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The Sathe Biscuit and Chocolate Company Ltd. Versus Dy. Commissioner of Income Tax

Penalty u/s 271(l)(c) - assessee has concealed the income by way of Capital Gain on sale of land at 44/A/1, Dhanori, Pune and furnished inaccurate particulars thereof - Held that:- In the present case too having regard to the conspectus of facts and circumstances, non-declaration of capital gain in assessment year 2007-08 cannot be construed as a deliberate lapse but it could only be construed as an inadvertent error of judgement on a point of law and therefore no penalty u/s 271(1)(c) of the Ac .....

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ued as furnishing of inaccurate particulars of income within the meaning of section 271(1)(c) of the Act, as held by the Hon’ble Supreme Court in the case of CIT vs. Reliance Petro products Pvt. Ltd., (2010 (3) TMI 80 - SUPREME COURT ).

Thus lower authorities have erred in imposing the penalty u/s 271(1)(c) of the Act on the impugned aspect of the matter. - Decided in favour of assessee. - ITA No.441/PN/2012 - Dated:- 10-4-2015 - Shri G.S. Pannu And MS. Sushma Chowla JJ. For the Appel .....

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ee has raised the following Grounds of Appeal :- 1. The Learned CIT (A) erred in confirming the penalty u/s 271(l)(c). 2. The Learned CIT (A) erred in confirming the penalty of ₹ 12,76,62,859/- on the ground that assessee has concealed the income by way of Capital Gain on sale of land at 44/A/1, Dhanori, Pune and furnished inaccurate particulars thereof. 3. The Learned CIT (A) was not justified in holding the Learned A.O.'s stand that the assessee had inflated the fair market value of .....

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support of the Return of Income by the appellant. 6. The Learned CIT (A) erred in confirming the penalty levied on the ground of difference of opinion on estimation of FMV as on 01.04.1981. 7. The Learned CIT (A) erred in confirming the penalty levied on the ground of difference of opinion on year of taxability of income. 8. The Learned CIT(A) erred in confirming the penalty levied, when capital gain is taxed in the A.Y. 2007-08 instead of 2008-09 because of the High Court Judgment (not the Supr .....

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stimate of FMV as on 01.04.1981 was based on the FMV as per the Stamp Duty Authorities Circular No.5 dated 10in -14m August 1989. d. There was no practice of estimating the FMV by Stamp Duty Authorities in the reckoner in the year 1981 and therefore the only correct way to find out the FMV in 1981 was on the basis of circular referred above. e. The sale instances referred by the Learned AO for determining the FMV as on 01.04.1981 were not comparable at all with the appellant's land and there .....

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preme Court's decision in case of Vegetable Product (88 ITR 192), penalty was not leviable. h. Merely because the Learned A.O. disagree with the true particulars submitted in support of return of income, it cannot be construed that the appellant concealed the particulars of income or furnishe3d incorrect or inaccurate particulars of income for the purpose of Sec. 271(1)(c). i. The learned A.O. failed to refer the valuation of land as on 01.04.1981 to Departmental Valuation Officer, and faile .....

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nalty u/s 271(1)(c) of the Act has been imposed with respect to addition made by the Assessing Officer on account of long term capital gain earned by the assessee on sale of land at 44/A/1, Dhanori, Pune. Before we proceed to adjudicate the efficacy of the penalty sustained by the income-tax authorities on the Grounds raised in the Memo of Appeal, we may touch-upon an Additional Ground of Appeal raised by the assessee in the course of hearing, which reads as under :- 1] The learned CIT(A) erred .....

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the Hon ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT, (1998) 229 ITR 383 (SC). Notably, the said Ground was also raised by the assessee before the CIT(A) who has deal with the same in para 5.1 to 5.1.2 of the impugned order and has rejected the same on merits. At the time of hearing, the Ld. CIT-DR did not oppose the admission of the said Ground of Appeal. In this background, both the counsels furnished their say on the merits of the Additional Ground of Appeal. 6. A .....

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nt financial year in which the order of the CIT(A) has been received by the Commissioner of Income Tax or the Chief Commissioner of Income Tax, as the case may be. In this context, it is pointed out that the assessment order u/s 143(3) r.w.s. 147 of the Act was passed on 23.03.2009 and the show-cause notice u/s 274 r.w.s. 271(1)(c) of the Act was issued on 23.03.2009. The order of the CIT(A)-III, Pune arising from the assessment order dated 23.03.2009 is passed on 31.08.2009. On this basis, asse .....

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pealed to the Tribunal against the order of the CIT(A) in quantum proceedings dated 31.08.2009 and therefore the time limit for levy of penalty was to be reckoned in terms of section 275(1)(a) of the Act i.e. within six months from the end of the month in which the order of the Tribunal was received by the Commissioner of Income Tax or Chief Commissioner of Incom5e Tax, as the case may be. It was therefore contended that seen from this angle the order of penalty passed by the Assessing Officer o .....

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allenged the quantum addition before the Tribunal, the period of limitation for passing of penalty order u/s 271(1)(c) of the Act is to be reckoned as per the provisions of section 275(1)(a) of the Act i.e. within a period of six months from the end of the month in which the order of the Tribunal has been received by the concerned Commissioner of Income Tax or the Chief Commissioner of Income Tax, as the case may be. In this context, the following discussion in the judgement of the Hon ble Madra .....

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month in which the order of the Appellate Tribunal is received by the Chief Commissioner. There cannot be any doubt on this aspect. Accordingly, this court is of the view that the proviso to section 275(1)(a) of the Act, does not nullify the availability to the third respondent of the period of limitation of six months from the end of the month when the order of the Income-tax Appellate Tribunal, Chennai, is received by the third respondent herein. 9. If we examine the fact-position in the pres .....

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ved by the Commissioner of Income Tax or the Chief Commissioner of Income Tax, as the case may be. From the side of the assessee, there is no dispute that the impugned penalty order has been passed by the Assessing Officer within six months from the end of the month in which the Tribunal order was received by the Commissioner of Income Tax or the Chief Commissioner of Income Tax, as the case may be. Thus, in this factual background and having regard to the parity of reasoning laid down by the Ho .....

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ce of notice u/s 148 of the Act on 28.05.2008 in consequence to which an assessment u/s 143(3) r.w.s. 147 of the Act was completed on 23.03.2009 assessing a total income at ₹ 76,10,61,683/-. The said income represented an addition made by the Assessing Officer on account of long term capital gain in respect of the land situated at Dhanori, Pune. The assessee company challenged the addition made by the Assessing Officer in appeal before the CIT(A) who has since affirmed the same. However, t .....

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7; 12,76,62,859/- by restricting it to the revised long term capital gain computed after the order of the Tribunal at ₹ 56,89,07,575/- as against ₹ 76,10,61,683/- assessed by the Assessing Officer. 11. The area of difference between assessee and the Revenue with regard to the taxability of the long term capital gain is two-fold. Firstly, it is noticed that while computing capital gain assessee considered the Fair Market Value of the said land as on 01.04.1981 at ₹ 1230 per sq.m .....

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₹ 1230 per sq.mtr., the Tribunal directed it to be adopted at ₹ 665 per sq.mtr.. In this context, a revised working of the long term capital gain has been furnished by the assessee which comes to ₹ 56,10,96,776/- as against ₹ 37,19,49,949/- offered to tax by the assessee albeit in the next assessment year 2008-09. The copy of the said working is placed at page 4 of the Paper Book. 12. Pertinently, on this point it is also relevant to observe that the assessee had sold th .....

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limb of the addition on which the penalty ha8s been levied. Thus, it is notable that the penalty has been levied by the Assessing Officer on two aspects, firstly on the ground that the capital gain was not offered in assessment year 2008-09; and, secondly, that the assessee had adopted the Fair Market Value of the land as on 01.04.1981 at ₹ 1230 per sq.mtr. as against which the Tribunal has directed to adopted the Fair Market Value as on 01.04.1981 at ₹ 665 per sq.mtr.. 13. In this .....

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d by the assessee. It was pointed out that the Fair Market Value was adopted by the assessee on the basis of a Valuation Report obtained from a Government Approved Valuer which was very much before the Assessing Officer. In assessment year 2005- 06 also, the said issue travelled before the Tribunal and in its order dated 06.09.2010 (supra) in ITA No.1568/PN/2008 the Fair Market Value of the land as on 01.04.1981 was directed to be adopted at ₹ 665 per sq.mtr.. In assessment year 2005-06 al .....

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Value as on 01.04.1981 is concerned, no penalty was leviable having regard to the decision in the assessee s own case for assessment year 2005-06 (supra). This factual matrix has not been oppos9e d by the Ld. CIT-DR appearing for the Revenue. 14. We have perused the precedent dated 20.03.2012 (supra) in the assessee s own case and find that the following discussion in the order is relevant :- 6. After going through the rival submissions and perusing the material on record, we find that the asses .....

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tal gain and after rejecting the content ion raised on behalf of the assessee, the Assessing Officer considered the capital gain of ₹ 22,93,91,745/ - which was confirmed by the CIT(A) . In second appeal and the Tribunal vide its order dated 6t h September 2010 in ITA No. 1568/PN/2008 directed the Assessing Officer to compute the capital gain by taking FMV of the land at ₹ 665/ - per sq. mtr as on 1-4-1981. In consequential order , the long term capital gain has been revised by the As .....

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tic and without any basis. He stated that the assessee has adopted the higher value of the land and thereby reduced the income. Accordingly, the above said FMV of the proper ty was adopted at ₹ 15.23 per sq. mtrs as against the claim of the assessee at ₹ 1230/ - per sq mt rs for the purpose of computation of capital gain. Now, the FMV as stated above, has been held to be reasonable at ₹ 665/ - per sq. mtrs. In fact the FMV of the land has been the subject matter of penal ty wh .....

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h not accepted by the him at the relevant point of time. The assessee was trying to give explanation with regards to non ITA filing of the return and to10 justify its claim of FMV in the computation of capital gain. So there is nothing on record to suggest that the assessee had any intent ion to conceal the income. This view gets strength from the fact that the assessee had paid advance tax on the long term capital gain arising from the sale of the balance port ion of the land. So, the assessee .....

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nafide impression that the FMV adopted by i t for the purposes of computation of capital gain is justified. The Hon ble supreme Court in the case of Reliance Petro products Pvt . Ltd. (322 ITR 158) has held that even if the assessee makes an incorrect claim in law, same cannot be stated that the assessee has concealed its income or furnished inaccurate particulars of income. Clause (c) of sect ion 271(1) categorically states that the penalty would be leviable if the assessee conceals particulars .....

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nalty is leviable on the income assessable on account of adoption of the Fair Market Value as on 01.04.1981 at ₹ 665 per sq.mtr. as against ₹ 1230 per sq.mtr. adopted by the appellant company. Thus, the Assessing Officer is directed to delete the same. 16. The second issue on which the penalty has been levied is non-offering of the capital gain to tax by the assessee in assessment year 2007-08. On this issue, assessee pointed out that it had offered to tax the long term capital gain .....

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into a Development Agreement with one M/s Raghuleela Builders Pvt. Ltd. on 19.03.2007 which was registered on 04.04.2007. The Ld. Representative at the time of hearing has pointed out that ultimately the Conveyance Deed was executed on 27.03.2008, a copy of which has been placed at pages 177 to 179 of the Paper Book. Notably, assessee considered that the transfer of land giving rise to the levy of capital gains took place during the period 01.04.2007 to 31.03.2008 and accordingly it declared ca .....

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action is concerned, the same has been affirmed by the Tribunal also vide its order dated 06.09.2010 (supra). Be that as it may, for the present, the merits of the controversy are not the issue before us. 18. On this aspect, the plea of the Ld. Representative was that in terms of the Development Agreement dated 19.03.2007, assessee only gave a license to the purchaser/developer to enter upon the land and to commence development and construction. The case of the Revenue is that the Development A .....

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t to the assessment year 2007-08. In support, he invited our attention to a copy of the complaint filed by the assessee to Vishrantwadi Police Station dated 22.05.2007, which has been placed at pages 182 to 185 of the Paper Book. In terms of the said complaint, it is sought to be made out that a mob of about 50 to 60 people entered the said land. Another complaint filed with the Police dated 26.05.2007 is also enclosed at pages 186 to 187 of the Paper Book; the Ld. Representative also referred t .....

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he merits of the addition which is not the subject-matter of the controversy before us. The assessee had also stated in the course of the hearing that only part consideration was received by the assessee during the year under consideration inasmuch as only a sum of ₹ 38,25,92,925/- out of the total consideration of ₹ 76,51,85,850/- was received during the assessment year 2007-08. It was pointed out that only after receipt of the entire consideration the Conveyance Deed of the said la .....

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ther hand, the Ld. CIT-DR has supported the order of the authorities below. It was argued by Ld. CIT-DR that the plea of the assessee that long term capital gain on sale of land was taxable in assessment year 2008-09 was negated by the Tribunal and therefore the Assessing Officer was justified in levying the penalty. It was submitted by the Ld. CIT-DR that the Development Agreement dated 19.03.2007 clearly stated that assessee company handed-over possession of the said land on that date and ther .....

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lment of income and/or furnishing of inaccurate particulars of such income within the meaning of section 271(1)(c) of the Act. Factually speaking, it is not a case where assessee has not offered the capital gains to tax rather it is a case where the income has been offered to tax by the assessee, albeit in the subsequent assessment year. The Assessing Officer has assessed the capital gain in assessment year 2007-08 based on the decision of the Hon ble Bombay High Court in the case of Chaturbhuj .....

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ed that the burden of proof in a penalty proceeding varies from that involved in an assessment proceeding and therefore in the penalty proceedings the taxing authority is bound to consider the matter afresh on the basis of material before it and in the light of the burden cast to ascertain whether the levy of penalty is justifiable. As per the Hon ble Supreme Court, the finding in the assessment order that the disputed amount represented income may constitute good evidence in penalty proceedings .....

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al gain has been sustained by the Tribunal in the quantum proceedings. It is noteworthy that in so far as the particulars relating to the impugned income furnished by the assessee in the proceedings before the Assessing Officer are concerned, the same have not been found to be erroneous or incorrect. The entire conspectus of the dispute, which we have narrated in the earlier paras would reveal that the crux of the difference between the assessee and the Revenue is the year in which the capital g .....

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t situation is as to whether assessee s action of declaring such income in assessment year 2008- 09 is bona-fide or not ? It is quite apparent from the copy of the Development Agreement which is placed in the P15aper Book that it was registered on 04.04.2007. It is also clear that the Conveyance Deed was ultimately executed on 27.03.2008 after assessee received the full consideration from the purchaser. It is also not in dispute that during the previous year relevant to the assessment year under .....

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es, the Ld. Representative made a statement at Bar that the advance taxes on such income payable for assessment year 2008-09 were paid by the assessee within period prescribed which was even before the re-assessment proceedings were started by the Assessing Officer for the instant assessment year 2007-08. The said statement made by the Ld. Representative for the assessee at Bar has not controverted by the Revenue. 22. In the case of Metal Rolling Works Ltd. vs. CIT, (2011) 339 ITR 373 (Bom.), wh .....

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2010) 323 ITR 641 (Bom.). In the case of Jayant Vegoils and Chemicals Pvt. Ltd. (supra), penalty was imposed with respect to the disallowance of a fine levied in lieu of confication of goods. The Assessing Officer had noted that in terms of an order passed by the competent authority, the fine was dropped and therefore the disallowance was justified. Factually, 1it 6was not disputed that the fine in lieu of confiscation had been cancelled by the competent authority, but assessee took the plea tha .....

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