RAJARAM PATIDAR,BHOPAL MADHYA PRADESH vs. INCOME TAX OFFICER 2(4), HOSHANGABAD ROAD

आदेश / O R D E R

Per B.M. Biyani, A.M.:

Feeling aggrieved by appeal-order dated 10.01.2024 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”] which in turn arises out of penalty-order dated 29.03.2016 passed by learned ITO-2(4), Bhopal [“AO”] u/s 271(1)(c) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2010-11, the assessee has filed this appeal.

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Rajaram Patidar, Misrod vs. ITO, 2(4), Bhopal ITA No. 129/Ind/2024 - AY 2010-11

perused.

return of AY 2010-11 on 12.12.2011 declaring a total income of Rs.

1,00,000/- from rent of tractor and agricultural income of Rs. 75,000/-. The

case was selected for scrutiny vide notice dated 13.08.2012/05.09.2012 u/s

143(2) and the AO ultimately passed assessment-order dated 25.03.2013

determining total income at Rs. 4,53,11,710/- after making additions of (i)

Rs. 3,96,04,934/- on account of undisclosed long-term capital gain from

sale of properties, (ii) Rs. 1,06,772/- on account of undisclosed interest

income and (ii) Rs. 55,00,000/- on account of unexplained cash-credit. The

AO, however, accepted agricultural income declared by assessee. The

assessee carried matter in first-appeal whereupon the CIT(A) confirmed

additions to the extent of (i) Rs. 2,92,60,829/- on account of long-term

capital gain and (ii) Rs. 1,06,772/- on account of interest income. The

assessee then carried matter to next level before ITAT in ITA No.

371/Ind/2015 which the ITAT decided vide order dated 28.09.2018. Ld. AR

submitted that the ITAT has allowed further relief to assessee and after

ITAT’s order, the only additions surviving in assessee’s case are (i) Rs.

6,26,256/- on account of long-term capital gain and (ii) Rs. 1,06,772/- on

account of interest income. This is the final status of quantum proceeding in

assessee’s case.

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Rajaram Patidar, Misrod vs. ITO, 2(4), Bhopal ITA No. 129/Ind/2024 - AY 2010-11

are precisely concerned in present appeal. The AO imposed penalty of Rs.

60,50,000/- u/s 271(1)(c) vide order dated 29.03.2016 qua the additions

confirmed by CIT(A) treating the same as income concealed by assessee. The

assessee challenged penalty-order before CIT(A). The CIT(A) has decided

assessee’s appeal vide order 10.01.2024 and upheld the penalty of Rs.

60,50,000/- imposed by AO.

Rs. 60,50,000/- imposed by AO and upheld by CIT(A). The grievance of

assessee can be segregated in two parts, namely (A) the penalty qua the

relief already granted by ITAT in quantum-proceeding is not to be sustained,

and (B) the remaining penalty qua the additions of (i) Rs. 6,26,256/- on

account of long-term capital gain and (ii) Rs. 1,06,772/- on account of

interest income, surviving even after ITAT’s order, should also be deleted on

merit.

that the penalty u/s 271(1)(c) is not sustainable qua the relief already

granted by ITAT in quantum-proceeding because the very basis of

imposition of penalty has collapsed to that extent. Therefore, the AO is

directed to delete penalty to that extent. This deletion is, however, subject to

the rider that if the revenue is in further appeal before High Court against

the quantum deleted by ITAT and the ITAT’s order is reversed, the revenue

shall have power to revive the penalty in accordance with law.

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Rajaram Patidar, Misrod vs. ITO, 2(4), Bhopal ITA No. 129/Ind/2024 - AY 2010-11

of both sides made their respective contentions against and in support of

penalty. We present below our anlaysis and adjudication:

7.1 Penalty qua the long-term capital gain of Rs. 6,26,256/-:

(i) Ld. AR for assessee submitted that the impugned capital gain was

derived by assessee from sale of agricultural land but the resultant capital

gain was not declared in the original return of assessee by assessee’s

counsel who filed the return under the impression that after claiming

exemption u/s 54B in respect of investment made in new lands, the

assessee would not have any taxable gain. But subsequently during

scrutiny-proceeding, when the assessee made re-working and realized that

there remained a taxable gain of Rs. 3,85,258/- even after exemption u/s

54B, the assessee offered the same by means of a revised return and paid

tax on 07.11.2012 but the AO did not take cognizance of assessee’s revised

return treating the same as invalid having been filed beyond statutory time

for filing of revised return. Further, the assessee computed capital gain by

adopting estimating cost at fair market value as on 01.04.1981 @ Rs. 5

lakh/ hectare but the same was finally upheld by ITAT @ Rs. 1 lakh/hectare

in Para 30 of ITAT’s order, this has resulted in a difference of Rs. 2,40,998/-

in computation of taxable gain. This way, the aggregate of Rs. 3,85,258/-

offered by assessee in revised return (+) the difference of Rs. 2,40,998/-

relatable to estimation difference of fair market value as on 01.04.1981,

represents the amount of impugned addition of Rs. 6,26,256/- surviving in

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Rajaram Patidar, Misrod vs. ITO, 2(4), Bhopal ITA No. 129/Ind/2024 - AY 2010-11

the end. Having explained this factual matrix, Ld. AR submitted that the

assessee has himself offered capital gain in revised return and also paid tax

suo motu although the revised return was not within statutory time.

Further, the difference of Rs. 2,40,998/- is an estimation difference only.

Therefore, there is no concealment by assessee and the penalty should not

have been imposed.

(ii) Per contra, Ld. DR for revenue strongly opposed the submissions of

Ld. AR. He submitted that it is an admitted fact that the revised return was

filed after expiry of statutory time-limit, hence the AO is very much correct

in rejecting the same as invalid return. Then, he drew our attention to the

following para of assessment-order:

“2.1 During the period under consideration, the assessee has offered income

of Rs. 1,00,000/- in the return of income claiming the same to have been received as rent of tractor owned by him. He has also offered agricultural income of Rs. 75,000/-. As per AIR information available in the case of the

assessee he has sold two immovable properties on 22.12.2009 and 04.02.2010 having fair market value on the date of transfer determined by the Stamp Duty Authority as Rs. 1,04,82,500/- and Rs. 41,82,200/- respectively. The assessee has neither disclosed sale of immovable properties nor offered any income under the head Short/Long Term Capital Gain. Vide order sheet entry dated 12.09.2012, the assessee was asked to furnish details of sale of

immovable properties during the period under consideration. He was further asked to furnish working of Short/Long Term Capital Gain in respect of such

transactions alongwith copies of registered sale deeds and purchase deeds.”

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Referring to same, Ld. AR submitted that the notings made by AO clearly

show that (i) the department received information of sale transactions of

immovable properties made by assessee from AIR database and (ii) it is only

when the AO questioned assessee vide order-sheet entry dated 12.09.2012

to furnish the details of those sale transactions and to furnish the working

of capital gain that the assessee came out with filing of revised return on

07.11.2012 and offer resultant capital gain to department. Therefore, the

assessee has not made any voluntary disclosure, in fact the assessee

concealed taxable gain in original return. Ld. DR further relied upon certain

decisions to contend that the Hon’ble Courts have upheld imposition of

penalty in such a situation. The most important judgement relied by Ld. DR

is CIT Vs. NG Technologies Ltd. (2015) 57 Taxmann.com 389 (Delhi)

wherein it was held thus:

“20. Therefore, it is clear to us that the assessee had not filed revised return voluntarily but had filed the revised return after the Assessing Officer confronted the assessee and they were asked to explain how and why the loss on account of sale of fixed assets was claimed in the profit and loss account. The said loss, capital in nature and could not have been claimed in the profit and loss account.

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Ld. AR pointed out that the assessee’s SLP against the decision of Hon’ble

Delhi High Court is already dismissed by Hon’ble Supreme Court vide order

dated 18.04.2016 as reported in (2016) 70 taxmann.com 37 (SC).

(iii) In rejoinder, Ld. AR submitted that the levy of penalty is not

mandatory in all cases. He submitted that the fact remains that the

assessee submitted a revised return, paid tax before filing such return and

informed to the AO during scrutiny-proceeding. He further submitted that

the addition finally remaining is much less compared to the entire addition

made by AO. Considering these aspects, the assessee should be absolved

from penalty.

(iv) We have considered rival submissions of both sides and perused the

documents to which our attention has been drawn. It is a fact that the

assessee filed original return just declaring a rental income of Rs.

1,00,000/- from tractor and an agricultural income of Rs. 75,000/-. The

assessee did not declare capital gain earned from sale of properties in such

return. It is further a fact that the department received information of sale of

properties by assessee from AIR and when the AO questioned the assessee

for the transactions reported in AIR vide order-sheet dated 12.09.2012, only

thereafter the assessee filed a revised return declaring capital gain and

paying tax thereon. From these facts, one can only find that the assessee

has not voluntarily filed revised return but had filed the same only after the

AO confronted the assessee. Therefore, the assessee’s case is straightaway

covered by decision of Hon’ble Delhi High Court in CIT Vs. NG

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Technologies Ltd. (supra) as approved by Hon’ble Supreme Court by

rejecting asessee’s SLP. In fact, the assessee’s case is more worse for the

reason that the revised return filed by assessee was also not a valid return.

Therefore, in the light of this decision, the penalty imposed by AO qua the

capital gain deserves to be upheld. Other pleading made by Ld. AR are not

legal and do not impress us. However, we find that out of the addition of Rs.

6,26,256/-, one part of Rs. 2,40,998/- is attributable to the estimation-

difference of fair market value as on 01.04.1981 for which the ITAT has also

observed in their quantum-order thus:

“30…...In the given facts and circumstances of the case and being fair to both the parties, we are of the view that cost of acquisition for 1.647 acres should be adopted ………”

Therefore, the addition of Rs. 2,40,998/- is a result of a fair view taken by

ITAT in the matter of estimation and hence to that extent, it should not be

considered as concealment. Being so, we hereby come to the conclusion that

penalty is sustainable for first component of Rs. 3,85,258/- but not for other

component of Rs. 2,40,998/-. We hold accordingly.

7.2 Penalty qua the undisclosed interest income of Rs. 1,06,772/-:

The basic fact of interest income is also same that it was not declared by

assessee in original return and it was subsequently declared in an invalid

revised return. Ld. AR for assessee only submitted that unlike in capital

gain, the issue of interest income was not raised by AO in the order-sheet

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Rajaram Patidar, Misrod vs. ITO, 2(4), Bhopal ITA No. 129/Ind/2024 - AY 2010-11

dated 12.09.2012 and the assessee has voluntarily disclosed interest income

in revised return. However, it is culled out from assessment-order that the

assessee received sale-proceeds of immovable properties through cheques in

his bank account (Para 2.5 of assessment-order) and the impugned interest

income is also from bank accounts (Para 3.1 of assessment-order).

Therefore, it can be discerned that when the AO, vide order-sheet entry

dated 12.09.2012, questioned the assessee to explain the transactions of

sale of immovable properties, the assessee had to declare not only capital

gain but also interest from banks in the revised return. Therefore, the plea

of Ld. AR that the declaration of interest income was voluntary is not

acceptable and the same is rejected. Consequently, the imposition of penalty

qua the interest income is hereby upheld.

thus:

(a) The penalty qua the relief granted by ITAT in quantum-proceeding is

hereby deleted with the rider that if ITAT’s order is reversed by a

higher forum, the revenue shall have power to revive the penalty in

accordance with law.

(b) The penalty qua the addition of Rs. 3,85,258/- on account of capital

gain is upheld but the penalty for addition of Rs. 2,40,998/- relatable

to estimation difference in capital gain is deleted.

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Rajaram Patidar, Misrod vs. ITO, 2(4), Bhopal ITA No. 129/Ind/2024 - AY 2010-11

(c) The penalty qua the addition of Rs. 1,06,772/- on account of

undisclosed interest income is upheld.

Order pronounced in open court on 27.06.2024

Sd/- sd/- (VIJAY PAL RAO) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Indore िदनांक /Dated : 27.06.2024 CPU/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPYAssistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore

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