TMI Blog2003 (6) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, not taxable. During the course of assessment proceedings, the assessee filed a copy of the purchase agreement of the land at Panvel along with 7/12 Extract in the name of person from whom the assessee purchased the land on 27-7-1990. The Assessing Officer appears to have perused the said 7/12 Extract and noticed that it did not indicate any crops produced on the land by the earlier owner. The assessee purchased this land on 27-7-1990 which was sold by him on 30-6-1994. The Assessing Officer further observed that during the period the land was in the possession of the assessee, no agricultural income has been shown in the returns filed for the relevant assessment years. He made an enquiry from Tahsildar, Panvel. The enquiry revealed that the land which was sold by the assessee was tax free for the land revenue. It further revealed that the plots of land in question are situated within a radius of 8 Kms. of Panvel Distt. limit. The Assessing Officer brought this fact to the notice of the assessee vide his letter dated 1-3-1996 during the course of assessment proceedings and fixed the case for hearing on 12-3-1996. On 12-3-1996, the assessee filed a revised return declarin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the land at Panvel. He obtained permission for the same under the relevant state law and made an investment of Rs. 1,80,000 on 27-7-1990. However, he did not derive any agricultural income upto the date of sale of the land on 30-6-1994 for a sum of Rs. 17.90 lakhs. According to the Assessing Officer, such huge gain from transfer of the asset within a short time indicated that the investment had prima facie no hearing on the agricultural potential of the land in question rather, having regard to the location of the land which is within a very short distance of the Panvel Municipality, consideration other than agricultural potentiality can easily be inferred. (ii) The contention of the assessee regarding filing of all necessary particulars in the return of income is not acceptable from the mere note appended to the statement of income to the effect that the assessee has sold agricultural land, the profits on which are not offered for tax as it is exempted. In this note, the exact location of the land was not specified. It was also not clarified in the return why the land in question could not be treated as capital asset within the meaning of section 2(14)(iii) of the Act. (iii) O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7-1990 for Rs. 1,80,000 and sold the same in the year 1994. The assessee was under the bona fide belief that since the said land was agricultural land, profit from it was not liable to income-tax. (ii) The assessee gave a note in the return to the above effect. (iii) Concealment can only be of facts and not of conclusions. The assessee has not concealed any facts. (iv) If an assessee is able to substantiate the explanation with necessary evidence and proofs that it was a bona fide explanation and all material facts were properly disclosed by him, Explanation-1 is inapplicable. Reliance was placed on the decisions in Shashi Rajkapoor v. ITO [1991] 38 ITD 249(Bom.), Diamond Trust Investment (P.) Ltd. v. Asstt. CIT [1994] 51 ITD 123 (Bom.), CIT v. Umashankar Saraf [1983] 139 ITR 842 [1981] 7 Taxman 106 (Bom.)(NB)". The above submissions of the assessee did not find favour with the CIT(A) who confirmed the impugned penalty by observing thus: "I have considered the rival submissions and looking at the facts of the case, in my opinion, it is squarely covered by Explanation 1 to section 271(1)(c) of the I.T. Act. As rightly pointed out by the Assessing Officer, it is quite evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase deed. But for the fact that the land fall within 8 Kms. of municipal limit, capital gains would not have become exigible. He was candid enough to admit that there was a failure on the part of the assessee to check from the land revenue authorities whether the impugned land fall within 8 Kms. of municipal limit before filing the return and even during assessment proceedings. However, it was a bona fide error on the part of the assessee. As soon as the results of enquiry conducted by the Assessing Officer came to the notice of the assessee, he filed the revised return and declared the capital gains and paid the tax thereon. He further submitted that no further addition has been made and the revised return has been accepted as it is. He, therefore, submitted that the Revenue authorities were not justified in imposing the impugned penalty. In support of his arguments, he referred to the following decisions and placed heavy reliance on the following court cases: (i) CIT v. Suresh Chandra Mittal [2001] 251 ITR 9(SC) (ii) ITO v. Devibai H. Parmani [2003] 84 ITD 342 (Mum.) (SMC) (iii) CIT v. Ram Commercial Enterprises Ltd. [2000] 246 ITR 568 (Delhi) (iv) Chandra Pal Bagga v. IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation from the land revenue authorities. He, therefore, submitted that on the facts and in the circumstances of the assessee's case, the Revenue authorities are justified in imposing the impugned penalty. 7. We have given our careful thought to the rival submissions, perused the orders of the Revenue authorities as also the decisions relied upon by Shri Tralshawala, the learned counsel for the assessee. The assessee is under legal obligation to file his return of income suo motu under section 139(1) of the Act. In case, the assessee does not file his return suo motu within the time allowed under section 139(1), the Assessing Officer may call upon the assessee to furnish return of his income by issue of notice under section 142(1) of the Act. Assessment proceeding commences thereafter. Having furnished the return under sub-section (1) or in pursuance of a notice issued under section 142(1), if the assessee discovers any omission or any wrong statement therein, he may furnish a revised return within the time allowed as per section 139(5) of the Act. The Assessing Officer may also call for return by issue of a notice under section 148 if he has reasons to believe that any income ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the act of concealment of particulars for the purpose of levy of penalty. The process of enquiry into the correctness, truthfulness or accuracy of the particulars furnished by the assessee cannot be closed at the threshold by looking at the return. That would negative and render otiose the very provisions of the statute. As per the rule of evidence, there is distinction between set of facts 'not proved' and facts 'disproved' and facts 'proved'. No doubt, the benefit of the principle that mere unsatisfactory nature of explanation furnished cannot amount to proof of falsity of explanation furnished can apply in case the fact finding authority reaches a stage which would mean that except rejection of the explanation furnished by the assessee, there is no material to sustain the plea of concealment. But if the state of affairs reveals the stage where one can positively reach a conclusion that the fact alleged is proved or disproved, the principle that mere rejection of explanation cannot result in levy of penalty will have no application. To reach this stage also enquiry will have to be undertaken of the disclosure made in the return or in the statement annexed to the return and arriv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a municipality etc. or (b) in any area within such distance, not being more than 8 Kms., from the local limits of any municipality etc., as the Central Government, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations specified by notification in the Official Gazette. It may be stated at this stage that in exercise of the powers vested in the Central Government as aforesaid, the Central Government issued a notification No. SO 77(E), dated 6-2-1973 and specified in respect of Bombay, areas for urbanisation upto a distance of 8 Kms., in all directions from the limits of Municipal Corporation of Greater Bombay. Subsequently, the Central Government published a draft notification in the Gazette dated 13-2-1991 for specifying certain areas for the purpose of item (b) of section 2(14)(iii) of the Act and invited objections and suggestions from the public. After considering objections and suggestions received from the public, the Central Government in suppression of earlier notification aforesaid, issued fresh notification No.SO. 10(E), dated 6-1-1994 wherein at Sl. No. 14 under the State of Maharashtra areas upto a distance of 8 Kms. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quisite permission under law. But the fact remains that ever since the land was purchased, he did not carry out any agricultural operations thereon for the reasons best known to him. The irresistible presumption which one can safely take is that he never intended to cultivate the land as an agriculturalist and was on the look out for a profitable deal to dispose it of which happened after a wait of just few years when the lane purchased for a consideration of Rs. 1.8 lakhs could be sold at a hefty price of Rs. 17.97 lakhs. 10. To reiterate, the assessee himself admitted in the note appended below the statement of total income filed along with the return that there was profit from sale of land which was not offered for tax, it being exempt. This stand was reiterated during the assessment proceedings by claiming that the land is agricultural land and that it is beyond 8 Kms. of Panvel municipality, hence, no capital asset within the meaning of section 2(14)(iii)(b) of the Act till communication to him of the result of enquiry conducted by the Assessing Officer to the effect that at the time of sale, the land is not an agricultural land, it being within 8 Kms., of Panvel municipalit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1984-85 and 1985-86 showing income ranging between Rs. 10,000 to Rs. 12,000. Later on, action under section 132 was taken against him which led to re-opening of assessments. A notice under section 148 was served on him and pursuant thereto, he filed revised returns for those Assessment Years showing higher income. When the matter relating to impossibility of otherwise of the penalty for concealment reached the Tribunal, the Tribunal held that the penalty could not be levied. The Department took the matter before the High Court and the High Court of Madhya Pradesh held that the Tribunal was justified in cancelling the penalty. The following reasons were given: "Once the revised assessment was regularised by the Revenue and once the Assessing Officer had failed to take any objection in the matter, the declaration of income made by the assessee in his revised returns and his explanation that he had done so to buy piece with the Department and to come out of vexed litigation could be treated as bona fide in the facts and circumstances of the case." Two things emerge: (i) Returns were filed in response to notice under section 148 and in those returns higher incomes were shown and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer did not accept this explanation and taxed the difference of Rs. 1,40,000 as short-term capital gain. No appeal was preferred and the addition became final. Thereafter, the Assessing Officer initiated penalty proceedings under section 271(1)(c) and imposed the penalty. The Tribunal reduced the penalty. On further appeal, their Lordships held that the assessee had shown long-term capital gains and claimed exemption but the transaction had been disclosed in the return. There was no concealment of income. However, this decision also is of no help to the assessee, as in the case before us, the relevant basic facts had not been disclosed and exemption was claimed on the basis of incorrect and untruthful facts. 14. In Devibai H. Parmani's case, it has been held by Mumbai Bench of the Tribunal that as per Explanation 1 to section 271(1)(c), if the Assessing Officer has found that the explanation offered by the assessee is false, then penalty can be imposed on the amount which is found to be concealed. As stated earlier, the assessee had claimed exemption and the explanation offered during assessment as also penalty proceedings were found to be false and therefore, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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