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2015 (12) TMI 134 - ITAT HYDERABAD

2015 (12) TMI 134 - ITAT HYDERABAD - TMI - Penalty u/s 271(1)(c) - evasion of tax on sale of property - Held that:- the assessee has offered the surplus out of OTS to Bank in the books of the company/firm, which is more than the sale under dispute, to tax and also offered to tax the interest income. It shows that there is no intention to conceal the income. The ld. AR also insisting that the sale transaction does not attract income tax and He was under influence of his financial advisers that th .....

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Dated:- 9-10-2015 - SHRI P.MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER For The Assessee : Shri D.V. Anjaneyulu & Ms. P. Pravallika For The Revenue : Shri Y. Sesha Srinivas ORDER PER S. RIFAUR RAHMAN, A.M.: Both these appeals filed by different assessees are directed against separate orders, both, dated 23/03/2015 of ld. CIT(A) - VII, Hyderabad for the AY 2006-07. The assessees in both of these appeals are directors of the same company and as the facts and issue .....

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y, share income from Hansa Overseas and other sources, filed his return of income for the AY under consideration on 31/10/2006 admitting income of ₹ 1,57,700. The case was reopened u/s 147 and an order u/s 143(3) read with section 147 was passed on 30/03/13 determining the income at ₹ 1,06,50,840 including long term capital gains at ₹ 1,03,16,340, which was upheld by the CIT(A), on appeal, vide order dated 22/11/13. 5. Thereafter, AO initiated penalty proceedings u/s 271(1)(c) .....

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the bank accounts of the assessee. c) The assessee converted these amounts into FDs, earned interest and admitted the same under other sources for the year under consideration. d) The assessee, along with his brother, as Directors and partner of M/s Hoe Leather Garments Pvt Ltd., and M/s Hansa Overseas Enterprises, agreed for the OTS with the creditor banks on 29.12.2005. Accordingly, the assessee utilized the sale proceeds, after more than six months of their receipt, towards clearing dues out .....

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ideration was appropriated by the Banks directly towards dues outstanding against the name of the company, contrary to the credits appearing in his bank account and the subsequent date of OTS on 29.12.2005. g) Though a vague claim of 'direct appropriation by the banks' was made by the assessee, but failed to prove that the sale was a 'conditional sale' or the property in question was mortgaged to the banks. h) As it was clear that no strings were attached to the sale of the prope .....

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nable since the assessee cannot avoid the right tax payable in the hands of right person. 5.1. After considering assessee s contentions, the observations of AO are as under: 5.2 The assessee tried to evade tax on sale of property at each stage of the proceedings and in the contrary claimed that he has furnished voluntarily all the information relating to the sale of . property and has not concealed any income. However, this claim of the assessee is bereft of any merit. It is not a case that the .....

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y the first appellate authority. He further observed that, based on the information furnished by the assessee in the case of Company, M/s Hoe Leather Garments Pvt Ltd., the case of the assessee was reopened and a notice u/s 148 was issued. Even at this stage, the assessee has not disclosed the transaction of sale of property in the return filed in response to notice u/s 148 and claimed some sort of exemption, as he thinks fit. The reasons for not showing the sale transaction are clear since the .....

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is particulars of income relevant for the subject assessment year. 5.3. In view of the above observations and considering the facts of the case and the conduct of the assessee, AO levied penalty of 200% which comes to ₹ 46,42,000 u/s 271(1)(c) of the Act. 6. Aggrieved by the penalty order, assessee preferred appeal before ld. CIT(A). 7. Ld. CIT(A) after discussing the issue at length confirmed the penalty levied by AO by observing that the claim of bona-fide belief of assessee in not offer .....

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e original return or return in response to section 148 with bonafide belief that there is no capital gains as the entire sale proceeds from immovable property which was offered as collateral security was wholly and exclusively used for discharge of debt and no benefit accrued or received to assessee from the said transaction. 9.1 Ld. AR also submitted that the assessee being Director/Partner of the company/firm has used the proceeds of sale towards settlement of One Time Settlement (OTS). Also, .....

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lement by SBI ₹ 75.00 Offered as income for tax purposes during The AY 2006-07 ₹ 372.81 It is clear that the assessee is bonafide and law abiding citizen by disclosing the surplus of ₹ 419.81 lakhs as other income in the books of the company/firm (refer paper book page 13) 9.2 Ld. AR also submitted that the assessee has to keep the funds in the bank for short term till the OTS arrangements are approved by the bank. As soon as the OTS is sanctioned by the bank, the proceeds were .....

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ble Supreme Court in the cases of R.M. Arunachalam vs. CIT (supra) and VSNR Jagdish Chandran vs. CIT (supra) have clearly held that amount paid out of sale proceeds to clear mortgage debt cannot be treated as cost of acquisition or cost of improvement so as to reduce the same from sale consideration while computing capital gain u/s. 48 of the Act. Though the learned AR has relied upon certain decisions to contend that when there are conflicting views, the view favourable to the assessee is to b .....

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llow the decisions of the Hon ble Supreme Court. In view of the aforesaid, we do not find any infirmity in the order of ld. CIT(A) in upholding the assessment of capital gain at the hands of the assessee. Accordingly, we uphold the order of the learned CIT(A) by dismissing the grounds raised by the assessee. 9.5 Ld. AR argued that the Hon ble Supreme Court judgment relied on by the Hon ble ITAT is distinguishable. He still insisted that the transfer of assets will not attract tax. 10. Ld. DR, on .....

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