TMI Blog2016 (6) TMI 798X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has given money to M/s. Alpha Commercials for the purpose of investment in residential property. The Assessing Officer observed that just because the assessee has remitted the demand raised by the Department, it cannot be a reason for levying the penalty. However, he has not found the claim of the assessee that the assessee has handed over the money to M/s. Alpha Commercial for investment in residential property. Further, when the assessee has given an explanation that he has given money to Alpha Commercials for the purpose of investment in residential house, it is the duty of the Assessing Officer to examine the records of M/s. Alpha Commercials to find out whether, the claim of the assessee is genuine or not. The Assessing Officer without making investigation, cannot presume that the explanation given by the assessee is false or bogus. In the present case, the assessee submitted a detailed explanation before the Assessing Officer. Thereafter, it is the duty of the Assessing Officer to establish that the assessee has concealed income or furnished inaccurate particulars of income. In the present case, the Assessing Officer has accepted the amount offered by the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld a land situated at Neelankarai to M/s. Kannammal Educational Trust and admitted that the land sold was an urban land only and no agricultural activities were carried out on the said land. Hence, the land was capital asset in nature. The present assessee is one such co-owner out of the total 13 co-owners of the impugned land sold out. 3.1 The Assessing Officer noticed from the above facts that the income chargeable to tax under the head Capital gains had escaped assessment. Accordingly, the Assessing Officer issued a notice under section 148 of the Act to the assessee on October 25, 2012. In response to the notice under section 148, the assessee filed a return income for the assessment year 2010-11 on December 27, 2012, admitting an income ₹ 7,31,554 (excluding the capital gains of ₹ 1,90,27,203) after withdrawing the earlier deduction claimed under section 54B at ₹ 1,90,00,000 and paid the taxes on declared such capital gains. The reassessment was completed by determining the total income of ₹ 1,96,98,760 (including long-term capital gains of ₹ 1,90,27,203) on March 8, 2014. 3.2 The penalty proceedings of the Act for furnishing inaccurate pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. In this case, there was a delay of 175 days in filing all these appeals before the Commissioner of Income-tax (Appeals). The assessee filed a condonation petition before the Commissioner of Income-tax (Appeals) stating as follows : The assessment order for the assessment year 2010-11 dated March 8, 2014, and in this regard the assessee submits that the appeal against the assessment order ought to have been filed within 30 days from the said date of service. However, as admitted in the sworn statement September 13, 2012, the assessee was under the mistaken impression about the correctness of surrender of the claim of exemption under section 54B of the Act in the computation of total income formed part of the original return of income. In the sworn statement the assessee admitted his/his ignorance of law inasmuch as the said ignorance should construed in both ways consequent to the interpretation of said provisions in the Act to the factual matrix of the case. The assessee, therefore, had remitted the taxes quantified in the re-assessment order and wanted to purchase peace with the Depart ment ignoring the professional advice received on the wrong order passed which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings, vide notice dated March 8, 2014, under section 274 read with section 271(1)(c) of the Act. The assessee replied to that notice, vide letter dated August 12, 2014, that the assessment order dated March 8, 2014, was delivered on August 12, 2014. The assessee was of the opinion that the Assessing Officer would not levy penalty in this case. However, the Assessing Officer has given a fresh opportunity of hearing to the assessee on September 25, 2014, wherein the assessee's representative requested the Assessing Officer to drop the penalty proceedings since the demand raised has been paid. Finally, on September 25, 2014, the assessee came to the conclusion that the Assessing Officer would levy penalty and therefore, he took a decision to file the appeal against the reassessment order dated March 8, 2014. Accordingly, the assessee filed the appeal before the Commissioner of Income-tax (Appeals) on September 26, 2014, on the bona fide belief that the Assessing Officer would not levy penalty has been vanished. 6. On the other hand, the learned Departmental representative submitted that the assessee cannot wait for the decision of the Assessing Officer, to levy penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer is going to levy penalty under section 271(1)(c) of the Act in these assessment years. Hence, the assessee filed appeals against the quantum addition before the Commissioner of Income-tax (Appeals) on September 26, 2014. As per the Commissioner of Income-tax (Appeals), this cannot be a reasonable cause to file the appeals belatedly and the assessee cannot wait for the result of penalty proceedings in filing the appeal. This observation of the Commissioner of Income-tax (Appeals) is unwarranted. Thus, in our opinion, there is superficial approach to the problem by the Commissioner of Income-tax (Appeals). The matter has to be considered in the light of human probabilities. The reason stated by the assessee in these cases is that he was waiting for the outcome of the penalty proceedings. Therefore, we have to consider, whether reasonable prudent person would do so. The inference of such delay has to be drawn on the basis of circumstances available on record and conduct of the assessee. After considering the surrounding circumstances and applying the test of human probabilities, one has to reasonably conclude that the plea of the assessee is genuine. The explanation offered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so. 7.1 In our opinion, when substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right for injustice being done because of non-deliberate delay. In our opinion, the delay in this case is very short, i.e., 175 days and there is no question of inordinate delay, when the reason stated by the assessee was a reasonable cause for not filing the appeal. We have gone through the reason for delay as discussed in earlier paragraph. The Madras High Court in the case of CIT v. K. S. P. Shanmughavel Nadar [1985] 153 ITR 596 (Mad) considered the delay of condonation and held that there was sufficient and reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. Accordingly, the Madras High Court condoned nearly 21 years of delay in filing the appeal. When compared to 21 years of delay considered by the court, the delay of 175 days before the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erits is with regard to allowability of deduction under section 54B of the Act. Since the Commissioner of Income-tax (Appeals) decided the issue on the merits without condoning the delay, is not appropriate. Hence, we remit the issue to the file of the Commissioner of Income-tax (Appeals) with a direction to decide the same afresh. He shall not be prejudiced by the earlier finding of the Commissioner of Income-tax (Appeals) on the merits in that order. Accordingly, this issue is allowed for statistical purposes. In the result, the appeals in ITA Nos. 253, 248, 249, 246, 255, 245, 247, 250/Mds/2016 are allowed for statistical purposes. 9. In ITA No. 237/Mds/2016, the grievance of the assessee is with regard to levy of penalty under section 271(1)(c) of the Act. 10. The facts of the case are that the assessee, an individual is having income from business, capital gains and other sources. The assessee filed his original return of income for the assessment year 2010-11 on March 29, 2012, admitting a total income of ₹ 7,31,554. In the statement of income filed with the return of income, for the assessment year 2010-11, the assessee had admitted the sale of agricultural land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only an urban land. Therefore, the assessee's claim of exemption under section 54B of the Act was wrong. (iii) Further, the assessee neither invested the amount of sale consideration of impugned land in the purchase of agricultural lands nor did he deposit in the Capital Gains Account Scheme, within the stipulated period as provided in the Act. Hence, the long-term capital gains of ₹ 1,90,27,203 was brought to tax. In response to the penalty show-cause notice issued by the Assessing Officer, the learned authorised representative furnished a letter dated August 12, 2014, which reads as follows, 'out of the sale consideration, the assessee has instructed M/s. Alpha Commercials to pay the money to the seller of the agricultural land at Mahabalipuram and claimed exemption under section 54B of the Act being part performance of the contract. As the said Alpha Commercials has used the money for the business purposes and has not paid the money as per the agreement. 10.3 From the above, it was noticed by the Assessing Officer that the assessee had not actually either invested the amount in the purchase of the property or invested in the Capital Gains Account Sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of the Act. The present return was filed in response to the notice under section 148 of the Act. 11.1 The Commissioner of Income-tax (Appeals) further observed that from the perusal of the assessment order passed under section 143(3) read with section 147 of the Act dated March 8, 2014, for the assessment year 2010-11 in the case of the assessee, it is revealed that a survey operation was carried out in the case of the firm M/s. Alpha Commercials at Jhaver Plaza, No. 1, Nungambakkam High Road, Chennai-34, on September 13, 2012. Shri Ameerdeen, who is the managing partner of the said firm, had admitted in his sworn statement that the land at Neelankarai was sold to M/s. Kannammal Educational Trust by 13 co-owners. All the co- owners had filed the return of income for the assessment year 2010-11 claiming the said land as agricultural land and claimed exemption under section 54B of the Act. However, as ascertained during the course of the survey operations and from the sworn statement Sh. Ameerdeen, the land at Neelankarai was an urban land and no agricultural activity was being carried out on the said land. The present assessee, Shri S. S. M. Ahmed Hussain, is also one of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of survey operation under section 133A in the case of M/s. Alpha Commercials. Therefore, the contention of the assessee that he had voluntarily disclosed the capital gains in the revised return of income, was factually incorrect. Firstly, the return of income could not be revised since the original return was not filed under section 139(1). Secondly, the subsequent return filed by the assessee was only in response to the notice under section 148 of the Act which was issued to him after the detection of the discrepancies noticed during the survey operation. Thirdly, in the original return of income, the assessee had treated the impugned land as agricultural land knowing fully the fact that the same was not an agricultural land and neither any agricultural activities were being carried out on the said land. Had there not been a survey in the business premises of M/s. Alpha Commercials, this true fact would never have been detected. Therefore, the element of voluntary disclosure, as claimed by the assessee, is missing in this entire process which would come to the rescue of the assessee. 11.5 According to the Commissioner of Income-tax (Appeals), the assessee has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer during the reassessment proceedings and also during the penalty proceedings. Moreover, these issues have been thoroughly analysed during the appellate proceedings as well. Accordingly, he observed that the act of withdrawal of exemption by the assessee in the return of income filed in response to the notice under section 148 was not a voluntary one and has been undertaken only after the Department's action under section 133A in the case of M/s. Alpha Commercials. In support of his findings, the Commissioner of Income-tax (Appeals) relied on the ratio of the judgments of the different courts which are squarely applicable to the present case of the assessee. Against this, the assessee is in appeal before us. 12. The learned authorised representative submitted that the Assessing Officer erred in imposing penalty under section 271(1)(c) of the Act after framing the reassessment under section 143(3) read with section 147 of the Act without assigning proper reasons and justifications. According to him, the Assessing Officer erred to appreciate that the provisions of section 271(1)(c) of the Act had no application to the facts of the case and ought to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty under section 271(1)(c) of the Act was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law. 12.4 According to the learned authorised representative, there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles of natural justice would be nullity in law. Further, the learned authorised representative submitted that during the appellate proceedings, the assessee furnished further written submissions on December 22, 2015, reiterating the earlier stand taken before the Assessing Officer during the penalty proceedings. The assessee has reiterated that he had voluntarily and truly offered the full amount received as sale consideration as per sale agreement as income for capital gain purposes in the assessment year 2010-11 and, therefore, his intention was true and honest. The assessee has also pleaded that even though the capital gain was assessable only in the assessment year 2013-14, however, in order to settle the matter amicably with the Department he had offered the capital gains in the assessment year 2010-11 itself by offering voluntarily in the revised return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t binding the proceedings relating to penalty. The penalty proceedings are independent from the assessment proceedings and it is not the continuation of assessment proceedings. In the penalty proceedings, the Assessing Officer has to be satisfied that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. In other words, it must be, at the outset, established by the Revenue that the amount which is said to have been concealed or not disclosed by the assessee in his return of income, constitute the income of the assessee. It is only then further the question, as to whether the income has been concealed or whether the assessee can give satisfactory explanation as to why, he has not disclosed a particular amount, will arise which was his income. 15. In the penalty proceedings, the Assessing Officer requires to perfectly establish that the receipt constituted as an income in the hands of the assessee in the relevant assessment year and the assessee deliberately concealed and furnished inaccurate particulars of income. Further, in the penalty proceedings, in cases, if the assessee able to place any other evidence, which was not pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act to evade tax after knowing the fact that no such transaction has actually taken place. Accordingly, the Assessing Officer levied penalty under section 271(1)(c) of the Act at 100 per cent. of tax sought to be evaded. 17. Now, the issue for our consideration is, whether the assessee wilfully claimed wrong deduction under section 54B of the Act. Before the Assessing Officer, it was given an explanation regarding this claim that out of the sale consideration, the assessee has instructed M/s. Alpha Commercials to pay the money to the seller of the residential property. Hence, the assessee has claimed exemption under section 54F of the Act being part performance of the contract and the said Alpha Commercials has used the money for the business purposes and has not paid the money as per the agreement. According to the Assessing Officer, the assessee has not actually invested capital gains arising out of sale proceedings in purchase of any residential property or deposited in Capital Gains Account Scheme. In the penalty order, the Assessing Officer after considering the explanation of the assessee was of the opinion that the assessee has to offer the above amount in the original re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer. Thereafter, it is the duty of the Assessing Officer to establish that the assessee has concealed income or furnished inaccurate particulars of income. In the present case, the Assessing Officer has accepted the amount offered by the assessee as his income and levied penalty without making any enquires and investigation to disprove that the explanation given by the assessee is either false or bona fide. Therefore, in our opinion, the penalty cannot be levied in the present case. The above view of ours is fortified by the judgment of the Andhra Pradesh High Court in the case of CIT v. Chennupati Tyre and Rubber Products 90 CCH 181 and the decision of the co-ordinate Bench of the Tribunal in the case of Sri Balaji Educational and Charitable Public Trust v. Asst. CIT 44 CCH 402 (wherein the author is a co-author). In view of the above, we are inclined to delete the penalty levied in this case. Accordingly, applying the same ratio, we are inclined to delete the penalty levied in all the appeals and allow the appeals in ITA Nos. 237, 238, 239, 240, 241, 242, 243, 244 and 251/Mds/2016. 18. In the result, the appeals of the assessee in ITA Nos. 253, 248, 249, 246, 255, 245, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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