ACIT 19(2), MUMBAI vs. RONNI HOSI METHA, MUMBAI

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ITA 6740/MUM/2012Status: DisposedITAT Mumbai03 August 2016AY 2008-0931 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the assessee had indeed furnished inaccurate particulars of income. It distinguished the case of CIT v. Suresh Chandra Mittal by noting that in that case, revised returns were regularized by the Revenue and the surrender was made after persistent queries, whereas in the present case, the Revenue conducted detailed investigations and confronted the assessee with incriminating evidence, compelling the surrender of claims. The Tribunal also found the decision in UOI v. Rajasthan Spinning and Weaving Mills supportive of its conclusion, stating that penalty is a punishment for deliberate deception with intent to evade duty. The Tribunal concluded that the assessee deliberately misrepresented facts by claiming sub-tenancy and camouflaging proceeds as long-term capital gains to claim Section 54F deduction. Therefore, the penalty under Section 271(1)(c) levied by the AO was confirmed. However, the Tribunal restricted the penalty to 100% of the tax evaded. The Tribunal clarified that it only adjudicated the penalty related to the sub-tenancy claim and Section 54F deduction, as other grounds deleted by the CIT(A) were not agitated by the Revenue.

What were the facts?

The Revenue appealed against an order of the CIT(A) deleting a penalty of Rs. 45,00,000/- imposed under Section 271(1)(c) of the Income Tax Act, 1961, for the assessment year 2008-09. The Assessing Officer (AO) initiated penalty proceedings after observing that the assessee claimed Rs. 1,13,73,000/- as long-term capital gains exempt under Section 54F. The assessee claimed sub-tenancy rights from 1995, which were surrendered in 2007. However, the AO found no documentary evidence to support the sub-tenancy, including electricity bills, telephone bills, or property tax payments. Enquiries with BEST and BMC, and a statement from the original tenant, Shri Rajni C. Shah, denied the existence of such sub-tenancy. The AO concluded the sub-tenancy was fraudulently created to avoid tax. The assessee eventually accepted the wrong claim during assessment proceedings and revised his income.

What were the issues?

1. Whether the CIT(A) erred in deleting the penalty under Section 271(1)(c) of the Act by holding that failure to prove sub-tenancy does not automatically imply furnishing inaccurate particulars of income, especially when the treatment of income affects deductions under Section 54F and tax rates, suggesting intentional reduction of tax liability. (Question of law and fact, concerning Section 271(1)(c)). 2. Whether the CIT(A) failed to appreciate that offering income after selection of return for scrutiny establishes an intention to avoid tax liability, which constitutes concealment or furnishing of inaccurate particulars of income. (Question of law and fact, concerning Section 271(1)(c)). Assessee's Contention: The assessee argued that merely making an incorrect claim does not tantamount to furnishing inaccurate particulars. They relied on CIT v. Suresh Chandra Mittal (affirmed by the Supreme Court) where a revised return filed to buy peace after persistent queries was held to be bonafide, and penalty was not exigible. They also cited UOI v. Rajasthan Spinning and Weaving Mills, which they believed supported their position. Revenue's Contention: The Revenue argued that the assessee intentionally misrepresented income by claiming a non-existent sub-tenancy to avail Section 54F deductions and reduce tax liability. They contended that the assessee's actions constituted furnishing inaccurate particulars of income. They distinguished the cited cases, arguing that in this instance, the Revenue conducted detailed inquiries and confronted the assessee with evidence, compelling the surrender of claims.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 54F,Section 143(3),Section 143(2),Section 133(6),Section 131

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY & SHRI RAMIT KOCHAR

For Respondent: Shri B.S. Bist, Sr. D.R

सुनवाई क" तार"ख /Date of Hearing : 30-05-2016 घोषणा क" तार"ख /Date of Pronouncement : 03-08-2016 आदेश / O R D E R

PER RAMIT KOCHAR, Accountant Member

1.

This appeal, filed by the Revenue, being 3rd August, 2012 passed by learned Commissioner of Income Tax (Appeals)- 30, Mumbai (hereinafter called “the CIT(A)”), for the assessment year 2008-09, the appellate proceedings before the learned CIT(A) arising from the penalty order dated 11th May,2011 passed by the learned Assessing Officer (hereinafter called “the AO”) u/s 271(1)(c) of the Income Tax Act,1961 (Hereinafter called “the Act”).

ITA 6740/Mum/2012 2

2.

The grounds of appeal raised by the Revenue before Income Tax Appellate Tribunal, Mumbai (hereinafter called “the Tribunal”) in the memo of appeal filed with the Tribunal read as under:-

1. On the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred in deleting the penalty u/s 271 (1 )(c) of the Income Tax Act at Rs.45,00,000/- after holding that just because assessee could not prove his sub tenancy that does not automatically mean that the appellant has furnished inaccurate particulars of income without appreciating the facts that offering income either under the head of Income from other sources" or "Capital Gain" incurs substantial effect on allowability of deductions u/s 54F of the IT Act and the rate of tax, thus the treatment of the income under different head can be intentional to reduce the tax liability which can also well be termed as furnishing of inaccurate particulars of income.

2. On the facts and in the circumstances of the case and in law, the Learned CIT(A) has failed to appreciate the facts that offering income after selection of return for scrutiny establishes the intention to avoid the tax liability which cannot be covered under the category of particulars of bonafide mistake which can also well be termed as concealment of particulars of income or furnishing of inaccurate particulars of such income.

3. The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the AO be restored.”

3. The brief facts of the case are that the assessee is a partner in M/s Nevron Properties & Estates which is engaged in the business in estate agencies and brokerage. During the course of assessment proceedings u/s 143(3) read with Section 143(2) of the Act , the AO observed from the records, that the assessee has shown receipts on sale of long term capital asset at Rs.1,13,73,000/- which were claimed exempt u/s. 54F of the Act. The assessee was asked by the AO to submit the details in respect of the transactions in respect of the sale of long term capital asset and claim of exemption u/s.54F of the Act. It was submitted by the assessee that in the year 1995 Mr. Rajni C. Shah, original tenant of M/s. Leach and Weborney of part of property situated at 66, Off E. Moses Road, Lower Parel, Mumbai ITA 6740/Mum/2012 3 allowed the assessee to occupy the office premises and to do business transactions for the benefit of both of them and all cost were borne by Mr. Rajni C. Shah. It was submitted that by a Deed of Conveyance dated 9th March, 2007, M/s. Leach & Weborney sold , conveyed and transferred the land and structures thereon to M/s Second Land Developers Private Ltd. subject to the occupations of the areas in possession with the tenants/sub- tenants. Thereafter by a Deed of Surrender of Tenancy dated 12th April, 2007 the assessee surrendered to M/s Second Land Developers Private Ltd. all his tenancy rights in the said premises in his occupation. The agreement dated 12th April, 2007 was stamped and registered and was submitted by the assessee before the AO during the course of assessment proceedings u/s 143(3) read with Section 143(2) of the Act. The AO asked the assessee to prove his sub-tenancy and also submit a copy of the sub-tenancy agreement entered into by him with the original tenant said Mr. Rajni C. Shah who allowed the assessee to use office premises in the year 1995 along with proof of payment of rent, telephone bills, electricity bills, property tax etc to prove sub-tenancy in favour of the assessee with respect to the portion of the said property. In reply the assessee submitted before the AO that he does not presently have any receipts of electricity bills, telephone bills, payment of taxes made to various government bodies in respect of the said tenanted property. It was submitted that no Sub-tenancy agreement with Mr. Rajni C. Shah was entered into by the assessee , and he also did not obtain any license for the business carried on by him from the said property under the Shops and Establishment Act. The assessee gave to the AO present address of Sh Rajni C. Shah. The assessee submitted the copy of Deed of Surrender of Tenancy dated 12th April, 2007 executed by him with the Second Land Developers Private Ltd registered with Sub-

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