SH. PARMINDER SINGH MAVI,MORINDA vs. ITO, ROPAR

आदेश/ORDER Per Annapurna Gupta, Accountant Member

Both the present appeals have been preferred by the same assessee against separate orders of the Commissioner of Income Tax (Appeals), Chandigarh [hereinafter referred to as CIT(A)], dated 1.10.2014 confirming the levy of penalty u/s 271(1)(b) and u/s 271(1)(c) of the Income Tax Act,1961(hereinafter referred to as “Act”) respectively.

W e s h a l l f i r s t b e t a k i n g u p t h e a p p e a l o f t h e a s s e s s e e i n I T A N o . 1 0 1 5 / C h d / 2 0 1 4 .

I T A N o . 1 0 1 5 / C h d / 2 0 1 4 :

2 ITA Nos.1014 & 1015/Chd/2014 A.Y.2008-09

2 . T h e a s s e s s e e i n t h e p r e s e n t a p p e a l h a s c h a l l e n g e d

t h e o r d e r o f t h e L d . C I T ( A ) c o n f i r m i n g t h e l e v y o f

p e n a l t y u / s 2 7 1 ( 1 ) ( c ) o f t h e A c t a m o u n t i n g t o

R s . 4 0 , 5 9 , 1 3 6 / - .

3 . B r i e f f a c t s r e l a t i n g t o t h e c a s e a r e t h a t n o r e t u r n

o f i n c o m e f o r t h e i m p u g n e d y e a r i . e . a s s e s s m e n t y e a r

2 0 0 8 - 0 9 w a s f i l e d b y t h e a s s e s s e e . T h e r e a f t e r t h e

A s s e s s i n g O f f i c e r ( i n s h o r t r e f e r r e d t o a s ‘ A . O . ’

i n i t i a t e d p r o c e e d i n g s u / s 1 4 7 o f t h e A c t i s s u i n g n o t i c e

u / s 1 4 8 o f t h e A c t o n i n f o r m a t i o n i n h i s p o s s e s s i u o n

t h a t t h e a s s e s s e e h a d e a r n e d c a p i t a l g a i n w h i c h h a d

n o t b e e n r e t u r n e d f o r t a x . . N o r e t u r n w a s f i l e d i n

r e s p o n s e t o n o t i c e i s s u e d u / s 1 4 8 a l s o . T h e r e a f t e r

s e v e r a l n o t i c e s u / s 1 4 2 o f t h e A c t w a s s e r v e d u p o n t h e

a s s e s s e e , b u t t h e s a m e r e m a i n e d u n c o m p l i e d w i t h .

F i n a l l y t h e a s s e s s e e f i l e d r e t u r n o f i n c o m e d e c l a r i n g

i n c o m e o f R s . 2 9 , 8 8 , 2 3 0 / - u n d e r t h e h e a d L o n g T e r m

C a p i t a l G a i n . T h e A . O . n o t e d t h a t t h e p r o c e e d i n g s u / s

1 4 7 o f t h e A c t h a d b e e n i n i t i a t e d a g a i n s t t h e a s s e s s e e

a s i n f o r m a t i o n a v a i l a b l e w i t h t h e D e p a r t m e n t r e v e a l e d

t h a t t h e a s s e s s e e w a s a M e m b e r o f M / s D e f e n c e

S e r v i c e s C o - o p e r a t i v e H o u s e B u i l d i n g S o c i e t y , M o h a l i .

w h i c h w a s h a v i n g 2 7 . 3 a c r e s o f l a n d i n v i l l a g e K a n s a l ,

D i s t r i c t S A S N a g a r a n d s o c i e t y h a d e n t e r e d i n t o a

t r i p a r t i t e a g r e e m e n t o n 2 7 . 4 . 2 0 0 7 w i t h M / s T a t a

H o u s i n g D e v e l o p m e n t B u i l d e r s L t d . a n d M / s H a s h

B u i l d e r s P v t . L t d . f o r s a l e o f l a n d t o t h e m . T h a t t h e

3 ITA Nos.1014 & 1015/Chd/2014 A.Y.2008-09

m e m b e r s w e r e t o g e t t h e c o n s i d e r a t i o n i n c a s h a s w e l l

a s i n k i n d a s p e r t h e i r p l o t s i z e . T h a t t h e a s s e s s e e

d u r i n g t h e r e l e v a n t p e r i o d h a d r e c e i v e d R s . 3 2 l a c s a s

h i s p r o p o r t i o n a t e s h a r e . As per the agreement each

"member of The Defense Services Co-operative House

Building Society Ltd. having a plot of 500 sq.yd. in the

society would receive Rs. 80,00,000/- as monetary

consideration. Accordingly, a total monetary consideration of

Rs 124,72,89,000/- was receivable by all the individual

members of the society taken together. In addition to this, as

consideration in kind, each such member owning owing plot

of 500 sq yd would receive one furnished flat measuring

2250 sq. ft. to be constructed by M/s Tata Housing

Development Company Ltd. As the assessee was the owner of

500 Sq. yds of plot in that Society, as per the agreement he

was entitled for the full consideration comprising of Rs.

80,00,000/- as monetary consideration and one furnished

flat of 2250 Sq. ft as consideration in kind. The total cost of

the furnished flats was valued at Rs.1,01,25,000/-

determined/estimated at the rate of Rs. 4,500/- per sq. ft.

Thus the total consideration or the full consideration

accruing to the assessee was worked out at Rs.

1,81,25,000/-. The A.O. after perusing the contents of the

Joint Development Agreement held that the assessee had

transferred its plot through the society to M/s Tata Housing

Development Company Ltd. for which consideration had been

settled in the form of cash as well as kind. He, therefore,

held that the provisions of section 2(47)(v) of the Act r.w.s.

4 ITA Nos.1014 & 1015/Chd/2014 A.Y.2008-09

53A of the transfer of Property Act were attracted on

entering into the Development Agreement and the assessee

had come within the purview of section 45 of the Act as per

which it was chargeable to tax in the capital gains earned by

taking in to consideration both the cash as well as kind

component of the consideration. He accordingly computed

Long Term Capital Gain earned by the assessee at

Rs.1,79,13,228/- and added the same to the income of the

assessee. Penalty proceedings u/s 271(1)(c) of the Act for

concealing/furnishing inaccurate particulars of income were

initiated by the A.O. and notice issued to the assessee to

show cause as to why penalty be not levied. During the

pendency of the penalty proceedings the quantum addition

made in the case of the assessee was confirmed by the

CIT(A), whose order in turn was upheld by the I.T.A.T. Thus

the addition made to the income of the assessee was

confirmed by the I.T.A.T. who had followed their own order

in the case of Charanjit Singh Atwal Vs. ITO in ITA

No.448/Chd/2011 while upholding the addition. In the

penalty proceedings before the A.O. the assessee requested

that the same be kept in abeyance since the appeal had been

filed by the assessee to the Hon'ble High Court. The A.O.

rejected the same and levied penalty on the addition made to

the income of the assessee @ 100% of the tax sought to be

evaded on the same which came to Rs.40,59,136/-.

who upheld the order of the A.O. holding that the assessee’s

5 ITA Nos.1014 & 1015/Chd/2014 A.Y.2008-09

case was clearly covered under the provisions of

Explanation-3 to section 271(1)(c) of the Act, as per which a

person is deemed to have concealed his particulars of income

within the meaning of section 271(1)(c) of the Act if he fails

to file his return of income without a reasonable cause if he

has taxable income. The Ld.CIT(A) held that since the

assessee had taxable income which is evident from the

return filed, his case was squarely covered by the

Explanation-3 to section 271(1)iii) of the Act and, therefore,

upheld the levy of penalty. He further held that the assessee

had declared an income only when proceedings u/s 147 were

initiated and, therefore, also the declaration of income in the

return could not be said to be suo moto and thus the

assessee was liable to penalty. He relied upon the decision of

the Hon'ble Delhi High Court in the case of Zoom

Communication Pvt. Ltd., 271 ITR 510 in this regard.

appeal before us raising the following grounds :

“1. That the Learned CIT(A) has failed to appreciate the facts and circumstances of the case and has thereby erred in sustaining penalty u/s 271 (l)(b) of the Income Tax Act, I961. 2. Since the appellant resides in United Kingdom and the notice was not received by him. There was non- compliance on the part of the representative of the appellant. 3. Moreover, the order passed by the Assessing Officer is without jurisdiction as the assessee being non - resident is assessable by ACIT(international Taxation) Chandigarh. 4. In view of the above stated facts and circumstances it is prayed that penalty order may kindly be quashed or such other relief be granted as is deemed fit.”

6 ITA Nos.1014 & 1015/Chd/2014 A.Y.2008-09

for assessee contended that firstly penalty was not leviable

on the entire capital gain assessed since the decision of the

I.T.A.T. in the case of C.S. Atwal & Others (supra), which

was followed by the Ld.CIT(A) while confirming addition in

assessee’s case, had travelled right upto the Hon'ble High

Court, who had held that the assessees in such facts and

circumstances were liable to capital gains only on the land

which was actually transferred and thus sold and

consideration received by them. The Ld. counsel for

assessee, therefore, contended that in any case that the

assessee had correctly returned capital gains in the return

of income fled by him on the component of consideration

actually received by him during the year as per the judgment

of the Hon'ble High Court. He further stated that vis-à-vis

the issue of penalty, the Hon'ble I.T.A.T. had dealt with the

same in the case of C.S. Atwal & Others (supra) where

penalty was levied on identical fact situation deleting the

entire penalty levied holding that the assessee was of the

bonafide belief that the transfer would be completed only

when the Joint Development Agreement would succeed and

further on finding that on similar facts and circumstances

the ITAT Chandigarh Bench had deleted the penalty levied

u/s 271(1)(c) of the Act. The I.T.A.T. also held that the issue

was debatable since the A.O. had taxed the capital gain in

the hands of the society on protective basis since the JDA

7 ITA Nos.1014 & 1015/Chd/2014 A.Y.2008-09

referred the society as the “owner”. Our attention was drawn

to the findings of the I.T.A.T. at para 13 of his order as

under:

“13. We have considered the rival submissions and have also gone through the records. In our view, as the facts narrated above suggests, it was not a simple case of transfer of land. The land was owned by the Society constituting 95 Members including the assessee. The consideration settled for the transfer was in cash as well as in kind i.e in the shape of flats to be given to the Members as per their proportionate share in the property. As discussed above, though the assessee had received the cash component by way of first two installments as per the proportionate share in the land on the pro-rata transfer of the land by society, however, the consideration in kind i.e. flats was not received by the assessee as the JDA could not mature. Hence, there seems force in the contention of the assessee that he was of the bonafide belief that the transfer in this case would be completed only when the JDA would mature or succeed. As observed above, the Hon'ble Supreme Court has already held that the transfer in respect of the remaining part of the land would not fall in the definition of the transfer as provided u/s 2(47) of the I.T. Act and there was no certainty of the transactions getting successful. The assessee suo moto revised the return though belatedly on 7.10.2009 when the regular assessment proceedings were under progress and offered the capital gains tax in respect of amount received by him as per his share out of the first two installments received by the Society on prorate transfer of land. Till the filing of the revised return, the assessee was never confronted by the Assessing officer on this issue. The assessee thus suo moto / voluntarily offered capital gains on the amount actually received by him. The issue was highly debatable. Even the land was transferred by the society. In the JDA, society has been referred to as ‘owner’. If the society was the ‘owner’ then the capital gains apparently would also be taxable in the hands of the society. The Assessing officer of the society has also taxed the capital gains in the hands of the society on protective basis. Hence, it was a debatable issue whether the capital gains will be taxed in the hands of the society or in the hands of the assessee. Not only the issue regarding the nature of the transactions but also about the date on which the transfer can be said to have completed, was debatable.

8 ITA Nos.1014 & 1015/Chd/2014 A.Y.2008-09

Further, in the similar facts and circumstances in the case of another assessee namely Shri Balwinder Singh Dhillon, the Coordinate Chandigarh Bench of the Tribunal for the assessment year 2008-09 in ITA No. 1140/Chd/2014 vide order dated 3.8.2015 has upheld the order of the CIT(A) deleting the penalty so levied by the Assessing officer u/s 271(1)(c) of the Act. The said decision has been further followed by the Chandigarh Bench of the Tribunal in the case of ‘ITO Vs. Smt. Neena Chaudhary’ in ITA No. 1096/Chd/2014 for assessment year 2008-09 wherein also the Departmental appeal challenging the deletion of penalty levied u/s 271(1)(c) has been dismissed. The said decision have also been followed by the Amritsar Bench of the Tribunal in ‘Shri Raghunath Sahai Puri Vs. DCIT order dated 13.6.2016 in ITA No. 633/ASR/2014 for assessment year 2007-08. Considering the overall facts and circumstances of the case, and in view of the decisions of the Coordinate Benches of the Tribunal, in respect of income earned by the other members of the society from the same transactions, whereby, upholding the order of the CIT(A) in cancelling penalty u/s 271(1)(c) of the Act, we are of the view that this is not a case of furnishing of inaccurate particulars of income or concealment of income so as to attract the penal provisions of section 271(1)(c) of the Act. The penalty so levied by the lower authorities in this case is hereby ordered to be deleted.” 7. The Ld. DR, on the other hand, heavily relied upon the

order of the CIT(A).

the parties. Admittedly, identical issue of levy of penalty on

capital gains earned on account of transfer of land through

Joint Development Agreement entered into by cooperative

societies of members with M / s T a t a H o u s i n g D e v e l o p m e n t

B u i l d e r s L t d . a n d M / s H a s h B u i l d e r s P v t . L t d . ( s u p r a )

h a s a l r e a d y b e e n d e a l t w i t h b y t h e I . T . A . T . i n t h e c a s e

o f C . S . A t w a l ( s u p r a ) h o l d i n g t h a t i t w a s n o t a f i t c a s e

o f l e v y o f p e n a l t y s i n c e t h e i s s u e w a s d e b a t a b l e a n d

t h a t t h e a s s e s s e e b o n a f i d e l y h a d n o t r e t u r n e d t a x

9 ITA Nos.1014 & 1015/Chd/2014 A.Y.2008-09

i n i t i a l l y b e l i e v i n g t h a t t h e c a p i t a l g a i n w o u l d a c c r u e

o n l y w h e n t h e J o i n t D e v e l o p m e n t A g r e e m e n t w o u l d

m a t u r e . S i n c e n o d i s t i n g u i s h i n g f a c t s h a v e b e e n

b r o u g h t t o o u r n o t i c e b y t h e L d . D R , t h e d e c i s i o n o f

t h e I . T . A . T . w o u l d s q u a r e l y a p p l y t o t h e f a c t s a n d

c i r c u m s t a n c e s o f t h e p r e s e n t c a s e , f o l l o w i n g w h i c h w e

d i r e c t t h e d e l e t i o n o f e n t i r e p e n a l t y . W e m a y a d d t h a t

t h e p e n a l t y i n a n y c a s e w a s n o t l e v i a b l e o n t h e

a d d i t i o n w h i c h w a s n o t s u s t a i n a b l e i n v i e w o f t h e

d e c i s i o n o f t h e H o n ' b l e J u r i s d i c t i o n a l H i g h C o u r t i n

t h e c a s e o f C . S . A t w a l ( s u p r a ) , w h o h a d d i r e c t e d

a d d i t i o n o n l y t o t h e e x t e n t o f l a n d t r a n s f e r r e d b y t h e

a s s e s s e e a n d c o n s i d e r a t i o n r e c e i v e d b y h i m , d i r e c t i n g

d e l e t i o n o f b a l a n c e o f t h e a d d i t i o n . I n v i e w o f t h e

a b o v e , t h e e n t i r e p e n a l t y l e v i e d i s d i r e c t e d t o b e

d e l e t e d .

T h e a p p e a l o f t h e a s s e s s e e i s a l l o w e d .

ITA No.1014/Chd/2018

of four notices issued to the assessee u/s 142(1) of the Act.

It was contended that the assessee was residing abroad in

U.K. Notices had been served on his representative who in

turn forgot to attend the proceedings. The Revenue has not

controveted this fact that the assessee was residing abroad

when the notices were served. Therefore, considering the

same, we find that the assessee had reasonable cause for not

10 ITA Nos.1014 & 1015/Chd/2014 A.Y.2008-09

attending the hearings and penalty levied u/s 271(1)(b) of the Act is directed to be deleted.

The appeal of the assessee thus stands allowed.

Order pronounced in the Open Court.

Sd/- Sd/- संजय गग� अ�नपूणा� गु�ता (ANNAPURNA GUPTA) (SANJAY GARG) �याय�क सद�य/Judicial Member लेखा सद�य/Accountant Member �दनांक /Dated: 11th February, 2019 *रती* आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar