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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
This two appeal by the different assessee are arising out of the different order of CIT (A)-22, Mumbai in appeal No. CIT (A)-22/ACIT-10(3)/IT-54&53/2012-13 of even date 21-01-2014. The Assessments were framed by ACIT Circle-10(3), Mumbai for the A.Y. 2009-10 vide orders dated 30-11-2011 u/s 143(3) (ii) of the Income Tax Act, 1961 (hereinafter ‘the Act’). The penalties were levied by ACIT Circle-10(3), Mumbai u/s 271(1)(c) of the Act vide his orders of even date 30-05-2012.
2. The only common issue in these two appeals of assessee is against the order of CIT(A) confirming the penalty levied by AO u/s 271(1)(c) of the Act. Both assessee have raised an identical worded grounds and facts are exactly identical regarding the issue of long term capital gains arising out of sale of the land and building situated at Sector-8 Vashi, Navi Mumbai and sold it for a total consideration of Rs.1.50 crores. Both the assessee had 50% share each amounting to Rs.75,00,000/-. This property was acquired on 11-10-1999 and the cost of acquisition was amounting to Rs.28,84,660/-. Hence, we take up in the case of Sharada Tukaram Bhor. The relevant ground raised which reads as under: - “The Ld. CIT(A) has erred in:-
Disregarding that penalty was levied on baseless adverse inferences, without establishing either concealment or furnishing of inaccurate particulars by the Appellant.
Rejecting Appellant’s suo motou revision for non-filing of revised return, disregarding that the same had time-barred.
3. Not appreciating bona finds of the Appellant’s explanation.
Disregarding that the penalty was groundless and that the levy was without application of mind.
5. Upholding AO’s false premise of a notice having been served on the Appellant, disregarding that the same was proved to be false.
6. Disregarding that the notice u/s 143(2) /142(1) called for information generally required in every scrutiny case with no specific query at all.”
Briefly stated facts are that both the assessee are director of Sanchita Frozen Foods P. Ltd. and declared income from salary, income from other sources and capital gains on sale of property. The assessee along with her husband was owner of land and building situated at Sector-8 Vashi, Navi Mumbai and sold it for a total consideration of Rs.1.50 crores. Both the assessee had 50% share each amounting to Rs.75,00,000/-. This property was acquired on 11-10-1999 and the cost of acquisition was amounting to Rs.28,84,660/-, the cost of acquisition per assessee being 50% each amounting to Rs.14,42,330/-. The assessee file original return income and declaration of long term capital gain from the above sale, which was computed at Rs. 13,04,346/- after claiming the deduction of Index cost at Rs.38,05,154/- and also exemption u/s 54F of the Act amounting to Rs.35,60,500/- for investment in the residential property. The AO claimed that the assessee was asked to furnish the details of sale of investment and property vide notice dated 11-07-2011 (the assessee denied that this notice is not issued to assessee). The assessee vide letter dated 22-08-2011 admitted that the indexed cost of the asset sold was originally taken at Rs. 38,05,154/- and therefore, she submitted a revise particulars of income and computed the long term capital gain at Rs.17,97,057/- which as under: - “Sale consideration: 75,00,000 Less Indexed Cost of acquisition: 14,42,330 x 582/389 21,57,933 Investment u/s 54 35,45,000 57,02,933 Taxable Long Term Capital Gain 17,97,067”
The AO assessed this long term capital gain and initiated the penalty proceedings u/s 271(1)(c) of the Act. The assessee accepted the assessment of long term capital gain. The AO started the penalty proceedings for furnishing of inaccurate particulars of income in respect of declared long term capital gain.
4. The AO discussed the facts for levy of the penalty vide his penalty order in Para 4.1which reads as under: - “On careful consideration of the submission of the assessee I don’t see any merit in any of the submissions of the assessee. The contention that the assessee on its own furnished a revised computation is factually not correct since vide the letter issued u/s 142(1) dated 11-07-2011 the assessee was specifically called for various details and documentary evidences pertaining to specifically called for various details and documentary evidences pertaining to assessee’s computation of income, investment made, assets transferred during the year etc., in response to which the assessee filed the revised computation enclosing only part revised documentary evidences called for. Thus the assessee’s claim that the revised computation was voluntary is factually wrong. Further even if such were to be the case, still when the assessee filed the Return after taking services of a qualified Charger Accountant, wherein the actual income was grossly under reported, amount to gross negligence on the part of the assessee and his CA and that itself is sufficient to attract the levy of penalty as was held by the Hon’ble Apex Court in the case o K.P. Madhusudan Vs. CIT 251 ITR 99 (SC) that is for the assessee to prove that his failure to return the correct income was not due to fraud or negligence on the part of the assessee and his CA and that itself is sufficient to attract the levy of penalty as was held by the Hon’ble Apex Court in the case of K.P. Madhusudan Vs. CIT 251 ITR 99 (SC) that is for the assessee to prove that his failure to return the correct income was not due to fraud or negligence...”
Finally, he levied the penalty vide Para 8 which reads as under: - “8. Upon carefully considering the submissions made after examining the assessee’s case in the light of various judicial parameters as discussed above, I hold that the assessee company has furnished inaccurate particulars of income and concealed the particulars of its income both in terms of Explanation 1 to Section 27(1) (c) of the Act, and even otherwise i.e. without invoking such deeming provisions, to the extent of Rs.16,62,721/-. Hence, this is a fit case for levy of penalty u/s 271(1)(c) of the Act.”
We have heard rival contentions and gone through facts and circumstance of the case. The facts are that the assessee engaged one CA and provided complete information and documents and trusted the CA Kavita Chainani to make correct computation and correct Return of Income. He paid taxes as advised and as per ROI prepared by her and there was no reason to suspect any error in her computation. The assessee was completely clueless about it before the new CA pointed out the error. CA Kavita Chainani's bill for professional charges is also filed in the paper book. The assessee furnished full details regarding the LTCG in the original Return itself, but, the following computational errors were detected on 15.7.2011 by another CA engaged due to non-availability of the earlier CA: a) under-statement of capital gains by applying incorrect indexation; b) non-consideration of stamp duty and registration charges as part of reinvestment in new house; & c) excess exemption claimed.
The assessee Suo Moto carried out corrections and tax+ interest was paid upon detection of error but prior to detection by the AO. Immediately upon detection of the error, the assessee revised computation, paid differential tax with interest, and filed revised computation prior to any hearing in the case, drawing AO's attention to omissions in the Return. The assessee suo moto got his income recomputed and paid tax with interest on 22.7.2011, revised Return of Income though prepared, but could not be uploaded due to time-barring. The assessee flied revised computation with letter to AO dated. 22.7.2011 by:
(i) admitting his mistake at the first instance; (ii) pointing out the exact errors, (iii) informing that Revised Return was not getting uploaded due to time- barring, & (iv) requesting that Rs.31,40,917/- be added to Returned income.
As such, far from withholding any particulars, the Assessee volunteered the information prior to assessment proceedings. The assessee also proved his bonafide by filing chronology of events, which are as under:
It was explained by the assessee that had the assessee not been under a belief that CA's computation as coned, he would have revised it much prior to 22.7.2011, in own interest, at least to save interest liability, which he has paid. Further, AO's contention that assessee came forward to declare income only after the case was selected for scrutiny in Sept 2010, is also not true, for the reason that assessee would have revised income in September 2010 itself, or thereafter would not have waited till July 2011 increasing his liability of interest u/s 234-B & u/s 234-C of the Act. As such the explanation seems to be correct for the reason that assessee had trusted the computation by his earlier CA as correct until errors and omissions were detected by new CA, is bona fide. We also find that the amount in question which formed the basis for the AO to levy penalty was truthfully reported in the Return of Income. The AO was requested to add Rs. 31,40,9171- to returned income as Revised Return was time-barred. In any case, the assessee realized his mistake and rectified the same by revising income & paying tax, prior to actual assessment proceedings. The following needs to be noted in this connection: i. AO admits that assessee disclosed and his only objection is that the disclosure was in response to AO's notice raising specific query (para 2(iii) & 4.1) but, we noted that his notice does not contain any specific query. ii. Assessee's explanation since inception that the error was computational is reproduced at para 3.l of the Order, & iii, AO has not alleged non-disclosure or suppression of any material facts relevant to computation of income. iv AO assessed total income, including the long term capital gains of the basis of information furnished / disclosed by the assessee only and had the same not been correct and complete, income assessed by AO would not have matched with assessee's revised computation. AO has not alleged hiding or withholding of information or any tax not paid off it.
6. In view of the above facts of the case, we find that the assessee Suo Moto carried out corrections and paid tax+ interest upon detection of error but prior to detection by the AO. Immediately upon detection of the error, the assessee revised computation, paid differential tax with interest, and filed revised computation prior to any hearing in the case, drawing AO's attention to omissions in the Return. We are of the view that the intention of the assessee was bonafide in declaring the income during assessment proceedings and also paid taxes. In view of the provisions of section 271(1)(c)of the Act, disclosure which has been made in any part of the return which is incorrect or false to the knowledge of the assessee and if that fact is established, such disclosure cannot take it out from the purview of the act of concealment of particulars of income or act of furnishing inaccurate particulars for the purpose of levy of penalty. But we are of the view that the process of inquiry into the correctness, truthfulness or accuracy of the particulars furnished by the assessee cannot be closed at the threshold by looking at the return. That would negative and render otiose the very provisions of the statute. We are of the view that as per rule of evidence, there is distinction between set of facts “not proved” and facts disproved and facts proved. Benefit of the principle that mere non-satisfactory nature of explanation furnished cannot amount to proof of falsity of explanation furnished can apply in case the fact-finding authority reaches to a stage where it can only conclude that the fact alleged is “not proved” which would result that except rejection of the explanation furnished by the assessee, there is no material to sustain the plea of concealment. But, on the other hand, if the state of affairs reveals a stage where one can positively reach a conclusion that the fact alleged is proved or disproved, the principle that mere rejection of explanation cannot result in levy of penalty will have no application. To reach this stage also, inquiry will have to be undertaken of the disclosure made in the return or in the statement annexed to the return and to arrive at a finding whether the particulars disclosed are truthful, or false or not proved to be satisfactory. In the first case, it would be a positive case of no concealment, in the second stage, it would be a positive case of concealment and in the third case, benefit of doubt will go in favour of assessee. But in either case, inquiry must proceed from the stage the alleged disclosure has taken place and not stop at that stage and close the inquiry at the threshold on the abstract principle that mere rejection of explanation does not result into levy of penalty. In the present case also the Revenue has no where proved the allegation of concealment despite explanation offered by the assessee. The AO has not detected the income rather assessee suo moto declared the same and that also without any enquiry. The actual position in law is that merely because the assessee’s addition has been confirmed, that cannot automatically bring in levy of penalty for concealment. If the assessee offers an explanation, the Revenue authorities have to consider the acceptability of the explanation and pass necessary orders. In the present case, the Revenue has not rejected the explanation of the assessee and merely levied the penalty on the basis that income of the assessee is assessed. In view of the above facts, we are of the considered view that CIT(A) has erred in confirming the action of the AO in levying penalty for furnishing of inaccurate particulars of income u/s 271(1)(c) of the Act. We delete the penalty and allow the appeal of the assessee.
Similar are the facts in the case of husband in , because the transaction of sale of property is the same and capital gain is also same. The facts being identical, we delete the penalty on the same reasoning in this appeal also.
In the result, both the appeals of the assessee’s are allowed.
Order pronounced in the open court on 20-01-2017.