TMI Blog2010 (8) TMI 651X X X X Extracts X X X X X X X X Extracts X X X X ..... wo appeals by the Revenue arise out of the orders passed by the Commissioner of Income-tax (Appeals) deleting the penalty imposed by the Assessing Officer under section 271(1)(c) for the assessment year 1999-2000 in respect of two different but connected assessees. Since both the appeals are based on similar facts and common grounds of appeal, we are, therefore, disposing them off by this consolidated order the sake of convenience. 2. Factual matrix of the case : Shri Umedraj K.Vardhan filed his return claiming exemption under section 54 from long term capital gain amounting to Rs. 2,15,14,920 on account of investment made in purchase of flat amounting to Rs. 2,25,00,000. Long term capital gain arose to the assessee on sale of flat in the building known as Vastu situated at Plot No. 26-B of Worli Estate, M.A.G. Khan Road, Worli, Mumbai to M/s. Udhe India Limited, for a total consideration of Rs. 4.90 crores, out of which assessee s share was Rs. 2.40 crores. Shri Champalal K. Vardhan, the other assessee before us, was the other co-owner of the said flat and the remaining amount or sale consideration fell to his share. Shri Umedraj K. Vardhan worked out indexed cost of acquisiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessees under consideration. It was still further noticed that the proposed construction was never started, which fact was accepted by the assessee as well as Sapphire and even the proposed site plan and building plan was not available with the builder as the same could not be produced in response to summons under section 131. It was also observed that agreements indicated the allotment of four flats on 8th floor whereas the uncertified and unapproved floor plan, given by the assessee, during the course of hearing, showed that the flats were on 5th and 3rd floors of the building. Considering all these aspects, the Assessing Officer held the entire transaction to be camouflage and hence sham. Further no signature of any witness was found on the four agreements. In view of the fact that the plan was not approved by BMC and there was no other buyer of the flats except these two assessees and the further fact that Shri Champalal K. Vardhan was also director of Sapphire, the Assessing Officer denied exemption under section 54. The facts of Shri Champalal K. Vardhan are similar inasmuch as he also claimed exemption under section 54 on account of investments of Rs. 2.25 crores made in fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed. 7. A careful circumspection of the above Explanation (1) divulges that where in respect of any facts material to the computation of the total income of any person under this Act, such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deception; honestly, as distinguished from bad faith; openly; sincerely. That we say is done bona fide which is done really, with a good faith, without any fraud or deceit. 11. One cannot loose sight of the fact that penalty under section 271(1)(c) is always the outcome of concealment of income or furnishing of inaccurate particulars of income. It may be a case of concealment of income, where some income earned by the assessee is taken back and not offered for taxation. It may be a case of furnishing of inaccurate particulars of income, where though income earned was offered, but some other means were adopted for reducing tax burden, such as, wrong claim of expenses or deductions or exemptions etc. It is fundamental that both the cases of concealment of income or furnishing of inaccurate particulars of income, eventually lead to evasion of tax, which is intended to be curbed by the penalty provision. Every case of penalty pre-supposes that there has been the rejection of assessee s stand qua some disallowance or addition etc. in the quantum proceedings. Whereas penalty is always the outcome of addition etc., but its converse is not true, that is, addition etc. does not always le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant to the assessment year under consideration for purchasing four flats each for residential purposes. We are not on the question of granting exemption under section 54 as that claim has already been negatived by the Tribunal and nothing has been brought to our notice that the said order has been reversed or modified either by the Hon ble High Court or by the Tribunal itself on miscellaneous application. That is be all and end all for the purposes of assessment. 14. In the present proceedings we need to examine as to whether the assessee can be said to have concealed income or furnished inaccurate particulars of his income, so as to be caught within the mischief of section 271(1)(c). To put it differently, it needs to be ascertained whether the claim made by the assessees, which has been eventually rejected, can be said to be bona fide or mala fide. It is manifest from the discussion supra that when a bona fide claim is made by the assessee, which does not find favour with the Revenue authorities, that cannot be a ground for imposition of penalty under section 271(1)(c) of the Act. If however the claim itself is mala fide then no one can save the assessee from facing the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roposed construction and the booking of flats, so as to give colour of genuineness to the claim of exemption under section 54 in the hands of these assessees. The mala fide intention was existing ab initio for lodging a false claim of exemption towards purchase of flats, which was, in fact, never intended. The fact that BMC never gave approval to Sapphire and the commencement of construction could never see the light of the day coupled with the fact that only these two assessees were the proposed buyers and none else, are pointer to the design made by the assessees in claiming exemption under section 54 by parking the funds in a related company allegedly in the garb of advance for purchase of flats, but for which such exemption would not have been available. Mala fide intention of both assessees in claiming exemption under section 54 is visible to the naked eye and the Tribunal cannot remain as a mute spectator to such goings on. Under such circumstances we are of the considered opinion that the learned CIT(A) mis-directed himself in deleting the penalty imposed by the Assessing Officer in both the cases. We, therefore, overturn the impugned orders and restore the orders of the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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