concealed its income of long term capital gains and thereby committed the default within the meaning of Explanation 5 to section 271(1)(c) of the Act.
5. The CIT(A) while deciding the appeal relating to the levy of penalty under section 271(1)(c) of the Act had elaborately considered the documents found during the course of search and established the cash receipt in the hands of assessee on account of development agreement. He also then referred to the submission of the assessee in the quantum appeal before the CIT(A) wherein in order to buy peace of mind and to settle the matter, the quantum appeal was withdrawn by assessee. Further, the assessee had agitated levy of penalty but the order of the Assessing Officer was upheld holding the assessee to have furnished inaccurate particulars of income and also concealed the income and hence the levy of penalty under section 271(1)(c) of the Act amounting to Rs.25,25,570/-, was held to be justified.
6. The assessee is in appeal against the order of CIT(A).
7. The Ld. Authorised Representative for the assessee pointed out that certain additional documents are being filed which go to the root of the issue and the same merits to be admitted. He further pointed out that against the demand raised for levy of penalty under section 271(1)(c) of the Act the Assessing Officer had issued notices under section 276CCC of the Act under which an order of attachment of immovable properties owned by the assessee was passed on 28-11-2008 and rectified order on 08-12-2008. The copies of the said orders are placed at pages 29 to 32 of the paper book. The Ld. Authorised Representative for the assessee stressed that where the properties 4 ITA Nos.305 & 306/PUN/2014 which are alleged to have been transferred by the assessee are still in the possession of assessee and have been attached by the Assessing Officer against the outstanding demand pending, then there is no merit in holding the assessee to have concealed its income and making it liable for levy of penalty under section 271(1)(c) of the Act. He further drew our attention to the certificate issued by Talati dated 19-04-2010 which is placed at page 32 of the paper book under which also, clearly, it is mentioned that different survey numbers owned by the assessee and others are under attachment of the Commissioner of Income Tax. The Ld. Authorised Representative for the assessee referred to the copy of the development agreement which is placed from page 87 onwards and referred to survey numbers and the area of the plot which was agreed to be developed and also referred to the attachment order and pointed out that all the portion of the plots, which the assessee had agreed to be developed have been attached by the Department. In other words, the said properties are still owned by the assessee and there is no question of charging the same to tax and in any case there is no merit in holding that the assessee had concealed its income and making it liable for levy of penalty under section 271(1)(c) of the Act.
8. The Ld. Authorised Representative for the assessee referred to the various public notices issued for cancellation of agreement for sale of property placed at pages 58 and 59 of the paper book and copy of the documents in proof of on-going litigation placed at pages 60 to 68 of the paper book and copy of the suit filed against the assessee along with legal notice given by the assessee which are placed at pages 69 to 85 of the paper book. Another contention raised was against the application of Explanation 5 to section 271(1)(c) of the Act.
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ITA Nos.305 & 306/PUN/2014
9. The Ld. Departmental Representative for the Revenue on the other hand stressed that the cash consideration has been received by the assessee in the captioned assessment year and the same merits to be brought to tax. Since the assessee had not furnished any return of income and had not declared such receipts in his hands, there was merit in levy of penalty under section 271(1)(c) of the Act.
10. We have heard the rival contentions and perused the record. The issue which arises in the present appeal is against levy of penalty for concealment under section 271(1)(c) of the Act. In the facts of the present case, during the course of search on the premises of the assessee, various documents were found and impounded by the Investigation Wing. The said documents had details of the transaction in relation to development agreement entered into by the assessee with the developer under which in addition to the said consideration, cash component was also detailed. The assessee admittedly had received cash during Financial Year 2005-06. The assessee claims that in order to buy peace it had offered the said amount to tax during the course of assessment proceedings. The Assessing Officer had computed the income from long term capital gains in the hands of assessee on account of two parts of the transaction, i.e. sale of extra land and the retention of land. The assessee along with other co-owners were held to be assessable on account of income from long term capital gains. The Assessing Officer had computed the said gain in the hands of assessee which has been accepted per se in order to buy peace. Even the appeal filed in the quantum proceedings was withdrawn by the assessee in order to buy peace. However, the Assessing Officer held the assessee liable for levy of penalty under section 271(1)(c) of the Act for concealment of income by not furnishing the return of income. The assessee claims that though it had entered into the development agreement, 6 ITA Nos.305 & 306/PUN/2014 but certain dispute arose between the parties. The terms of the said agreement could not be complied with and the civil suits are pending between the parties. In other words, the assessee has retained the said land till date and the same has not been transferred. The question which arises is because of the changed circumstances, where development of the property could not be completed and consequently the same could not be transferred, merely because the assessee had offered the cash component as income in his hands in the year under appeal, can the assessee he held to be liable to levy of penalty under section 271(1)(c) of the Act.
11. In order to adjudicate the issue, it is necessary to refer to the facts and events which have happened after the year under appeal, i.e. because of dispute between the parties, the transaction of development of property could not be completed. The said dispute has resulted in civil suit being filed and pending before the court. Various public notices have been issued for cancellation of development agreement. The assessee has filed additional evidences in this regard from pages 58 to 85 of the paper book and in view of the nature of public documents the same are being admitted and referred to.
12. Another aspect of the issue is the order of the Assessing Officer in attaching the immovable properties owned by the assessee as late as on 28-11-2008. The attachment order has been passed by the Assessing Officer in respect of demand arising on account of levy of penalty under section 271(1)(c) of the Act against which the assessee is in appeal before us. The perusal of attachment order reflects the name of the assessee and other co- owners being mentioned in respect of the plots at Adgaon, Nashik with Gat Numbers and the area of each plot. Once the same is compared with the development agreement which is placed from page 87 onwards with special mention at pages 90 and 91 of the paper book, the survey numbers are same 7 ITA Nos.305 & 306/PUN/2014 including the area. Where the assessee had entered into a development agreement but the same could not be completed because of the dispute between the parties, though the capital gains on the amounts received in assessment year 2006-07 has been offered to tax, but the possession and the retention of the property by the assessee establishes the case of assessee that there is no transfer and the transaction has not been completed till date. The Talati vide order dated 19-04-2010 has also acknowledged that the properties owned by the assessee and the co-owners is under attachment to the Commissioner of Income Tax. In such circumstances, we find no merit in levying penalty and holding the assessee to have concealed the income under section 271(1)(c) of the Act. We accordingly hold so.
13. The next aspect of levy of penalty under section 271(1)(c) of the Act is invoking of Explanation 5 to section 271(1)(c) of the Act, which reads as under:
[Explanation 5. - Where in the course of a [search initiated under section 132 before the 1st day of June, 2007], the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilizing (wholly or in part) his income,-
(a) for an previous year which has ended before the date of the search, but the return of income for such year has not been furnished before the said date or, where such return has been furnished before the said date, such income has not been declared therein; or
(b) for any previous year which is to end on or after the date of the search, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of the search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income, [unless,-
(1) such income is, or the transactions resulting in such income are recorded, -
(i) in a case falling under clause (a), before the date of the search;
and
(ii) in a case falling under clause (b), on or before such date, in the books of account, if any, maintained by him for any source of income or such income is otherwise disclosed to the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner] before the said date ; or 8 ITA Nos.305 & 306/PUN/2014 (2) he, in the course of the search, makes a statement under sub-section (4) of section 132 that any money, bullion, jewellery or other valuable article or thing found in his possession or under his control, has been acquired out of his income which has not been disclosed so far in specified in [***]sub-section (1) of section 139, and also specifies in the statement that manner in which such income has been derived and pays the tax, together with interest, if any, in respect of such income.]
14. The Ld. Authorised Representative for the assessee in an alternate plea pointed out that where penalty has been levied under the old Explanation 5 to section 271(1)(c) of the Act, which has limited scope and in the case of assessee, since no money, bullion or jewellery was found, the Explanation 5 to section 271(1)(c) of the Act is not attracted. He referred to the order of Assessing Officer and pointed out that the addition in the hands of assessee has been made on the basis of entries in the documents seized during the course of search. He stressed that under the Explanation 5A to section 271(1)(c) of the Act there are two parts, i.e. (a) addition to be made where the assessee is found to be the owner of money, bullion, jewellery or other valuable articles or thing; or (b) any income based on any entry in any books of account or other documents etc. found during the course of search, and second limb is missing in Explanation 5 to section 271(1)(c) of the Act.
15. We find merit in the plea of the assessee. The operation of Explanation 5 to section 271(1)(c) of the Act was limited to any money, bullion, jewellery or other valuable articles or thing, found during the course of search and where the assessee claims that It was acquired by him by utilizing his income, then conditions are provided therein, to hold, whether the assessee is liable to levy of penalty for concealment or not. The Explanation 5 to section 271(1)(c) of the Act is silent about the working of income on the basis of any books of account or other documents found during the course of search which represent the income of the person searched for any previous years. In the 9 ITA Nos.305 & 306/PUN/2014 absence of same and where the sole basis for the addition in the hands of assessee is the document found during the course of search and admittedly no cash being found, then Explanation 5 to section 271(1)(c) of the Act is not attracted. We hold so and delete the penalty levied under section 271(1)(c) of the Act on this alternate plea also. Accordingly, we direct the Assessing Officer to delete the penalty levied under section 271(1)(c) of the Act. The ground of appeal raised by assessee is allowed.
16. The facts and issue in ITA No.306/PUN/2014 are identical the facts and issue in ITA No.305/PUN/2014 and our decision in ITA No.305/PUN/2014 shall apply mutatis mutandis to ITA No.306/PUN/2014.
17. In the result, the appeals of the respective assessees are allowed.
Order pronounced on this 17th day of March, 2017.
Sd/- Sd/-
(R.K. PANDA) (SUSHMA CHOWLA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
पण
ु े / Pune; "दनांक Dated : 17 March, 2017.
th
Satish
आदे श क' ( त*ल+प अ,े+षत/Copy of the Order is forwarded to :
1. The Appellant;
2. The Respondent;
3. The CIT(A)-1, Nashik
4. The CIT-I, Nashik
5. The DR 'A', ITAT, Pune;
6. Guard file.
आदे शानस ु ार/ BY ORDER,स // True Copy // Assistant Registrar आयकर अपील य अ$धकरण ,पणु े / ITAT, Pune