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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA & SHRI PAWAN SINGH
Date of Hearing –04.05.2017 Date of Order –30.05.2017
O R D E R PER: SHAMIM YAHYA
This appeal by the assessee is directed against order of Ld. CIT-A dated 21.05.2014 and pertains to assessment year 2007-08.
The grounds of appeal read as under:
1. On the fact and circumstances of the case as well as in Law, the Learned CIT(A), erred in confirming the penalty levied u/s 271 (1 )(c) by Learned Assessing Officer without appreciating the facts of the case.
Mahendra L. Shah (HUF), ITA no.4382/Mum./2014 2. On the fact and circumstances of the case as well as in Law, the Learned CIT(A), erred in confirming the penalty levied u/s 271 (1 )(c) by Learned Assessing Officer without appreciating the fact that non-disclosure of capital gain on the sale of agricultural land under the bonafide belief of its non- taxability.
On the fact and circumstances of the case as well as in Law, the Learned CIT(A), erred in confirming the penalty levied u/s 271 (1 )(c) by Learned Assessing Officer without appreciating that a mere rejection of a legal claim which would not amount to furnishing of inaccurate particulars of income.
4. On the fact and circumstances of the case as well as in Law, the Learned CIT(A), erred in confirming the penalty levied u/s 271 (1 )(c) by Learned Assessing Officer without appreciating that mere rejection of explanation of assessee in assessment proceeding would not be sufficient for the levy of penalty.
5. On the fact and circumstances of the case as well as in Law, the Learned CIT(A), erred in confirming the penalty levied u/s 271 (1 )(c) by Learned Assessing Officer without appreciating that addition made on account of debatable issue relating to the interpretation of section 2 (14) (iii) (a) of the Act wherein population of 10,000 is not to area of village where the land is situated but to the area of total jurisdiction of the relevant authority (Pardi municipality).
6. The appellant craves leave to add, amend, alter or delete the said ground of appeal.
Mahendra L. Shah (HUF), ITA no.4382/Mum./2014 3. In this case it was noticed by the Assessing Officer that the assessee had sold the land situated at Survey No. 1021 in Village Pardi (Gujarat). The profit arise on the same was claimed as exempt and not chargeable to tax under capital gains, on the ground that the land was an agricultural capital asset under the provisions of Sec. 2(l4)(iii)(a) of the I. T. Act. To verify the claim of the assessee, the Assessing Officer requested the land revenue authorities at Pardi to confirm whether the said land is situated outside the 8 km. from the limits of Pardi Municipality. The Talathi of Pardi provided the map showing the location of the aforesaid land and confirmed that the land is situated within the 2 km. from the Municipality at Pardi. The Assessing Officer confirmed the same from the official website of Census of India that, as per the last census the total population of the Municipality of Pardi was 24,231.
After gathering all these facts, AO observed that the assessee has knowingly providing incorrect information regarding capital gain, land, population at Pardi. He was serves with show cause notice on the basis of the facts gathered from land revenue authorities at Pardi, as to why the receipt on sale of land should not be subjected to the capital gain tax. The assessee’s representative filed letter saying that the assessee is not staying in Pardi and while filing the return of income for A.Y.2007-08, he was under bonafie belief that Mahendra L. Shah (HUF), ITA no.4382/Mum./2014 the land was outside Pardi Municipality and accordingly, the capital gain was taken as exempt.
From the above facts and circumstances AO opined that the assessee knowingly suppressed income by providing incorrect information not only at the time of filing of return of income but also during the assessment proceedings. Accordingly, the A.O held that the sale of land at Pardi does not satisfy the conditions laid down in Sec. 2(14) of the I.T. Act and the said transaction is liable to capital gain tax.
The acquisition cost of the land was taken at Rs.22,000/- by increasing the four times of the value given by the assessee. The long term capital gain works out by the Assessing Officer at Rs.28,85,820/-. The penalty proceedings u/s. 271 (1)(c) initiated for filing inaccurate particulars of income and concealment of income.
A show cause notice issued to the assessee on 23.04.2010 requesting him to appear before the Assessing Officer on 20.05.2010 at 12.30 p.m. The assessee's representative replied vide his letter dated 29.04.2010 that the assessee has preferred appeal before the CIT(A) against the said addition and which is pending. Hence, he requested to keep the proceeding u/s. 271(l)(c) in abeyance till the disposal of the CIT(A).
Mahendra L. Shah (HUF), ITA no.4382/Mum./2014 The CIT (A) vide its order dated 27.04.2011 confirmed the additions of the Assessing Officer and dismissed the appeal of the assessee. Again the show cause notice issued to the assessee on 15.11.2011 requesting the assessee to appear before the undersigned on 25.11.2011 at 12.30 p.m. Assessee's representative vide his letter dated 21.11.2011 informed that the assessee has filed the appeal' before the Hon'ble IT AT and, therefore, requested to keep the penalty proceedings in abeyance till the disposal of the appeal of the assessee. The Hon'ble ITAT also confirmed the addition made by the Assessing Officer and dismissed the appeal of the assessee. Show cause notice issued to the assessee on 12.02.2013 for his explanation/submission. No reply has been received from the assessee. Hence, A.O. levied a penalty of Rs.5,80,258/- u/s.271(1)(c).
Upon assessee’s appeal confirmed the penalty
Against above order is in appeal before us. We have heard both the counsel and perused the records. We find that in this case assessee has sold agricultural land. Furthermore assessee had obtained a certificate of city survey superintendent Vapi that the concerned land was outside city limits of Vapi. Furthermore the assessee was not staying in the said locality. In these circumstances Mahendra L. Shah (HUF), ITA no.4382/Mum./2014 assessee was of the opinion that the sale of land was not exigible to capital gains tax.
As against the above revenue authorities have made enquiry and on the basis of their enquiry it came to notice that the concerned land was situated within 8 km of the municipal limits. Hence despite being agricultural land the sale was exigible to capital gains tax. It is further noted that learned CIT-A has himself accepted that the assessing officer at the beginning was not clear as to whether it is a case of concealment of income or furnishing of inaccurate particulars of income.
In the background of aforesaid factual scenario in our considered opinion assessee cannot be held guilty of contumacious conduct so as to warrant levy of penalty under section 271 (1) c. This view is supported by the larger bench of honourable apex court in the case of Hindustan Steel Ltd., vs. State of Orissa 83 ITR 26.
Accordingly in the background of aforesaid discussion and precedent in our considered opinion the conduct of the assessee was not contumacious so as to warrant levy of penalty under section 271(1)(c). This is more so when at the beginning of the enquiry the assessing officer was not clear as to whether there is a concealment of income or furnishing of inaccurate particulars of income.
Mahendra L. Shah (HUF), ITA no.4382/Mum./2014 Accordingly we set aside the order's of authorities below and delete the levy of penalty.
In the result this appeal filed by the assessee stands allowed.