SH. SATPAL GOSAIN,LUDHIANA vs. ACIT, LUDHIANA

आदेश/Order PER ANNAPURNA GUPTA, AM: The present appeal has been filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-1, Ludhiana (in short CIT(A) dated 29.1.2016 passed u/s 250 (6) of the Income Tax Act, 1961 (in short referred to as ‘Act’), confirming the levy of penalty u/s 271(1)(c) of the Act.

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the MLAs, named as the Punjab Cooperative Housing

Buildings Society Ltd., had entered into a tripartite joint

development agreement with M/s HASH Building Pvt. Ltd,

Chandigarh and TATA Housing Development Co. Ltd.,

Mumbai ,for setting up a residential cum commercial project

CAMELOT. On perusal of the agreement, the AO found that

Punjab Cooperative Housing Building Society Ltd., would

transfer its land to TATA Housing Development Co. Ltd,

Mumbai in lieu of monetary consideration and consideration

in kind. As per the agreement each member of the Punjab

Cooperative Housing Building Society Ltd., having a plot of

500 sq. yard in the society would receive Rs.82,50,000/- as

monetary consideration. Accordingly, a total monetary

consideration of Rs.1,06,42,50,000/- was receivable by all

the individual members of the society taken together. In

addition to this, as consideration in kind each such member

(i.e. members owing plot of 500 sq. yd) would receive one

furnished flat measuring 2250 sq. ft. to be constructed by

M/s Tata Housing Development Company Ltd. The cost of

each furnished flat @ 4500/- sq. ft. having an area of 2250

sq. ft was worked out to Rs.1,01,25,000/-. The assessee,

Sh. Satpal Gosain, owned a 1000 sq. yard land in the

society. As per the agreement he was entitled for full

consideration comprising Rs.1,65,00,000/- as monetary

consideration and two furnished flats of 2250 sq.ft. as

consideration in kind. The total cost of these two furnished

flat came to Rs.2,02,50,000/-. So the total consideration

according to the AO was at least Rs.3,67,50,000/-. The

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assessee had also received two payments of Rs.30 lac and

Rs.36 lac already. Therefore, the AO made an addition of

Rs.3,55,21,070/- to the income of the assessee for the

impugned year and initiated penalty proceedings u/s

271(1)© of the Act.

asked the assessee as to why the penalty may not be

imposed. The AR of the assessee replied as under:-

"(a) That the Hon'ble Punjab & Haryana High Court has directed that no coercive measures should be used. Coercive measures includes penalty. As per "thesaurus.com" online dictionary website penalty has been stated to be synonym of the word coercive measure. (b) That it is submitted that the order of the worthy ITAT- Chandigarh Bench has been appealed in Punjab & Harayana High Court. (c) That the Joint Development Agreement very clearly states that the society will be transferring the land only upon the receipt of consideration. The fact that the land only to the extent which has been transferred in favour of THDC, has been registered in favour of THDC and the ownership of the THDC in respect of this land has been registered in revenue records. The land which has not been transferred to THDC stands in the name of society till date in the revenue records. This is enough evidence that ownership in respect of untransformed land lies with the society only and the various rights given under the Joint Development Agreement are conditional and not enough to give the ownership to THDC had possession as referred by the Ld. AO been any criteria of transfer, the entire land should have been transferred in the name of THDC in the revenue records. (d) The assessee also relied upon certain judicial pronouncements in his favour.”

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But the AO was not satisfied with the reply of the

assessee and imposed penalty amounting to

Rs.79,72,552/- u/s 271(1)(c) of the Act for concealing his

income.”

who held that Hon'ble Punjab & Haryana High Court in the

case of C.S.Atwal Vs. CIT & Another in its order dated

22.7.2015 had held that the capital gains tax was not

payable on the consideration which had not been received

during the year and which stood cancelled and incapable of

performance at present due to various orders of the Hon'ble

Supreme Court and the Hon'ble High Court in PILs filed.

Following the same the Ld.CIT(A) held that the assessee was

liable to pay tax only on the capital gains relating to the

amount received by him.Consequently he held that no

penalty was leviable on the capital gains which was not

actually received by the assessee during the relevant

assessment year, however, with regard to the amount

received during the year the Ld.CIT(A) upheld the levy of

penalty stating that the assessee had disclosed the said

amount in its return filed in response to notice u/s 148

only after detection by the Department and not suo motto.

The relevant findings of the Ld.CIT(A) at para 2.4 of his

order are as under:

“2.4 I have considered the facts of the case, the basis of the penalty imposed by the Assessing Officer and arguments of the AR during the course of the penalty as well as the appellate proceedings. The Hon'ble Punjab & Haryana High court in the case of C.S. Atwal vs. CIT and Anr. in ITA No.200, 201, 232 to 25S, 271 to 273, 283 to

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298, 303 to 308, 310 to 316, 332 to 334, 356 to 358 and 361 of 2013, 10 to 16, 25, 26, 73, 74, 90, 110, 136, 191, 192, 253, 254, 278 and 398 of 2014 vide order dated 22.07.2015 has held as under: "As per the order of the Hon'ble Punjab & Haryana High Court " it was submitted by learned counsel for the assessee-appellant that whatever amount was received from the developer, capital gains tax has already been paid on that and sale deeds have also been executed. In view of cancellation of JDA dated 25.02.2007, no further amount has been received and no action thereon has been taken. It was urged that as and when any amount is received, capital gains tax shall be discharged thereon in accordance with law. In view of the aforesaid stand, while disposing of the appeals, we observe that the assessee appellants shall remain bound by their said stand." Therefore, as per the said order of the Hon'ble Jurisdictional High Court, the appellant was not liable to pay capital gains tax on the consideration which had not been received during the year and which stood cancelled and incapable of performance at present due to various orders of the Hon'ble Supreme court and the Hon'ble High Court in PILs. Therefore, the appellant was liable to pay capital gains tax only on the amount received by him. Hence, in view of the said order of the Hon'ble Jurisdictional High Court, no penalty under sec271(l)(c) can be levied on the amount of capital gains which was not actually received by the appellant during the relevant assessment year. However, the appellant has received an amount of Rs.24,00,000/- during the year under consideration on which capital gains tax was to be imposed. The original return of income was filed on 03.12.200/- in which income from capital gains was shown as ‘nil’. Notice u/s 148 was issued on 04 01.2010 and served on the assessee on 07.01.2010. In response to the same, the appellant filed a revised return u/s 148 on 02.02.2010 which also included income from capital gains amounting to Rs.22,00,670/- after applying indexation. The Assessing Officer rejected this return by holding that the revised return filed by the assessee was beyond time prescribed u/s 139(5) and therefore was treated as non-est. The CIT (Appeals) in the quantum order for the year under consideration has held that the return filed in response to notice u/s 148 was valid. However, the fact remains that the same was furnished only after detection by the department and not suo motto, the said return is thus not voluntary but only after notice u/s 148 was issued" by the department. Therefore, there is no force in the appellant's plea that the capital gains were returned before detection by the department. Further, the appellant is advised by experts/C.As in income tax matters and is expected to be aware of the provisions of law and therefore the plea that he was verbally told by officials of TATA Housing Development Co. Ltd. & M/s HASH Builders Pvt Ltd. that the money paid

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was advance money in contemplation of sale and therefore the said amount was not included in his return, is not acceptable. The cases relied upon by the AR are distinguishable on facts. The AR has relied on the decision of the Jurisdictional Hon'ble High-Court in the case of CIT vs. Suraj Bhan (2007) 159 taxmann 26 wherein the assessee had filed revised return showing higher income and explained that the same was done to buy peace of mind and to avoid litigation and it was held that penalty cannot be imposed merely on account of subsequently declared higher income. However, in the case under consideration notice u/s 148 was issued on 04.01.2010 and the revised return filed on 02.02.2010 was treated as non-est return since it was filed beyond the time prescribed u/s 139(5) and the Assessing Officer has categorically held that the assessee has failed to disclose the profits or gains from the transfer of capital assets prior to detection by the department. Although the CIT (Appeals) held in the quantum order that The return was valid but the fact remains that it was filed after detection by the department. The AR has further relied on the case of ITO vs. Chatrabhuj Hinduji Soni of the Hon'ble ITAT Ahmadabad in ITA no. 620/Ahd/2008 wherein the revised return filed in pursuance of notice u/s 148 wherein income was surrendered was regularized by the revenue and the Assessing Officer had failed to make any objection that the income declared in the revised return or its explanation was not bonafide whereas in the instant case the Assessing Officer has declared the revised return as non-est and has recorded that the assessee had failed to disclose the said income in its return of income and that the same was not offered for tax prior to detection by the department. The AR has also placed reliance on the case of Late N.R. Palanivel vs CIT(2014) 90 CCH 0104 wherein the assessee was operating transport bus and survey was conducted u/s 133A . Further, in the said case, notice was issued u/s 148 and the revised return filed was accepted by the Assessing Officer without any addition and the explanation made on the basis of Explanation B to sec271(l)(c) was not considered by the revenue and therefore the order of Hon'ble ITAT confirming the penalty proceedings was set-aside whereas the facts in the instant case are distinguishable as discussed earlier. It has been held in the case of Prem Pal Gandhi vs CIT 335 ITR 23 (2009) by the Jurisdictional High court that where the assessee has filed a revised return surrendering the additional income only on coming to know the detection of concealment by the department and it is not a case of bonafide voluntary disclosure, penalty u/s 271(l)(c) is leviable. Reliance is also placed on the case of Mahavir metal works vs CIT(PSH) 92 ITR 513 to hold that penalty u/s 271(l)(c) is attracted notwithstanding the fact that the assessee filed a revised return, where the omission is deliberate and where the return is revised only after the

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department got information. Further, it has been held in Bhairav Lai Verma vs. Union of India (ALL) 238 ITR 855 that "voluntarily" means out of free will without any compulsion and that if the department has incriminating material with regard to the disclosed income, disclosure is not voluntary. In the instant case the disclosure was not voluntary. Therefcu^tJ^6 appellant had no bonafide cause for not declaring the said capital gains income of Rs.22,00,670/- on the amount of consideration received during the year in its return of income originally filed. Therefore, the penalty levied u/s 271(l)(c) for concealment of income as well as for furnishing of inaccurate particulars of income is confirmed on the said amount however, the balance amount of penalty levied on amount not actually received during the year is hereby deleted in view of the said judgment of the Hon'ble Jurisdictional High-Court. This ground of appeal is partly allowed.” 5. Aggrieved by the same the assessee has come up in

appeal before us raising following grounds:

“1. That the Ld. C1T(Appeals) grossly erred in facts and on law, in confirming the levy of penalty, as imposed by the Ld. A.O. U/S 271(l)(c) of the Income-tax Act, 1961 for alleged non- disclosure of long term capital gains. 2. That the assessee had declared long-term capital gains in his return filed U/S 148 which had been declared valid and accepted as per the order of C1T(Appeals) dated: 21.12.2011. 3. That by any reckoning, the issue being highly debatable and the assessee's bonaflde not in doubt, nor his explanation held to be false, the levy of penalty was wholly illegal and hence not sustainable. 4. That the order of Ld, CIT( Appeals) is against law and facts of the case and therefore, liable to be set aside. 5. That the appellant craves, leave to add, amend, alter, modify or substitute all or any of the above mentioned grounds of appeal when the appeal is finally heard and disposed off.” 6. During the course of hearing before us the Ld. counsel

for assessee pointed out that the penalty levied on identical

issue of consideration received during the year on account

of transfer of land by virtue of Joint Development

Agreement (JDA) between Tata Housing Building Society

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Ltd., M/s Hash Builders Pvt. Ltd. and Punjabi Cooperative

House Building Society Ltd. in which the assessee owns a

plot has been dealt with by the ITAT Chandigarh Bench in

the case of Shri Charanjit Singh Atwal Vs. ITO in ITA

No.66/Chd/2016 dated 20.4.2018. It was pointed out that

the I.T.A.T. had held the issue of charging the capital gains

earned on transfer of land made during the year as a

debatable issue and directed the deletion of penalty levied

on the same. Our attention was drawn to the relevant

findings of the I.T.A.T. at para 13 of the order as under:

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The issue was highly debatable. Even the land was transferred by the society. In the JDA, society has been referred to as 'owner'. If the society was the 'owner' then the capital gains apparently would also be taxable in the hands of the society. The Assessing officer of the society has also taxed the capital gains in the hands of the society on protective basis. Hence, it was a debatable issue whether the capital gains will be taxed in the hands of the society or in the hands of the assessee. Not only the issue regarding the nature of the transactions but also about the date on which the transfer can be said to have completed, was debatable. Further, in the similar facts and circumstances in the case of another assessee namely Shri Balwinder Singh Dhillon, the Coordinate Chandigarh Bench of the Tribunal for the assessment year 2008-09 in ITA No. 1140/Chd/2014 vide order dated 3.8.2015 has upheld the order of the CIT(A) deleting the penalty so levied by the Assessing officer u/s 271(l)(c) of the Act. The said decision has been further followed by the Chandigarh Bench of the Tribunal in the case of 'ITO Vs. Smt. Neena Chaudhary' in ITA No. 1096/Chd/2014 for assessment year 2008-09 wherein also the Departmental appeal challenging the deletion of penalty levied u/s 271(l)(c) has been dismissed. The said decision have also been followed by the Amritsar Bench of the Tribunal in 'Shri Raghunath Sahai Puri Vs. DCIT order dated 13.6.2016 in ITA No. 633/ASR/2014 for assessment year 2007-08. Considering the overall facts and circumstances of the case, and in view of the decisions of the Coordinate Benches of the Tribunal, in respect of income earned by the other members of the society from the same transactions, whereby, upholding the order of the CIT(A) in cancelling penalty u/s 271(l)(c) of the Act, we are of the view that this is not a case of furnishing of inaccurate particulars of income or concealment of income so as to attract the penal provisions of section 271(l)(c) of the Act. The penalty so levied by the lower authorities in this case is hereby ordered to be deleted.” 7. The Ld. counsel for assessee, therefore, stated that the

issue was directly covered by the aforesaid decision of the

I.T.A.T. and no penalty was leviable interest he present

case.

of the CIT(A).

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orders of authorities below and also the decisions referred

to before us. Admittedly the penalty in the present case has

been levied on the capital gains liable to tax in the

impugned year by virtue of the decision of the Hon'ble

Jurisdictional High Court in the case of C.S.Atwal (supra).

We have also gone through the order passed by the I.T.A.T.

on the issue of penalty levied on the said capital gains in the

case of C.S.Atwal (supra) itself and find that it had found

the issue of charging the capital gains to tax in the

impugned year as a debatable issue. The I.T.A.T. had held

that the land was transferred by the society and even JDA

referred the society as the owner, therefore the capital gains

should have been taxed in the hands of the society, which

the A.O. had done on protective basis. On this basis the

I.T.A.T. held that the issue whether the capital gains were

taxable in the hands of the assessee was a debatable issue.

The I.T.A.T. also held that even the date on which the

transfer could be said to have been completed was debatable

since while the Revenue of the view that the transfer took

place when JDA was entered into, the Hon'ble High Court

had held otherwise and had subjected to tax only capital

gains earned on transfer of land which had actually taken

place. The ITAT also held that there was force in the

contention of the assessee that he was of the bonafide belief

that the transfer would be completed only when the JDA

would mature since the consideration in kind had not been

received as the JDA could not mature. Since the facts and

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circumstances leading the levy of penalty in the present case are identical to the case of C.S.Atwal (supra) and Ld. DR has not brought to our notice any distinguishing facts with regard to the said case, the decision rendered therein will apply squarely to the present case also, following which we delete the penalty levied.

Order pronounced in the Open Court.

Sd/- Sd/- संजय गग� अ�नपणा� ग�ता (ANNAPURNA GUPTA) (SANJAY GARG ) �याय�क सद�य/ Judicial Member लेखा सद�य/ Accountant Member �दनांक /Dated: 26th November, 2018 *रती*

आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to :

आदेशानसार / By order, सहायक पंजीकार/ Assistant Registrar

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