TMI Blog2016 (9) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... id any tax towards impugned gain. Thus, this plea of oversight on behalf of the Assessee is listless. Hence, no case of reasonable cause for omitting to include the income in the first return is successfully made out. The preponderance of probabilities is weighed against the assessee. We also wish to note here that penalty proceedings in question are governed by S. 271(1)(c) read with Explanations appended thereto. The assessee is expected to justify his bonafides in the light of Explanation 1 of S. 271(1)(c) of the Act. The condonation of penalty for compliance failure on the grounds of ‘reasonable cause’ as provided under S. 273B is foreign to the scope of S. 271(1)(c) of the Act. All the other co-owners except the assessee have discharged their tax obligations in their individual capacity. This serves as a clear indicator that while the parties may have agreed to come together for better co-operation, the parties were to bear their own losses or retain their own profits contrary to the case made out by the assessee. If the version of the Assessee is to be given any credence, one has to see the conduct of the assessee. The obligations of the Assessee as one of the members who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r scrutiny by the Assessing Officer. The Assessing Officer was in possession of certain information as per Annual Information Report (AIR) that the assessee has sold land at Survey No.229/1B+2B to Larsen Turbo (L T) Ltd. along with four other co-owners with one fifth share belonging to the assessee. As per sale deed, the assessee has got his share of sale consideration at ₹ 47,68,365/-. The Assessing Officer found on verification of the return of income that the assessee has not declared this transaction of sale of land in his return of income. In response to notice by Assessing Officer, the assessee filed his revised return on 26.08.2010 in which he has shown total income of ₹ 42,42,030/- including Long Term Capital Gain (LTCG) arising from sale of land at ₹ 41,24,384/-. Thereafter, the assessee filed another revised return on 11.10.2010 in which the assessee claimed short term loss of ₹ 2,57,718/-. The Assessing Officer observed that revised returns so filed were out of time and the impugned income was declared after detection of concealment by the Department. The Assessing Officer, therefore, refused to take cognizance of the revised returns so filed. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer, however, perceived the facts against the assessee and alleged that the assessee has omitted to offer the income altogether in the return of income and therefore the assessee is liable to penalty for concealment of income. 4. Aggrieved by the penalty order, the assessee preferred an appeal before the CIT(A). 5. Before the CIT(A), the assessee once again submitted that he has purchased agricultural land along with his friends with intention to sale the aforesaid land after developing it. Accordingly, they developed the land and sold it to Larsen Turbo Ltd.. The sale deed was executed by the assessee along with co-owners and other land owners for acquisition of land. It was stated by the assessee before the CIT(A) that he along with his friends later formed AOP for this venture. The CIT(A) was not convinced with the explanation offered by the assessee to be bonafide one. He observed that land were purchased by the assessee and others in the capacity of co-owners. The AOP was formed later. The CIT(A) thus observed that land so purchased did not belong to AOP and therefore AOP could not have paid taxes on the land which did not belong to it. The CIT(A) also noted that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso simultaneously asserted that income should be rightly assessed under the head business income as against the capital gains in the hands of the other co-owners as well as the assessee. He has offered the income and paid the taxes only to avoid any unwarranted litigation. The penalty is thus not justified. He, thereafter, adverted our attention to the English Translation of the development agreement at Page No.20 of the Paper Book. He observed with reference to the aforesaid development agreement that the agreement was entered into on 11.03.2005 between five parties including the assessee with vendors namely Smt. Kiran Pradipkumar Agrawal. Thus, at the acquisition stage itself, the intention of the assessee was manifest to act as a developer of the said property as per the development agreement. The land was to be sub-divided into plots and the plots were to be sold on development basis. The assessee together with other joint purchasers were also entitled to construct ownership schemes in relation to the impugned land. He submitted that from the text and tenor of the development agreement entered into at the time of acquisition of land, it is evident that the intention was to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication as to what facts, how many of them and of what nature, are necessary to come to a conclusion that there is an association of persons within the meaning of section 3 ; it must depend on the particular facts and circumstances of each case as to whether the conclusion can be drawn or not. 8. The Ld. AR also made reference to the decision of the Hon ble Supreme Court in the case of CIT vs. Buldana District Main Cloth Importers Group, 42 ITR 172 (SC) and N.V. Shanmugham And Co. vs. CIT, 81 ITR 310 (SC) to lay stress to his plea that the present agreement between the assessee and other co-owners was in the nature of AOP and the income generated from the sale of land should be correctly taxed in the capacity of the AOP. Shri Naniwadekar thus asserted that the income itself has been wrongly assessed in the hands of assessee. There is, thus, no justification to impose penalty based on such a wrong assessment. He further exhorted that penalty proceedings are independent of the assessment proceedings and observations made in the assessment proceedings are not conclusive for the determination of controversy in the penalty proceedings. Therefore, merely because the income has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income is taxable in the hands of the AOP is also devoid of any merit. He, therefore, submitted that no interference is called for with the action of the Revenue in imposing the minimum penalty on these speaking facts. 10. We have carefully considered the rival submissions. The assessee has assailed the imposition of penalty under section 271(1)(c) and contends that that no penalty is warranted in the facts and circumstances of the case in view of the specific case made out that income is not assessable in the hands of assessee in his individual capacity at the first place and is rightly assessable in the hands of different person i.e. AOP. Without prejudice to this plank, the second plank of the argument is that having regard to the reasonable cause for failing to discharge its tax obligation, imposition of penalty under S. 271(1)(c) is not justified. 11. We take notice from the facts narrated above that the assessee admittedly did not file return of income within the due date specified under section 139(1) of the Act. The impugned capital gain of ₹ 41,24,384/-- and another income towards bank interest ₹ 21,941/- was not offered for taxation in the belated re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tify his bonafides in the light of Explanation 1 of S. 271(1)(c) of the Act. The condonation of penalty for compliance failure on the grounds of reasonable cause as provided under S. 273B is foreign to the scope of S. 271(1)(c) of the Act. 12. We shall now examine another plea of the assessee that the impugned income from sale of property is in the nature of business income and taxable in the hands of the AOP and thus not rightly susceptible to tax in the hands of the assessee at the first place. We note that the several citations were referred to lend support to this plea. However, we find such averment to be an argument of despair. In the instant case, the investments were made from respective individual sources and the shares were definite and ascertainable. As borne out from the conduct of the other co-purchasers of the property, the so called arrangements between the co-purchasers were capable of being split. Common design is also absent as can be seen from the conduct of the other co-owners. All the other co-owners except the assessee have discharged their tax obligations in their individual capacity. This serves as a clear indicator that while the parties may have agree ..... X X X X Extracts X X X X X X X X Extracts X X X X
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