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Income Tax Appellate Tribunal, MUMBAI BENCHES “B”, MUMBAI
Before: Shri Mahavir Singh & Shri Manoj Kumar Aggarwal
Date of Hearing :03.10.2017 Date of Pronouncement :11.10.2017 O R D E R
Per Mahavir Singh, Judicial Member
This appeal by assessee arises out of the order of the Commissioner of Income Tax (Appeals) – 30, Mumbai [in short CIT(A)] in appeal No.CIT(A)-30/ITO- 19(1)(3)/IT-63/12-13 dated 10.12.2013. The assessment was framed by the Income Tax Officer-Ward 19(1)(3), Mumbai,(in short ITO or AO) for A.Y. 2009-10, vide his order dated 28.03.2012, u/s. 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). The penalty under dispute was levied by the ITO Ward 19(1)(3), Mumbai u/s. 271(1)(c) of the Act vide his order dated 24.09.2012.
Shri Harilal Malukchand Mehta 2. The only issue in this appeal of the assessee is against the order of the CIT(A) confirming the levy of penalty by the AO u/s. 271(1)(c) of the Act. For this the assessee has raised the following ground:
“The learned Commissioner of Income-tax, Appeals has erred while upholding action of the Assessing Officer considering concealment of income Rs.4,99,97,801/- (return income Rs.62,60,801 + return loss Rs.4,37,37,000) against actual return of income Rs.8,94,480 with c/f. long term capital loss Rs.4,37,37,000 and assessed income Rs.8,94,480 + long term capital gain Rs.59,06,980. The learned Commissioner of Income-tax, Appeals has wrongly upheld levy of penalty Rs.1,13,29,5007- on the basis of deemed concealed income Rs. 4,99,97,8017- against tax evaded Rs.14,12,189 (tax payable as per return of income Rs.1,87,901 and tax assessed Rs. 16,00,090)
The learned Commissioner of Income-tax, Appeals has wrongly concluded that appellant has furnished inaccurate particulars of income in spite of fact that your appellant was relied on valuation report from registered valuer.”
Briefly stated facts of the case are that the assessee is deriving interest on various bonds and deposits. During the year under consideration, the assessee along with other two co-owners i.e. Shri Chandrakant Malukchand Mehta and Shri Mulraj Malukchand Mehta sold immovable property situated at Plot bearing CTS No. E/498 at Bandra (W), Mumbai, for a sum of ` 6,95,79,000/- and assessee’s 1/3rd share was at ` 2,31,93,000/- . The assessee computed Long term capital gain after taking the cost of acquisition as on 01.04.1981 at ` 1.15 crores being 1/3rd share of this property. Accordingly, he computed the indexed cost of acquisition as on the date of sale at ` 6,69,30,000/- and declared Long term capital loss of ` 4,37,37,000/-. The Assessing Officer during the course of assessment proceedings in the case of other co-owner Shri Chandrakant Malukchand Mehta for Shri Harilal Malukchand Mehta Assessment Year 2009-10 noticed that he has shown cost of acquisition as on 01.04.1981 at `68,33,333/- for his 1/3rd share. In the case of the other co-owner, the Assessing Officer after discussion of the case and as per “Indian Valuers Directory & Reckoner”, as on 01.04.1981 has taken the cost of acquisition of the property as ` 2,05,00,000/- and accordingly, 1/3rd share was computed at `68,33,333/-. The capital gain in the case of Shri Chandrakant Malukchand Mehta was assessed accordingly. Subsequently, the assessee’s case was re-opened by issuing of notice u/s. 148 of the Act on the same reasoning. The assessee in response to the said notice filed return of income as per the cost of acquisition as on 01.04.1981 taken by the other co-owner Shri Chandrakant Malukchand Mehta and re-worked capital gains as `59,06,980/-. However, Ld. AO, finally computed the capital gain as `62,60,801/- by substituting the cost of acquisition as on 01.04.1981 on the basis of “Indian Valuers Directory & Reckoner” which came to ` 20,50,206/-. To support the original cost of acquisition of Rs.669.30 Lacs adopted by the assessee, the assessee filed the valuer’s report dated 19.03.2009 of Mr J V Udani, approved valuer, who valued the property as on 01.04.1981 at ` 1.15 crores, the indexed value of which came to Rs.669.30 Lacs. The Assessing Officer assessed Long term capital gain finally at ` 62,60,801/- and taxed accordingly. No appeal was filed against the quantum addition by the assessee. The Assessing Officer initiated penalty proceedings u/s. 271(1)(c) of the Act for furnishing of inaccurate particulars of income as well as for concealment of income vide para 4.2 of the assessment order, observing as under:
4.2 Since, in the original return of income filed by the assessee, the assessee tried to conceal income by furnishing inaccurate particulars of Shri Harilal Malukchand Mehta cost of acquisition of property by furnishing false and misleading valuation report dated 19th March 2009 of M/s. J.v.Udani, approved Valuer (Fellowship No.F-1032) wherein 1/3rd share of property is valued at Rs.114 lacs whereas the same M/s. J.V.Udani, has valued the 1/3rd share of same property in the case of other co-owner at Rs 68 lacs vide his report dated 19th March, 2009, a copy of which is also available on record and subsequently only in response to the notice u/s. 148 of the I.T.Act, the assessee filed another return of revised income. Therefore, penalty proceedings u/s. 271(1)(c) are being initiated separately for furnishing inaccurate particulars and concealment of income.
The Assessing Officer levied penalty u/s. 271(1)(c) of the Act observing as under:
Coming to the merit of imposition of penalty, it is to be said that section 271(1)(c) of the Income-tax Act, 1961 is attracted where in the case of any proceedings under the Act, the Assessing Officer is satisfied that any person has concealed the particulars of his income, or has furnished inaccurate particulars of such income. The expression, “has concealed” and “has furnished inaccurate particulars” have not been define in the section or anywhere in the Income-tax Act. However, notwithstanding the difference in the two circumstances, they lead to the same effect viz. Keeping off a portion of the income, the former is direct while the latter may be indirect in its execution. ..... 16 Thus, the minimum penalty leviable is Rs.1,13,29,500/- and the maximum penalty leviable is Rs.3,39,88,500/-. Considering the facts of the case, I am satisfied that the penalty of Rs.1,13,29,500/- be levied. I, therefore, hereby direct the assessee Viz. Shri Harilal Malukchand Mehta to pay a sum of Rs.1,13,29,500/- (Rupees one crore thirteen lakhs twenty nine thousand five hundred only ) as and by way of penalty u/s. 271(1)(c) of the Income Tax Act, 1961 read with explanation of the Income-tax Act, 1961.”
Aggrieved the assessee preferred appeal before the CIT(A), who confirmed the action of the Assessing Officer vide para 6.1 and 6.2 as under:
“6.1 I have duly considered the above submission of the appellant. However, from facts narrated in the penalty order, it is evident that the Shri Harilal Malukchand Mehta appellant has colluded with M/s J.V. Udani to obtain valuation report dtd.19.3.2009, wherein the - cost of acquisition of the property sold during the year has been shown at Rs.3,45,00,000/- and 1/3rd of the above amount, i.e. Rs. 1,15,00,000/- was taken as cost of acquisition in the computation of LTCG. The appellant thus declared LTCL of Rs.4,37,37,000/- on sale of the property, instead of LTCG of Rs.62,60,801/-. On the contrary, another co-owner of the same property in his case, on the basis of valuation report dtd.19.3.2009 of the same valuer, M/s J.V. Udani, declared his 1/3rd share in the cost of acquisition of the above property at Rs.68 lac, that is 1/3rd of Rs.2,05,00,0007- and declared long term capital gain. The above manipulation of figures in the valuer's report, therefore, has to be taken to have been made at the instance of the appellant, who was trying his luck to escape paying any taxes on the long term capital gain, had assessment not been completed u/s 143(3) of the Act. This is a blatant manipulation of the provisions of the Act, and the AO was more than justified in initiating proceedings u/s 271(1)(c) of Act. In view of the above discussion, I hold that penalty is exigble in the case of the appellant.
6.2 In so far as the reliance placed by the appellant on various court decisions are concerned, the same are not applicable to the facts of the case of the appellant discussed above. On the contrary, the decisions relied upon by the AO to levy penalty in the case of the appellant are found to be more applicable. Besides, I place reliance on the hon'ble Supreme Court's decision in Civil Appeal No.9772 of 2013, in the case of Mak Data Pvt Ltd , wherein the apex court has re-confirmed the scope of section 271(1)(c) of the Act, laid down by it in UOI v/s Dharmendra Textiles Processors (2008) 13 SSC 3693 and CIT v/s Atul Mohan Bindal (2009) 589, to uphold the penalty order, Consequently, I hold and confirm that levy of penalty Rs. 1,13,29,500/- in the case of the appellant is fully justified, and dismiss the grounds of appeal.” Aggrieved, the assessee is in second appeal before the Tribunal.
We have heard the rival contentions and gone through the facts and circumstances of the case. The assessee has disclosed Long term capital loss of ` 4,37,37,000/- on sale of property and for this he has arrived at the cost of acquisition as on 01.04.1981 on the basis of the valuer’s report of approved valuer J Shri Harilal Malukchand Mehta V Udnani dated 19.03.2009 and 1/3rd share of the assessee worked out at `. 1.15 crore. After applying indexation provisions, the cost of acquisition as on 01.04.1981 was computed at ` 6,69,30,000/-. Subsequently, it was found that assessee’s brother, who is a co-owner of 1/3rd share in the property, also estimated valuation as on 01.04.1981 at ` 61,50,618/- and his share was adopted at ` 20,50,206/- and, accordingly, capital gains was calculated. The assessee revised capital gains in the return of income filed in response to notice issued u/s 148 in the light of value adopted by the co-owner and paid taxes thereupon.
6. We find that the Assessing Officer has simply not accepted the cost of acquisition as on 01.04.1981 as adopted by the assessee and relied on the “Indian Valuers Directory & Reference Book”, to incorporate the market value of the property of Mumbai as on 01.04.1981 as written by Shri Santosh Kumar [Architect, Government Registered Valuer for Land & Building] & Shri Sunit Gupta [M Val. (RE), government registered Valuer for Real Estate], who has based the valuation as on 01.04.1981 on the basis sale instances for Mumbai. The assessee has also not objected to the assessment. But can this be a case for levy of penalty u/s. 271(1)(c) of the Act? We find that Hon’ble Supreme Court in the case of Dilip N Shroff vs. JCIT [291 ITR 519] on the issue of capital gain on the basis of the valuer’s report, which was not accepted by the Assessing Officer, the penalty was deleted and relevant observation of Hon’ble Supreme Court reads as under:
“91. The assessee could get the valuation done through any other mode of index value, or the assessee could have engaged any other valuer other than a registered valuer also. In the instant case, the assessee had chosen to obtain the opinion of a registered valuer.
Shri Harilal Malukchand Mehta 92. The registered valuer has arrived his opinion on certain basis. He while making the valuation report, disclosed all the particulars. He disclosed that he had chosen to the index value method. He did not rely upon any sale instance. He might have referred to the valuation of the property as mentioned in a local newspaper. But it is not in dispute that he did not furnish any inaccurate particulars. It is true that he has not enclosed the sheet showing sale instance but nothing turns thereupon as he had not relied upon any sale instances.
There can be a genuine difference of opinion between two experts. The District Valuer, as noticed hereinbefore, having regard to the sale instances of 1979 wherein the value of the land was fixed at Rs. 500 per sq. ft., took notice of the fact that the valuation in terms of another sale instance of October 19, 1982, wherein the land was valued at about Rs. 1,823 per sq. ft. A valuation was to be arrived at as on April 1, 1981. He picked up a figure of Rs. 897 per sq. ft. No reason had been assigned in support thereof. No other or further sale instances had been given. We do not know as to whether any other sale instances were available. He merely stated that such valuation had been arrived at after taking into account the time size- shape, time gap, location-situation and also the factors like physical, social, legal and economical. Some other officer could have picked up holes in the said report. On the other hand, the opinion of the registered valuer, as would appear from the report, was that he had taken into consideration the value of the shop as Rs. 1,525 per sq. ft.
A duty may be enjoined on the assessee to make a correct disclosure of income but if such disclosure is based on the opinion of an expert, who is otherwise also a registered valuer having been appointed in terms of a statutory scheme, only because his opinion is not accepted or some other expert gives another opinion, the same by itself may not be sufficient for arriving at a conclusion that the assessee has furnished inaccurate particulars.
It is of some significance that in the standard pro forma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing the Shri Harilal Malukchand Mehta order of assessment laid emphasis that he had dealt with both the situations.
The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice (See Malabar Industrial Co. Ltd. v. CIT [2000] 2 SCC 718).
We have, however, noticed hereinbefore that the Income-tax Officer had merely held that the assessee is guilty of furnishing of inaccurate particulars and not of concealment of income; which finding was arrived at also by the Commissioner of Income-tax and the Income-tax Appellate Tribunal.
In K. C. Builders v. Asst. CIT [2004] 2 SCC 731, this court formulated the following questions for consideration (page 567) : "8. On the above pleadings and facts and circumstances of the case, the following questions of law arise for consideration by this court : (a) Whether a penalty imposed under section 271(1)(c) of the Income-tax Act and prosecution under section 276C of the Income- tax Act are simultaneous ? (b) Whether the criminal prosecution gets quashed automatically when the Income-tax Appellate Tribunal which is the final court on the facts comes to the conclusion that there is no concealment of income, since no offence survives under the Income-tax Act thereafter? (c) Whether the High Court was justified in dismissing the criminal revision petition vide its impugned order ignoring the settled law as laid down by this court that the finding of the Appellate Tribunal was conclusive and the prosecution cannot be sustained since the penalty after having been cancelled by the complainant following the Income- tax Appellate Tribunal's order no offence survives under the Income- tax Act and thus the quashing of the prosecution is automatic? (d) Whether the finding of the Income-tax Appellate Tribunal is binding upon the criminal court in view of the fact that the Chief Commissioner and the Assessing Officer who initiated the prosecution under section 276C(1) had no right to overrule the order of the Income-tax Appellate Tribunal. More so when the Shri Harilal Malukchand Mehta Income-tax Officer giving the effect to the order cancelled the penalty levied under section 271(1)(c) ? (e) Whether the High Court's order is liable to be set aside in view of the errors apparent on record? 99. In K. C. Builders (supra), this court noticed the dictionary meaning of the explanation and held (page 565) : "4. The respondent/assessing authority treated the difference between the income as per original return and revised income as concealed income. The Assistant Commissioner of Income-tax levied penalties under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') for all the aforesaid four assessment years. Accordingly, penalty proceedings were initiated. The first appeal against the order of penalties levied for concealment of income against the appellants were confirmed by the Commissioner of Income-tax (Appeals). As per the directions of the Chief Commissioner of Income-tax, four complaints were filed in the Court of the Additional Chief Metropolitan Magistrate, Egmore, Chennai for offences under sections 276C(2), 277 and 278B of the Act and sections 120B, 34, 193, 196 and 420 of the Indian Penal Code."
The learned Additional Solicitor General, however, submitted that although on the facts of the case the decision rendered is correct the view of the court that unless there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable on the part of the assessee to conceal his income so as to evade Income-tax thereon may not be correct. As at present advised, we do not intend to go into the said question; as in the facts and circumstances of the case, there are enough materials to show that the action on the part of the appellant may not be said to be such which would attract the penal provision under section 271(1)(c) of the Act.”
Even otherwise, the assessee has disclosed all the particulars and nothing was concealed by the assessee and Hon’ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd., 322 ITR 158 has clearly concluded that in case there is no concealment on facts or particulars, it cannot be a fit case for levy of penalty of income for furnishing inaccurate particulars of income. In the present case before Shri Harilal Malukchand Mehta us also the disputed penalty is levied only because the opinion of registered valuer is not accepted or some other expert gives another opinion, is not by itself sufficient for arriving at a conclusion that the assessee had furnished inaccurate particulars of income attracting penalty u/s 271(1)(c) of the Act. In the instance case, the assessee has chosen to obtain the opinion of a registered valuer and the registered valuer has arrived at his opinion on certain basis. While he making the valuation report, disclosed all particulars. There can be a genuine difference of opinion of different expert and hence, once there is difference of opinion, the penalty u/s 271(1)(c) of the Act cannot be levied. In view of the above, we are of the view that the penalty levied by the Assessing Officer and confirmed by the CIT(A) cannot be sustained and hence, it is deleted.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on this day of 11 October 2017.