SHRI SHYAM SUNDER DUSEJA,JAIPUR vs. ITO WARD-6(3), JAIPUR, WARD-6(3), JAIPUR

The only effective ground of appeal relates to levy of penalty u/s 271(1)(c) on difference between actual sale consideration and DLC value of immovable property sold by the assessee.

During the course of hearing, the ld. AR submitted that during the financial year relevant to impugned assessment year, the assessee had sold a shop for a consideration of Rs. 3,50,000/- value of which was 2 Shri Shyam Sunder Duseja, Jaipur Vs. ITO, Ward 6(3), Jaipur adopted by the stamp duty authority at Rs. 6,10,313/-. It was submitted that in order to avoid any litigation, the assessee in his return of income declared the capital gains by applying the provisions of section 50C by taking the sale consideration of Rs. 6,10,313/- as adopted by stamp duty authority as against actual sale consideration of Rs. 3,50,000/- received by the assessee resulting in the additional tax liability which has been duly paid, however, the same has been made the basis for levy of penalty u/s 271(1)(c) and which is the subject matter of present penalty proceedings.

It was submitted that the addition tax liability has arisen on account of applying the deeming provisions of section 50C of the Act. It was submitted that during the course of assessment proceedings, the assessee has furnished all the relevant facts and documents genuineness of which have not been doubted by the Assessing Officer. It was further submitted that it is not the case where it has been alleged by the Assessing officer that the assessee has received any consideration over and above the consideration as declared in the sale deed. It was accordingly submitted that merely on account of deeming provisions, it cannot be construed to be a case of furnish of inaccurate particulars of income or concealment of particulars of income. It was submitted that section 50C is a deeming provision and it has to be strictly construed and cannot be extended for the purpose of levy of penalty. It was further submitted that even penalty provisions needs to be construed strictly and only where there is any positive evidence of concealment of income, the penalty can be levied. It was submitted that in the instant case, the assessee has suo-moto adopted the deemed sale consideration u/s 50C while filing the return of income and which has been accepted, thus, there is no question of furnish of inaccurate particulars of income or concealment of particulars of income

Per contra, the ld. DR submitted that the assessee has not filed return of income originally u/s 139(1) of the Act though, he has sold the property and earned capital gains thereon. The assessee has declared his income in response to notice u/s 148 of the Act which has been accepted by the Assessing Officer and penalty has simultaneously been initiated against him. It was submitted that the Assessing Officer has levied penalty u/s 271(1)(c) by holding that the assessee had taxable income and not filed his return of income voluntarily and only when he received the notice u/s 148 of the Act, the return has been filed. It was accordingly submitted that it is a clear case of concealment of income and if notice u/s 148 was not issued, the assessee would not have come forward and declared capital gains in his return of income. She accordingly supported the order of the lower authorities.

In his rejoinder, the ld AR submitted that if the total income of the assessee is computed by taking the sale value of shop at Rs 3,50,000/- instead of value adopted by the stamp duty authorities, total income of 4 Shri Shyam Sunder Duseja, Jaipur Vs. ITO, Ward 6(3), Jaipur the assessee remains below the taxable limit and hence, the assessee didn’t file his return of income originally and there was thus a reasonable cause for not filing the return of income. However, as soon as the assessee received the notice u/s 148, in order to avoid any litigation, the return of income was filed taking the value of shop as adopted by the stamp duty authorities and the tax liability arising on account of such differential sale consideration was duly paid by way of self-assessment tax.

We have heard the rival contentions and perused the material available on record. This matter has been considered by the Jaipur Benches in the case of Anita Beniwal, Alwar vs. ITO, Ward 1(4), Alwar (supra) wherein it was held as under:- “6. We have heard the rival contentions of both the parties and perused the material available on the record. The assessee had shown sale consideration at Rs. 8 lacs whereas as per section 50C of the Act, the Stamp Authority has assessed the value of property at Rs. 12,35,730/-, there was difference at Rs. 4,75,658/- in the capital gain, which has been accepted by the assessee during the course of assessment proceedings. The case law referred by the assessee are squarely applicable. In this case also, there is no evidence with the Revenue to prove that the assessee has received much more than reflected in the return. The addition was on account of deeming provision, therefore, we delete the penalty confirmed by the ld. CIT(A).”

Further, the matter has been considered by the Lucknow Benches in the case of ACIT vs. Lohia Starlinger Ltd (supra) wherein following the decision of the Hon'ble Calcutta High Court in the case of Madan Theatres Ltd., it was held as under:

Further, the matter has been considered by the Mumbai Benches in the case of Renu Hingorani, Mumbai vs. ACIT, Mumbai (supra) wherein it was held as under:-

The Revenue’s only contention is that such return of income has not been filed voluntarily and has been filed only in response to notice u/s 148 and thus, in a way, it is a case of deemed concealment though we find that the provisions of explanation 3 to section 271(1)(c) have not been specifically invoked by the Assessing officer either at the time of initiating or while passing the penalty order. If we look at the provisions of 8 Shri Shyam Sunder Duseja, Jaipur Vs. ITO, Ward 6(3), Jaipur explanation 3 to section 271(1)(c) which talks about cases of deemed concealment, it read as under: “[Explanation 3. – Where any person fails, without reasonable cause, to furnish within the period specified in sub-section (1) of section 153 a return of his income which he is required to furnish under section 139 in respect of any assessment year commencing on or after the 1st day of April, 1989, and until the expiry of the period aforesaid, no notice has been issued to him under clause (i) of sub-section (1) of section 142 or section 148 and the Assessing Officer or the Commissioner(Appeals) is satisfied that in respect of such assessment year such person has taxable income, then, such person shall, for the purposes of clause (c) of this sub-section, be deemed to have concealed the particulars of his income in respect of such assessment year, notwithstanding that such person furnishes a return of his income at any time after the expiry of the period aforesaid in pursuance of a notice under section 148.”

The aforesaid explanation 3 of Section 271(1)(c) had come up for interpretation before the Hon'ble Gujarat High Court in case of Chhaganlal Suteriya V. ITO (2011) 337 ITR 350 (Guj) wherein the Hon'ble Gujarat High Court observed as under: "A mere failure to furnish a return of income does not amount to concealment u/s 271(1)(c) of the Income-tax Act, 1961. But the introduction of Explanation 3 to section 271(1) with effect from April 1, 1976, has changed the law on the point in certain cases. For the purpose of falling within the purview of Explanation 3, (i) a person should not have been previously assessed (that is, he should be a new assessee); (ii) he should have failed without reasonable cause to furnish a return of income for Assessment Year 1989-90 or any 9 Shri Shyam Sunder Duseja, Jaipur Vs. ITO, Ward 6(3), Jaipur year subsequent thereto within two years from the end of the Assessment Year concerned; (iii) no notice should have been issued to him u/s 142(1) or section 148 of the Act till the expiry of the two year period, and (iv) the concerned officer is satisfied that in respect of such Assessment Year, such person had taxable income. In such cases, Explanation 3 provides that such person shall be deemed to have concealed the particulars of his income within the meaning of clause (c) of section 271(1) of the Act for such Assessment Year. In such an eventuality, even if the person concerned files a return after the expiry of the period of two years in pursuance of a notice u/s 148 of the Act, the deeming provisions of Explanation 3 shall still have application. The conditions for the applicability of Explanation 3 to section 271(1) are cumulative and each of the conditions has to be established for the purpose of invoking the provision."

In the instant case, the first condition that a person has not been previously assessed to tax under this Act has been omitted by Finance Act, 2002 w.e.f. 1.4.2003 and is thus no more on the statute. The second condition is that he should have failed without reasonable cause to file the return. We find that there was a reasonable cause with the assessee for not filing the return originally within prescribed time as he holds a belief that his taxable income was below the taxable limit and no tax liability arises thereon considering the actual sale consideration received by the assessee on sale of shop amounting to Rs 3,50,000/-. The bonafide of such belief has not been challenged by the Revenue, as we have noted above that there is no finding or adverse material that the assessee has received any consideration over and above the sale consideration of Rs 3,50,000/. We therefore find that there was a reasonable cause for the assessee for not filing the return of income originally within prescribed

In light of aforesaid discussions and in the facts and circumstances of the present case, we are of the considered view that where the value so declared in the return of income has been accepted by the Assessing officer and infact, the returned income has been accepted, there cannot be any basis for levy of penalty u/s 271(1)(c) for concealment of income. In the result, the penalty so levied is hereby directed to be deleted and the matter is decided in favour of the assessee.