Loading judgment…
Facts
The assessee appealed against a penalty levied under Section 271(1)(c) of the Income Tax Act for AY 2009-10. The penalty was based on an addition of Rs. 45,00,000/- confirmed by the CIT(A) as Long Term Capital Gain, arising from the sale of shares initially claimed as a family settlement or 'owelty'. The ITAT had previously remanded the case, and on re-assessment, the addition was confirmed.
Held
The Tribunal noted that while the initial assessment and additions were confirmed, penalty proceedings are distinct. Citing CIT vs. Reliance Petroproducts (P) Ltd., it was held that not every addition automatically results in a penalty. The Tribunal found no reason to sustain the impugned penalty in this specific instance, despite the lower authorities' findings.
Key Issues
Whether the penalty under Section 271(1)(c) is sustainable when the underlying addition, though confirmed by lower authorities, is subject to different interpretations of facts and legal principles, particularly concerning the distinction between sale consideration and 'owelty' in a family settlement context.
Sections Cited
271(1)(c), 143(3), 45, 48, 2(47)
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’, NEW DELHI
Before: Sh. Satbeer Singh Godara
Asstt. Year : 2009-10 Smt. Soni Sonu Mirchandani, Vs ACIT, F-166, Malcha Marg, Anand Central Circle-5, Niketan, New Delhi-110021 New Delhi-110005 (APPELLANT) (RESPONDENT) PAN No. AAQPM7786H Assessee by: None Revenue by : Sh. Akhilesh Kumar Yadav, Sr. DR Date of Hearing: 04.06.2025 Date of Pronouncement: 04.06.2025 ORDER This assessee’s appeal for Assessment Year 2009-10, arises against the CIT(A)-24, New Delhi’s DIN & order No. ITBA/APL/M/250/2024-25/1073130044(1) dated 11.02.2025, in proceedings u/s 271(1)(c) of the Income Tax Act, 1961 (in short “the Act”).
Case called twice. None appears at the assessee’s behest. She is accordingly proceeded ex-parte.
Learned departmental representative vehemently argues during the course of hearing that both the lower authorities have rightly held the assessee to have concealed as well as furnished inaccurate particulars her taxable income inviting section 271(1)(c) penalty of Rs.10,19,700/- levied in the “4. I have perused the order /s 271(1)(c) of the Act passed on 06.10.2021. I have considered the material available on record. In the present appeal, the appellant has raised two grounds of appeal
which have been reproduced in para 2.1 above. Ground Nos. 1, 1.1, 1.2, 1.3, 1.4, 1.5, 2, 2.1 and 2.2 are related to penalty u/s 271(1)(c) and all are dealt with together in the following paragraphs. 4.1 In the case the appellant field return of income on 28.07.2009 declaring an income of Rs.92,15,12,886/-. In the return of income, the appellant had shown Long term capital gains of Rs.92,33,99,485/-. Later on the case was selected for scrutiny and the assessment was completed u/s 143(3) on 11.11.2011 after certain additions at the assessed income of Rs.3,84,18,760/-. The details of addition made during the course of assessment proceedings are as under:- i. Indexed cost of acquisition for LTCG shown by the assessee on sale of shares was restricted to Rs.75,75,001/- as against Rs.99,80,872/-, This restriction was done on the ground that the applicable cost of inflation would be that of the first year in which assessee became owner of the asset (by way of gift) and not the year in which that previous owner acquired the asset as per the provisions of the Explanation (iii) to Sec. 48 of the Act. ii. Rs.45,00,000/- was taxed in the hands of the assessee as Long term capital gain u/s 45 of the Act received indirectly on relinquishment of her right to manage Monica Electronics Ltd and Onida Saka Ltd. 4.2 Aggrieved by the order, the appellant preferred appeal before CIT(A), who gave part relief of Rs.24,05,871/- by allowing indexation of assets (shares received as gift) from the date of ownership by the previous owner instead of from the first year in which the appellant became the owner. The addition of Rs.45,00,000/- as LTCG was confirmed by the CIT(A). The appellant preferred appeal before the Hon'ble ITAT against the order of the CIT(A). The appellant took an additional ground before the Hon'ble ITAT as follows:- "that on the facts and circumstances of the case and in low, the AO/CIT(A) erred in not holding that the amount Soni Sonu Mirchandani received on re-alignment of shareholding pursuant to family settlement arrangement was not liable to capital gains tax under section 45 of the Income Tax Act, 1961.” 4.3 This additional ground was admitted by the Hon'ble ITAT and vide its order dated 29.02.20l6, the case was remanded back to the file of the A.O. for fresh adjudication as per law. Following the direction of the Hon'ble ITAT, fresh assessment was made by the Assessing Officer vide order u/s 143(3) of the Act dated 14.12.2016. The income of the appellant was assessed at income of Rs.93,84,18,760/- after making both the additions afresh made in the original assessment order passed vide order u/s 143(3) dated 11.11.2011. 4.4 Thereafter, the appellant preferred appeal against the above assessment order dated 14.12.2016. The CIT(A) dismissed the appeal of the appellant vide order dated 11.02.2020. The appellant preferred appeal before the Hon'ble ITAT who deleted the addition of Rs.24,05,871/- in favour of the appellant and confirmed the addition of Rs.45,00,000/- in favour of revenue vide order in dated 28.09.2020. 4.5 As per the order, penalty of Rs.10,19,700/- was imposed vide order u/s 271(1)(c) dated 19.03.2015 for the addition of Rs.45,00,000/- which was confirmed by the CIT(A). However, the penalty was cancelled by the CIT(A) vide order dated 02.06.2016 stating that since the assessment order has been set aside by the Hon'ble ITAT to be done afresh, the penalty does not survive for consideration. However the AO would be at liberty to reinitiate the penalty proceedings in accordance with law while completing the assessment in pursuance to the direction of the ITAT in quantum appeal.” 4.6 In the assessment order dated i4.12.2016 passed in pursuance to the order of the Hon'ble ITAT, penalty proceedings u/s 271(1)(c) of the Act was initiated by the A.O. and notice u/s 274 r.w.s. 271 of the Act dated 14.12.2016 was issued along with assessment order. On receipt of the order of the Hon'ble ITAT, a show cause notice u/s 274 r.w.s. 271(1)(c) dated 12.06.2021 was issued by the Assessing Officer to the appellant. In response, the appellant did not furnish any reply. 4.7 Further, Assessing Officer held that the appellant had concealed particulars of income of Rs.45,00,000/- by stating that money was given to her for equalization of interests in family property and thus was 'owelty'. However, after due consideration of the assessment order Soni Sonu Mirchandani and appellate orders, Assessing Officer observed that the appellant had concealed particulars of income of Rs.45,00,000/- which was received by her as sale consideration of her assets (shares) which was acquired by her from father and son as gift and Assessing Officer was clear that correct particular of income was not furnished by the appellant which lead to the concealment of income for the AY 2009-10 as provided in the section 271(1)(c) of the Act. The Appellate Authority had also confirmed the addition of Rs.45,00,000/- made by the Assessing Officer on account of Long Term Capital Gain. Therefore, the Assessing Officer was not convinced with the reply of the appellant in course of penalty proceedings and thereafter imposed penalty u/s 271(1)(c) of the Act to the tune of Rs. 10,19,700/- on the appellant. 4.8 It is pertinent to refer to the order dated 28.09.2020 of the Hon'ble ITAT vide which it has dismissed the appeal of the appellant. The relevant part of the order is reproduced as follows for ready reference:
11. Considering the facts of the case, evidences on record and the Judgments reproduced above, it is clear that assessee did not produce any evidence of prior, present or likelihood of any future family dispute on record to justify the execution of the Memorandum of Family Settlement. The clauses of the Memorandum of Family Settlement clearly establish that it was a simple transaction of sale and purchase of shares, subject to consideration received by the assessee from Shri Golu L. Mirchandani. Shri Golu L. Mirehandani have been described as purchaser of the shares and assessee as seller in the Memorandum of Family Settlement which could never be regarded as Family Settlement Deed. The assessee did not have any antecedent, title of any family property because whatever shares/asset assessee has possessed as owner have been sold Subject to consideration because the assessee has acquired the shares of two Companies by way of gift from her father and sons. Thus, it was not a family property which could have been divided between the assessee and Shri Golu L. Mirchandani. The assessee did not receive any share from the family of her husband The facts also clearly established that there is n0 equitable partition or distribution of family shares/ assets. The chart reproduced above shows that it was merely sale transaction of shares which could not be considered as Family Settlement. Thus, it cannot be said that the impugned amount was given to assessee for equalization of interest in the family property and thus, it was not an owelty as is claimed by the assessee. It is also clear as per the terms of the Family Soni Sonu Mirchandani Settlement that entire shares of the assessee in GOVISO and IWAI were sold to Siri Golu L. Mirchandani for impugned consideration and the assessee did not get any other share or asset in reciprocation and hence, the money received was not on account of re- alignment of shares and thus, it could not be considered as owelty received by the assessee. The husband of the assessee did not transfer any share/property, so, where is the question of distribution of asset between the family of her husband and his property ? No owelty paid on alleged Family Settlement. No other transfer of family asset took place between the parties to the Family Settlement. It is a sale transaction between the two parties only i.e. assessee and Shri Golu L. Mirchandani. The authorities below did not accept the genuine Family Settlement because the authorities below have held it to be a simple transaction of sale and purchase of shares, subject to consideration. In other group companies no reasons explained to surrender the right or car etc. The assessee received market price for sale of shares and surrendered/relinquished her right in various companies, subject to impugned consideration. In the present case, the assessee has received impugned money as sale consideration for sale of shares and not as Owelty for equalization of interest in the family property. Since shares were the personal property of the assessee, therefore, when same were transferred to Shri Gol L. Mirchandani, it would amount to sale. It is an admitted fact that assessee initially admitted the transactions to be sale and purchase transaction subject to consideration. The assessee was not able to prove by any evidence to justify retraction from the earlier admission on disclosing the sale transaction in the original return of income disclosing capital gains. However, the assessee by claiming now it to be Family Settlement tried to defraud the Revenue to reduce the taxable returned income. As regards the amount of Rs.45 lakhs, it may be noted that assessee has received this amount for relinquishing her rights to manage the two companies i.e., the consideration for her asset. She has not received this amount as owelty as there were no division of assets. She had to forego her assets for a consideration and she did not receive any asset/right in reciprocation nor was the money paid for equalization of the interest. Thus, the money received by her though indirectly were the sale consideration of transfer of her rights and not owelty. Rs.45 lakhs was paid in settling the liability of the assessee in the matter of Excise prosecution which would amount to transfer. Thus, it is clear that assessee received the impugned amount on sale of the Soni Sonu Mirchandani shares. Therefore, it would be transfer of capital asset within the meaning of Section 2(47) of the I.T. Act, 1961, so as to attract the provisions of capital gains which assessee has rightly disclosed in the return of income and paid the tax thereon. There is no quarrel with regard to legal proposition canvassed by the Learned Counsel for the Assessee with regard to Family Settlement, however, the Judgments relied upon by the Learned Counsel for the Assessee above are not applicable to the facts and circumstances of the case. We, therefore, do not find any justification to interfere with the orders of the authorities below. In the result, Ground Nos. 1, 2, 3 and 5 of the appeal of assessee are dismissed.” 4.9 From the above, it can be seen that appellant has indirectly received the said amount but has deliberately not offered the same for taxation in the name of family settlement. As already mentioned by erstwhile CITI(A)- 24, New Delhi that "The appellant is an intelligent and well to do person who is duly assisted by counsel in filing her return of income. She cannot claim ignorance of law being a well to do citizen capable of having best counsels." Considering also this fact, it is difficult to believe that appellant has determined its total taxable income without due application of mind. There is no justification with the appellant for not including this amount in her taxable income. 4.10 Even after two rounds of verification by the Assessing Officer, appellant could not file any justification or documentary evidence in support of her claim. Therefore, it is a clear cut case of concealment of income on the part of the appellant. 4.11 In view of the above, the order of the Assessing Officer levying penalty amounting to Rs.20,56,850/- u/s 271(1)(c) of Income Tax Act is upheld. Accordingly, Ground Nos. 1 to 5 of appeal are dismissed.”
4. I have given my thoughtful consideration to the assessee’s pleadings all along and the Revenue’s foregoing vehement contentions. I find no reason to sustain the impugned penalty. It is made clear that at the best; the assessee claims to have invoked “owelty” principle to contend before the learned lower authorities that amount received herein of Rs.45,00,000/- does
5. That being the case, the tribunal hereby quotes CIT vs. Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158 (SC) that it is not each and every disallowance/addition which automatically results of the impugned penalty as both these proceedings are parallel in nature, to delete the impugned penalty of Rs.10,19,700/- levied by the learned lower authorities in very terms. Ordered accordingly.