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2015 (11) TMI 1129 - ITAT MUMBAI

2015 (11) TMI 1129 - ITAT MUMBAI - TMI - Penalty u/s 271(1)(c) - assessee has taken excessive cost value of the land without any evidence in order to reduce its capital gain tax liability - CIT(A) deleted the penalty - Held that:- Both of the lower authorities have determined the rates of land, by adopting some basis. The AO had accepted the claim of the assessee in the original assessment order. He changed his stand in the reassessment order. Thus, there are three different opinions with respec .....

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that, with certainty, that there was any concealment of income or furnishing of inaccurate particulars of income on the part of the Assessee. Under the income tax law, parameters for determination of taxable income and levy of penalty are different from each other. Both should not be mixed or interchanged.

The penal provisions are quasi criminal in nature, therefore these have to construed and applied strictly. Penalty can be levied by the AO, only and only, if, the AO is able to es .....

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nion, the same by itself may not be sufficient for arriving at a conclusion that the assessee has furnished inaccurate particulars of income. Hence, in our considered opinion, penalty cannot be levied in the facts and circumstances of this case, especially when the quantification of the income itself does not have strong pillars to stand. - Decided in favour of assessee. - ITA NO.936/Mum/2014 and ITA NO.937/Mum/2014 - Dated:- 7-10-2015 - Shri Amit Shukla, Judicial Member, and Shri Ashwani Taneja .....

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entical ground in both the years: For AY 2004-05: Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) was justified in deleting penalty levied u/s.271(1)(c) of the Income Tax Act 1961 of ₹ 63,66,835/- without appreciating that the assessee has taken excessive cost value of the land without any evidence in order to reduce its capital gain tax liability. The Ld. CIT(A) further failed to appreciate that the assessee had filed inaccurate particulars which he was no .....

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iled to appreciate that the assessee had filed inaccurate particulars which he was not able to explain during the assessment and penalty proceedings (refer para 10 of ITAT s order against quantum appeal). First we take up ITA N0 936/M/2014, AY 2004-05: 2. The brief background of these cases is that, penalty u/s 271(1)(c) was levied with regard to the addition made by the AO in the assessment proceedings on the ground that value, as on 01.04.81, of the land sold by it during the year under consid .....

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d the same at ₹ 3,34,72,902/-, whereas the Ld. CIT(A) worked out the same at ₹ 2,23,95,570/-. The revenue accepted the order of Ld. CIT(A), whereas the assessee contested the matter further in second appeal before the Hon ble ITAT, in the quantum proceedings. The Tribunal dismissed the appeal of the assessee and confirmed the order of the Ld. CIT(A). Thereafter, penalty proceedings were initiated by the AO and penalty was levied on the amount of capital gain as was recomputed by the .....

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nalty. It was submitted that assessee did not file its return honestly, and that s why there was huge variation in the rate of land as was determined by the AO or as was adopted by the Ld. CIT(A), in comparison to the rate as was claimed by assessee in the return of income. It was further submitted that AO had adopted the rate after making necessary enquiries through sub-registrar. It was further submitted that Hon ble Tribunal has confirmed the addition, as was sustained by Ld. CIT(A) and there .....

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ed that AO had made addition on the basis of estimation only. This addition was not confirmed by the Ld. CIT(A) as it is, and an addition of a different amount was made by him. Further, no DVO s report was obtained by the AO before making the addition. Thus, rates have been adopted by the AO on the basis of some general inquiries, and no concrete material has been used by the AO for determining value of the land as on 1-4-81. It was further submitted that no appeal was filed by the Revenue again .....

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lation of principles of natural justice also. It was further submitted that the charge fixed for levy of penalty viz. whether there was concealment of income or furnishing of inaccurate particulars of income, is not clear, therefore, penalty is illegal. Reliance was placed in this regard on the judgments of Hon ble Gujarat High Court in the case of New Sorathia Eng. Co vs CIT 282 ITR 642. Lastly; it was submitted that quantum appeal against the order of Hon ble Tribunal has been filed by the ass .....

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re possible on the issue involved therein, and therefore, under such circumstances penalty should not be levied. 5. We have heard both the sides very carefully and gone through the orders of lowers authorities as well as material placed before us for our consideration and judgments relied upon by both the parties. The brief facts of the case are that the assessee filed its return of income on 30.07.2004 declaring capital gain of ₹ 46,48,295/- on sale of 38,670/- sq. meters of land and stru .....

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at ₹ 2,23,95,570/-. The assessee filed an appeal before the Tribunal, which was dismissed by Tribunal s order dated 17.06.2011, thus confirming the order of Ld CIT(A). 5.1. Subsequently, penalty proceedings were initiated by issuing notice u/s 271(1)(c) of the Income Tax Act, 1961. In response, the assessee submitted its reply through by letter dated 19.03.2012, wherein it was submitted that the capital gain as on 01.04.1981 was determined as per Registered Valuer s Report who had based t .....

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case of Dilip N. Shroff, 291 ITR 519. 5.2. The AO without referring to the reply submitted in response to penalty notice dated 13.03.2012, passed an exparte order stating that the assessee has not furnished any explanation in response to penalty notice and relying on the Supreme Court decision in the case of K.P. Madhusudanan vs. CIT 251 ITR 99 concluded that the assessee has not discharged the onus and as such imposed penalty. 5.3. In appeal against the penalty order, the assessee had made det .....

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dustrial land being non agricultural. In appeal, the value was arrived at by comparing the assessee s land with reference to double room tenements for ground storied temporary chawls with bricks and mud wall, located in slum area without proper access and cannot be called as authorized development, and that the ownership of the land mentioned in one of the documents is that of Zopadi and no electric supply . It was submitted that the assessee had given the explanation based on cogent and reliabl .....

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nder section 148(1), when the same was issued without recording valid reasons? (ii) Whether the Appellate Tribunal is correct in law in upholding the validity of notice issued under section 148(1) merely on change of opinion when the market value as on 01.04.1981 was verified during the course of original assessment proceedings? (iii) Whether the Appellant Tribunal erred in upholding the determination of the Long Term Capital Gain of ₹ 2,23,95,570/- as against ₹ 46,48,295/- declared .....

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the confirmation by the appellate authorities of the addition/disallowances made in the assessment order. The assessment and penalty proceedings are different. The mere fact of confirmation of addition cannot, per se, lead to the imposition of the penalty. In the penalty proceedings, the assessee is given chance to show that why the penalty be not imposed with reference to the addition made or confirmed in the quantum proceedings. If the assessee succeeds in explaining his case, then no penalty .....

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rein, as per law, penalty can be levied. The necessary ingredients for attracting the explanation to section 271(1)(c) are as follows: (a) if a person fails to offer the explanation, or (b) he offers the explanation which is found by the authorities to be false, or (c) the person offers 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 have been disclosed by him. If the case of an assessee falls in a .....

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disallowed in the assessment order. 5.5. Let us now, analyse facts of the case and explanation of the assessee, in the assessment proceedings as well as in penalty proceedings. As per facts on record, the assessee firm had sold industrial land vide two agreements dated 30.04.2004 along with structures threon to one M/s. Sidhi Real Estate Developers for a total consideration of ₹ 5,06,70,000/-. The land was purchased in 1966 and the assessee was entitled to adopt its fair market value as o .....

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sessing officer was of the view that this valuation as highly exaggerated, and devoid of any basis. On 10th December, 2010 the assessing officer wrote to the assessee pointing out three comparable sale instances in the locality which indicated the prices between ₹ 5 to ₹ 10 per square feet, as late as in 1985, and in respect of house property which any day fetches higher price than a vacant factory land would fetch. It was also pointed out that the areas in which these sale instances .....

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ecember, 2010, the registered valuer pointed out various discrepancies in the assumptions made by the AO. The registered valuer contended that the three sales instances reported by AIR unit are not of buildable plot or of authorized structures along with land, having proper accesses and other services such as electricity, water supply, drainage etc. and that these house are not situated in the vicinity or on the road on which the land under valuation fronts . The assessing officer was clearly no .....

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. The value so arrived at ₹ 1.67 per square feet was then enhanced by 50% on account of the fact that the land was for use as a non-agricultural land. The value as on 01.04.1981 was thus arrived at ₹ 2.51 per square feet. Accordingly, cost of acquisitions of land was taken at by adopting the value at ₹ 2.51 as on 01.04.1981 and then applying the indexation. It was in this background that the additions were made to the capital gains disclosed by the assessee. The Ld CIT(A) confi .....

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seen that the necessary conditions for invoking explanation 1 of section 271(1)(c) are missing. Both of the lower authorities have determined the rates of land, by adopting some basis. The AO had accepted the claim of the assessee in the original assessment order. He changed his stand in the reassessment order. Thus, there are three different opinions with respect to rates of land i.e. one - as formed by AO in original assessment order, two- as formed by the AO in reassessment order and three- .....

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ssessee. Under the income tax law, parameters for determination of taxable income and levy of penalty are different from each other. Both should not be mixed or interchanged. The penal provisions are quasi criminal in nature, therefore these have to construed and applied strictly. Penalty can be levied by the AO, only and only, if, the AO is able to establish that case of the Assessee falls within the framework of the penal provisions, and as per the given parameters. If we examine the facts of .....

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