N.BASKAR,CHENNAI vs. ACIT NON CORPORATE CIRCLE 16, CHENNAI

आदेश /O R D E R

PER M. BALAGANESH, ACCOUNTANT MEMBER:

ITA No.2104/Mds./2017 :- 2 -:

2. The only issue to be decided in this appeal is as to whether the ld CITA was justified in upholding the levy of penalty u/s 271(1)(c) of the Act, in the facts and circumstances of the case.

A notice u/s 148 of the Act was issued on the assessee in view of the fact that the assessee had not reported the capital gains in respect of sale of land situated at Mugalivakkam village for a total consideration of `1,80,73,292/-. The assessee had executed the sale deed in the capacity of power of attorney holder in favour of M/s VGN Homes Pvt Ltd vide registered sale deed on 7.12.2010. In the said sale deed, under the consideration column, it was mentioned that the consideration had been duly paid by the buyer of the land. But assessee pleaded that it had not received any consideration and hence did not bother to offer the long term capital gains on sale of land. In response to notice issued u/s 148 of the Act, the assessee offered the salary income together with the long term capital gains on sale of the abovementioned land and paid the due taxes thereon. The said return was duly accepted by the ld AO and assessment was completed accordingly.

The ld AO levied penalty u/s 271(1)( c) of the Act on the addition made towards long term capital gains in the sum of `22,00,998/- on the ground that the assessee would be eligible for the penalty in terms of Explanation 3

ITA No.2104/Mds./2017 :- 3 -: to section 271(1)( c) of the Act. This action of the ld AO was upheld by the ld CITA. Aggrieved, the assessee is in appeal before us on the following grounds:-

“1.1 The Order of the Learned Commissioner of Income-tax (Appeals) — 4, Chennai, is contrary to the law and facts of the case.

1.2 The learned Commissioner of Income-tax (Appeals) — 4, Chennai, erred in not considering Ground Nos.1O and 11 of the Grounds of Appeal, in respect of issuing a notice which is invalid in law, as the specific ground under which the penalty proceedings were initiated was not mentioned in the said Notice.

1.3 The learned Commissioner of Income-tax (Appeals) — 4, Chennai, erred in not considering Ground No. 12 of the Grounds of Appeal, in respect of not affording an opportunity to the appellant by the incumbent Assessing Officer before passing the Penalty Order.

1.4 The Learned Commissioner of Income-tax (Appeals) — 4, Chennai, erred in not considering the written submissions filed before him by the appellant.

1.5 The Learned Commissioner of Income-tax (Appeals) — 4, Chennai, erred in not adducing to the fact that the appellant has not deliberately avoided payment of tax on sale of plots.

1.6 The Learned Commissioner of Income-tax (Appeals) — 4, Chennai, erred in not considering the submission that the appellant was not liable to file return as the appellant was in receipt of salary income which has not exceeded the maximum amount not chargeable to tax.

1.7 The Learned Commissioner of Income-tax (Appeals) — 4, Chennai, erred at Para 7 of the Order in stating that the appellant has not furnished any documentary evidence that the appellant was not in receipt of the sale consideration, even though the said fact was not controverted by the Assessing Officer, more so, when an Order of Attachment was passed by the Assessing Officer under Section 28lB of the Act on the buyer of the plots.

ITA No.2104/Mds./2017 :- 4 -:

1.8 The Learned Commissioner of Income-tax (Appeals) — 4, Chennai, erred in merely following the observations of the Assessing Officer and not analysing independently whether the appellant has consciously concealed the particulars of income or furnished inaccurate particulars of such income.

1.9 The facts in the case laws relied on by the learned Commissioner of Income-tax (Appeals) —4, Chennai are against the facts in the case of the appellant.

3. Relief claimed in Appeal:

The order of the Learned Commissioner of Income-tax (Appeals) — 4, Chennai, in respect of the above matters maybe set aside and pass such orders as the Hon’ble Members of the Bench, may deem fit on proper appreciation of the facts and circumstances of the case.”

4. The ld AR argued that the show cause notice issued by the ld AO u/s. 274 read with section 271(1)(c) of the Act was defective in as much as it did not contain the offence committed by the assessee ie. whether the assessee had concealed the particulars of his income or had furnished inaccurate particulars of his income. There was no specific charge made out by the ld. AO in this regard on the assessee in the said show cause notice. Accordingly, the ld AR prayed for cancellation of the penalty by placing reliance on the decision of the Hon’ble Karnataka High Court in the case of CIT vs SSA’S Emerald Meadows in of 2015 dated 23.11.2015 which was later

ITA No.2104/Mds./2017 :- 5 -: approved by the Hon’ble Supreme Court by dismissal of Special Leave Petition (SLP) by the revenue in CC No. 11485/2016 dated 5.8.2016.

In response to this, the ld DR vehemently relied on the order of the ld. AO.

Now the short question that arises for consideration is as to whether the penalty could be validly levied based on the defective show cause notice. This issue has been addressed by the Hon’ble Karnataka High Court in the case of CIT vs SSA’S Emerald Meadows in of 2015 dated 23.11.2015 which in turn placed reliance on another judgement of the same court in the case of CIT vs Manjunatha Cotton and Ginning Factory reported in 359 ITR 565 (Kar). In the said decision, their Lordships of Hon’ble Karnataka High Court held that :-

3. The Tribunal has allowed the appeal filed by the assessee

holding the notice issued by the Assessing Officer under section 274 read with section 271(1)(c ) of the Income Tax Act, 1961 (for short ‘the Act’) to be bad in law as it did not specify which limb of Section 271(1)(c ) of the Act, the penalty proceedings had been ITA No.2104/Mds./2017 :- 6 -: initiated i.e , whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of Commissioner of Income Tax vs Manjunatha Cotton and Ginning

Factory reported in (2013) 359 ITR 565.

question of law arises in this appeal for determination by this Court.

The appeal is accordingly dismissed.”

5.1. We find that the Revenue had preferred a SLP before the Hon’ble Supreme Court against this judgement which was dimsised in CC No. 11485/2016 dated 5.8.2016 by observing as under:-

“UPON hearing the counsel, the Court made the following ORDER Delay condoned.

We do not find any merit in this petition. The special leave petition is, accordingly dismissed.

Pending application, if any, stands disposed of.”

5.2. Respectfully following the aforesaid judicial precedents, we cancel the levy of penalty in the facts and circumstances of the case.

ITA No.2104/Mds./2017 :- 7 -:

Since the levy of penalty has been cancelled on this technical issue, no decision is hereby rendered on merits of the addition. Accordingly the grounds raised by the assessee are allowed.

Order pronounced on 25th January, 2018 at Chennai.