KARAMJIT SINGH DHANJAL,NEW DELHI vs. JCIT, NEW DELHI

ORDER

Per L.P. Sahu, Accountant Member:

1. That on the facts and the circumstances of the case, the Ld. CIT(Appeals) has erred both on law and on facts in confirming the imposition of penalty of Rs.4,49,246/- imposed u/s. 271(1)(c) of the Income Tax Act, 1961 dated 30.05.2011 by JCIT Circle 26(1), New Delhi for A.Y. 2008-09 ignoring the fact that the appellant was under a bonafide belief that the transaction in question gave rise to long term capital gain.

2. That on the facts and the circumstances of the case, CIT(Appeals) was wrong in confirming the order of the AO passed u/s. 271(1)(c) of the Income Tax Act 1961 dated 30.05.2011 when all the material necessary for completion of income was disclosed before AO and available on the record.”

2. The brief facts of the case are that the assessee filed return of income on 21.07.2009 declaring income of Rs.11,16,978/-. The return was processed u/s. 143(1). Later on the case was selected for scrutiny through CASS. During the scrutiny proceedings, the AO noted that in the computation of income, the assessee has shown long term capital gain on the sale of industrial plot bearing No. WH4, Mayapuri Industrial Area, Phase-I, New Delhi for consideration of Rs.52,75,000/- and he also availed benefit of section 54 for the purchase/construction of new house. In this regard, the Assessing Officer asked to justify the entire long term capital gains in his hand while he was having ½ share in the said property. In this regard, the assessee clarified that the above property was purchased in F.Y. 1997-98 jointly with his father each having ½ share. He also submitted that ½ share in the property which was registered in the name of his father was purchased by the assessee on 22.02.2007 and the entire property was sold on 04.02.2008. He submitted a revised computation of income and accordingly, computed the short term capital gain on the sale consideration of ½ share of property which was purchased from his father on 22.02.2007 and paid tax thereon accordingly before completion of assessment. The ld. Assessing Officer also assessed the income of the assessee at Rs.21,63,000/- after including the additional income declared in the revised computation. The AO, however, initiated penalty proceedings u/s. 271(1)(c) of the Act for filing inaccurate particulars of income and imposed a penalty of Rs.4,49,246/- u/s. 271(1)(c) of the Act. Against this order, the assessee appealed before the ld. CIT(A), who upheld the order of the Assessing Officer. Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before the Tribunal.

• Later on, with the change in family circumstances, the appellant's father Sh Darshan Singh demanded his share and to settle the family dispute the appellant in the year 2007 paid Rs. 4,44,000/- to his father Sh. Darshan Singh and on the basis of agreement to sell ,GPA got his share registered in his own name. • During the previous year relevant to assessment year 2008-09 the said property was sold by the assessee for a total consideration of Rs. 52.75 Lac. • In view of the earlier understanding the appellant treated the full capital gain as long term capital gain without considering the registration in the year 2007 of ½ share of the property under reference. c) Later on when the fact was brought to his notice that the portion of plot purchased from his father does not fulfill the condition of long term capital gain, he got his income re-computed from his Chartered Accountant and surrendered the amount of Rs. 21,60,200/- as short term capital gain on sale of property vide letter dated 29-10-2010 and paid the additional taxes and interest totaling to Rs. 6,42,338/- as detailed below: 29-11-2010 Rs.4,00,000.00 04-03-2011 Rs.1,50,000.00 31-03-2011 Rs.92.338.00 TOTAL Rs. 6.42.338.00 While imposing the penalty the Ld. Assessing Officer has ignored the above action of the appellant. In fact the appellant had no intention to conceal any income nor gave incorrect particulars of his income. All the relevant papers were duly submitted and co-operated with the department fully. Reliance is placed on the following cases: 1. "Punjab High Court in case of CIT vs. Suraj Bhan [2007] 159 Taxman 26 has held that penalty could not be imposed when assessee has filed revised return showing higher income and give explanation that higher income was offered to buy peace of mind and to avoid litigation." In our case the Appellant has filed revised computation after paying whole taxes. But during the course of Assessment proceeding when Appellant has noticed that Capital Gain on 1/2 Share of property sold has been wrongally computed, he has suo moto revised his Computation of Income by showing higher Income and after payment of full taxes. As the Appellant has filed the revised computation showing higher income and he has done this to buy peace of mind and to avoid litigation. So Penalty U/s 271(l)(c) should not be levied.

In our case penalty should not be levied as Appellant has wrongly claimed short term capital gain as long term capital gain under bonafide belief the property was his personal property though the same was in the name of both of them. So wrong claim is made due to bonafide mistake. 5." In case of CIT vs. Reliance Petroproducts Pvt Ltd. 322 ITR 158 (SC) held that where information given is not found to be incorrect, assessee cannot be held guilty of furnishing inaccurate particulars of income for the purpose of levying penalty u/s 271(l)(c). Further held that mere making a wrong claim does not amount to furnishing inaccurate particulars. In the absence of finding that any details supplied by assessee is incorrect or false, penalty cannot be levied. Since Penalty can not be levied due to mere making of wrong claim and It does not amount to furnishing of inaccurate particulars.

6. In the case of Dilip N.Shroff Vs. JCIT (2007)29 ITR 519(SC) that imposition of Penalty for Concealment is not automatic. A.O has to be fair and objective." Concealment of Income" refers to deliberate act on the part of assessee. A mere omission or negligence would not constitute a deliberate act of suppression very or suggetio falsi. Since mistake has occurred due to omission or negligence. It would not constitute a deliberate act of suppression very or suggetio falsi. So penalty U/s 271(l)(c) of the Income Tax Act 1961 should not be levied.

The Supreme Court in the case of Cement Marketing Co. of India Ltd Vs Asst. CST (1980) 124 ITR 15 has held that unless the filing of an inaccurate return is accompanied by a guilty mind, penalty could not be imposed. It has been further held that the return could not be "false" unless there is an element of deliberateness in it.”

“8. We have heard the ld. DR and gone through the facts of the case. As is apparent from the aforesaid facts, the AO levied penalty u/s 271(1)(c) of the Act in respect of an amount of `60,39,824/-comprising addition on account of rental income-`4,63,388/-;disallowance of interest-`2,51,507/-,addition towards short term capital gains on sale of properties-`10,50,950/-;short term capital gains on sale of shares-`1,60,503/- and long term capital gains-`40,98,919/-. The ld. CIT(A) cancelled the penalty on the ground that disallowance of interest was deleted by the ITAT while issue relating to addition towards rental income had been restored to the file of the AO and additional income towards capital gains on sale of properties and shares was disclosed by the assessee suo motu during the course of assessment proceeding. The assessee submitted revised return since in the original return long term capital gain on UTI liquid plus fund institution plan was claimed exempt u/s 10(38) of the Act as also to reflect correct figures of sale of land at Kheri Sadh and rental income. Merely because the assessee disclosed additional income suo motu after issue of a notice u/s 143(2) of the Act, does not amount to detection of concealment by the AO. Apparently, the assessee had given all particulars of his income and had disclosed all facts to the AO during the assessment proceedings.. It is not the case of the AO that in reply to a query of the AO, some new facts were discovered or the AO had dug out some information which was not furnished by the assessee. In such circumstances, we are of the opinion that no penalty is leviable. It is well settled that assessment proceedings and penalty proceedings are separate and distinct and as held by Hon'ble Supreme Court in the case of Ananthraman Veerasinghaiah & Co. Vs. CIT, 123 ITR 457, the finding in the assessment proceedings cannot be regarded as conclusive for the purposes of the penalty proceedings. It is, therefore, necessary to reappreciate and reconsider the matter so as to find out as to whether the addition made in the quantum proceedings actually represents the concealment on the part of the assessee as envisaged in sec. 271(1 )(c) of the Act and whether it is a fit case to impose the penalty by invoking the said provisions. It is also well settled that the criterion and yardsticks for the purpose of imposing penalty u/s 271(1)(c) of the Act are different than those applied for making or confirming the additions. The Hon’ble Kerala High Court in the case of CIT v. M. George & Bros. [1986] 160 ITR 511 held that where the assessee for one reason or the other agrees or surrenders certain amounts for assessment, the imposition of penalty solely on the basis of the surrender will not be well-founded. Hon’ble Punjab and Haryana High Court in the case of CIT v. Suraj Bhan [2007] 159 Taxman 26 while following the decision in CIT v. Suresh Chandra Mittal [2001] 251 ITR 9(SC), held that when an assessee files a revised return showing higher income and gives an explanation that he offered higher income to buy peace of mind and avoid litigation, penalty cannot be imposed merely on account of higher income having been subsequently declared. The Hon’ble Apex Court in CIT v. Suresh Chandra Mittal, [2001] 251 ITR 9/119 Taxman 433, upheld the decision of the Hon’ble Madhya Pradesh High Court rendered in the case of CIT vs. Suresh Chandra Mittal [2000] 241 ITR 124, where in similar circumstances it was held that the initial burden lies on the revenue to establish that the assessee had concealed the income had furnished inaccurate particulars of such income. The burden shifts to the assessee only if he fails to offer any explanation for the undisclosed income or offers an explanation which is found to be false by the Assessing Officer. 8.1 In Qudai International vs. Income Tax Officer 2009 (13) MTC 622 (Trib), the ITAT Lucknow Bench 'A' held that "mere raising of query by the Assessing Officer did not amount to detection of concealment. It cannot therefore, be said that the revised return was filed after detection of concealment and was not voluntary. The term "detection" itself implies the Assessing Officer had reached a conclusion but the query raised by the Assessing Officer was only first step in detection of concealment. If the assessee voluntarily revised the return, it could not be said that it does not fulfill requirements of section 139(5) of the Act." The facts of the present case are also similar to the facts of the aforesaid referred to case. 8.2 Similarly, in the case of Dy. CIT vs. Tarun Agarwal 2009 (13) MTC 831, the ITAT Lucknow Bench 'A' held that "the assessee had surrendered the amount before any specific detection of undisclosed income or even before the issue of notice. Even though a general enquiry was going on and notices had been issued to some of his relatives and the amount might have been surrendered because of compulsion of circumstances, it was not sufficient to penalise the assessee as the factum of detection was not there." In the instant case also, nothing is brought on record that there was any detection at the level of the AO to suggest that the assessee concealed the income on account of capital gains, which was offered for taxation suo motu in the revised return. 8.3 Merely because a notice u/s 143(2) had already been issued and the assessee filed revised return thereafter, disclosing additional income towards capital gains, which was not correctly shown in the original return, does not tantamount to detection of concealment of income u/s. 271(1)(c) of the Act . Hon’ble Madhya Pradesh High Court in the case of CIT v. S.V. Electricals P. Ltd., 155 Taxman 158 and Hon’ble Jharkhand High Court in CIT v. Ashim Kumar Agarwal, 153 Taxman 226 held that where the assessee surrenders his full income, though at a later stage, there was no question of any concealment on his part and consequently, no penalty under Section 271(1)(c) was leviable, and that a omission from return of income did not amount to concealment. Hon’ble jurisdictional High Court while adjudicating the issue of levy of penalty u/s 271(1)(c) of the Act in the case of CIT vs. Harnarain in their decision dated 31st October,2011 in concluded that “surrender of the amount by the assessee after receipt of the questionnaire could not lead to an inference that it was not voluntary, in the absence of any material on record to suggest that it was bogus or untrue. It is further evident that there was neither any detection nor any information in the possession of the Revenue which might lead to a conclusion that there was a detection by the Revenue of concealment. Accordingly, the question of law framed is answered against the Revenue and in favour of the assessee.” 9.. In the instant case, the assessee voluntary disclosed additional income during the course of assessment proceedings and paid tax thereon. In the light of view taken in the aforesaid decisions, it cannot be said in the case before us, additional income disclosed during the course of assessment proceedings was not voluntary or that the assessee wanted to conceal the income. Even though the revised return was found to be invalid, the AO accepted the income as declared in the revised return and computation. The AO did not bring any material on record that the declaration of income made by the assessee in his revised return or his explanation was not bonafide. In these circumstances, there appears to be no basis for imposition of penalty on the ground that the assessee furnished inaccurate particulars of income. Since the Revenue have not placed before us any material nor brought to our notice any contrary decision so as to enable us to take a different view in the matter, we are not inclined to interfere. Therefore, ground no.1 in the appeal is dismissed.” In the aforesaid case also, the assessee filed revised computation of income in response to the notice u/s. 143(2), whereby further income was declared by the assessee and assessment was also made by the Assessing Officer by adopting the figures declared by the assessee in the revised computation. Similar is the situation in the case before us. Therefore, respectfully following the order of coordinate Bench in the aforesaid case, we are of the opinion that the ld. CIT(A) has wrongly confirmed the penalty imposed by the Assessing Officer u/s. 271(1)(c) of the Act. Accordingly, the appeal of the assessee deserves to be allowed.