GINJALA ATCHIRAJU, L/R. OF GINJALA SIMHADRI RAJU, ,KAKINADA vs. INCOME-TAX OFFICER, WARD -1, , KAKINADA

PER S. BALAKRISHNAN, Accountant Member :

This appeal filed by the Legal Representative of the assessee against the order of Ld. Commissioner of Income Tax (Appeals)-3, Visakhapatnam in DIN & Order No. ITBA/APL/S/250/2021-

2 22/1037833888(1), dated 15/12/2021 arising out of the penalty

order U/s. 271(1)(c) of the Act was passed on 28/06/2019.

of the Act was carried out in the case of the assessee on

20/07/2017. During the course of the survey operations, it was

noticed that Sri Ginjala Simhadri Raju along with his daughter

sold land and buildings on 13/1/2015. However, the assessee

filed return of income for the AY 2015-16 by admitting business

income of Rs. 3,18,120/- and capital gains at Rs. NIL.

Subsequently, the revised return was filed on 30/09/2016 by

admitting long term capital gains of Rs. 45,155/-. The assessee

during the course of the survey operations submitted that he has

erroneously considered the sale consideration and the cost of

acquisition and hence correct long term capital gains could not

be admitted in his return of income. He also submitted that the

entire investment in the land and buildings was made by him and

his daughter’s name was included for the name sake which was

also confirmed by his daughter at the time of survey proceedings.

The Ld. AO observed that the income chargeable to tax has

escaped income and the case was reopened U/s. 148 of the Act

by issuing a notice on 11/8/2017 which was served on the

3 assessee on 21/8/2017. In response, the assessee filed return of

income manually on 24/10/2017 by admitting the LTCG at Rs.

1,65,82,836/- and business income at Rs. 3,18,120/-.

Subsequently, notice U/s. 143(2) dated 9/5/2018 was issued and

served on the assessee. Since there was no response from the

assessee, the Ld. AO completed the assessment based on the

material available on record. The assessee being the owner of

land admeasuring 3.55 Acres, at Perumallapuram Village H/o. AV

Nagaram Village, Thondangi Mandal, EG Dist., gifted part of the

land ie., 1163.38 sq yds to his daughter Smt. V.A. Krishnaveni on

01/11/2017. The assessee had constructed semi-finished

buildings admeasuring 35,166 sq ft in his share of land during

the FY 2004-05 and leased out the said semi-finished structures

to an Educational Society by name M/s. Simhadri Educational

Society, vide lease deed dated 22/02/2006. Similarly, Smt. V.A.

Krishnaveni (daughter of the assessee) has constructed semi-

finished buildings admeasuring 40,993/- sq ft during the FY

2008-09. A copy of the sale agreement dated 11/3/2014 was

found and impounded during the survey proceedings where the

assessee and his daughter agreed to sell their land and buildings

for an agreed amount of Rs. 8,15,00,000/- to Sri G. Narayana

Rao. Subsequently, the Ld. AO noticed that the sale deed was

4 registered in favour of Sri G. Narayana Rao and his wife Smt. G.

Sakunthala on 13/1/2015 for an amount of Rs.7,15,00,000/-

only. On a query from the Ld. AO, the assessee accepted that he

has received an amount of Rs. 1 Cr over and above the sale

consideration shown in the registered sale deed. During the

course of the re-assessment proceedings, the assessee furnished

the working for long term capital gains both in his hands and in

the hands of his daughter. The assessee relied on the valuation

reports issued by an Engineer Mr. B. Srinivas for the cost of

construction while computing the capital gains. The Ld AO did

not accept the cost of acquisition claimed by the assessee based

on his valuation reports, the Ld. AO referred the matter to the

Valuation Cell of the Department on 9/5/2018. The Ld. AO

observed that the assessee did not cooperate with the Valuation

Officer and thereafter issued a show cause notice to furnish his

objections, if any, for the proposed assessment of long term

capital gains. Since there was no response from the assessee,

another show cause notice dated 11/12/2018 was issued. In

response, the assessee made written submissions before the Ld.

AO and accepted that the entire long term capital gains on the

sale of immovable property can be considered in his hands only.

Accordingly, based on the Valuation Report, the Ld. AO

5 recomputed the cost of acquisition while computing the long term

capital gains. The balance amount of Rs. 1 Cr which was not

supported by the registered sale deed, the Ld. AO considered it as

unexplained money received and assessed as income from other

sources in the hands of the assessee. The Ld. AO also initiated

penalty proceedings U/s. 271(1)(c) of the Act. Finally, penalty

order U/s. 271(1)(c) of the Act was passed on 28/06/2019.

Aggrieved by the penalty order of the Ld. AO, the assessee filed

an appeal before the Ld. CIT(A).

order stating that the penalty cannot be levied merely based on

revised estimate of the cost of acquisition by the Ld. AO. It was

also submitted before the Ld. CIT(A) that there is no furnishing of

inaccurate particulars of income or any concealment of income by

the assessee and hence penalty U/s. 271(1)(c) cannot be levied.

Considering the submissions made by the assessee, the Ld.

CIT(A) found that the assessee has not disclosed capital gains

correctly and also found difference with respect to sale

consideration of the property sold and hence dismissed the

appeal of the assessee. Aggrieved by the order of the Ld. CIT(A),

the assessee is in appeal before us.

appeal:

“1. The order of the Ld. CIT(A) is contrary to the facts and also the law applicable to the facts of the case. 2. The Ld. CIT (A) is not justified in confirming the penalty of Rs. 90,00,000/- levied by the Assessing Officer U/s. 271(1)(c) of the Act. 3. The Ld. CIT(A) ought to have appreciated that there was no case of ‘furnishing inaccurate particulars of income’ by the appellant. Any other grounds may be urged at the time of hearing.” 4.

is with respect to levy of penalty of Rs. 90 lakhs by the Ld. AO

U/s. 271(1)(c) of the Act.

computation of capital gains, the assessee has bonafidely relied

on the Valuation Certificate provided by the independent valuer

and has computed the long term capital gains while filing the

return of income. However, the Ld. AO has not accepted the

independent valuer’s report and has referred the matter to the

Ld. DVO. Based on the Ld. DVO report, the Ld. AO has made an

addition by reducing the cost of acquisition of the assessee as per

the valuation provided by the Ld. DVO. The Ld. AR further argued

that there is no concealment of income by the assessee but the

7 assessee has bonafidely believed the independent valuer’s report

and penalty cannot be levied on the estimate made by the Ld. AO.

On the issue of concealment of income of Rs. 1 Cr, the Ld. AR

submitted that the assessee has failed to furnish correct

particulars of income while filing the original return of income.

The Ld. AR therefore submitted that the assessee reworked the

computation of penalty proportionate to the concealment of

income by the assessee and pleaded that it may be considered by

the Bench. Further, the Ld AR also relied on the decision of the

Hon’ble Madras High Court in the case of CIT vs. Apsara Talkies

[1985] 155 ITR 0303.

Per contra, the Ld. DR relied on the orders of the Ld.

Revenue Authorities and argued in support of the same.

available on record. It is the case of the Ld. Assessing Officer

that the assessee has concealed his income and furnished

inaccurate particulars of income while filing the original return of

income and therefore the provisions of section 271(1)(c) was

invoked. However, we find that the assessee has disclosed the

cost of acquisition while computing the long term capital gains

based on the independent valuer’s report. Further, we also see

8 from the written submissions made by the Ld. AR that the

assessee’s daughter Smt. V.A. Krishnaveni has filed her return of

income and admitted the proportionate share of long term capital

gains. However, we find that since the assessee has accepted the

pay the tax on behalf of his daughter, the Ld. AO has treated the

entire long term capital gains in the hands of the assessee. We

noted that the assessee has merely agreed to discharge the

liability of his daughter and therefore the incidence of tax cannot

be cast on the assessee. Further, it was accepted by the Revenue

the return of income filed by the daughter of the assessee Smt.

V.A. Krishnaveni. The Ld. AO also based on the estimate of the

Ld. DVO differed with the cost of acquisition claimed by the

assessee and concluded that the assessee has furnished

inaccurate particulars of income. The Hon’ble Madras High

Court in the case of CIT vs. Apsara Talkies (supra)has clearly

held that mere estimate of cost by Departmental Valuer could not

constitute material to concealment and therefore levy of penalty is

not valid. Respectfully following the decision of the Hon’ble

Madras High Court in the case of CIT vs. Apsara Talkies (supra),

we are inclined to delete the proportionate penalty levied on

account of difference in the valuation by the Ld. DVO.

9 8. On the issue of concealment of income of Rs. 1 Cr by the assessee while declaring the sale consideration at Rs. 7.15 Crs instead of Rs. 8.15 Crs, we find that the assessee has furnished inaccurate particulars of income while filing the return of income and thereby it attracts the provisions of section 271(1)(c) of the Act. In this connection, the Ld. AR submitted a computation of penalty in respect of concealment of income and computed it at Rs. 23,85,025/-. Therefore the levy of proportionate penalty for Rs. 23,85,025/- with respect to the concealed income is hereby confirmed U/s. 271(1)(c) of the Act.

Pronounced in the open Court on the 15th June, 2023.

Sd/- Sd/- (दु�वू� आर.एल रे�डी) (एस बालाकृ�णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) �या�यकसद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER

Dated : 15.06.2023 OKK - SPS

10 आदेश क� ��त�ल�प अ�े�षत/Copy of the order forwarded to:- �नधा�रती/ The Assessee – Sri Ginjala Atchiraju L/R of Ginjala 1. Simhadri Raju, D.No.5-135, Main Road, Vakalapudi, Valasapakala, Kakinada, Andhra Pradesh – 533005. राज�व/The Revenue – Income Tax Officer, Ward-1, Sri Deepthi 2. Towers, 3rd Floor, Main Road, Kakinada, Andhra Pradesh 533001. 3. The Principal Commissioner of Income Tax (Central), Visakhapatnam. आयकर आयु�त (अपील)/ The Commissioner of Income Tax 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, �वशाखापटणम/ DR, ITAT, 5. Visakhapatnam गाड� फ़ाईल / Guard file 6. आदेशानुसार / BY ORDER

Sr. Private Secretary ITAT, Visakhapatnam