TMI Blog2015 (10) TMI 2050X X X X Extracts X X X X X X X X Extracts X X X X ..... s its income and paying taxes thereon, and then paying to the legal heirs which would have been the correct manner, he chose to give the amount directly to the legal heirs after paying the taxes. Once assessee has complied with the terms of the Will and the family arrangement then, it cannot be held that at the time of filing of the return the assessee lacked genuine and bona fide belief or acted mala fidely to divert the income for evading the taxes. The concealment of income or furnishing of inaccurate particulars, as contemplated in clause (c) of section 271 has to be seen with reference to amount of tax sought to be evaded. Here, in case there is no tax which has been sought to be evaded, because as pointed out earlier, the assessee had paid more taxes as it has to pay taxes on the gross amount paid to the legal heirs. Thus, under the present facts and circumstances, we hold that penalty levied by the Assessing Officer and confirmed by CIT(A) is unsustainable. - ITA No. : 1965/Mum/2014 - - - Dated:- 16-9-2015 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER For The Appellant by : Shri Chetan Karia For The Respondent by : Shri Rajesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -07, the assessee firm has treated the said transactions as transfer of asset and long-term-capital-gain was computed by adopting gross sale consideration of ₹ 17 crores. The Assessing Officer in the assessment order for the impugned assessment year, that is, 2009-10 has taken note of this fact and has also given credit to sum of ₹ 17 crores, already considered for taxation. After the death of Mrs. Pravin Dholakia on 20.11.2006, daughter Meenaz was appointed as Executrix of her Will and her Estate by which she has bequeathed her property to her Husband (Shri Pyarali Dholakia). Later on, Mr. Pyarali Dholakia also expired on 19.09.2007 and again daughter Meenaz was appointed as Executrix of his Will and Estate. As per his Will, it was mentioned that, in the event of development of the property by the firm, each of his three daughters would be entitled to 10% of the sale proceeds and the balance after the payment of taxes, will belong to his son Mateen. Thereafter, the assessee firm started negotiation for retirement from the joint venture by which the land would go to the developers. On 21.05.2008, the partners retired from Joint venture and received consideration of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be considered while deciding the taxability of income arising out of long term capital gain on sale of shares mentioned above : i. The assessee firm M/s Goldfilled Mercantile Co. is having absolute rights in the title of the property mentioned at a above. ii. None of the family members have any rights in the property at a and only the Assessee firm M/s GMC have rights in the JV and/or the property. iii. M/s Goldfilled Mercantile Co. is the owner of the piece of land a for last more than 50 years. Since the title of the land is in the name of firm itself, the taxability at the time of transferring the capital asset would be in the hands of the firm only. iv. At the time of entering into Joint Venture agreement in May, 2006, none of these family members had any role to play and in fact Joint Venture deed was only signed by Shri Mateen Dholakia on behalf of assessee firm M/s Gold filled Mercantile Co. v. None of the family members have staked any claim for any share in the property when the property ( a b ) was transferred vide agreement dated 08/05/2006. vi. The only obligation for the Assessee firm was that to pay the mutually agreed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the AY 2007-08 was reduced and long-term-capital-gain was computed at ₹ 41,62,25,278/-. Thereafter, the assessee moved an application u/s 154, praying that, in case the deduction of ₹ 17,74,22,070/- is not given, then adjustment of tax paid by the firm in the name of the legal heir should be adjusted. The Department fairly agreed with such a prayer and allowed the credit of taxes, paid by the assessee though on behalf of the legal heirs. This adjustment in fact, resulted into refund of ₹ 13,29,566/- which is evident from the copy of the order passed by the Assessing Officer u/s 154. 4. Now, penalty has been levied on this claim of deduction of ₹ 17,74,22,070/-. In the penalty proceedings, the assessee s explanation has been summarized by the Assessing Officer in Penalty order in para 5.2, which for the sake of ready reference is reproduced hereunder i. They acknowledge that the property belongs to the firm and the share of the legal heirs was paid to them under mutual agreement, however, tax on the amount paid to the legal heirs were erroneously deposited in the names of the heirs instead of the firm. Also since the payments were made by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance Petroproducts (P.) Ltd. and Delhi High Court in the case of Zoom Communications. 6. Before us the Ld. Counsel, Shri Chetan Karia, after explaining the entire facts, first of all, drew our attention to relevant documents, like joint venture agreement entered into between the assessee firm and the developer; family arrangement between father and his four children and family business of M/s Goldfilled Mercantile Company; a copy of Will executed by Shri Pyarali Dholakia; second family agreement dated 9th May, 2008 and Retirement deed. From these documents, placed in the paper book, he submitted that firstly, by virtue of these documents and reading of the relevant clauses therein, the assessee was under genuine and bona fide belief that amount of sale consideration received should be paid to the three daughters as per partner as per his will and who were his legal heirs and, therefore, the payment was made to them after calculating the on grossing-up the amount, that is, the gross amount paid and the taxes thereon. Thus, the assessee had paid more taxes on or behalf of the legal heirs. Secondly, the overall conduct of the assessee is required to be seen/gauged that there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the assessee s claimed was based on the opinion of the Chartered Accountant and then it was submitted that there was a clerical mistake. There cannot be two views in the case of the assessee that it was assessee who was liable to show the income and there is no debatable issue at all or assessee had any bona fide belief. Thus, he strongly relied upon the order of the CIT(A). 8. We have heard the rival contentions, perused the relevant finding given in the impugned orders and also the material referred to before us. There is no dispute with regard to the facts discussed in the foregoing paragraphs. However, for the sake of brevity, the crucial facts, which are relevant for deciding the levy of penalty are hereby reiterated again. One, Shri Pyarali Dholakia owned an immovable property at Chakala, Andheri (East), Mumbai along with his wife. Earlier, he was carrying out his business in his proprietorship concern. Later on, in the year 1975, the proprietorship concern was converted into a partnership firm whereby his daughters and his son were taken as partners. In 1983, his wife Mrs. Pravin Dholakia and his son became the partners along with Shri Pyarali himself. The im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings, the Assessing Officer held that in view of the decision of the Hon ble Supreme Court in the case of ITO vs Ch. Atchaiah (supra), the assessee should have shown the income under the right head and therefore, the claim of deduction is not allowable as the assessee should have shown the entire capital gain in its own hand. This disallowance of tax at ₹ 17,74,22,707/- is the subject matter of penalty. The assessee s case has been that, by virtue of Will of the father of the legal heirs and by family arrangement, there was diversion by overriding title in favour of the legal heirs to get share in the sale proceeds of the land and, therefore, there was a bona fide belief that the amount paid to the legal heirs is not be included in the sale consideration of the capital gain shown by the assessee firm. Once, the Assessing Officer had taxed the whole amount in the hands of the assessee, the assessee agreed to this proposition and made an application before the Assessing Officer that the taxes paid by the firm on behalf of legal heirs should be given credit to the assessee, which in fact was duly accepted and was given by the Assessing Officer under the order passed u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to his father, (later on converted into property of partnership firm) had to be given to his sisters. Instead of receiving the whole amount in the hands of the partnership firm and including it as its income and paying taxes thereon, and then paying to the legal heirs which would have been the correct manner, he chose to give the amount directly to the legal heirs after paying the taxes. Thus, there was no mala fide intention for evading the tax or not showing the income, because so far as assessee is concerned there is no tax impact even otherwise also, what has to be seen is, whether the assessee s explanation that there was diversion by overriding title by virtue of obligation cast upon due to Will . Family arrangement and the other documents. Though such an award should have included as income and then such an income should have been applied as per the will of the partner, but therefore the purpose of penalty, it cannot be held that assessee is guilty of concealment of income. Once assessee has complied with the terms of the Will and the family arrangement then, it cannot be held that at the time of filing of the return the assessee lacked genuine and bona fide belief or a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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