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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI NABIN KUMAR PRADHAN
Instant appeal by the assessee is directed against the order dated 26th September 2013, passed by the learned Commissioner (Appeals)–27, Mumbai, for the assessment year 2007–08.
Grounds raised by the assessee are as follows:–
“1. On facts and circumstances of the case and in law, the Commissioner of Income Tax (A)–27 erred in confirming the levy of penalty of Rs. 6,86,315/- on disallowance of Indexation benefit on capital gain made by the Assessing officer.
2 Kshitij M. Kotak (HUF)
The CIT failed to appreciate that:- There was no dispute about the Income earned which was a) offered to tax. The AO did not find anything wrong in the Income b) earned by the Assessee. The AO did not allow the indexation reasoning the c) inability of the Assessee to prove the date and from of source of the same with documentary evidence. The assessee inherited the jewellary which was explained to d) the AO. And thus the indexation is allowable to the assessee Thus it is clear that all the issues are where the stand taken e) by the Assessee is not accepted by the AO. and accordingly your appellant submits that penalty is not leviable.
3. The appellant prays that the penalty levied of Rs.6,86,315/- may be deleted.”
Brief facts are, assessee HUF filed its return of income on 28th 2. March 2009, declaring total income of ` 1,47,724. During the assessment proceedings, the Assessing Officer noticed that the assessee in relevant previous year, has sold certain silver / gold items and received sale consideration of ` 30,58,445. After reducing therefrom index cost of acquisition, assessee had declared long term capital gain. When the Assessing Officer called upon the assessee to furnish details of acquisition of the gold / silver items sold during the relevant previous year, it was submitted by the assessee that they were ancestral properties and were acquired during the year 1978–79. However, as alleged by the Assessing Officer, the assessee could not produce any documentary evidence to establish that gold / silver items
3 Kshitij M. Kotak (HUF) were acquired during the year 1978–79. He further alleged that the assessee did not furnish copy of wealth tax return to show that these capital assets were reflected in the return of income. He, therefore, concluded that the claim of indexation for computation of long term capital gain cannot be allowed. Accordingly, he treated the entire sale consideration of ` 30,58,445 as long term capital gain. Though, the assessee challenged the aforesaid decision of the Assessing Officer by filing an appeal before the learned Commissioner (Appeals), however, ultimately the assessee withdrew the appeal. On the basis of addition made on account of computation of capital gain the Assessing Officer initiated proceedings for imposition of penalty alleging furnishing of inaccurate particulars of income. Though, assessee objected to the initiation of proceedings for imposition of penalty, however, the Assessing Officer rejecting the explanation of the assessee passed an order on 28th March 2012, imposing penalty of ` 6,86,315 under section 271(1)(c). Being aggrieved of the penalty order so passed the assessee preferred appeal before the learned Commissioner (Appeals).
The learned Commissioner (Appeals), however, did not find merit in the submissions of the assessee and confirmed imposition of penalty under section 271(1)(c) by holding that the assessee has failed to discharge the onus cast upon it that the claim of indexation of cost of acquisition is under a bonafide belief.
4 Kshitij M. Kotak (HUF)
Learned Authorised Representative reiterating the submissions made before the Departmental Authorities submitted that the gold / silver items were locked in an old unopened cupboard which was inherited from the ancestors and by virtue of family arrangement made on 5th February 2006, the assessee received its share in the ancestral property. Learned Authorised Representative submitted, as the gold / silver items were acquired by the previous owner prior to 1st April 1981, the assessee under the bonafide belief claim indexed cost of acquisition while computing capital gain. To demonstrate that gold / silver items were acquired from its ancestors learned Authorised Representative relied upon some purchase invoice dated 19th March 1971, photographs of unopened cupboard as well as copy of family arrangement. Learned Authorised Representative submitted, only because the appeal filed before the learned Commissioner (Appeals) on the addition made by the Assessing Officer was withdrawn that will not lead to the presumption that assessee had accepted the view of the Department that cost indexation is inadmissible. Learned Authorised Representative submitted, as the assessee has made full disclosure of all material facts relating to long term capital gain arising out of sale of gold / silver items it cannot be accused of furnishing inaccurate particulars of income so as to impose penalty under section 271(1)(c). For such proposition, he relied upon the decision of the 5 Kshitij M. Kotak (HUF)
Hon'ble Supreme Court in CIT v/s Reliance Petroproducts Pvt. Ltd., [2010] 322 ITR 0158 (SC), and the decision of Hon'ble Jurisdictional High Court in CIT v/s Manjula J. Shah, [2011] 355 ITR 474 (Bom.).
The learned Departmental Representative on the other hand submitted, the assessee had not established the fact that the gold / silver items were acquired prior to 1st April 1981. He submitted, by claiming indexed cost of acquisition, assessee has reduced the long term capital gain, hence, has furnished inaccurate particulars of income. He submitted, the very fact that the assessee withdrew its appeal before the learned Commissioner (Appeals) against determination of capital gain by the Assessing Officer proves the fact that the claim made by the assessee was inadmissible. He, therefore, submitted that imposition of penalty under section 271(1)(c) is justified.
We have considered the submissions of the parties and perused the material available on record. From the facts on record, it is evident that during the relevant previous year, assessee had sold certain gold / silver items for a total sale consideration of ` 30,58,445 and has declared long term capital gain. On a perusal of the assessment order, it is evident that the Assessing Officer also accepts the fact that the gain derived from sale of gold / silver items is to be treated as long
6 Kshitij M. Kotak (HUF) term capital gain. That being the case, we fail to understand how long term capital gain can be computed without allowing indexed cost of acquisition. On a plain reading of section 48 of the Act, it is clear that long term capital gain has to be computed after reducing therefrom expenditure incurred wholly and exclusively in connection with such transfer and the cost of acquisition of asset and the cost of any improvement thereto with admissible indexation. Therefore, without determining cost of acquisition the computation provision fails. Of– course, in the present proceedings, we are not concerned with the computation of capital gain as it has become final since the assessee withdrew its appeal challenging such computation, however, it cannot be denied that disallowance of indexation is a debatable issue. Further, it is evident that the assessee has furnished full particulars relating to sale of gold / silver items with supporting evidence. In fact, sample copies of purchase invoices showing acquisition of some gold/silver items were also produced before the Departmental Authorities. Further, the deed of family arrangement showing distribution of assets was also submitted before the Departmental Authorities. That being the case, assessee cannot be accused of furnishing inaccurate particulars of income with regard to sale of silver / gold items. Only because, the claim of indexation of the assessee was disallowed and the assessee for whatever may be the reason accepted, would
7 Kshitij M. Kotak (HUF) automatically not lead to the conclusion that the assessee has furnished inaccurate particulars of income. A claim made by the assessee if found to be inadmissible in the course of assessment proceedings, does not amount to concealment of income or furnishing of inaccurate particulars of income IN EVERY CASE so as to invite the rigor of section 271(1)(c). In this context, we may refer to the decision of the Hon'ble Supreme Court in Reliance Petroproducts Pvt. Ltd. (supra). Thus, on overall consideration of facts and material on record, we are of the considered opinion that the assessee having not furnished any inaccurate particulars of income imposition of penalty under section 271(1)(c) is not justified. Accordingly, we delete the same.
In the result, assessee’s appeal is allowed. Order pronounced in the open Court on 12.08.2016