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Income Tax Appellate Tribunal, JAIPUR BENCH ’B’, JAIPUR
Before: SHRI RAMESH C. SHARMA, AM & SHRI VIJAY PAL RAO, JM vk;dj vihy la-@ITA No. 205/JP/2020
fu/kZkfjrh dh vksj ls@ Assessee by : Shri S.R. Sharma (CA) & Shri R.K. Bhatra (CA) jktLo dh vksj ls@ Revenue by : Smt. Runi Pal (DCIT) lquokbZ dh rkjh[k@ Date of Hearing : 21.07.2020. ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 21/07/2020. vkns'k@ ORDER
PER R.C . SHARMA, AM :
This is an appeal by the assessee against the order of ld. CIT (A)-2, Jaipur for the assessment year 2014-15, in the matter of penalty imposed under section 271(1)(c) of the I. T. Act.
Rival contentions have been heard and perused. Facts in brief are that the assessee is an Individual deriving income from salary, house property and other sources. The assessee for the year under consideration filed return of income u/s 139(1) declaring total income of Rs. 1,07,53,630/- which included Long Term Capital Gain of Rs. 94,72,909/- earned on sale of agricultural land which was jointly held in equal share with his brother Sunil Sharma. After processing the return, the AO issued notice under section 148. In the order framed under section 143(3) read with section 147, the AO made an addition on account of Capital Gains earned on sale of agricultural land. On the addition so made, AO also levied penalty under section 271(1)(c), which was confirmed by the ld. LD. CIT (A) and assessee is in further appeal before us.
It was argued by ld. A/R that any notice issued under section 274, read with section 271(1)(c) of the Income Tax Act, 1961, should specify under which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income.
In the absence of which no penalty should be levied on the assessee as determination of such limb is sine qua non for imposition of penalty under section 271(1)(c). Reliance was placed on the decision of Hon'ble Karnataka High Court in the case of CIT vs. SSA’s Emerald Meadows reported in 2015(11) TMI 1620, wherein Hon'ble’ble Court has held that :-
“ 3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under section 274 read with section 271(1)(c) of the Income Tax Act, 1961 (for short ‘the Act’) to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee has relied on the decision of the division Bench of this Court rendered in the case of Commissioner of Income Tax vs. Manjunatha Cotton And Ginning Factory (2013) 359 ITR 565.
4. In our view, since the matter is covered by judgement of the Division Bench of this Court, we are of the opinion, no substantial question of law arised in this appeal for determination by this court. The appeal is accordingly dismissed.”
The department has filed SLP in the Hon'ble Supreme Court which has been dismissed.
Therefore, Hon'ble Supreme Court has approved the findings made by Hon'ble Karnataka High Court in the case of CIT vs. SSA’s Emerald Meadows and CIT vs. Manjunatha Cotton & Ginning Factory & Others (2013) 359 ITR 565. Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory (2013) 359 ITR 565 (Karnataka) after referring to the decision of Hon'ble Supreme Court in the case of T.
Ashok Pai, 292 ITR 11 held as under :-
“ ……Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Hon'ble Apex Court in the case of Ashok Pai reported in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of Manu Engineering reported in 122 ITR 306 and the Delhi High Court in the case of Virgo Marketing reported in 171 taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limp being concealment, then the notice has to be appropriately market. Similar is the case for furnishing inaccurate particulars of income. The Standard proforma without striking of the relevant clauses will lead to an inference as to non application of mind …..?”
3.1 The ld. A/R further contended that the above ratio laid down in the case of Manjunatha Cotton & Ginning Factory (supra) has been followed by various High Courts in the below mentioned cases :- i) Shri Samson Perinchery, 953, 1097, 1226 of 2014 (Order dated 5.01.2017)(Bombay High Court). ii) SSA’s Emerald Meadows (2016) 73 taxmann.com 241 (Karnataka High Court) iii) Mitsu Industries Ltd., ITA No. 216 of 2004, Gujarat High Court. iv) Narayana Heights & Towers vs. ITO Ward-2-4, Jaipur ITA No. No. 1033/JP/2016.
3.2. With regard to the merits of the addition and the penalty imposed thereon, contention of the ld. A/R was that the inadvertent human error of taking wrong/in excess cost of acquisition while computing Long Term Capital Gain was bonafide and unintentional and committed by tax return preparer of counsel of assessee due to oversight only as he could not notice that the entire land was not sold but only a part of it was so sold and therefore the entire cost of acquisition of land was not to be taken and only proportionate cost is to be taken.
On the other hand, it was contended by ld. D/R that under the provisions of section 292B, mistake in the notice can be rectified. She further relied on the orders passed by the lower authorities.
We have considered the rival contentions and carefully gone through the orders of the authorities below. We have also deliberated on the judicial pronouncements referred by the lower authorities in their respective orders as well as cited by the ld. A/R and ld. D/R during the course of hearing before us, in the context of factual matrix of the case. From the record, we find that assessee jointly with his brother Shri Sunil Sharma sold ½ share in agricultural land. The said agricultural land was purchased long back in 1989 measured 18 Bigha 2 Biswa for Rs. 2,04,905/-. The assessee’s share in this land was 9 Bigha 1 Biswa. The assessee sold in this year 2 Bigha 6 Biswa out of his share. However due to clerical mistake the assessee and his brother Sunil Sharma in computation took cost of their respective part at Rs. 102303/- instead of Rs. 26037/-.
The assessee at the time of filing of return of income given the purchase deed to Tax Return preparer staff of his tax consultant. But the tax return preparer staff of tax consultant due to inadvertent mistake claimed the entire cost of acquisition of assessee’s share of land measuring to 9 bigha 1 biswa i.e. Rs. 102303/- in computation of long term capital gain while the land sold was 2 bigha 6 biswa out of said land the proportionate cost of which worked to Rs. 26037/- only. The assessee also got information from his brother of said mistake but by that time notice u/s 148 was received by assessee. The assessee therefore, while filing return in compliance to notice u/s 148 corrected the mistake in computation of capital gain and filed return of income declaring total income of Rs. 1,11,69,992/- which included Long Term Capital Gain of Rs. 98,89,268/- in place of Rs. 94,72,909/- declared in original return. The ld. AO also completed assessment u/s 143(3) /147 on returned income filed in compliance to notice under section 148 but initiated penalty proceedings u/s 271(1)(c). The notice issued by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 is bad in law in as much as it did not specify in which limb of section 271(1)(c) of the Income Tax Act, 1961 the penalty proceedings has been initiated, i.e. whether for concealment of income or furnishing of inaccurate particulars of income.
5.1. It is pertinent to note that in the notice, AO has not clearly mentioned the limb, on the basis of which, penalty was proposed to be imposed. The AO in assessment order or penalty notices did not specify the limb under which the penalty was initiated and simply issued a pre-printed notice without striking off the unnecessary portions of the notice. If the AO was of the view that the assessee has concealed the income or furnishing inaccurate particulars of income then he should have deleted or not mentioned the other limb for imposition of penalty i.e. concealing the particulars of income. The above act of the AO clearly shows that the entire exercise of initiation of penalty proceedings has been done without application of mind.
5.2. With regard to the merits of the penalty so levied, we find that it was an inadvertent human error while taking the costs of acquisition at the time of computation of capital gain. It was a bonafide and unintentional mistake which was rectified during the course of assessment itself. The Hon'ble Supreme Court in case of Price Water House Coopers P. Ltd. vs. CIT (2012) 348 ITR 306 held that ‘ the assessee should have been careful but in absence of due care in a case did not mean that assessee was guilty of either furnishing inaccurate particulars or attempting to conceal the income. Thus no penalty can be levied for a bona fide/inadvertent/human error’.
5.3. Further Hon'ble M.P. High Court in case of CIT vs. SKY Auto Products Pvt. Ltd. (2004) 271 ITR 335 held that where the assessee, a new businessman claimed depreciation for the full year in the first year of starting production though he was entitled only to fractional depreciation, it was a case of bonafide mistake on the part of the assessee. Such a ground cannot be a good ground for imposition of penalty u/s 271(1)(c).
5.4. The Hon'ble Supreme Court in the case of M/s. K.C. Builders vs. ACIT (2004) 265 ITR 562 held that mere omission from the return of an item of receipt does neither amount to be concealment nor deliberate furnishing of inaccurate particulars of income unless and until there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. In the view of the above there was neither concealment nor the assessee furnished the inaccurate particulars of income.
5.6. In view of the above discussion, we do not find any merit for the penalty so levied under section 271(1)(c) of the IT Act. The AO is directed to delete the same.
In the result, appeal of the assessee is allowed.
Order is pronounced in the open court on 21/07/2020.