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Before: SHRI JOGINDER SINGH & ASHWANI TANEJA
O R D E R
Per ASHWANI TANEJA, AM
1. This appeal has been filed by the assessee against the order of Ld. CIT(A) DT 19-08-2013 passed against penalty order u/s 271(1)(c) dt 09-06-2011.
In this appeal, the solitary issue is with regard to levy of penalty of Rs. 1,55,302/-. During the course of hearing the assessee appeared in person and submitted that he was not getting requisite assistance from his counsel. Keeping in view the situation of the assessee and facts and circumstances of the case, this bench appointed Ms. Asmita Gupta as amicus curie assisted by her colleagues Yahya Batatawala / Anupriya Aggarwal / Nikita Panhalkar / Tripti Jain, who were present in the court room at the time of hearing and volunteered to assist the bench. On behalf of the department, the appeal was argued by Shri Rakesh Ranjan, Senior Ld. Departmental Representative for the Revenue.
Ms. Gupta submitted that in this case, no penalty should have been levied as assessee was a layman belonging to a rural background and was not aware of the nitty gritties of the income-tax proceedings. There was no concealment of income on the part of the assessee. The claim made by the assessee was withdrawn during the course of assessment proceedings itself, the moment the assessee was apprised of the correct position of law. The department could not bring any contrary material on record to show that the facts narrated by the assessee were false.
4. Ld. DR relied upon the orders of the lower authorities.
The brief background of the case is that the assessee sold agricultural land during the year for Rs.11,21,000 on which the assessee claimed long term capital gain o Rs.7,53,667 as exempt on the ground that the asset sold was agricultural land. During the course of assessment proceedings it was brought to the notice of the assessee that the land is situated within 8 kms radius of the municipal limits and, therefore, it would not fall within the definition of agricultural land, capital gain of which would be exempt. Under these circumstances, the assessee immediately withdrew the claim and furnished revised computation and declared the long term capital gain of Rs.7,53,667 as taxable and paid the tax due thereon. The Assessing Officer accepted the revised return and filed no appeal against the assessment order. The Assessing Officer initiated penalty proceedings, wherein the assessee furnished following explanation: “The agreement for purchase of land specifically mentioned the land in question being the agriculture land. The land record extract also states the land in question being the agriculture land. On the advice of his then chartered accountant, the assessee was of the belief that the sale of agriculture land is not taxable to long term capital Gains. It is undisputed fact that the assessee had acted under professional advice of a chartered accountant, who filed his return of income, wherein, as per the advice then received, the land at GOA being agriculture in nature, did not attract the provisions of Income Tax Act, so as to make the gain arising on the sale thereof as taxable. In this context, reliance is placed on the following decision, wherein, addition attributable to the mistake of the Tax Consultant does not attract rigors of penalty u/s. 271(1)(c) of the Income Tax Act”
The assessee also relied on several judicial pronouncements. But, the AO was not satisfied with the explanation and, therefore, he levied the penalty on the ground that no mens rea is required to be proved for levying penalty.
Being aggrieved, the assessee filed appeal before the Ld. CIT(A) and made exhaustive submissions before the Ld.CIT(A), but he also did not agree with the submissions of the assessee and confirmed the penalty upholding the penalty order of the AO.
Before us, it was inter-alia reiterated on behalf of the assessee that the assessee was doing labour jobs and was not aware of the position of law and he relied upon the advice received at the time of filing of return that capital gain arising on sale of agricultural land located at a village in Goa was exempt as the agricultural land did not constitute ‘capital asset’ which was liable to capital gain tax. Similar stand was taken before the CIT(A) also and we find it useful to reproduce hereunder relevant portion of the submission filed by the assessee before the Ld.CIT(A) :
“At the outset, it is submitted that there is neither any concealment of income nor furnishing of an inaccurate particulars of such income. The addition made by the AO in the assessment order is solely on account of different views taken on the same set of facts which at best can only be termed as difference of opinion and certainly not concealment of income or furnishing of an inaccurate particulars of such income. Mere disallowance of a claim in the assessment proceedings cannot be a sole basis for levying penalty under Section 271(1)(c) of the Act under Section 271(1)(c) of the Act which is quasi-criminal proceeding in its nature. It is further submitted that there is no material evidence on record relating to the addition made by the AO, which suggest any concealment, or furnishing of inaccurate particulars by the Appellant. It is therefore submitted that mere disallowance / additions in assessment proceedings is not for levying penalty under Section 271(1)(c) of the Act. The facts and circumstances relating the only addition made by the AO and further not disputed in appeal are as under:- The Appellant had purchased an agricultural land \(jointly with Pradeep K. Mhaskar) situated at Village Poriem Tluka Sattari, North Goa. The agricultural land was purchased from Anand Gopal Mhaskar and Mrs. Shubhada Mhaskar in April 2004. The purchase consideration for such agricultural land was Rs.3,20,000/-. The entire consideration was paid by the Appellant. In November 2007, this land was sold to Smt Ratnabai A Mandrekar for a sum of Rs.11,21,000/-. The capital gain arising on such sale of agricultural land was treated as exempt since the capital gains were arising from the sale of agricultural land. The appellants claim for treating the capital gains as exempt was based on the Land Records which clearly stated that the impugned land is an agricultural land and also on the advice provided to the Appellant by the then tax consultant. It is therefore submitted that the Appellant was under a bonafide belief that since the capital gains arising on account of sale of agricultural land is exempt from tax, The AO has in his 8 kms of the municipality limits, the capital gains arising out of sale of land is taxable. It is respectfully submitted that the claim made or view taken by the Appellant was based on the advice of the then tax consultant which in the view of the AO was not correct. The purchase and the sale deeds and the relevant land records from the Officer-in-Charge of Land Records clearly proved that the impugned land is an agricultural land. Further complete details relating to the addition were filed before the AO during the course of assessment proceedings, the same is only a difference of opinion and hence there is neither any concealment of income nor furnishing of inaccurate particulars of such income. Under section 271(1)(c) of the Act the penalty can be imposed only when it is found that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. The section presupposes a conscious act on the part of the Appellant to have concealed income or furnish inaccurate particulars of such income and merely because the additions/disallowances have been made in the assessment order, would not by itself make that disallowance an act of concealment or furnishing of inaccurate particulars.
In view of the facts of the case and prevailing position in law at the relevant point of time when claims were made by the assessee, it is respectfully submitted that the explanation offered by the assessee in support of its claim for his claim were based on bonafide belief supported by on advice of a professional. Hence the claim made by the assessee under bonafide belief based on advice of a professional cannot be termed as concealment of income or furnishing of inaccurate particulars. it is submitted that on the facts and circumstances of the case it falls within the exception provided in Explanation I to section 271(1)(c) of the Act as the claim is based under bone fide belief supported by professional advice.”
The above submissions have been reiterated and elaborated before us also. Reliance has been placed on the following judgements in support of the argument that no penalty should be levied under such circumstances.
Bennet Coleman & Co Ltd of 2012 (Bombay High Court) 2. Chandrapal Bagga 261 ITR 67 (Raj) 3. ITO vs Roborant Investments (P) Ltd 7 SOT 181 (Mum)
CIT vs Caplin Point Laboratories Ltd 293 ITR 524 (Mad) 9. We have considered the entire facts and circumstances of the case. This fact is not denied that the land was situated in a village. Further, this fact is also not denied that the impugned land is described as agricultural land in the land records maintained with the local authorities. This fact is also not denied that the assessee belonged to a rural background and he is not well educated. The assessee is apparently not aware of the ‘nitty-gritties’ of the income-tax proceedings. The assessee was personally present in the court room. He had apparently acted on the advice of other persons, who were indeed not competent enough to advise the assessee. These facts have nowhere been denied by the AO or Ld. CIT(A). The conduct of the assessee has been such that the moment he came to know that agricultural land may be situated within 8 kms of the municipal limits, and therefore, it may not be exempt from income-tax, he immediately revised the return of income and paid tax thereon. Although, the assessee withdrew the claim and paid taxes, the precise location of land and its distance from the municipal limit is still unknown. During the penalty proceedings also nothing was brought on record by the AO to prove that the claim of the assessee was false and distance of the land was actually less than 8 kms from the municipal limits. This facts still remains under shadow of doubts. During the penalty proceedings also, nothing was brought on record by the AO to prove that the claim of the assessee was false and distance of the land was actually less than 8 kms. The addition has been made solely relying upon the revised computation sheet filed by the assessee. In the given circumstances, we find that it cannot be said that the claim was not bonafide at all. No mala fide intentions can be attached in this case. The nature of land is accepted by the AO to be agricultural land. It is admittedly located in a village. The only reason for disallowing the claim was the possibility of its 8 kms radius of the municipality. The exact answer to this question is not available on record. Under these circumstances, the addition itself remains under the shadow of doubts. Under these circumstances, we doubt whether penalty can be levied as per law contained in the Income Tax Act. In this regard, we take guidance from the judgment of Hon’ble Gujrat High Court in the case of National Textiles Corporation vs CIT 249 ITR 125 (Guj), wherein it was held that if the assessee gives an explanation which remains unproved, but, is not disproved, no penalty is imposable. Identical view was taken by Hon’ble Bombay High Court in the case of CIT vs Upendra V. Mithani (ITA No 1860 of 2009 Dt 5th August, 2009), wherein following observations were made:
The issue involved in the appeal revolves around deletion of penalty under Section 271(1)(c) of the I.T. Act. The Tribunal has concurred with the view taken by the Commissioner of Income Tax (A). The Commissioner of Income Tax (A) has rightly taken a view that no penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income as with the hypothesis that it does. If the assessee gives an explanation which is unproved but not disproved, i.e. it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee’s case is false. The view taken by the Tribunal is a reasonable and possible view. The appeal is without any substance. The same is dismissed in limine with no order as to costs.
Thus, in view of facts of this case and aforesaid legal position, we do not find it to be a case of concealment of income or furnishing of inaccurate particulars of income, and thus not fit for levy of penalty. Therefore, penalty levied by the AO is directed to be deleted.
As a result, appeal of the assessee is allowed.