Case Law Details
Shailendra Vs ITO (ITAT Delhi)
ITAT Delhi held that penalty under section 271(1)(c) of the Income Tax Act cannot be imposed on the basis of legal fiction of section 50C of the Income Tax Act.
Facts- The present appeal filed by the assessee for the assessment year 2009- 10 is directed against the order of Ld. CIT(A), Meerut dated 03.05.2018. The assessee has mainly raised the ground that no penalty U/s 271 (1)(c) can be imposed to assess the capital gain as per the provisions of section 50C/2(14) of the IT Act and CIT(A) is in error to confirm the same.
Conclusion- Held that penalty cannot be imposed on the basis of legal fiction of section 50C of the Act. He therefore, directed to work out the concealed capital gain in accordance with the sale value of the I do not see any infirmity into the direction of Ld.CIT(A). It would be open before the AO even to decide whether the land in question was a capital asset or not. Therefore, grounds raised by the assessee are rejected.
FULL TEXT OF THE ORDER OF ITAT DELHI
The present appeal filed by the assessee for the assessment year 2009- 10 is directed against the order of Ld. CIT(A), Meerut dated 03.05.2018. The assessee has raised following grounds of appeal:-
1. “That no penalty U/s 271 (1)(c) can be imposed to assess the capital gain as per the provisions of section 50C/2(14) of the IT Act and CIT(A) is in error to confirm the same. .
2. That the A.O is in error in imposing penalty of Rs. 2,84,382/- is bad in law and CIT(A) is in error to confirm the same.
3. That the assessee has right to add, modify or delete any ground during the appeal proceedings.”
2. At the time of hearing, no one attended the proceedings. However, a letter dated 0 1.02.2023 placed on record wherein Ld. Counsel for the assessee requesting that the written submissions filed by the assessee and the other material may be considered and decide the appeal on the basis of written submissions. Therefore, the appeal is taken up for hearing in the absence of the assessee and being disposed off on the basis of material available on record.
3. Facts giving rise to the present appeal are that assessment u/s 144 r.w.s 148 of the Income Tax Act, 1961 (“the Act”) was completed vide order dated 12.20 16. Thereby, the Assessing Officer (“AO”) made addition of Rs.24,87,500/- on account of Long Term Capital Gain (“LTCG”). The basis of computing capital gain was that the assessee paid stamp duty on market value of Rs.49,75,000/-. Therefore, the AO made addition of Rs.24,87,500/- and also initiated penalty proceedings u/s 271(1)(c) of the Act. Thereafter, the impugned penalty was imposed vide order dated 22.12.2017 of Rs.2,84,382/-.
4. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who after considering the submissions, partly allowed the appeal of the
5. Aggrieved against the order of Ld.CIT(A), the assessee preferred appeal before this Tribunal.
6. The assessee has made following written submissions:-
PAN: CAVPS9753D
Reg.: Sh. Shailendra
Village & Post – Chindauri Khas,
Meerut
Vs.
ITO, Ward-2(3),
Meerut
Ref: Appeal in ITA No. 61 00lOell201 8 for the A. Y. 2009-10 against the penalty order U/s 271(1)(c) of I.T. Act 1961, fixing the date of hearing on 23-08-2022.
Hon’ble Sir,
It is submitted that in this case, the assessee has received a notice fixing the date of hearing on 23-08-2022. In brief, facts of the case, are as under:
Facts of the Case:
That the assessee has sold agriculture land along with his brother which is situated at Village Chindauri Khas, Rohta Road, Meerut which is also approximately 12 km away from the municipal limit therefore, the above land is not a part of capital gain asset. That the A.O. also not considered the cost of index of the land.
In this regard, Ld. A.O. as completed the assessment by taking following income as under:
Income assessed on total long term capital gain Rs.24,87,500/-
The A.O. has initiated the penalty proceeding U/s 271(1)(c) against the assessee and imposed penalty of Rs. 2,84,382/- U/s 271 (1 }(c) against which the assessee filed an appeal before CIT(A) who has partly allowed the appeal. Further the assessee filed an appeal before Hon’ble I.TAT. by taking grounds of appeal:
GROUNDS OF APPEAL
1. That no penalty U/S 271 (1 )(c) can be imposed to assess the capital gain as per provision of section 50C/2(1 4) of the I. T. Act and CIT(A) is in error to confirm the same.
2. That the A.O. is in error in imposing of penalty of Rs. 2,84,382/- is bad in law and CIT(A) is in error to confirm the same.
3. That the assessee has right to add, modify or delete any ground during the appeal proceedings.
It is further submitted that the assessee has filed additional ground which is as under:
That the notice issued by the A.O. on 26-12-2016 is wage and routine manner and from the notice, it is not cleared whether the assessee has concealed the particulars of income or furnished inaccurate particulars of income.
A.O. Observation:
In this regard, Ld. A.O. observed as under:
That on going through the relevant documents during the course of assessment proceedings, it is very clear that the assessee had concealed particulars of its income and had rendered itself liable for penalty U/s 271 (1)(c) of the I.T. Act. The concealed income in this case comes to Rs. 15,71,914/- on which tax sought to be evaded works out to Rs. 2,84,382/-. The minimum and maximum penalty leviabe in this case u/s 271(1)(c) of I.T. Act comes to Rs. 8,53,146/- and Rs. 2,84,382/- @ 100% and 300% respectively. However, considering the facts of the case I impose a penalty of Rs. 2,84,382/- u/s 271(1)(c) of I.T. Act after obtaining approval of Addl. Commissioner of Income Tax, Range – 2, Meerut, vide F.No. Addl.CIT-MRT/Range-II/Penalty Approval/2017-18/283 dated 19-12-2017.
CIT- Finding:
In this case, the A.O. has imposed penalty of Rs. 2,84,382/-• since the assessee had, in the opinion of the A. O. concealed particulars of income amounting to Rs. 15,71,914/-.
In appeal the only argument of the Ld. A.R. is that since the capital gain has been calculated on the basis of section 50C which is a legal fiction penalty is not leviable.
It is a matter of record that the assessment in this case was completed U/s 148/144 which shows that there was no intention on part of the assessee to disclose his capital gain as per the provision of the law. The A.R. is right in arguing that legal fiction of section 50C cannot be apply to determine concealed particulars of income. The A. O. is therefore, directed to workout the concealed capital gain in accordance with the sale value of the property shown on the sale deed and on that basis as well as using the cost of acquisition allowed in appeal. On this actual amount of concealed capital gains the A. O. is directed to workout the penalty.
Assessee’s Submission:
That in the above case, the assessment was completed a total income of Rs. 24,87,500/-. The assessee filed appeal before CIT(A) which was partly allowed by CIT(A). Thereafter the assessee filed appeal before Hon’ble I.TAT. and Hon’ble I.TAT dismiss the appeal proper considering the documents filed by the assessee and page no. 5 of the Paper Book Certificate of Lekhpal was also filed which was giving on behalf of Tehsildar. The sale of the agriculture land is not taxable therefore, it is not a part of capital gain as define U/s 2(14) of I. T. Act, a copies of Certificate issued by Meerut Tehsildar and Google map. Hence, argument of the assessee cannot be rejected that the assessee has not filed any evidence before CIT(A) and Hon’ble I.TAT., copy of this documents is also enclosed herewith.
It is further submitted that the A.O. has issued a penalty notice U/s 271 (1)(c) and as per penalty notice U/s 271(1)(c) dated 26-12-2016, the A.O. given reason as under:
have concealed the particulars of your income of——————— furnished inaccurate particulars of such income.
This shows the assessee was not sure whether the assessee concealed any income or furnished inaccurate particulars of income, which is not punishable as per I.T. Act as decided in the case of Smt. Rachna Shiv, in ITA No. 53/Del/2018, in which it is held as under:
Facts of the case, in brief, are that the assessee is an individual and filed her return of income on 12.09.2009 declaring total income of Rs. 40,27,956/-. The Assessing Officer reopened the assessment u/s 147 on the ground that there was difference of receipts as per Form No.26AS and Income-tax Return. In response to notice u/s 148, the assessee filed the return of income on 15.04.2016. During the course of assessment proceedings, it was submitted that since the assessee could not obtain the copy of bank statement, therefore, the assessee surrendered an amount of Rs.2,47,395/- as income of the assessee on account of undisclosed income. The Assessing Officer accordingly completed the assessment u/s 147/143(3) on a total income of Rs.42,75,350/-. Since the assessee in response to notice u/s 148 filed her return of income declaring the same income which was originally returned and during the course of assessment proceedings had surrendered the income of Rs.2,47,395/-, the Assessing Officer in the penalty order passed u/s 271(1)(c) levied penalty of Rs.84,090/- being 100% of tax sought to be evaded.
In appeal, the ld. CIT(A) upheld the action of the Assessing Officer on the ground that voluntary disclosure does not release the assessee from the mischief of penal proceedings. According to him, law does not provide that when an assessee makes a disclosure and claims it to be voluntary regarding his unexplained income, he has to be absolved from penal provisions especially when the case was taken up for scrutiny on that very issue of suspicious transactions.
Aggrieved with such order of the ld. CIT(A), the assessee is in appeal before the Tribunal.
Ld. counsel for the assessee referred to the notice issued u/s 274 r.w.s. 271(1)(c) dated 17.11.2016 and submitted that the inappropriate words in the said notice has not been struck off and the notice does not specify as to whether the penalty is being levied for his concealing the particulars or furnishing inaccurate particulars of income. Referring to various decisions, he submitted that when inappropriate words in the notice are not deleted and the notice does not specify as to whether penalty is being levied for furnishing inaccurate particulars of income or for concealing the particulars, penalty u/s 271(1)(c) cannot be levied. He accordingly submitted that the order of the Id. CIT(A) be set‑ aside and the penalty levied by the Assessing Officer by cancelled.
Ld. DR on the other hand strongly supported me order of the Id. CIT(A). He submitted that by not declaring the correct short term capital gain, the assessee has concealed its particulars and furnished inaccurate particulars. Therefore, Id. CIT(A) was fully justified in sustaining the penalty levied by the Assessing Officer u/s 271(1)(c) of the I.T. Act.
I have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Id. CIT(A) and the Paper Book filed on behalf of the assessee. I have also considered the various decisions cited before me. It is an admitted fact that the assessee in her return of income has not disclosed the correct receipts since there was difference in Form 26AS and income declared. I find on being questioned by the Assessing Officer during the course of assessment proceedings, the assessee surrendered the amount and the Assessing Officer thereafter levied penalty u/s 271(1)(c) which has sustained by the Id. CIT(A). It is the submission of the Id. counsel for the assessee this was an inadvertent error on the part of the assessee since the bank account was not obtained and, therefore, penalty should not be levied since it was a bona-fide mistake. It is also the alternate contention of the Id. counsel for the assessee that inappropriate words in the notice has not been struck off and the notice does not specify as to whether the assessee has furnished inaccurate particulars of income or concealed its particulars of income.
I find some force in the alternate argument of the Id. counsel for the assessee. A perusal of the notice issued for levied of penalty, a copy of which has been filed during the course of hearing shows that the inappropriate words in the said notice have not been struck off and the notice does not specify as to whether penalty is being levied for concealing the . particulars of income or for furnishing inaccurate particulars of such income. I find the Hon’ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton and Ginning Factory reported in 359 ITR 656 has held that where the inappropriate words in the notice issued for levy of penalty are not struck off and the notice does not specify as to whether the assessee has concealed its particulars of income or furnished inaccurate particulars of income, penalty u/s 271 (1)(c) is liable to be deleted. I find the SLP filed by the Revenue was dismissed by the Hon’ble Supreme Court vide C.C. NO.11485/2016 order dated 05.08.2016. Since in the instance case also, the Assessing Officer has not struck off the inappropriate words and the notice does not specify as to whether the penalty is levied for furnishing inaccurate particulars of income or for concealing particulars of income, therefore, in view of the ratio laid down by the Hon’ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (supra), the penalty levied by the ‘Assessing Officer and sustained by the Id. CIT(A) is liable to be deleted. In view of the above discussion, the order of the Id. CIT(A) is set-aside and the grounds raised by the assessee are allowed.
10. In the result, the appeal filed by the assessee is allowed.
Further, the assessee rely upon the Hon’ble I. TAT. Order in the case of Smt. Rekha Agarwal in ITA No. 1024/Del/2013, in which, the addifion was confirmed but as per the Hon’ble Apex Court decision in the of CIT Vs. Reliance Petro Products Ltd. in Civil Appeal No. 2463 of 2010, the penalty levied by the A.O and confirm by CIT(A) was deleted by Hon’ble I.TAT., the copy of the same is being enclosed herewith.
Prayer:
Considering the facts and case law, Your honour is requested to kindly decide the appeal on the basis of written submission and case laws quoted by the assessee because the counsel of the assessee is unable to appear before Hon’ble Bench due to suffering from liver and kidney disease and treatment for the same are continued and oblige.
Thanking You,
Yours Faithfully
Sd/-
(Counsel for the Assessee)
Date-19.08.2022
7. On the other hand, Ld. Sr. DR opposed these submissions and supported the orders of the authorities below. She submitted that in this case, the assessee has been thoroughly negligent. The case was re-opened on the basis of AIR information regarding sale of property. However, despite having given sufficient opportunities, the assessee did not attend the proceedings. She submitted that under the facts and circumstances of the present case, the impugned penalty deserves to be sustained.
8. I have heard Ld. Sr.DR and perused the material available on record. I find that Ld.CIT(A) has decided the issue by observing as under:-
3. Reasons and Decision:
“In this case the AO has imposed penalty of Rs.2,84,382/- since the assessee had, in the opinion of the AO concealed particulars of income amounting to Rs. 15, 71,914/-.
In appeal the only argument of the ld. AR is that since the capital gain has been calculated on the basis of section 50C which is a legal fiction penalty is not leviable.
It is a matter of record that assessment in this case was completed u/s 148/144 which shows that there was no intention on part of the assessee to disclose his capital gain as per the provision of the law. The AR is right in arguing that legal fiction of section 50C cannot be apply to determine concealed particulars of income. The AO is therefore directed to workout the concealed capital gain in accordance with the sale value of the property shown on the Sale Deed and on that basis as well as using the cost of acquisition allowed in appeal. On this actual amount of concealed capital gains the AO is directed to workout the penalty.”
9. The above direction of Ld.CIT(A) is clear that penalty cannot be imposed on the basis of legal fiction of section 50C of the Act. He therefore, directed to work out the concealed capital gain in accordance with the sale value of the I do not see any infirmity into the direction of Ld.CIT(A). It would be open before the AO even to decide whether the land in question was a capital asset or not. Therefore, grounds raised by the assessee are rejected.
10. In the result, the appeal of the assessee is dismissed.
Order pronounced in the open Court on 02nd February, 2023.
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