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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM
PER DR. A. L. SAINI, ACCOUNTANT MEMBER:
These captioned two appeals filed by the different assessees, pertaining to Assessment Year 2014-15, are directed against the separate orders passed by the ld. Commissioner of Income Tax (Appeals)-2, Surat [in short the “CIT(A)”] in Appeal No.CAS-2/68/2017-18 and CAS/2/64/2017-18, both dated 23.08.2018, which in turn
ITA 697 & 698/SRT/2018 Assessment Year. 2014-15 Vijaysinh P Solanki & Mayur M. Patel arise out of separate penalty orders passed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 [hereinafter referred to as the “Act”].
Since, the issues involved in these two appeals are common and identical; therefore, these appeals have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in ITA No. 697/SRT/2018 for assessment year 2014-15 ( in case of Shri Vijaysinh P. Solanki), have been taken into consideration for deciding the above appeals en masse.
The solitary grievance of assessees in these two appeals, is that ld CIT(A) was erred in confirming the penalty under section 271(1) (c ) of the Income Tax Act.
The facts necessary for disposal of the appeals are stated in brief. The assessee before us is an individual and filed his return of income for the assessment year 2014-15, on 14.03.2015 declaring total income of Rs.21,40,010/-. The assessee`s case was selected for scrutiny and assessing officer has framed the assessment order under section 143(3) of the Income Tax Act, on 23.12.2016 by determining total income at Rs.38,39,760/-. During the course of assessment proceedings, it was noticed by the assessing officer that assessee had sold a plot of land in respect of which deduction under section 54B of the Income Tax Act was claimed. As per provisions of section 54B of the Income Tax Act, the assessee was asked to furnish various details, documents, explanations etc, to establish genuineness of agricultural activities undertaken by the assessee or other specified persons in the land which was sold and in the land that was purchased. In response, the assessee withdrew his claim of deduction under section 54B of the Income Tax Act. Hence, the assessing officer disallowed and added the claim of Rs. 16,77,758/- under section 54B of the Income Tax Act to the total income of the assessee. Further the assessee had also wrongly shown income from sale of milk amounting to Rs. 72,000/- as his agricultural income which was also disallowed and added to the total income of the assessee.
ITA 697 & 698/SRT/2018 Assessment Year. 2014-15 Vijaysinh P Solanki & Mayur M. Patel 5. Since the assessee withdrew his claim of deduction under section 54B of the Act at Rs. 16,77,758/- and wrongly shown income from sale of milk amounting to Rs. 72,000/-, as his agricultural income, therefore assessing officer initiated the penalty proceedings under section 271(1) (c ) of the Act and imposed penalty of Rs.3,52,414/- under section 271(1)(c) of the Act.
On appeal, ld CIT(A) has confirmed the penalty imposed by the assessing officer, under section 271(1)(c) of the Act. Aggrieved, the assessee is in further appeal before us. 7. Shri Suresh Kabra, Learned Counsel for the assessee, begins by pointing out that assessee has claimed deduction under section 54B of the Act with bona fide belief that he is eligible for such deduction, as he is a farmer and agriculturist and purchased other agricultural land. Although, assessee has purchased other agricultural land, however, he could not make compliance of exemption under section 54B of the Act i.e. he could not demonstrate by purchasing another agricultural land within two years from the sale of first agricultural land, therefore, assessee has voluntarily withdrawn the claim by submitting a letter to the assessing officer. That is, assessee has voluntarily submitted a letter before the Assessing Officer praying to withdraw the claim under section 54B of the Act.
Apart from this, assessee has also shown income from sale of milk, as an agricultural income to the tune of Rs.72,000/-. However, the assessing officer was of the view that income by sale of milk is an income which can be assessable under the head income from other sources and it is not an income from agricultural activities. Since, the assessee, by mistake, has shown, income by sale of milk, as an income from agricultural activities, therefore assessing officer has imposed penalty under section 271(1) (c ) of the Act. In this respect, ld Counsel submits that assessee is a farmer, and he believed that income by sale of milk is also an agricultural income therefore, he claimed sale of milk, as an agricultural income, by mistake. Taking into account these facts, Learned Counsel relied on the judgment of the Hon'ble’ Supreme Court in the case of CIT Vs. Reliance Petroproducts, 322 ITR 158 (SC)
ITA 697 & 698/SRT/2018 Assessment Year. 2014-15 Vijaysinh P Solanki & Mayur M. Patel wherein it was held that making claim in the return of income which is not sustainable in law, would not amount to furnish inaccurate particulars of income and therefore penalty should not be imposed on the assessee.
On the other hand, ld. Sr.DR for the Revenue, Ms. Anupama Singla submitted before us that during the assessment proceedings the assessing officer got inquiries conducted to ascertain whether the agriculture activities had been carried out which was prerequisite for making claim under section 54B of the Act. The inquiries conducted revealed that assessee had not carried out any agricultural activities in the last two years and therefore when this fact was confronted to the assessee, he admitted to pay the taxes and withdraw the deduction under section 54B of the Act. The contention of the assessee that he had made voluntarily withdrawal is devoid of merits and facts. It has been held in various judicial pronouncements that simply because the assessee agreed to the addition of concealed income after detection thereof, the assessee cannot escape from penalty u/s 271(1)(c) of the Act. She argues that voluntary disclosure does not lead to assessee being free from mischief of penal proceedings under section 271(1)(c) of the Act. She contends that assessee has claimed deduction under section 54B of the Act knowingly to cheat the Revenue. She stated that case law relied on by the Learned Counsel in case of CIT Vs. Reliance Petroproducts, 322 ITR 158 (SC) is not applicable to the assessee’s case under consideration. She pointed out that case law of Reliance Petroproducts (supra) relates to Section 14A disallowance which was wrongly claimed by the assessee in the return of income and therefore the case law cited by the Learned Counsel is no way defend the case of the assessee. She stated that intention of the assessee was to claim wrong claim in the return of income to defraud the Revenue, therefore, the case law cited by the Learned Counsel is not applicable in the instant case.
ITA 697 & 698/SRT/2018 Assessment Year. 2014-15 Vijaysinh P Solanki & Mayur M. Patel
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. At the cost of repetition, we reiterate the facts of the assessee`s case. In this case the assessing officer found during the assessment proceedings that assessee had sold an agriculture land at village Vanta for Rs.33,30,709/-. The assessee had purchased a land at village Parthan. The assessee had claimed 16,77,758/- as deduction under section 54B of the Act in respect of sale of land. The assessing officer, in the case of co-owner Mayur Mathurdas Patel (PAN : ABBPP0966Q) had got inquiries conducted during the assessment proceedings in the case of Mayur Mathurdas Patel and found that no agricultural activity had been carried out in the last many years on this land. The concerned assessing officer of the co-owner, Mayur Mathurdas Patel held that the conditions required for claiming deduction u/s 54B of the Act includes that the agriculture activities should have been carried out of the land within 2 years immediately prior to the date of transfer of land. Since, the co-owner i.e. Mayur Mathurdas Patel had not fulfilled the conditions for claiming deduction u/s 54B of the Act, therefore the concerned assessing officer disallowed the claim of Rs. 16,77,758/- u/s 54B of the Act in the assessment order u/s 143(3) dated 21.11.2016. In the present case also the facts remaining the same as the assessee is the co-owner and therefore he withdrew the claim u/s 54B of the Act when he was confronted regarding the agriculture activities. The assessing officer also disallowed the income from sale of milk of Rs. 72,000/- which was claimed as agriculture income. The assessing officer levied the penalty of Rs. 3,52,414/- u/s 271(1)(c) of the Act. The undisputed facts are that during the assessment proceedings the assessee had withdrawn the claim of deduction voluntarily and had paid the taxes on the long term capital gain (LTCG). The assessee contended before assessing officer that there was no willful incorrect claim under section 54B of the Act. 10. We note that during the year under consideration the assessee has sold a plot of land in respect of which deduction u/s 54B of the Act has been claimed. During the
ITA 697 & 698/SRT/2018 Assessment Year. 2014-15 Vijaysinh P Solanki & Mayur M. Patel course of assessment proceedings assessee has filed the sale deed of the concerned original asset, land bearing R.S.No.97, New Survey No. 1/1. Vill. Vanta, tal. Choriyasi, Dist. Surat. The assessee has also filed copy of purchase deed of new asset land bearing Block No.220, Village-Parthan, Tal. Navsari, Dist. Navsari. We note that during the assessment stage, the assessing officer issued a notice under section 142(1) of the Act, dated 01/08/2016, to furnish various details, documents and explanations to establish genuineness of agricultural activities by the assessee and details of the land that was sold and the land that was purchased.
In response to the show cause notice of the Assessing Officer, the assessee, vide letter dated 16.12.2106 offered to withdraw his claim of deduction under section 54B of the Act. The submission made by the assessee, before the assessing officer, is reproduced below:
"While filing of ROI on 14.03.2015, deduction u/s 54B of the Act claimed of Rs.16,77,758/- against the sale of agri. Land situated at Vata. During the course of assessment proceedings, sale deed of the same is submitted at page No. 16 mentioned as "JUNISHARAT NIKHETINIJAMIN" and hence, claimed against the purchase of New Agriculture land. Your honour has requested to produce the evidence regarding agriculture income/activity from the said land prior to sale for two previous years. I am an agriculturist and holding the land at various places accordingly presently, I am not able to produce, from which subject matter agriculture land and also the matter is old and hence, it will take require time. Furthermore, as per record of 7 x 12 mentioned as agriculture land and hence, I have claimed U/s 54B of the Act. Under the above circumstances, I hereby, withdraw the deduction of Rs. 16,77,758/- u/s 54B of the Act, during the ongoing assessment proceedings and made such addition while releasing order u/s 143(3) of the Act. Sir, I agree to pay taxes along with the legal interest payable on the same. Voluntarily and for mental peace, I agree with withdrawal of deduction. Kindly do not treat this addition as furnishing with inaccurate particulars of income and /or concealment of penalty and obliged. "
We note that assessee has submitted a letter before Assessing Officer stating that he had offered to withdraw his claim for deduction under section 54B of the Act. The assessee submitted before assessing officer the documents relating to sale of agricultural land and also stated that he could not produce the documents relating to Page | 6
ITA 697 & 698/SRT/2018 Assessment Year. 2014-15 Vijaysinh P Solanki & Mayur M. Patel purchase of agricultural land at other places, as he was having agricultural land at various places. We note that having withdrawn the deduction under section 54B of the Act, the assessee has agreed to pay the taxes alongwith interest and assessee, had in fact, paid the taxes alongwith interest on account of withdrawal of deduction under section 54B of the Act. However, the Assessing Officer has imposed the penalty under section 271(1)(c) of the Act stating that withdrawal of deduction under section 54B of the Act, is kind of a furnishing of inaccurate particulars of income and concealment of income. We do not agree with the assessing officer, as the assessee had furnished all the details of its deduction under section 54B of the Act in the return of income, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on assessee`s part. It was up to the assessing officer to accept assessee`s claim in the Return of Income or not. The assessee was having bona fide belief that he is entitled to claim deduction under section 54B of the Act, as he was having land at various places. Thus, merely because the assessee had claimed the deduction under section 54B of the Act, which claim was not accepted or was not acceptable to the revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c) of the Act.
We are very much conscious of Hon'ble Apex Court’s landmark decision in the case of CIT Vs. Reliance Petroproducts, 322 ITR 158 (SC), holding that just merely claim of wrong deduction in the return of income does not attract penalty under section 271(1)(c) of the Act. The findings of the Hon'ble Supreme Court is reproduced below:
“9. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been defined as :—
"not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript."
ITA 697 & 698/SRT/2018 Assessment Year. 2014-15 Vijaysinh P Solanki & Mayur M. Patel We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words 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. We must hasten to add here that 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 under section 271(1)(c) of the Act. 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. 10. It was tried to be suggested that section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as 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. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature.
In this behalf the observations of this Court made in Sree Krishna Electricals v. State of Tamil Nadu[2009] 23 VST 249 as regards the penalty are apposite. In the aforementioned decision which pertained to the penalty proceedings in Tamil Nadu General Sales Tax Act, the Court had found that the authorities below had found that there were some incorrect statements made in the Return. However, the said transactions were reflected in the accounts of the assessee. This Court, therefore, observed :
"So far as the question of penalty is concerned the items which were not included in the turnover were found incorporated in the assessee's account books. Where certain items which are not included in the turnover are disclosed in the dealer's own account books and the assessing authorities include these items in the dealer's turnover disallowing the exemption, penalty cannot be imposed. The penalty levied stands set aside."
ITA 697 & 698/SRT/2018 Assessment Year. 2014-15 Vijaysinh P Solanki & Mayur M. Patel The situation in the present case is still better as no fault has been found with the particulars submitted by the assessee in its Return.
The Tribunal, as well as, the Commissioner of Income-tax (Appeals) and the High Court have correctly reached this conclusion and, therefore, the appeal filed by the revenue has no merits and is dismissed.”
From the above judgment of the Hon`ble Supreme Court, it is abundantly clear that mere making of the claim of deduction, 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. Thus, claim of deduction under section 54B of the Act in the return of income, in the assessee`s case, does not attract penalty under section 271(1)(c) of the Act, therefore, respectfully following the judgement of the Hon'ble Supreme Court in the case of Reliance Petroproducts (supra), we delete the penalty imposed by the Assessing Officer and sustained by the learned CIT(A) under section 271(1)(c) of the Act.
Since the facts and circumstances in the case of Shri Mayur Mathurdas Patel in ITA No. 698/SRT/2018 for AY.2014-15, are identical to those considered in the case of Shri Vijaysinh P. Solanki (supra), our decision in the case of Shri Vijaysinh P. Solanki (supra), shall apply mutatis mutandis in the case of Shri Mayur Mathurdas Patel also.
In the result, the appeals filed by the assessees (in ITA No.697/SRT/2018 and ITA No.698/SRT/2018 for AY.2014-15), are allowed.
Order is pronounced on 27/07/2021 by placing result on Notice Board.
Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat �दनांक/ Date: 27/07/2021 SKS, Sr.PS Copy of the Order forwarded to 1. The Assessee Page | 9
ITA 697 & 698/SRT/2018 Assessment Year. 2014-15 Vijaysinh P Solanki & Mayur M. Patel 2. The Respondent 3. The CIT(A) 4. Pr.CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order / / TRUE COPY / / Assistant Registrar/Sr.PS/PS ITAT, Surat