TMI Blog2016 (1) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... t it is not a fit case for impose the penalty u/s 271(1)(c) of the Act. - I.T.A. No.3708/Mum/2014, I.T.A. No.1250/Mum/2013, I.T.A. No.4985/Mum/2014, I.T.A. No.4986/Mum/2014, I.T.A. No.179/Mum/2013, I.T.A. No.3709/Mum/2014 - - - Dated:- 21-10-2015 - SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER For The Assessee : Shri Neelkanth Khandelwal Ms. Hetal Panchal Respondent : Shri Aarsi Prasad (D.R) ORDER PER R.C. SHARMA, A.M. : Out of these six appeals, two appeals being ITA Nos. 4985/Mum/14 ITA No. 4986/Mum/14 for A.Y. 2010-11 are filed by the Revenue and four appeals being ITA Nos. 3708/Mum/14, ITA No. 1250/Mum/13, 179/Mum/13 and 3709/Mum/14 for A.Y. 2010-11 are filed by the assessee. These appeals filed by the assessee and Revenue are directed against separate orders passed by the ld. CIT(A) 25 for the assessment year A.Y. 2010-11, in the matter of order passed u/s.143(3)/271(1)(c) of the Income Tax Act, 1961. First, we shall take up assessee‟s appeals in ITA No. 1250/Mum/13 ITA No. 179/Mum/13 for A.Y. 2010-11. 3. These are the appeals filed by the assessee against two separate orders of ld. CIT(A) 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was brought on the statute book to nullify the effect of the Honble Supreme Court decision in case of CIT v/s B. C. Srinivasan Shetty reported in 128 ITR 294 wherein it was held that no capital gain is leviable in the case of self-generated assets involving no cost. In this way, it goes without saying that the decision of the Hon'ble Supreme Court in the case of CIT v/s B. C. Srinivasan Shetty reported in 128 ITR 294 is no longer applicable in view of the amendment made as above for which the Assessee did not feel tired in citing his various submissions. Further, the Assessee in his submission also stated that the provision of section 55(2)(a) of the IT Act is not applicable riding on the fact that the term leasehold right is not specifically mentioned in the provision u/s 55(2)(a) of the IT Act. The Assessee went on arguing that leasehold right is different than the tenancy right which was not the intention of the legislature to include in section 55(2)(a) of the IT Act. 7. The A.O. observed that the intention of the legislature was to bring almost all the self-generated assets to the ambit of capital gains taxable u/s 45 of the Act. The A.O. did not accept the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrases though the Legislature has used such phrases wherever they intended to enlarge the scope of the section, examples - (i) section 33A Explanation below sub-section (8) - leasehold rights or other right of occupancy in any land (ii) in section 155 - Explanation below sub-section (5A) - leasehold rights or other right of occupancy in any land (iii) section 32 (l)(ii) - or any other business or commercial rights of similar nature The only reason can be that the Legislature did not intend to enlarge the scope of the words tenancy rights . 1.4 Stamp Act Transfer by way of - (a) lease - covered by Entry 36 of the Schedule (b) Tenancy rights - covered by Article 5 (g-d) of the said Schedule Lease, leasehold rights, tenancy and tenancy rights are legal terms and if they have been used differently in different sections of Income-tax Act, it follows that the 2 carry different meanings. 1.5 (a) There is no cost of acquisition of leasehold rights - Cadell Weaving - 249 ITR 265 (Born) at page 270 - under the heading Facts and 273 ITR 1 (SC) (b) Section 55(2)(a) only refers to tenancy rights , cost of acquisition of which is deemed to be 'nil' and does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee along with the return of income wherein, facts were brought on record to the effect that since no cost was incurred in respect of leasehold rights acquired by the assessee, therefore, applying the principle laid down by the Hon‟ble Supreme Court in case of B.C. Srinivasan Shetty (supra), capital gain is not liable to tax. The A.O. found that the assessee has paid advance tax of ₹ 1.99 crores but no corresponding income was offered in the return of income. On A.O.‟s query as to why the assessee has not offered income of ₹ 10.83 crores, it was explained that the amount received on transfer of leasehold rights was not taxable because it was not possible to envisage the cost of acquisition and for this proposition, reliance was placed on the decision of Hon‟ble Supreme Court in the case of CIT vs. B.C. Shinivasan Shetty, 128 ITR 294. It was held by the A.O. that the rulings of Hon‟ble Supreme Court in the case of B.C. Shinivasan Shetty (supra) is no more applicable because necessary amendments have been made in the statute u/s 55(2)(a) of the Act w.e.f. 1-4-1995. It was the contention of the assessee that leasehold right which is a capital as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n arising on account of sale of leasehold rights in a property at Goregaon (W) vide Agreement at 18th December 2009 and conveyance dt. 18.3.2010 is not included ..... .... while filing the return in the Schedule AIR S.No. 7 has not been filled in since sale of leasehold right is not immoveable property. ` .... enclosed herewith a copy of the Computation of Total Income on the basis of which the aforesaid return of income is filed and you are requested to consider the same at the time of framing the assessment order. Further, a note was given at the end of the computation of total income forming part of return, which mentions the fact of sale of leasehold rights and the claim of the appellant that the same is not exigible to tax. The assessee also paid advance tax on the impugned gains so that he does not have to bear the burden of interest under section 234B in the eventuality of his claim not being accepted. The assessee during the course of assessment proceedings furnished among other details, the following:- - Lease Agreement dated 8th February, 1952 - Sale Agreement dated 18th December, 2009 - Conveyance Deed dated 13th March, 2010 - Letter dated August 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Hindustan Steel Ltd. v. State of Orissa - (1972),83 ITR 26,29 (SC) Indra Co. v. Union of India - (1967) 64 ITR 664, 667 (Raj) CIT v. Smt. Veerawali - (1976) 104 ITR 679 (Ori) The word may in section on 271`(1) indicates that the authority concerned has a discretion either to levy penalty or not to levy a penalty, for this proposition reliance was placed on following pronouncements. CIT vs. Maya Rani Punj (1973) 92 ITR 394 (Del) Poorna Biscuit Factory v. CIT (1975) 99 ITR 41 (AP) CIT vs. Prafulla Kumar Malik (1976) 104 ITR 648 (Ori) CIT vs. V.M. Modi Sons- (1976) 102 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 271(l)(c). That would clearly not be the intendment of the legislature. Our attention was invited to the observations of the Apex Court in Sree Krishna Electricals v. State of Tamil Nadu (2009) 23 VST 249 while dealing with penalty proceedings in Tamil Nadu General Sales Tax Act are apt, the Court had found that the authorities below that there were some incorrect statements made in the return. However, the said transactions were reflected in the accounts of the assessee. The Apex Court observed thus : So far as the question of penalty is concerned the items which were not included in the turnover were found incorporated in the appellant's account books. Where certain items which are not included in the turnover are disclosed in the dealer's own account books and the assessing authorities include these items in the dealer's turnover disallowing the exemption, penalty cannot be imposed. The penalty levied stands set aside . 19. He further invited our attention to the penalty order and contended that the A.O. has initiated the penalty proceedings for furnishing inaccurate particulars of income, however, in the entire order of penalty, the A.O. does not specify w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ights are different from tenancy rights. The ld. D.R. further argued that as to why the assessee paid advance tax on gains arising on surrender of leashold rights and claimed a refund of such tax paid by claiming the same to be not chargeable to tax. He further relied on the order of the ld. CIT(A) on para 4.6 stating that only a small percentage of cases are selected for scrutiny and penalty should be levied in such cases where the escapement of income is on illogical grounds and contended that the assessee took his chances that his case may not get selected in scrutiny and hence, the gains may skip the tax. 22. We have considered the rival contentions and carefully gone through the orders of authorities below and deliberated on the judicial pronouncements referred by lower authorities in their respective order as well as cited by ld. A.R. and ld. D.R. during the course of hearing before us. We have also carefully gone through the justifications filed by the ld. A.R. during the quantum proceeding so as to distinguish the leasehold rights from the tenancy rights. For the year under consideration, the assessee has filed his return of income on 20th September, 2010. On the very sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance was placed on the judgment of Hon‟ble Supreme Court in the case of Reliance Petroproducts Ltd. 322 ITR 158 (SC) wherein it was propounded that the word particulars‟ must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. The word inaccurate‟ is preceded by the word particulars‟ and hence, read in conjunction they would mean not accurate, not exact or correct, not according to truth or erroneous. Even during the assessment proceedings, the asessee has filed all his particulars to the effect that leasehold rights are different than the tenancy right. Even though the A.O. was not agreeing with the justification given by the assessee for not offering the capital gain arose on sale of self generated asset but the assessee has tried to justify its claim on the basis of decision of Hon‟ble Supreme Court in the case of B.C. Srinivasa Shetty (supra). Merely because the assessee‟s claim on the impugned receipts is not chargeable to tax which claim was not accepted by the A.O. by itself would not attract the penalty u/s 271(1)(c) of the Act. If the contention of the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence, the claim was made that the same is not chargeable to tax. The assessee, being a layman surely cannot interpret the complex Indian Income-tax Laws and has followed the advice of his Chartered Accountant. Reliance is placed on the following decisions where penalty levied on the assessee was deleted on the fact that he followed the advice of a professional tax expert:- T. Ashok Pai 292 ITR 11(SC) Dilip N. Shroff 291 ITR 519 (SC) Lachman Chaturbhuj Java 132 ITR 631 (Bom) Shyam Gopal Charitable Trust 290 ITR 99 (Del) Deepak Kumar 232 CTR (P H) 78 Sania Mirza 259 CTR (AP) 386 State of Kerala v. Krishna Kurup Madhava Kurup air 1971 Ker. 211 The Supreme Court in Concord of India Insurance Co. Ltd. v. Smt. Nirmala Devi [1979] 118 ITR 507, has held that legal advice given by the members of the legal profession may sometimes be wrong and even as pronouncement on questions of law by Courts are sometimes wrong. An amount ..... X X X X Extracts X X X X X X X X Extracts X X X X
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