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Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SMT. BEENA PILLAI & SHRI LAXMI PRASAD SAHU
PER BEENA PILLAI, JUDICIAL MEMBER Present penalty appeal is filed by assessee against order dated 28/01/2022 passed by Ld.CIT(A)-12, Bangalore for A.Y. 2015-16 on following grounds of appeal: “1. The learned CIT(A) has erred in assuming jurisdiction levying penalty u/s. 271(1)(c) of the Act. The impugned order as passed is bad in law, void ab initio, and without jurisdiction is liable to be quashed in toto.
2. The learned CIT(A) has erred in assuming jurisdiction u/s 271(1)(c) of the Act holding that there being an enhancement of assessment. On proper appreciation of facts and the law applicable, there being no enhancement of assessment, the assumption of jurisdiction to levy
Page 2 IT(IT)A No. 382/Bang/2022 penalty and the consequent order levying penalty becomes bad in law and such order is liable to be quashed.
3. In any case, the learned CIT(A) has erred in not appreciating the fact that that the learned assessing officer had already initiated the penalty proceedings on additions made and in the absence of any enhancement of assessment, no jurisdiction to levy penalty u/s. 271(1)(c) of the Act could have been assumed by the CIT(A). The order passed is bad in law and is liable to be quashed.
4. In any case and without prejudice, the learned CIT(A) has erred in not specifically pointing out the ground for initiation of penalty u/s. 271(1)(c) of the Act i.e., concealment of income or furnishing of inaccurate particulars of income. In the absence of specific ground for levy of penalty, the entire proceedings become bad in law and therefore, the order passed is liable to be quashed. 5.1 Without prejudice, the learned CIT(A) having initiated the penalty for both the limbs i.e., for concealment of income and furnishing of inaccurate particulars of income, has erred in levying penalty u/s. 271(1)(c) of the Act on the ground of concealment of particulars of income. The action of CIT(A) in levying penalty being contrary to his own findings is to be negated and penalty as levied is to be deleted. 5.2 In any case, the findings / conclusions drawn by CIT(A) regarding the excess claim of indexed cost of acquisition is wholly erroneous both on facts and law and such conclusions are to be disregarded, 5.3 The appellant has neither concealed any particulars of income nor has furnished any incorrect particulars of income and hence the appellant is not liable for any penalty. The penalty having being levied on erroneous appreciation of facts and wrong application of law requires to be cancelled. 5.4 In any case and without prejudice, the levy of penalty is erroneous and excessive and is therefore liable to be deleted.
In view of the above and on other grounds to be adduced at the time of hearing it is requested that the impugned order be quashed or atleast the penalty levied be cancelled.”
Brief facts of the case are as under: 2.1 Assessee filed his original return of income for year under consideration on 27/09/2016 declaring total income of Rs.1,61,95,750/-. For the year under consideration, the Ld.AO
Page 3 IT(IT)A No. 382/Bang/2022 noted that the assessee had derived income from capital gains. The case was selected for scrutiny and mandatory notices u/s. 143(2) of the Act was issued to the assessee. 2.2 Various notices subsequently were issued to the assessee on various dates however, the assessee did not file any response in lieu of the same. It was informed by the email to the assessee that, the return of income filed declared capital gains of Rs.1,48,57,151/-, whereas as per AIR data in the case of the assessee available with the department, the transaction amount in the Sub-Registrar office as on the date of transaction was Rs.5,37,08,200/-. 2.3 The Ld.AO was therefore of the view that, the assessee had under declared capital gains by Rs.3,88,51,069/-. The Ld.AO subsequently issued notice in view of the time barring nature of the proceedings on 23/11/2017 informing all the proposal to complete the assessment of the assessee u/s. 143(3) r.w.s. 144 of the Act by making addition of Rs.3,88,51,069/-. The assessee still did not respond. Two more opportunities was granted by the assessee on 06/12/2017 by sending an email to the assessee. As the assessee failed to respond to the various notices issued by email to the assessee, the assessment was completed by making addition to the capital gains being income not declared in the return of income by an amount of Rs.3,88,51,069/- on 15/12/2017.
Aggrieved by the order of the Ld.AO, assessee filed appeal before the Ld.CIT(A). 3.1 Before the Ld.CIT(A), assessee filed following written submissions.
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Page 7 IT(IT)A No. 382/Bang/2022 3.2 The Ld.CIT(A) observed that, the total consideration received by the assessee amounting to Rs.3,75,83,000/- was not acceptable to the Assessing Officer. The assessee filed copy of the sale deed dated 16/07/2014 according to which the total sale consideration received towards the sale of 8.36 acres of land was Rs.5,37,08,200/- out of which assessee received a consideration of Rs.3,75,83,000/- for parting with 5.85 acres of land and Smt. Savitri Vipin Chandra being the co-vendor in the sale deed received consideration of Rs.1,61,25,200/- for parting with 1.62 acres of land. 3.3 The Ld.CIT(A) accepted the sale consideration received by assessee to be Rs.3,75,83,000/- in respect of the LTCG computation. However, the Ld.CIT(A) noted that assessee claimed brokerage expenses of Rs.7,51,660/- in respect of which assessee filed evidences to support the claim. The Ld.CIT(A) rejected the brokerage expenses paid by the assessee on the ground that PAN No. were not taken from the persons to whom the brokerage was paid in cash. 3.4 The Ld.CIT(A) further noted that the property was purchased vide deed dated 23/09/2005 for Rs.23,68,000/- at measuring total area of land being 12.14 acres. The Ld.CIT(A) noted that the assessee bifurcated 5.85 acres of land and sold the same during A.Y. 2015-16 along with co-vendor being Smt. Savitri Vipin
Page 8 IT(IT)A No. 382/Bang/2022 Chandra and cost of acquisition of the land sold was arrived at Rs.11,41,090/-. The Ld.CIT(A) was of the opinion that the assessee was eligible for the proportionate cost of acquisition and allowed indexation being 1024/497. 3.5 The Ld.CIT(A) further noted that assessee claimed that land purchased underwent lot of improvement from 31/12/2005 to 14/11/2006 in respect of which, bank statement account was submitted. The Ld.CIT(A) noted that, the assessee had withdrawn Rs. 2 Lakhs during A.Y. 2006-07 and Rs. 17.50 Lakhs during A.Y. 2007-08. As assessee failed to submit the details of the work executed, purchase of any commodities / any labour payments, contract payments, cost of improvement claimed was disallowed. 3.6 The Ld.CIT(A) thus computed the long term capital gains after granting deduction claimed by assessee of the investments made u/s. 54EC amounting to Rs.50 Lakhs as under:
Consideration received on Sale of 3,75,83,000 5.85 Ares of land on 16.7.2014 Commission claimed paid of Rs.7,51,660 Disallowed Indexed Cost of acquisition of 5.85 Ares of 23,51,058 land on 23.9.2005
Cost of improvement claimed for AY 2006- Disallowed 07 and 2007-08
Cost of purchase of new house property u/s 65,46,786 54F Investment in 54EC bond 50,00,000 Long term capital gains 2,36,85,156
Page 9 IT(IT)A No. 382/Bang/2022 3.7 The Ld.CIT(A) also initiated penalty proceedings on account of wrong particulars of income filed as well as for concealing taxable income on the issue of LTCG. Aggrieved by the order of Ld.CIT(A), assessee filed appeal before this Tribunal.
Before this Tribunal, the Ld.AR submitted that while granting order giving effect to the CIT(A) order, the Ld.AO has granted relief to Rs.1,42,63,887/- and computed the net taxable income at Rs.2,46,57,773/-. She submitted that assessee has been denied the brokerage paid amounting to Rs.7,51,660/- and also denied the cost of improvement claimed the exemption claimed u/s. 54F and 54EC amounting to Rs.1,15,46,786/- in the rectification order passed by the Ld.AO dated 22/05/2018.
The Ld.AR submitted that assessee had not furnished any inaccurate particulars or concealed any material facts for the purpose of completing the assessment. She submitted that the Ld.AO on assumption of wrong facts made disallowances. It is submitted by the Ld.AR that the Ld.CIT(A) on verifying various submissions of the assessee granted relief partially. This itself shows that there was no concealment of facts by the assessee or filing of inaccurate particulars. The Ld.AR submitted the addition was confined only to the extent of commission paid for sale of property and indexed cost of improvement for want of PAN details of the persons to whom it was paid. She submitted that the revenue do not doubt the payment made through banking channel. She thus prayed for deleting the penalty levied in the above facts of the case.
Page 10 IT(IT)A No. 382/Bang/2022 On the contrary, the Ld.DR placed reliance on orders passed by authorities below. We have perused the submissions advanced by both sides in the light of records placed before us.
6. In order to appreciate the submission advanced by the Ld.AR, it is necessary to read the relevant penal provision. For sake of convenience, the same is reproduced hereunder: "271.Failure to furnish returns, comply with notices, concealment of income, etc. (1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person- ................................................................ (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,- (ii). ………………… (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income Explanation 1.-Where in respect of any facts material to the computation of the total income of any person under this Act,- (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Deputy Commissioner (Appeals) or the Commissioner(Appeals) to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed.
Page 11 IT(IT)A No. 382/Bang/2022
As evident from the aforesaid cl.(c) of s.271(1) of the Act, the words used are 'has concealed the particulars of his income' or, ‘furnished inaccurate particulars of such income'. In both situation of concealment and inaccuracy, the legislature has used phrase, 'particulars of income'. The legislature has not used the words 'concealed his income'. This is the reason why various Hon’ble High Courts and Hon’ble Supreme Court held that, the penal provision would operate when there is a failure to disclose fully or truly all the material particulars of income which lead to the correct computation of income in accordance with the provisions of the Act. So when any fact material to the determination of an item as income or material to the correct computation is not filed or that which is filed is not accurate, then the assessee would be liable to penalty under s. 271(1)(c) of the Act. The expression 'has concealed the particulars of income' and 'has furnished inaccurate particulars of income' have not been defined either in section 271 or elsewhere in the Act. However, notwithstanding the difference in the two circumstances, it is now well established that they lead to the same effect namely, keeping off a certain portion of the income from the return. According to Law Lexicon, the word "conceal" means: "to hide or keep secret. The word 'conceal' is con+celare which implies to hide. It means to hide or withdraw from observation; to cover or keep from sight; to prevent the discovery of ; to withhold knowledge of. The offence of concealment is, thus, a direct attempt to hide an item of income or a portion thereof from the knowledge of the income-tax authorities."
If the disclosure of facts is incorrect or false to the knowledge of the assessee, and this fact is established, then such disclosure cannot take such assessee out from the purview of the act of Page 12 IT(IT)A No. 382/Bang/2022 concealment of particulars or furnishing inaccurate particulars for the purpose of levy of penalty. The penalty u/s 271(1)(c) of the Act is leviable if the AO is satisfied in the course of any proceedings under this Act that any person has concealed the particulars of his income or furnished inaccurate particulars of such income.
In the present facts of the case the Ld.CIT(A) has not made out a case where the assessee has filed any inaccurate particulars or concealed any income. Assessee has filed all relevant materials for determining the income in his hands. The Ld.CIT(A) has not unearthed any details/ evidences that has lead to enhancement of income in the hands of the assessee.
In fact the enhancement of income by the Ld.CIT(A) is due to disallowance made by the Ld.CIT(A) of the commission paid and the cost of improvement claimed by the assessee for the reason that the assessee did not collect the PAN of the persons to whom the payments were made. There is no doubted that the payments were made through banking channels. Merely because the assessee did not collect PAN details of the Payees, and the bills and vouchers of most of the payments, the disallowance was made.
In our opinion, in the present facts, assessee cannot be penalized either for concealment of particulars of income' or 'furnishing of inaccurate particulars of income'. We therefore delete the penalty levied by the Ld.CIT(A). Accordingly the grounds 5.1 to 5.3 raised by the assessee stands allowed.
Page 13 IT(IT)A No. 382/Bang/2022
Ground Nos. 2-4 are on the issue of levy of penalty by the Ld.dCIT(A). As we have allowed the ground raised
by the assessee on merits, we are not inclined to decide this issue.
13. Ground Nos.1& 6 is general in nature and do not require adjudication. Accordingly the appeal filed by the assessee stands allowed partly. In the result, the appeal filed by the assessee stands partly allowed. Order pronounced in the open court on 1st December, 2022.