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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI R.C. SHARMA & SHRI SANJAY GARG
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 27.09.2013 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] agitating the confirmation of the levy of penalty of Rs.80 lakh under section 271(1)(c) of the Act computed by the Assessing Officer (hereinafter referred to as the AO) at the rate of 180% of the tax amount sought to be evaded.
The brief facts of the case are that the assessee filed his original return of income on 31.10.06 declaring income of Rs.1,13,21,721/- which was accepted under section 143(3) of the Act. Subsequently, a survey action under section 133(A) was conducted on 17.03.09 on the business premises of Gorwani Builders, a partnership firm where the assessee is a partner. It was found during the course of survey that the assessee is a builder and engaged in 2 Smt. Madu Gorwani, Legal Heir of Late Shri Gopal V. Gorwani construction activity and, has promoted his venture M/s. Gorwani Builders, as consisting of three projects, viz. (1) Palatial, (ii) Platinum & (iii) Palladium. Out of these three projects, Palatial was first completed in which the assessee constructed six flats, one on each floor, apart from one shop and his office. Out of these, he sold two flats on first and second floor to Jay Manjani and Ms. Sushmita Sen and shop on ground floor was sold to Ms. Twinkle Khanna for Rs. 1.39 Cr., Rs.2.69 Cr. and Rs.92 lac respectively. The remaining fiats on 3rd, 4th and 5th floor were rented out as service apartments. The AO, therefore found that the assessee was clearly running a business venture but, offered consideration received from sale of flats as LTCG and STCG, instead of business income. After considering the assessee’s submissions, he computed the income from sale of shop and flats under the head 'income from business', i.e. profit on sale of shop at Rs.61,39,900/- and profit on sale of flats at Rs.1,44,85,509/-, i.e. total of Rs 2,06,25,409/- under the head 'business income' and initiated penalty proceedings u/s. 271(1)(c) of the Act. The above assessment, vide order dated 30.12.11 has been accepted by the assessee.
During the course of penalty proceedings, the assessee submitted that he has accepted the additions by filing revised return of income and paid taxes thereon to purchase peace and avoid protracted litigation and income declared of Rs.21,80,32,560/ - has been accepted by the department in toto without making any additions. That the income from the sale of flats and shop had been declared under the head 'LTCG/STCG' under the bonafide belief that it was taxable under these heads, therefore, just because due to legal interpretation, the same has been assessed under a different head, it does not lead to the conclusion that there was concealment of income. The AO, however, did not find the above reply acceptable and held that the above income was declared under the head LTCG/STCG with a motive to reduce the tax liability and, further, amount of Rs.71 lac received in cash on sale of the 3 Smt. Madu Gorwani, Legal Heir of Late Shri Gopal V. Gorwani flat had not been offered for tax at all and, it was subsequently, i.e. on detection of the facts during the course of the survey that the assessee declared the same vide return filed in response to notice issued u/ s. 148 of the Act. He, has further held that had it not been for the survey carried out u/ s. 133A, the assessee would not have offered the above income to tax and subsequent disclosure of the above facts and offering the correct income to tax in the return filed in response to notice issued u/ s. 148 of the act, cannot absolve him from the fact of concealment of income. The AO for this purpose also relied on the Hon'ble Supreme Court's decision in the case of G.C Aggarwal (186 ITR 571) and Kerala High Court in the case of EC Josy.. & Bros. (240 ITR 818). He has also relied upon three other decisions viz. (i) CIT vs. Angara Satyam (AP) 37 ITR 230, (ii) Dayabhai Girdharbhai vs. CIT (Bom) 32 ITR 677 & (iii) CIT vs. Gopal Krishna Singhania (All) 98 ITR 27) in sub para 3.3 of the order, in support of the stand taken by him that imposition of penalty in reassessment proceedings for concealment in original proceedings is valid. The AO, accordingly computed the minimum penalty at Rs.44,44,166/- and maximum penalty at Rs.1,33,32,498/-, however, he has levied penalty of Rs.80 lac @ 180% of the tax amount sought to be evaded.
In appeal, the Ld. CIT(A) confirmed the penalty so levied by the AO. Being aggrieved, the assessee has come in appeal before us.
At the outset, the Ld. A.R. of the assessee has invited our attention to the order dated 31.12.15 of the Tribunal passed in the own case of the assessee on the identical issue for subsequent assessment year A.Y. 2008-09.
We find that during the said survey action, the assessee had declared Rs.70 lakhs as his unaccounted income for assessment year 2008-09. The Tribunal, considering the above, observed that had there been no survey operation, the assessee would not have surrendered Rs.70 lakhs for A.Y. 2008-
4 Smt. Madu Gorwani, Legal Heir of Late Shri Gopal V. Gorwani 09. The Tribunal therefore observed that the intention of the assessee was to conceal the said income. The Tribunal accordingly confirmed the penalty on the additional income offered of Rs.70 lakhs for A.Y. 2008-09. We find for the year under consideration, during the survey action, the assessee had offered Rs.71 lakhs as unaccounted income. Applying the same proposition, we are also of the view that had the survey action been not carried out, the assessee would not have offered the said income for taxation. We, therefore, find justification on the part of lower authorities in levying the penalty on the said additional income offered by the assessee. However, we find some merit in the contention of the Ld. A.R. that the penalty levied @ 180% was excessive. The AO has not mentioned any peculiar circumstances for levy of penalty at a higher rate. So keeping in view of the overall facts and circumstances and conduct of the assessee in offering the additional income during the survey action, we restrict the penalty to 100% of the tax amount sought to be evaded in relation to the additional income offered of Rs.71 lakhs.
So far as the second issue on which the penalty has been levied, the Tribunal in the identical circumstances has observed that the assessee had shown the income from sale of flats but under the head ‘capital gains’. The AO however treated the same as business income. The Tribunal considering the facts of the case has observed that it was not a case of concealment of income or of filing of inaccurate particulars of income as the treatment of income from the sale of flats whether was a business income or capital gains was a debatable issue. The case of concealment of income or filing of inaccurate particulars of income against the assessee on this issue is not well proved and the benefit of doubt in this respect must go to the assessee. We, accordingly, delete the penalty in relation to the second issue of treatment of income of Rs.2,06,25,409/- offered by the assessee as capital gains but treated by the Department as business income of the assessee.
In the result, the appeal of the assessee is treated as partly allowed.
Order pronounced in the open court on 06.05.2016.