S K BHANSALI & ASSOCIATES,PUNE vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, PUNE

Although a number of grounds have been raised by the assessee, however, these all relate to the order of CIT(A) / NFAC in confirming the penalty of Rs.32,89,952/- levied by the Assessing Officer u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).

Facts of the case, in brief, are that the assessee is a firm and engaged in the business of promoters and builders. It had filed its return of income on 31.10.2006 declaring total income at Rs.3,96,070/-. The Assessing Officer passed order u/s 143(3) of the Act vide order dated 29.08.2008 accepting the returned income filed by the assessee. Subsequently, a search action u/s 132 of the Act was conducted on Gita Group of concerns from Karnataka and Tapadiya family concerns at Pune on 06.06.2012. During the course of search at the office premises of the main concern of the group viz. M/s. Vishal Nirmitee Pvt. Ltd., certain incriminating documents were found and seized, according to which Tapadia family had sold land at Baner, Pune to the assessee firm and the assessee has paid cash amount totaling to Rs.2,53,76,665/- to Tapadiya family over and above the agreement value of Rs.97,74,069/- during the financial year 2005-06. The Assessing Officer, therefore, after recording the following reasons, reopened the assessment and notice u/s 148 of the Act was issued and served on the assessee: "In this case, information was received from the Office of the Deputy Director of Income Tax(Inv.) Unit-II(2), Pune, vide L.No. PN/Dy.DIT/Inv./Unit- II(2)/GITA/SKBA/2012-13/502 dated 28.03.2013. As per the said information, search u/s 132 was conducted on GITA group on 06.06.012. Seized documents reflected that Tapadya family members/concerns (Part of Gita group) had sold 47,433 sq.ft of land in Baner, Pune, to the assessee. As sale consideration, Tapadiya family members had received Rs.47,94,500/- in cheque (as per the agreement) from the assessee. Apart from this Tapadiya family members, namely, Mrs. Deepa Tapadiya and Mr. Yash Tapadiya received Rs.61,98,429/- and Rs.35,75,640/- respectively in cash from the assessee which was not accounted for, during the assessment year 2006-07. The same was offered for taxation by Tapadiya family members as their undisclosed income. Alongwith the information referred above sent , the deputy Director of income Tax has also sent the Xerox copies of the seized materials. I have perused those entries. The facts of the case as narrated above show that the assessee M/s S.K. Bhansali & Associates have paid Rs.97,74,069/- in cash to Tapadiya family members, during the A.Y. 2006-07, for purchase of land at Baner. I have perused and examined the assessment records for A.Y. 2006-07 of the assessee. Nowhere in the return of income or submissions made during the course of scrutiny, assessee has reflected transactions pertaining to the said land. During the assessment proceedings, the assessee has also filed Bank Statement in The Cosmos Co- operative Bank Ltd., Laxmi Road Branch, Pune, Bank Account No. is 0102043010011567. Perusal of the same shows that the assessee has not made any cash withdrawals during the year. Prima facie, it is apparent that assessee

In response to the said notice u/s 148 of the Act, the assessee filed its return of income on 30.04.2013 declaring total income at Rs.3,96,070/- which was declared originally. The statutory notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee, in response to which the assessee filed various details as called for from time to time. During the course of assessment proceedings, the Assessing Officer asked the assessee to explain as to why the cash paid to Tapadiya family totaling to Rs.97,74,069/- over and above the agreement value for purchase of land at Baner should not be added to the total income as unexplained income u/s 69B of the Act. The assessee in its reply denied to have made any cash payment to Tapadiya family for purchase of land. The assessee also requested for cross-examination of Shri Ajay Tapadiya. When the summons were issued to Tapadiya u/s 131 of the Act, his AR submitted that Mr. Tapadiya was out of station and therefore could not attend for cross-examination. The Assessing Officer provided the copies of statements recorded u/s 132(4) of the Act of Shri Ajay Tapadiya and copies of assessment orders passed in the cases of Shri Yash Tapadiya and Mrs. Deepa Tapadiya wherein they have admitted to have received certain amounts in cash. Rejecting the various explanations given by the assessee, the Assessing Officer made addition of Rs.97,74,069/- being the cash given for purchase of Baner land, the source of which could not be explained. He, therefore, made addition of the same u/s 69B of the Act.

The assessee preferred an appeal before the CIT(A) / NFAC who sustained the addition made by the Assessing Officer and on further appeal before the Tribunal, the Tribunal also sustained the addition. The Assessing Officer in the meantime initiated penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961. Rejecting the explanation given by the assessee, the Assessing Officer levied penalty of Rs.32,89,952/- being 100% of the tax sought to be evaded on the amount of Rs.97,74,069/-.

Aggrieved with such order of CIT(A) / NFAC, the assessee is in appeal before the Tribunal.

The Ld. Counsel for the assessee referring to pages 2 to 6 of the paper book drew the attention of the Bench to the statement recorded u/s 132(4) of the Act of Shri Ajay Bhagwandas Tapadiya on 07.06.2012. Referring to pages 3 and 4 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the reply given by Shri Ajay Bhagwandas Tapadiya to question No.18 which reads as under: “Q.18 Now, I am showing you page no 1 of Bundle no1 seized from your office chamber during the search action at office of M/s Vishal Nirmiti Private Limited. This page is dated 7/10/06 and mentions that a plot no 22 at Baner admeasuring 3320 sq ft was sold by YBT for an actual consideration of Rs.750/ sq ft and that for the purpose of agreement, consideration of Rs.215/sq ft has been adopted which is stamp duty valuation. Further, notings on this page mention that the agreement value consideration of Rs.7,13,800/- @ 215/sq ft has been received by Shri YBT by cheque and the balance consideration of Rs.17,76,200/- @ Rs.535/sq ft has been received in instalments. Further, from the registered sale deed agreement for the said plot of land, seized as page no 2 to 23 of Bundle no1, it becomes clear that the said plot has actually been sold by you to M/s. S.K. Bhansali and Associates for a consideration of Rs.7,13,800/-. Thus, on collective reading of Seized page no1 of Bundle no1 and seized page no 2 to 23 of Bundle no1, it becomes clears that „YBT‟ mentioned in seized page no 1 of Bundle no 1 refers to Yash Bhagwandas Tapadiya. In the light of foregoing facts, you are requested to go through these seized pages and explain this transaction in detail and explain the tax treatment accorded by YBT to the sale consideration received by him out of this sale transaction. A.18 As pointed out by you in the question itself, it is correct that the word „YBT‟ mentioned on seized page no 1 of Bundle no1 refers to me i.e. Yash Bhagwandas Tapadiya. This seized page no1 of Bundle no 1 which is dated 7/10/06 mentions that a plot situated at Baner owned by him admeasuring 3320 sq ft was sold by him (YBT) for total consideration at the rate of Rs.750/sq ft and that for the purpose of agreement, consideration of Rs.215/ sq ft has been adopted which is stamp duty valuation. Further, it is also true that, the agreement value sale consideration of Rs.7,13,800/- @ Rs.215/sq ft has been received by him by cheque and the balance consideration of Rs.17,76,200/- @ Rs.535/sq ft has been received by him in cash in installments. In nutshell, YBT sold the said plot situated at Baner admeasuring 3320 sq ft in Mar 2006 for Rs.24,90,000/- (@ Rs.750/sq ft) and received the said consideration partly in cash amounting to Rs.17,76,200/- (@ Rs.535/sq ft) and partly by cheque amounting to Rs.7,13,800/- (@ Rs.215/sq ft.) As regards the tax treatment accorded to this transaction, it may please be noted that YBT has duly disclosed the Long Term Capital Gain arising out of this transaction in his IT Return for A.Y. 2006-07 by considering the Agreement value i.e. cheque component of sale consideration of Rs.7,13,800/-. However, he has not offered to tax the cash component of Rs.17,76,200/- till date. Therefore, now he has offered to tax an amount of Rs.17,76,200/- as his undisclosed income for A.Y. 2006-07 in his statement on oath dt.07.06.2012. I‟ll pay the taxes due thereon in due course.”

Referring to the copy of the seized paper dated 07.10.2006 which relates to the financial year 2006-07 and assessment year 2007-08, he submitted that the said paper does not belong to the current assessment year. He submitted that there is no reference of any amount to any particular year. Further, the assessment year involved in the instant case is assessment year 2006-07 whereas the seized document is dated 07.10.2006 and the registration date is 2010-11. Therefore, it is not clear as to which year the cash payment relates to. Further no addition has been made in the assessment year 2007-08. Therefore, the penalty levied by the Assessing Officer and sustained by the CIT(A) / NFAC is not justified and is liable to be cancelled. Referring to the order of the Tribunal in assessee’s own case for assessment year 2010-11, copy of which is placed at pages 24 to 33 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the same and submitted that the Tribunal under identical circumstances has deleted the penalty levied by the Assessing Officer u/s 271(1)(c) of the Act which is upheld by the CIT(A) / NFAC.

The Ld. Counsel for the assessee further submitted that although the Tribunal has sustained the addition made by the Assessing Officer and upheld by the CIT(A) / NFAC, however, the penalty proceedings and assessment proceedings are separate and distinct and the assessee can always make a new plea during the penalty proceedings. He submitted that despite request by the assessee to cross- examine Ajay Tapadiya, he did not appear before the Assessing Officer on the appointed date although the assessee was very much present. It is not known as to why and how Tapadiya had agreed to have received the cash in the impugned assessment year.

The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and Ld. CIT(A) / NFAC. He submitted that Tapadiya family has categorically accepted that they have received cash over and above the cheque amount. Further, they have offered the cash amount received by them to tax. So far as the cross-examination of Tapadiya is concerned, the Ld. DR submitted that Tapadiya is known to the assessee and he could have brought him to the department for his cross-examination before the Assessing Officer. He accordingly submitted that this is a clear case of concealment of particulars of income and therefore, penalty is leviable u/s 271(1)(c) of the Act.

We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed by both the sides. We have also considered the various decisions cited before us. We find the Assessing Officer levied penalty of Rs.32,89,952/- u/s 271(1)(c) of the Act being the payment of cash of Rs.97,74,069/- to Mrs. Deepa Tapadiay and Yash Tapadiay on account of purchase of Baner land on the ground that the assessee has not explained the source of such unaccounted cash paid to Tapadiya family members. We find the CIT(A) / NFAC sustained the penalty so levied by the Assessing Officer. It is the submission of the Ld. Counsel for the assessee that the seized paper is dated 07.10.2006 which relates to assessment year 2007-08 and does not belong to the assessment year 2006-07. Further, there is no reference of any amount to any particular year. The Assessing Officer has not made any addition in the order passed for assessment year 2007-08. It is also his submission that Shri Tapadiya was not available on the appointed date when the assessee went to the office of the Assessing Officer for cross-examination. Further, from the reply given by Ajay Bhagwandas Tapadiya in question No.19, it is not coming out clearly in which financial year or assessment year such payments have been made by the assessee.

We find some force in the above arguments of the Ld. Counsel for the assessee. It is an admitted fact that the paper so found is dated 07.10.2006 and relates to assessment year 2007-08 and no addition has been made by the Assessing Officer in assessment year 2007-08. Further, from the reply given by Tapadiya, it is not coming out clearly as to in which financial year or dates the cash has been paid.

We find under identical circumstances, the Tribunal in assessee’s own case for assessment year 2010-11 vide order dated 13.02.2024 has cancelled the penalty by observing as under: “6. We have heard both the parties at length. The first and foremost question that arises for our apt adjudication is – as to whether the assessee could challenge taxability of the impugned alleged on-money payment of Rs.1,42,65,106/- in assessment year 2010-2011 itself or not ? We find that this tribunal‟s coordinate bench‟s order in group of appeals ITA.Nos.804 to 809/PN./2012 Shri Mangesh Tupe, Pune vs. ACIT decided on 30.04.2013 has rejected the Revenue‟s very contentions as under : “26. The point made out by the assessee is that having regard to the aforesaid, whereby MTDCL was granted irrecoverable license to commence development of the land on 26.03.1999 itself, then as per the decision of the Hon‟ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia (supra), „transfer‟ within the meaning of Section 2(47) of the Act takes place and the corresponding capital gain become taxable in assessment year 1999-2000 in terms of Section 45(i) of the Act. The Hon‟ble Bombay High in the aforesaid judgement had an occasion to consider the import of the expression „transfer‟ as per the Section 2(47) of the Act in case of a „development agreement‟ between the land owner and a developer. As per the Hon‟ble Bombay High Court, if a transaction involved the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to under Section 53A of the Transfer of Property Act, 1882 (4 of 1882) or any transaction which has effect of transferring or enabling in enjoyment of transfer property then having regard to the Clauses (v) and (vi) of Section 2(47) of the Act, transfer takes place in the year in which such agreement is entered into. The MOU dated 26.03.1999 between assessee and MTDCL clearly provides for permitting MTDCL to irrecoverably enter and commence and complete development of the land owned by assessee and therefore, there is substantial force in the plea of the assessee that the on date of entering of MOU i.e. 26.03.1999, an event of „transfer‟ within the meaning of Section 2(47) of the Act has taken place and therefore the capital gain is liable to be taxed in assessment year 1999-2000. We are conscious that the present proceedings are not in relation to substantive taxation of the impugned amounts but the aforesaid proposition is being considered only to examine whether legally speaking is there justification in the plea of the assessee that the taxability of the impugned capital gain was not legally conclusive in the manner made by the Assessing Officer and that in the eyes of law, the impugned capital gain was taxable in an another manner.

It is well settled proposition that the assessment proceedings and penalty proceedings under Section 271(1)(c) of the Act are independent proceedings and that the conclusions reached in the assessment proceedings are not conclusive so far as the penal provisions are concerned. No doubt a conclusion arrived at in the assessment proceedings is good evidence but the same cannot be considered as conclusive for the purpose of penalty proceedings in as much as the two proceedings are independent proceedings, and, in this connection gainful reference can be made to the judgement of the Hon‟ble Supreme Court in the case Khuday Eswara & Sons 83 ITR 639 (SC) and also to the judgement of the Hon‟ble Allahabad and Madras High Court in the cases of Raja Mohd. Amir Ahmad Khan 100 ITR 433 (All.) and B. Muniappa Gounder 102 ITR 787 (Mad.) respectively. In case the assessee in the course of penalty proceedings is able to demonstrate with certain degree of certainty that the addition made in the assessment proceedings was not warranted then the findings in the assessment proceedings cannot be considered as conclusive so as to fasten penal liability under Section 271(1)(c) on the assessee. In support of the aforesaid proposition, we may rely upon the ratio of judgement of the Hon‟ble Bombay High Court in the case of Jainarayan Babulal vs. CIT 170 ITR 399 (Bom.) In view of the aforesaid discussion, in our considered opinion, the CIT(A) made no mistake in deleting the penalty imposed by the Assessing Officer with respect to the income by way of Long Term Capital Gain of Rs.30,12,878/- on sale of land. Accordingly, the order of the CIT(A) is affirmed and the appeal of the Revenue in is dismissed.”

Since in the instant case also the seized paper is dated 07.10.2010 which is the basis for making addition and the statements recorded from Ajay Tapadiya, the key person of Tapadiya group does not specifically mention as to in which year or date the cash was received by them from the assessee, there is ambiguity relating to the assessment year involved for levying penalty for the payment of unaccounted cash. It is the settled principle of law that the assessment proceedings and penalty proceedings are separate and distinct and the assessee can always make a new plea during penalty proceedings although addition has been sustained in quantum proceedings. In this view of the matter, we are of the considered opinion that although it may be a case for making addition u/a 69B of the Act, however, penalty cannot be levied because of the ambiguity i.e. the assessment year involved. In this view of the matter, we are of the considered opinion that the CIT(A) / NFAC is not justified in sustaining the penalty levied by the Assessing Officer u/s 271(1)(c) of the Act. We, therefore, set aside the order of CIT(A) / NFAC and direct the Assessing Officer to cancel the penalty. We hold and direct accordingly. The grounds of appeal raised by the assessee are accordingly allowed.

In the result, the appeal filed by the assessee is allowed.