TMI Blog1999 (1) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. Name of Assessee Asstt. Year Penalty n/sec. Amount of penalty 1304/Hyd./91 Smt. G. Indira K. Reddy 1983-84 271(1)(c) Rs. 21,213 1305/Hyd./91 Shri Somanadri Bhupal 1983-84 271(1)(c) Rs. 28,890 368/Hyd./91 -do- 1985-86 271(1)(a) Rs. 2,62,540 492/Hyd./91 -do- 1983-84 271(1)(a) Rs. 45,662 1306/Hyd./91 Shri G. V. Krishna Reddy 1983-84 271(1)(c) Rs. 37,645 1307/Hyd./91 Shri Sanjay Reddy 1983-84 271(1)(c) Rs. 35,000 1308/Hyd./91 Smt. Shalini Bhupal 1983-84 271(1)(c) Rs. 49,311 503/Hyd./91 -do- 1983-84 271(1)(a) Rs. 77,894 3.1 Facts and circumstances leading to the imposition of impugned penalties are that G. V. K. Reddy along with the members of his family joined in a partnership on 27-7-1980, as M/s Sri Krishna Enterprises, to carry on the business of hotels, commercial complexes, etc. Along with Mr. Reddy and his family members, certain outside persons also joined the firm by way of contributing their landed properties towards the capital in the firm. The firm succeeded in procuring altogether an extent of 73,627 sq. metres of land for the business purposes. Between April and November of 1982, the Municipal Corporation of Hyderabad acquired 5,241 sq. metres of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment, and therefore, he assessed the appellants in the , Status of association of persons. In short, as against the income returned by the appellants in the hands of the firm under the head 'Capital gains', the Assessing Officer assessed the income as business income in the status of association of persons. 3.2 The assessment was taken in appeal before the CIT(A)-4, Hyderabad. The CIT(A) also upheld the finding of the Assessing Officer that the firm was only a sham arrangement for the purpose of carrying out its transactions in land and the firm was not genuine. The CIT(A) also held that the assessment could not be made in the status of association of persons, as according to him, the land was not held as business stock by the appellants. According to the CIT (Appeals) the appellants had to be assessed as co-owners of the land, and the income should be assessed under the head 'Capital gains'. Thus, holding, he set aside the assessment and directed the Assessing Officer to redo the assessment, after investigating the matter in detail from the inception of the firm in 1980 to its dissolution in 1984. 3.3 At this stage, the appellants filed returns in the individual names of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other four assessment years, viz. 1985-86 to 1988-89 have been waived by the CIT, vide his order dated 25-1-1995. Hence, he filed appeal ITA No. 1307/Hyd./91 questioning the penalty of Rs. 35,000 levied under section 271(1)(c) for the assessment year 1983-84. (e) In the case of Somanadri Bhupal, the CIT has waived interests and penalties for the assessments year 1988-89 whereas interest and penalties levied for the assessment years 1983-84 and 1985-86 are subsisting. Hence, he has filed three appeals, viz. ITA No. 1305/Hyd/91 against penalty of Rs. 28,890 under section 271(1)(c) and ITA No. 492/Hyd./91 against penalty of Rs. 65,668 under section 271(1)(a) for the assessment year 1983-84, and ITA No. 368/Hyd./ 91 against penalty of Rs. 22,62,540 for assessment year 1985-86. (f) In the case of Smt. N. Annapurnamma, the CIT has waived all the interests and penalties levied for assessments years 1984-85 to 1988-89, and hence there is no appeal from her before us. (g) In the case of Smt. Shalini Bhupal, all interests and penalties for assessment years 1985-86 to 1988-89 have been waived by the CIT vide his order dated 25-1-1995. For the assessment year 1983-84 interest under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions. (ii) Except in the cases of assessment years, where the returns were covered by notices under section 148, in all other cases, interest and penalties levied have been waived by the CIT under section 273A. (iii) When both the Department and the appellants have not preferred appeals against the order of the CIT(A) against the original assessment in the name of the firm, in which case both the parties had strong grounds to agitate the matter in the higher forum. (iv) That the appellants have not concealed any particulars of income, as all the particulars are always available in the records itself. It is contended that the compensation received from the Municipal Corporation of Hyderabad on acquisition of land was not a secret. The land revalued at market rate at the time of transfer of the land to the two companies on the dissolution of the firm was also apparent on the face of the records. The learned counsel for the assessee, Shri Bhaskara Rao contended that the assessments have been completed on the basis of a settlement arrived at with the department, which is apparent from the above factors and other facts of the case. It is submitted that in all the cases, inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overed by notices under section 148 and as such there was a statutory hitch in the Commissioner waiving those penalties and interests. Out of these fourteen matters, these eight appeals have been preferred before this Tribunal by the five assessees, questioning the penalties under section 271(1)(a) and under section 271(1)(c) tabulated in para 2 above, for the assessment years 1983-84 to 1985-86. The only reason for non-waiver of these penalties by the Commissioner under section 273A is the statutory fetter, viz. filing of the related returns was covered by notices under section 148, and but for that fetter, the Commissioner would have waived the interests and penalties for the impugned years under appeal as well in these cases. This position is very much evident from the order of the Commissioner dated 25-1-1995 passed under section 273A, in various files involved in these group of appeals. This is a strong ground in favour of the appellants that there was a settlement between the appellants and the Department. The capital gains in the individual hands of the appellants have been assessed only after the order of the CIT(A) dated 22-12-1989 passed against the original assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is fit for consideration. 7. As the law stood, under the provisions of section 271(1)(a) relevant for the assessment years 1983-84 and 1985-86, penalty for the delay in filing of the returns of income could not be levied, if the appellants established a reasonable cause. In this case, the assessee have a strong reason. Penalties are levied with reference to the revised returns filed in the individual capacities and assessments thereon. It is only after the order of the CIT(A) in the appellate proceedings on the assessment in the case of the firm, that the appellants could file their individual returns. It is long after the filing of the original return by the firm, its assessment and subsequent order of the CIT (Appeal) that the assessees could file their individual returns. If the original assessment completed in the hands of the firm, had not been set aside by the CIT (Appeals) the filing of the returns in the individual hands of the appellants would not have been warranted. Who has to file the returns and in what status assessments were to be completed were all debatable issues, till the CIT (Appeal) upon the assessment in the case of the firm, set aside the assessment with c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all other related cases, the Commissioner has waived interest and penalties taken into account, the various circumstances of the case. The penalties under appeal before us in these cases are also imposed very much under the same set of circumstances. Issue of notices under section 148 alone would not alter the pith and substance of the circumstances on (which the Commissioner has acted upon in other cases, where no such notices were issued under section 148. The circumstances which weighed with the Commissioner in cancelling the penalties in other cases, equally hold good in these cases, and but for the issuance of notices under section 148, the Commissioner would have cancelled these penalties as well. Issuance of notice under section 148 is a statutory fetter on the Commissioner in waiving the penalty under section 273A. As such, notice under section 148 may hold good for non-exercise of jurisdiction by the Commissioner under section 273A of the Act, but it would not hold good for appreciating the merits of the case in appeal against penalty. In these cases, the concealment is only the other side of the delay caused in filing the returns which we have already considered. The appe ..... 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