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2015 (6) TMI 366 - ITAT PUNE

2015 (6) TMI 366 - ITAT PUNE - TMI - Levy of Penalty u/s.271(1)(c) - assessee has furnished return of income only after issuance of notice u/s.148 - While computing the long term capital gain the AO computed the market value of one of the land at ₹ 1,15,50,000/- by applying provisions of section 50C as against the value declared by the assessee at ₹ 91 lakhs - Held that:- For the purpose of invoking the provisions of Explanation 3 to section 271(1) the conditions enumerated are cumul .....

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. See Chhaganlal Suteriya Vs. ITO [2011 (5) TMI 641 - Gujarat High Court]

Even otherwise also we find the Pune Bench of the Tribunal in the case of Agricultural Produce Market Committee (2015 (6) TMI 347 - ITAT PUNE while deciding an identical issue had cancelled the penalty levied by the AO u/s.271(1)(c) holding the Explanation 3 below Sec. 271(1)(c) which is deeming provision, is applicable to the assessee as period mentioned u/s. 153(1) has expired and then only the assessee filed .....

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of concealing the particulars of income for both the assessment years. - Decided in favour of assessee. - ITA No. 2238/PN/2013 - Dated:- 20-5-2015 - Ms. Sushma Chowla, JM And R. K. Panda, AM,JJ. For the Appellant : Shri Sunil Ganoo For the Respondent : Shri Mazar Akram ORDER Per R K Panda, AM. This appeal filed by the assessee is directed against the order dated 10-10-2013 of the CIT(A)-II, Nashik relating to Assessment Year 2008-09. 2. Levy of Penalty of ₹ 58,35,106/- u/s.271(1)(c) of th .....

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assessment proceedings the AO observed that the assessee APMC had sold non-agricultural land at Survey No.231 admeasuring 1 Hectare 34R for a consideration of ₹ 91 lakhs to Shri Liladhar Madhukar Patil, Pachora. However, as per sale deed the market price of the property was ₹ 1,15,50,000/-. It was further noted by the AO that the assessee had sold non agricultural land to Shri Atul Sanghavi, Pachora for a consideration of ₹ 15,51,000/-. During the course of assessment proceedi .....

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rdingly determined the long term capital gain at ₹ 99,45,876/-. 4. The assessee challenged the additions made by the AO determining the long term capital gain at ₹ 99,49,876/- before CIT(A). The Ld.CIT(A) while upholding the action of the AO in adopting the valuation as determined by the stamp duty valuation directed the AO to allow further cost of ₹ 25,00,000/- being enhanced compensation paid to the owner as per court order for the purpose of indexation. The AO thereafter ini .....

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asons. It was submitted that in the penalty notice, nothing was mentioned regarding the applicability of either main clause of section 271(1)(c) or Explanation 3 to section 271(1)(c). The assessee relied upon various case laws in support of its contention. 5. However, the AO was not satisfied with the explanation given by the assessee. He observed that as regard to the first contention it can be seen from the records that assessee ought to have offered for taxation the capital gain by adopting s .....

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filing of return of income. Instead, as per provisions of section 139(1) assessee should have filed return within the stipulated time to which assessee failed. The decisions quoted by the assessee are not squarely applicable to assessee's case. Rejecting the various explanations given by the assessee and distinguishing various decisions cited before him the AO levied penalty of ₹ 58,35,106/- u/s.271(1)(c) of the I.T. Act. 6. Before CIT(A) the assessee vehemently opposed the levy of pen .....

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market price, as per permission granted by the department, to come out from the financial problems/crisis. It was further submitted that the assessee APMC is maintaining regular books of accounts, which are duly audited by the Special Auditor, Class-I, of Co-operative Department of Jalgaon. The co5 operative audit was not completed by the due date of filing of return of income and hence the then C.A was reluctant to audit the books of account and hence, the assessee was not provided with reports .....

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the notice of Ld.CIT(A) which clearly shows that heavy loan was outstanding during this period against the assessee. 8. It was submitted that the assessee APMC has approached their then counsel for preparation of computation of income for filing return of income and came to know that it required to make the payment of self assessment tax of about ₹ 59.82 lakhs. Sufficient funds were not available with the assessee for making the payment of Self-Assessment tax and it was told to the assess .....

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as under and then filed the return of income : Date of S.A. payment Amount (Rs.) 28-02-2011 5,00,000 25-03-2011 5,00,000 25-03-2011 5,00,000 25-03-2011 5,00,000 31-03-2011 5,00,000 31-03-2011 5,00,000 31-03-2011 5,00,000 31-03-2011 5,00,000 31-03-2011 5,00,000 31-03-2011 5,00,000 31-03-2011 5,00,000 31-03-2011 5,00,000 Total 60,00,000 9. The assessee further submitted that even after receipt of notice under section 148 it had tried its best to collect the amount for payment of taxes but ultimat .....

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non filing of the return due to paucity of the funds amounts to reasonable cause, the assessee relied upon the decision in the case of Mahadeobari Tea Co. (P) Ltd. V/s. Dy. CIT reported in (2002) 75 TTJ 561 (Gau). 10. It was submitted that the AO has not properly appreciated the entire facts of the case and also reasons by which assessee was prevented for late filing the return of income. AO has not considered entire submissions of the assessee and merely brushed aside various facts stating, tha .....

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isions it was submitted that merely because the addition is confirmed by the first appellate authority, penalty cannot be levied automatically. For this proposition, the assessee also relied on the following decisions : 1. CIT Vs. Aarkay Saree Musuem reported in 187 ITR 147 (Bom.) 2. CIT Vs. Parmeshwari Das Satpal Barnala reported in (2008) 14 Taxmann 507 (P&H) 3. Gem Granites Vs. DY.CIT reported in (2009) 120 TTJ 992 (Chennai) 4. CIT Vs. Khoday Eswarsa & Sons reported in (1972) CTR 295 .....

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The assessee had worked out capital gains from sale of the said properties without considering the provisions of section 50C of the I.T. Act. Eventhough the assessee was fully aware that in assessee's case section 50C of the I.T Act was/is attracted, the assessee had deliberately made a wrong claim. Only when enquiries were conducted by the Department, the wrong claim was discovered. Distinguishing the various decisions cited before him, the Ld.CIT(A) held that it is not a case where the as .....

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income of ₹ 2,02,69,504/-. The AO completed the assessment determining the total income at ₹ 2,27,19,504/- wherein he made addition of ₹ 79,49,876/- on account of long term capital gain. While doing so the AO has considered the sale value of agricultural land at Survey No.231 sold to Shri Liladhar Madhukar Patil at ₹ 1,15,50,000/- as against ₹ 91 lakhs received by the assessee by applying provisions of section 50C of the I.T. At. He submitted that in appeal the Ld.C .....

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of the order giving effect to the order of the ITAT, Pune the Ld. Counsel for the assessee drew the attention of the Bench to the determination of income by the AO at ₹ 1,61,07,873/- as against the returned income of ₹ 2,02,69,504/- in the return of income filed in response to notice u/s.148. He submitted that in the penalty proceedings despite submissions made by the assessee regarding the sequence of events that has taken place the AO levied penalty of ₹ 58,35,106/- u/s.271(1 .....

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n levied, however, it appears that the same has been levied by following the provisions of Explanation 3 to section 271(1)(c) of the I.T.Act. He submitted that the notice u/s.148 in the instant case was issued within a period of 2 years from the end of the relevant assessment year. Since the assessment year involved in the instant case is A.Y. 2008-09 the two year period expires on 31-03-2011 and the AO has issued the notice u/s.148 on 24-12-2010. Referring to the decision of the Hon'ble Guj .....

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been previously assessed (b) he should have failed without reasonable cause to furnish return of income for A.Y. 1989-90 or any year subsequent thereto within 2 years from the end of the assessment year concerned (c) no notice should have been issued to him u/s.142(1) or section 148 of the Act before expiry of the 2 year period and (d) the concerned officer is satisfied that in respect of such assessment year such person had taxable income. In such cases Explanation 3 provides that such person .....

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nation 3 to sub-section (1) of section 271. Hence, unless Explanation 3 of section 271(1) is attracted, there can be no concealment as envisaged u/s.271(1)(c). Further, the conditions for the applicability of Explanation 3 to section 271(1) are cumulative and each of the conditions has to be established for the purpose of invoking the provisions. Since in that case the notice was issued to the petitioner assessee u/s.148 of the Act on 10-03-1997 which was within the period specified u/s.153(1) i .....

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therefore, penalty u/s.271(1)(c) of the I.T. Act cannot be levied in view of the Explanation 3 to provisions of section 271(1)(c) of the I.T. Act. 18. Even on merit the Ld. Counsel for the assessee submitted that even after amendment of section 10(20) the APMC's continued to be local authorities and there were wide spread misunderstanding. Only after the Hon'ble Supreme Court clarified about the definition of local authority that it was felt necessary to file the return of income from A. .....

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ed for payment of self assessment tax. 19. Referring to the decision of the Pune Bench of the Tribunal in the case of Agricultural Produce Market Committee, Jalgaon vide ITA Nos. 2019 to 2025/PN/2013 order dated 21- 10-2014 for A.Y. 2007-08 and 2008-09 he submitted that under identical facts and circumstances the Tribunal cancelled the penalty levied by the AO u/s.271(1)(c) of the I.T. Act and upheld by the CIT(A). He submitted that in view of the decision of the Hon'ble Gujarat High Court a .....

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sale of land correctly. Had there been no notice u/s.148 the assessee would not have filed the return of income. Therefore, under the facts and circumstances of the case levy of penalty u/s.271(1)(c) of the I.T. Act was justified which has been rightly upheld by the CIT(A). 21. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions .....

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O computed the market value of one of the land at ₹ 1,15,50,000/- by applying provisions of section 50C as against the value declared by the assessee at ₹ 91 lakhs. In appeal the Ld.CIT(A) while upholding the adoption of provisions of section 50C allowed further relief of ₹ 25 lakhs being enhanced compensation paid to the owner of the land as part of the cost of acquisition. On further appeal by the assessee as well as the revenue the Tribunal vide order dated 20-03-2014 set as .....

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ng effect to the order of the ITAT is ₹ 1,61,07,873/- as against the returned income of ₹ 2,02,69,504/-. Under these circumstances, now we have to decide the leviability of penalty u/s.271(1)(c) of the I.T. Act which has been levied by the AO at ₹ 58,35,106/- and upheld by the CIT(A). 22. It is the submission of the Ld. Counsel for the assessee that where the notice u/s.148 of the I.T Act has been issued before the completion of 2 years from the end of the relevant assessment y .....

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payment of self assessment tax and accordingly filed the return of income. Therefore, in view of the decision of the Pune Bench of the Tribunal in the case of Agricultural Produce Market Committee, Jalgaon (Supra) penalty u/s.271(1)(c) of the Act is not leviable. 23. We find some force in the above arguments of the Ld. Counsel for the assessee. The Hon'ble Gujarat High Court in the case of Chhaganlal Suteriya (Supra) has held that for the purpose of invoking the provisions of Explanation 3 t .....

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f Explanation 3 to section 271(1)(c) of the I.T. Act. The relevant observation of the Hon'ble High Court at pages 356 and 357 read as under : "11. Thus, the legal position that emerges is that mere failure to furnish a return of income does not tantamount to concealment under s. 271(1)(c) of the Act. In the circumstances, the contention raised on behalf of the Revenue that non-filing of the return of income per se amounts to concealment within the meaning of s. 271(1)(c) of the Act, bei .....

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will be treated to have concealed his income and penalty will be leviable on him accordingly if he is later found to have had taxable income in that year. Thus, for the purpose of falling within the purview of Expln. 3, firstly, a person should not have been previously assessed (that is, a new assessee); secondly, he should have failed without reasonable cause, to furnish return of income for asst. yr. 1989-90 or any year subsequent thereto within two years from the end of the assessment year co .....

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ncerned files a return after the expiry of the said period of two years in pursuance of a notice under s. 148 of the Act, the deeming provision of Expln. 3 shall still have application. 13. Though it has been contended on behalf of the respondents that in the present case Expln. 3 has not been applied; as noticed earlier mere non-furnishing of a return per se is not tantamount to concealment within the meaning of s. 271(1)(c) of the Act. The only eventuality under which nonfurnishing of return o .....

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are required to be satisfied. If any of the said conditions is not satisfied, the provisions of Expln. 3 to s. 271(1) of the Act would not be applicable. 14. In the present case admittedly the petitioner had not been previously assessed under the provisions of the Act, hence, the first requirement of Expln. 3 is duly satisfied. The petitioner had not filed his return of income within the period specified under sub-s. (1) of s. 153 of the Act and as such, the second condition is also satisfied. .....

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e cumulative and each of the conditions has to be established for the purpose of invoking the said provision. In the present case, all the conditions are not cumulatively satisfied. The failure on the part of the petitioner to furnish return of income within the specified period, therefore, cannot be deemed to be concealment within the meaning of the Expln. 3 to s. 271(1)(c) of the Act. 15. In the light of the aforesaid, it is apparent that the case of the petitioner does not fall within the amb .....

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upra) while deciding an identical issue had cancelled the penalty levied by the AO u/s.271(1)(c) of the I.T Act and upheld by the CIT(A) by observing as under : "5. In this case it is not in dispute that the assessee was treated as a local authority u/s. 10(20) of the Income-tax Act up to the A.Y. 2002-03. Subsequently, there was an amendment to section 10(2) of the Income-tax Act and the APMC was removed from the definition of the local authority. It is pertinent to note that the Finance A .....

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