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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI RAMIT KOCHAR
सुनवाई की तारीख /Date of Hearing : 09.05.2018 घोषणा की तारीख /Date of Pronouncement : 25.05.2018 आदेश / O R D E R
PER RAMIT KOCHAR, Accountant Member
1. This appeal, filed by the assessee, being 28.03.2016 passed by learned Commissioner of Income Tax (Appeals)-34, Mumbai (hereinafter called “the CIT(A)”), for assessment year 2011-12, the appellate proceedings had arisen before learned CIT(A) from penalty order dated 03.07.2014 passed by learned Assessing Officer (hereinafter called “the AO”) u/s 271(1)(c) of the Income- tax Act, 1961 (hereinafter called “the Act”) for AY 2011-12.
2. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called “the tribunal”) read as under:-
“Being aggrieved against order of the Commissioner of Income Tax (A), Mumbai, this appeal petition is being filed to consider the following grounds of appeal
, which are independent and without prejudice to each other:
1. On the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) erred in confirming penalty levied under section 271(1)(c) of the act.
2. On the facts and circumstances of the case, the Commissioner of Income Tax (appeals) erred in not considering the facts and explanation given during the proceedings.
3. On the facts and circumstances of the case, the Commissioner of Income Tax (A) has wrongly held that there is concealment of income as per judgement which has been overruled and or its effect has been diluted in subsequent judgements and without considering the reasonable cause of the same.”
3. The brief facts of the case are that the assessee is engaged in washing and ironing of clothes. It is claimed by the assessee that he is an illiterate person , 66 year of age and small time Dhobi having no knowledge of complex provisions and nitty-gritty‟s of the 1961 Act . It all happens that the assessee filed its return of income for the first time before the Revenue for the impugned assessment year . The assessee having sold as well purchased properties during relevant year under consideration did no filed details of the said transactions of sale and purchase of properties in the return of income filed with the Revenue. The assessee did not filed details of taxable long term capital gains earned by him after claiming exemption u/s. 54 of Act for which the assessee was liable to pay tax as per provision of 1961 of the Act in the return of income filed with the Revenue.
The AO on the other hand based upon the AIR information got an information that assessee has entered into transaction of sales and purchase of properties during the year under consideration and the assessee has not offered income on account of capital gains in the return of income filed with the Revenue and consequently no taxes stood paid to Revenue by the assessee. The assessee was asked to explain the same by the AO , the assessee submitted following details of long term capital gain earned by him before the AO during assessment proceedings, as under:- Total Flat at Mira Flat at Vakola, Road Santacruz(E) Sale Date 08.06.2010 10.01.2011 - 11,75,000 51,50,000 63,25,000 Sale Consideration received Less Brokerage Paid 23,500 1,04,000 1,27,500 Net Sale Consideration 11,51,500 50,46,000 61,97,500 Less 7,18,285 4,87,703 12,05,988 Index Cost of acquisition Total Long term capital 4,33,215 45,58,297 49,91,512 gain Less - - 37,34,940 Exemption u/s 54 cost of New House property Long term capital gain 12,56,572 This working was not reflected in the return of income filed by the assessee with Revenue and on verification of the details, the AO observed that assessee has claimed purchase cost of Rs. 3,10,000/- on property at Vakola, Santacruz (E) which was received in SRA while cost of acquisition was „Nil‟ and assessee also claimed brokerage paid of Rs. 5000/- for sale of property at Mira Road . The assessee was asked to explain the same by the AO. The assessee submitted its reply before the AO. The AO observed that Flat at Buildings no. A, 104, Dhobi Ghat, Vakola, Santacruz (E) Mumbai 400055 was acquired by the assessee under SRA scheme . It was observed by the AO from agreement dated 09-12-2003 between M/s Sagar Shopping Developers and the assessee , that the assessee‟s mother Smt. Sukhibai A Chaudhary was tenant and occupying the said residential premises . After her death tenancy rights got transferred to her sons (including assessee) and since the assessee got alternate premises free of cost under SRA scheme cost of acquisition of tenancy rights was „Nil‟ and purchase cost of the flat was taken at „Nil‟ by the AO while cost of stamp duty and registration charges was allowed by the AO as deduction while computing capital gains and capital gains were computed as under:-
Flat at Mira Road Flat at Vakola Total Sale Date 08.06.2010 10.01.2011 1175000 5150000 6325000 Sale Consideration received Less Brokerage Paid 23500 103000 126500 Net Sale Consideration 1151500 5047000 6198500 Less Index Cost of acquisition 706629 11655 718284
486567 486567 Less Index Cost of acquisition --- improvement 444871 4548778 4993649 Total Long term capital gain Less 3804940 Exemption u/s 54 cost of New House property as per Submission made Long term capital gain 1188709 The AO while bringing to tax above long term capital gains vide assessment order dated 24-3-2014 passed u/s 143(3), also simultaneously invoked penalty provision u/s. 271(1)(c) for furnishing of inaccurate particulars of income as the assessee in the opinion of the AO has concealed its income of Rs. 11,88,709/- being long term capital gains which were not declared in the return of income filed with the Revenue which led to the issuance of penalty notice by the AO u/s. 271(1)(c). The assessee did not challenge the assessment order passed by the AO dated 24-3- 2014 u/s 143(3) as no appeal stood filed by the assessee with learned CIT(A) against the assessment framed by the AO, which attained finality .
The assessee submitted before the AO during the course of penalty proceedings u/s 271(1)(c) that penalty proceedings be dropped against the assessee . The assessee also submitted that he is suffering with health problems. The Ld. AO levied the penalty of Rs. 2,44,875/- vide penalty order dated 03-07-2014 passed by the AO u/s 271(1)(c), by holding as under:-
“5. I have carefully gone through the assessee's reply letter dated 23.05.2014, it is important to note that the assessee has accepted the assessment order in toto and has not preferred appeal before the CIT(A) and the facts concealment and furnishing of inaccurate particulars came to light only because the case was selected for scrutiny and during the course of assessment proceedings u/s 143(3) of the I.T. Act.
Having carefully pursued the said submission made by the assessee the assessment order on careful consideration of all fact and circumstances of the case, I find that assessee's explanation is found to be not acceptable and tenable, due to following reasons.
Assessee is guilty of conscious act of concealment and furnishing of inaccurate particulars which came to light only because the case was selected for scrutiny and defaults attracting penalty u/s 271(1)(c ) of the IT Act.
The element of concealment of Income and furnishing of inaccurate particulars of income and glaringly apparent and clear in the addition made in the assessment order and the same attract penalty u/s 271(1)(c ).
In this case the assessee has deliberately and consciously concealed its income by furnishing inaccurate particulars as mentioned in the assessment order. It shall not the amiss to mention here that the word 'conceal' implies to hide or withdraw from observation to cover or keep away from sight to prevent the discovery of to withdraw knowledge of it is thus implicit in the word 'concealed’ that there has been deliberate act on the part of the assessee. Thus an element of deliberateness is embedded in the word 'concealment' even though the word deliberately was omitted by the Fin. Act 1964 w.e.f. 1.4.1965 NASA continental Exports Ltd. vs CIT (2002) 124 Taxman 172 (Hyd).
4. The assessee's default within the meaning of sec.271(1)(c) is clear and established as discussed above and also in the body of assessment order u/s 143(3) dated 24.03.2014.
7. In view of the above and of careful consideration of the fact and circumstances of the case, I am of firm opinion that the assessee has concealed the particulars of his income and furnished inaccurate particulars of his income within the meaning of section 271(1)(c ) r.w. explanation therein and has thereby rendered itself liable for penalty u/s 271(1)(c ) and I am satisfied that this a fit case for levying penalty u/s 271 (1)(c) of the IT Act.
8. The minimum Penalty leviable i.e. 100% of the Tax to be Rs.2,44,875/- and Maximum Penalty leviable is 300% of the tax to be Rs.7,34,625/-. Therefore I impose a Minimum Penalty of Rs.2,44,875/- .
This penalty order has been passed with prior approval of Jt. C.I.T. Range 19(2) Mumbai vide his letter No. Jt. CIT Rg. 19(2)/ Penalty Approval/2014-15 dated 03/07/2014.”
Aggrieved by the penalty order dated 03-07-2014 passed by the AO u/s 271(1)(c) , the assessee filed first appeal before learned CIT(A) and submitted that assessee is a small time dobhi engaged in washing and ironing of cloth . The assessee submitted that he is 66 years of age and illiterate person having no knowledge of the provisions of 1961 Act. It was submitted that assessee relied on his tax practitioner in filing of its return and assessee got the advice from its tax practitioner that since he has invested in another property and hence there is no need to pay taxes. It was submitted that hence the return of income was filed without declaring long term capital gains. It was also submitted that cost of tenancy had to be taken at the value prevailing as on 01.04.1981 as mother was tenant prior for 01.04.1981 and it is only on death of the mother of the assessee sometime in 1980, the assessee got the tenancy right and it is inadvertently that the assessee has not taken the cost of tenancy rights as on 01.04.1981 and assessee cannot be penalised for said fault of his tax practitioner. It was submitted that assessee cooperated and submitted all the details during the course of assessment proceedings . It was also submitted that the assessee was working in Kuwait but due to ill health, the assessee came back to India in 2007 and had a by-pass surgery in April 2007. It was submitted that assessee was entitled for taking cost of tenancy as deduction at the indexed cost of acquisition of the said tenancy but since this was not advised by his tax practitioner nor it was advised by the Income Tax Officer, the same could not be claimed . The assessee relied upon CBDT circular dated 11/04/1955 to contend that the AO‟s duty is to assist taxpayers in computing correct income which is chargeable to tax . It was submitted that assessee enclosed copy of agreement to provide alternate accommodation as per agreement dated 09.12.2003 wherein receipt in the name of his father dated 08.03.1977 at page no. 21 shows that tenancy was before 1977 in favour of his father and since there were payments made for the tenancy , the assessee was entitled for deduction towards cost of acquisition of tenancy but for the ill-advice of the tax practitioner , the assessee could not claim the cost of acquisition of tenancy and paid taxes as he was not having knowledge of provisions of Income Tax Act. It was submitted that it was the duty of the AO to have pointed out the said error and allow the cost of the tenancy at its indexed value as deduction. Thus it was submitted that there was no intention to conceal any income from Revenue. The assessee relied upon the following case laws as under:-
1. Hon’ble Allahabad High Court decision in the case of CIT v.. Hari Om Ashok Sumar Sugar Works (ITR no. 78 of 1992) 2. Hon’ble Andhra Pradesh High Court decision in the case of CIT v. Sania Mirza (order dated 09.02.2012 in of 2011) 3. Hon’ble Madhya Pradesh High Court decision in the case of CIT v. Pitambarads Dulichand reported at 273 ITR 271 4. Hon’ble Bombay High Court decision in the case of CIT v. Sidhartha Enterprises reported at 322 ITR 80 5. Hon’ble Bombay High Court decision in the case of CIT v. Shahbad Co-operative Sugar Mills Ltd. reported at 322 ITR 73. 6. Hon’ble Supreme Court decision in the case of CIT v. Reliance Petroproducts Ltd. reported at 322 ITR 158 7. Mumbai-tribunal decision in the case of Skill Infrastructure Ltd. v. ACIT, 139 ITD 25 (Mum.) (Trib) 8. Hon’ble Delhi High Court decision in the case of PHI Seeds India Ltd. (2008) 301 ITR 13 Thus it was prayed that the penalty be deleted. The learned CIT(A) after considering the contentions of the assessee confirmed the penalty vide appellate order dated 28-03-2016 , by holding as under:-
I have carefully considered the grounds of appeal
, statements
5. made by the appellant, assessment order and the order levying penalty u/s.271(1)(c). It is seen that the appellant had filed return of income for A.Y.2011-12 showing income of Rs.2,48,140/- as income from business. The fact that the appellant had entered into transactions of sale of two flats amounting to Rs.51,50,000/- and Rs.11,75,000/- came to light only after return of income submitted by the appellant was selected for scrutiny u/s.143(3) of the I.T.Act. The AO started the process of enquiry into the transaction of sale of flats made by the appellant on the basis of the AIR information available on record in respect of the sale of flats made by the appellant. The AO computed the income from Long term capital gains from the sale of two flats amounting to Rs.11,88,709/- after making due verifications. The appellant has accepted the working of capital gains made by the AO and has not contested the assessment made in his case. Thus it is an undisputed fact that the appellant has not filed any details of the transactions of sale of two flats in the computation of income and in the return of income. Thus there was a clear cut failure on the part of the appellant to file particulars in respect of the income earned by him from the sale of two flats during the year under consideration. The appellant 7 has argued that the default had occurred due to his lack of knowledge of income-tax and ill advice from the Tax Practitioners regarding the taxability of income earned from the sale of flats. The appellant has also argued that the Tax Practitioner advised him that there will not be any taxable capital gain from the sale of premises since the appellant had purchased property from the sale of premises. 5.1. The appellant in its written submissions and the oral arguments made during the proceedings has vehemently challenged the levy of penalty u/s.271(1)(c) of the I.T.Act amounting to Rs.2,44,875/- , The main contentions made by the appellant are as follows. i) The appellant was not having knowledge of income-tax and could not get the correct advise in respect of filing of return of income ii) The Tax Practitioner gave the incorrect advise to the appellant regarding the taxability of income from capital gains. iii) The appellant submitted the details of the property during the assessment proceedings. iv) There was no intention of the appellant to mislead the revenue. 5.2 The scheme of sec. 271(1)(c) visualizes imposition of penalty when the appellant has concealed income or when the appellant has furnished inaccurate particulars of income. In addition to these two situations, penalty can also be imposed, inter alia, when appellant is deemed to have concealed particulars of income under Explanation 1 to sec. 271(1)(c). A deeming fiction under Explanation 1 to sec. 271(1)(c) envisages two situations - (a) first, where in respect of any facts material to the computation of total income under the provisions of the Act, the appellant fails to offer an explanation or the explanation offered by the appellant is found to be false by the AO or the CIT(A); and, (b) second, where in respect of any facts material to the computation of total income under the provisions of this Act, the appellant is not able to substantiate the explanation and the appellant fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by the appellant. Thus, the penalty under sec. 271(1)(c) is a penalty for concealment of income or for furnishing of inaccurate particulars, or, under the extended definition by the virtue of Explanation 1 to section 271(1)(c), for a deemed concealment of income. 5.3 In the present case, the appellant has failed to show the income from long term capital gains on account of sale of two fiats in the Return of income. There is no mention in respect of any facts related to the sale of flats in the computation of total income as well as in the return of income. The appellant has explained that the default was on account of the ignorance of law by the appellant as well as ill advice given by the Tax Practitioner. Though the appellant has claimed that he is illiterate and person of low means, the facts mentioned by the appellant in his submissions prove that the appellant was living in Kuwait for 20 years and has returned back to do his business which is earning him taxable business income, The amounts of consideration received by the appellant from the sale of two flats during the year under consideration are also substantial. The overall financial position of the appellant was of such a level that he was able to afford a fairly skilled tax practitioner to file his return of income. As admitted by the appellant, the return of income for A.Y.2011-12 was filed with the help of a tax practitioner. The computation of income from sale of flats is not a complex issue. If an assessee provides details of such facts to any fairly skilled tax practitioner, it would not result in complete exclusion of any mention regarding sale of fats from the computation of total income as well as return of income. The appellant has also argued that he was informed by the tax practitioner that there will not be any capital gains taxable in his hands because he has purchased property from the sale of premises. However, it is evident from the facts of the case that the investment in the new house property amounting to Rs.38,04,940/- was much lesser than the total amount of sale consideration received from sale of two flats of Rs.63,25,000/-. Since the provisions for taxation of long term capital gains as well the provisions for exemption u/s.54 of the I.T.Act are very clear, no fairly skilled tax practitioner will advise any assessee to not to show any particulars regarding the transactions of sale of flats. Had the appellant really provided the details of sale of flats to the tax practitioner along with the details of investment in the new property, the tax practitioner would have in the most probability advised the assessee to file the particulars in respect of sale of flats and to claim exemption in respect of the new property by giving all the details. In view of these facts, the explanation given by the appellant that the complete absence of any mention in respect of the sale of flats and the income earned from it, is a false explanation. Therefore, the deeming provisions of explanation 1 to section 271(1)(c) are attracted in the present case. The deeming provisions come into play where in respect of facts, materials to the computation of the total income of any person under this act, (i) when the appellant fails to provide an explanation, (ii) when the appellant provides an explanation which is found to be false, and (iii) when the appellant provides an explanation which he fails to substantiate and he fails to prove that the explanation was bona fide and that all the facts necessary for the same and material for computation of income have been duly disclosed by the appellant. 5.4 In the present case, though the appellant has provided an explanation regarding his failure to make any mention in respect of income earned from the sale of flat, the explanation is found to be false as discussed earlier. It is also not a case where the appellant was having any bonafide belief. The appellant himself has also not claimed to have any bonafide belief in his explanation. Instead the appellant has stated that he was relying on the advice given by the tax practitioner. Therefore, clause A of explanation 1 to section 271(1)(c) of the I.T. Act is applicable to the facts of the present case and the appellant is therefore, deemed to have concealed particulars of income. At this juncture it may be relevant to refer to the decision of the Hon'ble Supreme Court in the case of Dharmendra Textiles Processors Ltd. as reported in 306 ITR 277 wherein the Apex Court held that Mens rea was an essential ingredient of section 271(1)(c) and there is no discretion with the authority competent to impose penalty below the prescribed minimum.
6. In view of the foregoing discussion, I am of the considered opinion that the AO is fully justified on facts and in law in concluding that the case of the appellant is a fit case for imposing penalty u/s.271(1)(c) of the I.T. Act for concealing the particulars of income. Accordingly, the penalty levied of Rs.2,44,875/- at minimum rate is upheld. Ground No.1 is dismissed.
The other ground raised by the appellant says that appellant be allowed to add, amend, alter or delete any ground of appeal at the time of appellate proceedings. No such option has been exercised by the appellant during the appellate proceedings. Therefore, it is clear that this ground of appeal is academic in nature and no decision is required in respect of this ground of appeal. For the statistical purposes, this ground should be taken as dismissed.”
6. Aggrieved by the decision of learned CIT(A), the assessee has come in an appeal before the tribunal . The Ld. Counsel for the assessee submitted before us that assessee has sold certain premises and has acquired another residential premises for which exemption u/s. 54 was claimed . It was submitted that assessee is an old and illiterate person engaged in washing and ironing of cloth and he is a small time dhobi. It is submitted that this is the first return of income filed by the assessee with Revenue. The assessee filed written submissions before learned CIT(A) which are placed in file. The learned counsel for the assessee has also relied upon the following case laws as under:-
1. Pankaj Kumar Gupta v ITO in dated 16.01.2018 2. P K Joshua v. ITO in ITA no. 4487 to 4491/Mum/2014 dated 07.06.2017 The assessee also relied upon the decision of Hon‟ble Andhra Pradesh High Court in the case of Sania Mirza(supra) . The assessee has pleaded for deletion of the penalty levied by the AO which was later confirmed by learned CIT(A). The Ld. DR on the other hand has relied upon the order of learned CIT(A) which was brought to our notice .
7. We have considered rival contentions and perused the material on record including cited case laws. We have observed that the assessee is dhobi and engaged in washing and ironing of cloth. The assessee has claimed himself to an illiterate person . The assessee has also pleaded to be of old age and not maintaining good health. The assessee has claimed that he was earlier working in Kuwait and returned to India in 2007 due to ill- health and he had by-pass surgery in April 2007. The assessee was not filing any return of income with the Revenue till AY 2010-11 and this is the first return of income filed by the assessee with Revenue. The assessee has sold two flats one at Mira Road and another flat at Vakola , Santacruz (E), Mumbai during relevant year under consideration. The assessee also purchased property during the year under consideration for which the assessee was entitled for exemption u/s 54 of the 1961 Act. The assessee did not disclosed both sale and purchase of the properties undertaken by him during the relevant period under consideration in the return of income filed with the Revenue . The assessee did not disclosed taxable long term capital gains in the return of income filed with the Revenue and no taxes stood paid to Revenue. During assessment proceedings conducted by the AO u/s 143(3) r.w.s. 143(2), the AO came in possession of information from AIR that the assessee has sold and purchased immovable properties during the year under consideration and the same was not declared in the return of income filed with the Revenue. When it was pointed out by the AO, the assessee gave all details and finally assessment u/s 143(3) was framed by the AO bringing to tax long term capital gains chargeable to tax . The assessee accepted assessment framed by the AO u/s 143(3) and no appeal was filed by the assessee. It is claimed that the flat at Santacruz(W) was allotted under SRA in lieu of tenancy right , which tenancy rights were initially held in the name of his father and as per the agreement produced before the authorities below dated 09-12-2003 between the assessee and developer Sagar Shopping, the father had made payments under tenancy rights in the year 1977 on 08-03-1977 which showed that tenancy was held by father prior to 1977 which stood mentioned at page no. 21 of the agreement dated 09.12.2003 to provide alternate accommodation under SRA in lieu of tenancy rights. The tenancy passed on to assessee‟s mother on death of father . After death of mother of the assessee, the tenancy came to be in favour of the assessee under the tenancy laws. The mother of the assessee expired in the year 1980 . The assessee had not claimed the acquisition cost of tenancy while computing long term capital gains on sale of flat at Vakola which as per the assessee had to be taken based on prevailing value as on 01.04.1981 and thereafter indexation has to be applied as per cost inflation index. It is the claim of the assessee that assessee is illiterate person of old age non-maintaining good health and was ill advised by his tax Practitioner. It is also claimed that the AO despite having all the documents in his possession did not advised assessee to claim the value of tenancy as on 01.04.1981 and its indexation thereof , as deduction from the sale proceed of said alternate flat allotted under SRA in lieu of tenancy right. It was submitted that the AO was duty bound to have allowed the said value of tenancy rights as on 01-04-1981 and its indexation thereof while computing long term capital gains. The assessee also relied upon CBDT circular dated 11-04-1955 to contend that it is the lawful duty of the AO to assist the tax- payer in paying correct taxes and to grant necessary reliefs and deduction even if the same were not claimed by taxpayer. It is the claim of the assessee that he was ill advised by counsel and the assessee being illiterate was having no knowledge of nitty-gritty‟s of the complex provision of 1961 of the Act. It was claimed that assessee was told by his tax practitioner that since he has purchased new residential properties and hence there is no need to pay tax on the sale of properties. The assessee has claimed that once he came to know that he is liable to pay tax he came forward and deposited income-tax after declaring the said income during the course of assessment proceedings. The assessment order framed by the AO was accepted and no appeal was filed. It is also claimed by the assessee had the AO allowed deduction regarding the tenancy cost at a value as on 01.04.1981 and indexation thereof, there would have been no tax liability. Thus in nutshell it is claimed that there is no concealment of particulars of income or furnishing of inaccurate particulars of income and no penalty is exigible within the mandate of provisions of Section 271(1)(c). We have gone through the entire spectrum of the factual matrix surrounding this appeal and after considering the entire factual matrix of the case, we are of the considered view that assessee has come forward with a bonafide explanation and the conduct of the assessee is bonafide which takes it out from exigibility of penalty within mandate of penalty provisions as are contained in section 271(1)(c) and hence no penalty is exigible on the assessee keeping in view totality of factual matrix and circumstances of this peculiar case.Thus, we order deletion of the penalty levied by the AO u/s 271(1)(c) of the 1961 Act. The assessee succeeds in this appeal. We order accordingly.
In the result , appeal of the assessee is allowed.