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2016 (5) TMI 1163 - ITAT VISAKHAPATNAM

2016 (5) TMI 1163 - ITAT VISAKHAPATNAM - TMI - Levy penalty u/s 271(1)(c) - undisclosed capital gain - assessee has sold the property during the financial year 2007-08 and computed the capital gain for the assessment year 2009-10 for which no satisfactory explanations has been offered - Held that:-AO dealing with the matter is to consider whether the explanations offered by the assessee or the person as the case may be is reasonable and as regards the reason was on account of reasonable cause. I .....

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also undisputed fact that he had disclosed the capital gain for the A.Y. 2009-10. Penalty u/s 271(1)(c) of the Act could be imposed when all the necessary facts were not disclosed by the assessee before the assessing officer. We further noticed that when the facts was brought to the notice of the assessee, the assessee has accepted the proposal mooted by the A.O. and offered the capital gain in respect of 3 sale deeds for the assessment year 2008- 09. Therefore, the A.O. was not correct in comi .....

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(c) of the Act. - Decided in favour of assessee - I.T.A. No. 698/Vizag/2013 - Dated:- 6-5-2016 - Shri V. Durga Rao, Judicial Member And Shri G. Manjunatha, Accountant Member For the Appellant : Shri C. Subrahmanyam, AR For the Respondent : Shri A. Narayana Rao, DR ORDER Per G. Manjunatha, Accountant Member: This appeal filed by the assessee is directed against the order of CIT(A), Vijayawada dated 30.9.2013 and it pertains to the assessment year 2008-09. 2. The brief facts of the case are that t .....

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ocument is registered in the financial year 2008-09. The assessee has offered long term capital gain from sale of property for the assessment year 2009-10. From the information available in the income tax data base, the A.O. noticed that the assessee has sold an immovable property during the financial year 2007-08, but the resultant capital gain has not been offered for tax. Therefore, issued a notice u/s 148 of the Income Tax Act, 1961 (hereinafter called as 'the Act') to reopen the ass .....

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t be levied for the assessment year 2008-09. In response to the show cause notice, the assessee submitted that he had sold the immovable property and as per the requirement of the buyer registered the property by way of 4 registered documents. The assessee further submitted that 3 documents were registered in the financial year 2007- 08 and one document was registered in the financial year 2008-09. Though the properties are registered in the financial year 2007-08, the possession of the property .....

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een taken place during the financial year 2007-08 and accordingly computed the capital gain for the assessment year 2008-09 for which the assessee has agreed. 3. Thereafter, the Assessing Officer issued a show cause notice u/s 271(1)(c) r.w.s. 274 of the Act and proposed to levy penalty u/s 271(1)(c) of the Act for concealment of particulars of income or furnishing inaccurate particulars of income. In response to show cause notice, the assessee submitted that he had neither concealed the particu .....

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the particulars of income for the assessment year 2008-09. It was further submitted that the impugned property is a single property, which was conveyed by way of 4 sale deeds for the convenience of the buyer. The buyer insisted that the property to be conveyed by way of 4 sale deeds, accordingly, separate sale deeds have been executed, however, the possession of the property has been handed over after execution of final sale deed. The assessee further submitted that the building was under the oc .....

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mpletion of assessment proceedings. Therefore, the A.O. was not correct in coming to the conclusion that there is a concealment of particulars of income which attracts the penalty u/s 271(1)(c) of the Act. The A.O. after considering the explanations furnished by the assessee held that the assessee has sold the property during the financial year 2007-08 and computed the capital gain for the assessment year 2009-10 for which no satisfactory explanations has been offered. The A.O. further held that .....

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oncealed the particulars of income and hence, it is a fit case for levy of penalty u/s 271(1)(c) of the Act. With these observations, levied minimum penalty of ₹ 10,73,674/- u/s 271(1)(c) of the Act. 4. Aggrieved by the penalty order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee submitted that the A.O. was not correct in levy of penalty u/s 271(1)(c) of the Act, as he had neither concealed the particulars of income nor furnished inaccurate particulars .....

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y has been handed over in the financial year 2008-09. Accordingly, as per the definition of transfer u/s 2(47)(v) of the Act, the transfer took place only when the possession of the property is handed over to the buyer. The CIT(A) after considering the submissions of the assessee held that the assessee has not offered any reasons for not offering the capital gain in respect of 3 sale deeds for the assessment year 2008-09. The assessee stated that he has agreed for the additions proposed by the A .....

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is contrary to the facts and also the law applicable to facts in the case of the appellant. 2. The learned Commissioner of Income Tax (Appeals) is not justified in confirming the penalty of ₹ 10,73,674/- levied by the assessing officer u/s 271(1)(c) of the Income Tax Act, 1961. 3. The learned Commissioner of Income Tax (Appeals) ought to have appreciated that there was neither concealment of particulars of income nor furnishing of inaccurate particulars of income. 4. The learned Commission .....

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officer for issue of notice u/s 271(1)(c) of the Act. 6. Any other grounds that may be urged at the time of appeal hearing 5. From these grounds of appeal, the assessee has challenged the CIT(A) order confirming the levy of penalty u/s 271(1)(c) of the Act. The assessee also filed an additional ground by way of memorandum of petition for additional grounds and challenged the legality of the penalty proceedings. The Ld. A.R. submitted that the penalty imposed u/s 271(1)(c) of the Act is legally .....

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of the Act. In support of his arguments, relied upon the judgement of Hon ble High Court of Karnataka in the case of CIT Vs. Manjunatha Cotton & Ginning Factory 359 ITR 565. He also relied upon the decision of ITAT, Visakhapatnam bench in the case of B. Revathi Vs. DCIT in ITA No.599/Vizag/2014. On the other hand, the Ld. D.R. strongly supported the orders of the CIT(A). 6. We have heard both the parties and perused the materials available on record. The assessee challenged the legality of .....

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reason that the A.O. has issued a show cause notice and proposed to levy penalty for concealment of particulars of income and furnishing inaccurate particulars of income. Therefore, we are of the view that the A.O. has arrived at proper satisfaction before initiation of penalty proceedings and accordingly, the additional ground raised by the assessee is rejected. Accordingly, we dismiss the additional ground raised by the assessee. 7. The next issue came up for our consideration is levy of pena .....

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itted that there is no willful concealment of income, as the assessee has declared the capital gain on transfer of immovable property for the assessment year 2009-10 and also paid the resultant tax. It is further submitted that the assessee has agreed the proposal of taxing the long term capital gain for the assessment year 2008-09 to buy peace and also to cooperate with the department for smooth completion of the assessment proceedings. Therefore, the A.O. was not correct in coming to the concl .....

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the financial year 2008-09. The assessee claimed that physical possession of the property has been handed over to the buyer of the property during the assessment year 2009-10. It is further argued that when the final sale deed has been executed in the financial year 2008-09 and physical possession of the property has been handed over during the assessment year 2009-10, the assessee has rightly computed the capital gain in the assessment year 2009-10. The fact that the assessee has agreed for ca .....

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th the parties and perused the materials available on record. The factual matrix of the case is that the assessee has sold an immovable property consisting of land and building and executed four separate sale deeds. Out of the 4 sale deeds, 3 sale deeds have been executed in the financial year 2007-08 and the remaining one sale deed has been executed in the financial year 2008-09. According to the assessee, the possession of the property has been handed over in the financial year 2008-09 after e .....

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ssession of the property. It is further submitted that the assessee has computed the long term capital gain and filed return for the assessment year 2009-10 and offered the capital gain for tax. Therefore, the A.O. was not correct in coming to the conclusion that the assessee has not disclosed the capital gain for the assessment year 2008-09. 10. The A.O. levied the penalty u/s 271(1)(c) of the Act on the ground that the assessee with a malafide intention willfully concealed the particulars of i .....

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fault and agreed the capital gain to be taxed for the assessment year 2008-09. Therefore, it is a clear concealment of particulars of income which attracts the penalty u/s 271(1)(c) of the Act. It is the contention of the assessee that there is no willful concealment of particulars of income, as he had disclosed the capital gain on total consideration received towards transfer of immovable property for the assessment year 2009-10. The assessee further contended that he had filed the return of i .....

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filly concealed the particulars of income which attracts the penalty u/s 271(1)(c) of the Act. 11. The only issue which arises for our consideration is whether there is concealment of income which attracts penalty under sec. 271(1)( c) of the Act. Before, we go into the merits of this case, let us understand the position of law as enumerated u/s 271(1)(c) of the Act. Section 271(1)(c) of the Act provides for levy of penalty, in a case where the A.O. or CIT(A) is satisfied that the person has con .....

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admittedly, the assessee has not disclosed the capital gain in respect of 3 sale deeds, though the sale deeds are coming within the financial year 2007-08. But, he had declared the capital gain in respect of all the 4 sale deeds for the assessment year 2009-10 and paid the capital gain tax as per law. It is the contention of the assessee that the capital gain is liable for the assessment year 2009-10, as the transfer as defined u/s 2(47)(v) of the Act took place during the assessment year 2009-1 .....

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not have disclosed the capital gain for the assessment year 2008-09, if the department has not reopened the assessment for the assessment year 2008-09. 12. The assessee has disclosed the capital gain before the department has reopened the assessment u/s 147 of the Act for the assessment year 2008-09. The only difference is that whether the particular capital gain is taxable for the assessment year 2008-09 or 2009-10. It is the contention of the assessee that he was under the bonafide belief that .....

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of the view that the assessee has handed over the possession of the property to the buyer after execution of final sale deed which was executed during the financial year 2008-09. Therefore, there is a merit in the contention of the assessee that he is under bonafide belief that he is liable to pay capital gain tax for the assessment 2008-09. It is not a case of A.O. that the assessee never disclosed the capital gain tax in the regular returns filed for the assessment year 2009-10. The assessee h .....

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n of fact and it has to be decided in each case on consideration of material placed before the concerned authority. The levy of penalty u/s 271(1)(c) of the Act is not automatic. Before levy of penalty, the concerned officer is required to find out that any violation referred to in the said provisions is without a reasonable cause. The initial burden is on the assessee to show that there exists a reasonable cause which was the reason for the failure referred to in the concerned provisions of the .....

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ment year 2008-09 or 2009-10 is a finding of fact which needs to be examined with reference to the facts available on record. The assessee proved that he had handed over the possession of the property in the financial year 2009-10. It is also undisputed fact that he had disclosed the capital gain for the A.Y. 2009-10. Penalty u/s 271(1)(c) of the Act could be imposed when all the necessary facts were not disclosed by the assessee before the assessing officer. We further noticed that when the fac .....

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in the case of CIT Vs. Reliance Petro Products Pvt. Ltd. (2010) 322 ITR 158. The Hon ble Supreme Court, while deleting the penalty u/s 271(1)(c) of the Act held that mere making a claim which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars of income. The relevant portion is reproduced hereunder: A glance at the provision of s. 271(1)(c) would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assesse .....

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ase that no information given in the return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an in .....

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uot;inaccurate" and "particulars" in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. In this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under s. 271(1)(c). A mere making of the claim, which is not sustainable in law, by i .....

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he expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not attract the penalty under s.271(1)(c). If the contention of the Revenue is accepted then in case of every return where the claim made is not accepted by AO for any reason, the assessee will invite penalty under s. 271(1)(c). That is clearly not the intendment of the legislature. The Tribunal, as well as, the CIT(A) and the High Court have correctly reached this conclusion. -Sree Krishna El .....

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ot an essential element for imposing penalty for breach of civil obligations or liabilities. Willful concealment is not an essential ingredient for attracting civil liability. Existence of conditions stipulated in Section 271(1)(c) is a sine qua non for initiation of penalty proceedings u/s 271. The existence of such conditions should be discernible from the Assessment order or order of the Appellate Authority or Revisional Authority. Even if there is no specific finding regarding the existence .....

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The said deeming provisions are not applicable to the orders passed by the Commissioner of Appeals and the Commissioner. The imposition of penalty is not automatic. Imposition of penalty even if the tax liability is admitted is not automatic. Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discerni .....

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explanation offered, even though not substantiated by the assessee, but is found to be bonafide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. The direction referred to in Explanation IB to section 271 of the Act should be clear and without any ambiguity. If the AO has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority .....

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eet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. Taking up of penalty proceedings on the limb and finding the assessee guilty of another limb is bad in law. The penalty proceedings are distinct from the assessment proceedings. The proceedings for imposition of penalty though emanate from proceedings of assessment, it is independent and separate aspect of the proceedings. The findings recorded in .....

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