9911796707
TMI Blog1975 (10) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment on 17th April, 1964. The amount of compensation was determined is September, 1968 and the assessee actually received the amount in June, 1969. 3. The assessee filed the return of income on 4th March, 1970 showing income from salary, house property and interest. But the assessee did not show any income under the head "Capital gains" in the return. The ITO after making full enquiries, decided that the land was not agricultural land and that compensation received in respect of the acquisition of the said land resulted in a capital gain of Rs. 3,27,994 and accordingly he included the same in the total income of the assessee. The assessment was completed on a total income of Rs. 3,46,347. The total income as determined was as under :-- 1. Income from salary 1,690 2. Income from property 100 3. Income from other sources as shown by the assessee (as precautionary measure). 16,590 4. Capital gains as discussed above(Separate chart is enclosed) 3,27,374 . . 3,46,374 The ITO at the time of completing the assessment also stated as under : "Issue a notice under s. 274/271(1)(a) for late filing of the return for default of s. 139(1), and default of s. 274/273 for non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee held only a paper title to the land the land was in actual possession of the mortgagee sir Seth Bhagchand Soni (Firm Moolchand Nemichand). As such the assessee was and still of the opinion that the receipts in the hands of the assessee is a casual income a windfall which is not taxable under the Act. As also the land being agricultural land, it does not come in purview of definition of capital asset as defined under s. 2(4) of the Act, hence no capital gains could be charged. As the amount of interest related to a period of four years and the it was taxable relying under s. 3 and s. 4 that income of several years cannot be taxed in one year and has to be taxed in relevant assessment as per rate applicable the assessee filed the returns of income for the asst. yrs. from 1965-66 to 1970-71, by bifurcating the interest income an accrual basis for every previous year. On these facts, your honour has initiate penalty proceedings here, we may be permitted to say that, there is no concealment and no inaccurate particular has been furnished by the assessee hence no penalty could be and should be imposed. May we take the liberty of requesting your honour that in such a case when th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch. The relevant porton at page 76 is as under : "It will be seen that though the provision of s. 271(1)(c) of the IT Act, 1961 are held to be applicable in respect of the assessee for each of the assessment yeas under still so far as the quantum of penalty is concerned, it has not been stated nor it can be held that the amendment made in s. 27(1)(c) which is to come into effect from 1st April, 1968 has retrospective operation from strictly speaking, the amendment will be operative from the asst. yr. 1968-69 and not for any of the earlier assessment years." (3) Now on coming to the question of quantum of capital gain it is submitted that the valuation adopted as on 1st Jan., 1954 is very very low and quite unjudicious. This in no way can be made as basis of penalty. Even if the claim of mortgage of Rs. 2,06,000 is accepted in part by higher course the valuation placed by the learned ITO will badly shatter. All that is required to be placed is the full particulars of income and that the assessee has done. In these circumstances, there is no submitted, since in the Tribunal appeal of the assessee has been ordered to be fixed early, hence these proceedings be kindly kept in abeya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been signed by the A.R. Return of income has to be signed by the assessee and if there is any annexure i.e., a part of the return and that should be signed by the assessee. Thus it is clear that no letter was annexed as stated in Part-IV of the return. Perusal of even this letter dt. 28th March, 1970 further reveals that there is no mention of capital gains therein and no exemption has been claimed in the said letter about capital gains. That letter only speaks about spreading over of interest of Rs. 73,391.32. Thus even this letter is of no relevance so far as penalty proceedings are concerned. It is the duty of the assessee to state a definite amount of profits or loss in respect of the each source of income in the return of income. So also is the case in regard to any item of income which the assessee claims to be shown in part-IV of the return that is why columns has been provided for showing particulars of the income as well as the amount of income. If the assessee claimed that no taxable capital gains were exempt from taxation it was his duty to have shown the full particulars of such income in the relevant part of return or in the annexure. This objection is also therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of his earlier alleged annexure which was said to have been filed along with the return of income. Thus for the first time the assessee had come forward with his case for non-inclusion of the capital gains in the assessee's total income, by his letter filed on 25th Aug., 1070. Thus it would be clear from the course of assessment proceedings that the assessee had at no time before the enquiry was started by the ITO come forward to disclose the capital gains for inclusion or non-inclusion in his return of income. The assessee's guilt has therefore been established. I, therefore, hold that the assessee had concealed and or furnished inaccurate particulars of his income when he filed the return on 4th March, 1970 and is therefore liable to penalty under s. 274(1)(iii) of IT Act, 1961" The learned IAC after considering the material on record found that the total amount of capital gains earned by the assessee amounted to Rs. 3,27,994 out of which deduction upto Rs. 5,000 is admissible leaving a net capital gain of Rs. 3,22,994. Accordingly, he imposed a penalty of Rs. 3,23,000. 6. Being aggrieved with the order of the IAC the assessee has filed appeal before us and it was contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory acquisition. It was also contented that the land was agricultural. In this respect it was further pointed out that the S.D.O. in his order of award has mentioned khata, Khasra number of the land. The assessee has further contended before the ITO vide his letter dt. 16th Jan., 1971 that the land was agricultural. The ITO did not agree that there was no capital gain and consequently he held that there was capital gain. Thus it was contended that right from the very beginning the assessee was also under the impression that the receipt was only causal. 7. It was further contended that in the return the assessee made a note that a letter annexed with the return may be seen. It was also contended that along with the return a letter dt. 4th March, 1970 was annexed and later on another letter dt. 28th March, 1970 was also submitted in which all the details were given. It was also contended that along with the return the assessee has given all the details, copies of the award given by the S.D.O. was also filed and copy of the statement showing the details of the agricultural land in question and the order of the Court fixing the value and the rate of interest were also filed. Thus it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was clear concealment of income. The learned Departmental Representative also relied on the ratio of decision of the full Bench of the Kerala High Court decided on 10th Sept., 1974, the copy of which has been filed by him. This decision has not been reported so far as such it is not possible to give other citation. It was also contended that in the present case the returned income was less than 80 per cent of the finally assessee income as such Explanation to s. 271(1)(c) is applicable. In view of the explanation, the initial burden lay on the assessee to prove that there was no fraud or gross or wilful neglect on the part of the assessee in filing the return. From the material on record the assessee failing to discharge the initial burden which lay upon him and as such it should be presumed that there was concealment of income and the assessee also furnished inaccurate particulars of his income. It was further contended that in penalty proceedings no further material was produced by the assessee and as such the evidence produced in the assessment proceedings is presumed to be evidence and the absence of any other evidence on record it should be presumed that the charge of concea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee proving that failure to return the correct income did not arise from any fraud or gross or wilful negligence. The quantum of proof necessary would be that required in a civil case namely, preponderance of prohability." Now in the light of the laid down above, it is to be seen whether the assessee was able to discharge the initial onus which lay upon him. Before the learned IAC the assessee took the case in clear words. He observed as under:-- Before me the main argument of the assessee was to the effect that the assessee had placed all relevant material before the ITO which was necessary for determination of the capital gains and therefore the assessee had no intention to conceal the income from this source if at all it was found taxable". The return in this case was filed on 4th March, 1970. In part IV of the return the assessee clearly stated as under:-- Kindly see annexed letter." According to the learned counsel for the assessee this annexed letter is dt. 4th March, 1970. On the other hand according to the Revenue, this letter was not annexed along with the return. Letter signed by the assessee was dt. 28th March, 1970. From the records it is also establishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e state Government. It is also undisputed fact that in the letter the actual amount of compensation given to the assessee was clearly mentioned. It means that at the time of filing the return the assessee made it clear that the assessee did receive the amount of compensation as a result of acquisition of the property in question. So from this fact itself it is clear that there could not be any concealment of income by the assessee. 14. Now the point for consideration remains whether letter of 4th March, 1970 was filed along with there turn or not. The learned IAC held that no such letter was filed along with the return. At the same time, he in his order discussed the letter dt. 4th March, 1970 holding that it was not signed by the assessee. It means that impliedly he accepted that letter dt. 4th March, 1970 was filed by the assessee. We may Point out here that the ITO at the time of making the assessment never held that the assessee did not send letter dt. 4th March, 1970 alongwith the return. In the order sheet also there is no averment that the assessee never sent any letter dt. 4th March, 1970. Looking to the entire facts and the material on record it is clear that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received in each assessment year is enclosed herewith. As this income was below taxable limits hence no returns were filed in these years. Even through the Court has termed the payment of Rs. 84,523.33 as interest but the assessee feels that this is a part and parcel of the compensation receivable. Sir, as the Income-tax is leviable on receipt as per the nature in the hands of recipients and it was nothing to do with the treatment the paper gives. However, without conceding the above, it is submitted that if this amount is held taxable then it should be taxed in all the respective years to which is pertains. And with this view a return of income for 1965-66 is herewith filed showing the income from salary and interest as above. However, as the amount is paid only in the year 1969, no interest for late filing the return be please charged. For the remaining returns as the assessee has gone abroad, we shall file the same as soon as he returns. Similar payments under s. 140-A shall be made at that time. I am enclosing herewith five Authorities in our favour. Submitted accordingly." The letter dt. 28th March, 1970 also reads as follows:-- "RE : Mr. Syed Abdul Basir, Ajmer. The b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... five Authorities in our favour. Submitted accordingly." In the letter dt. 4th March, 1970 the assessee clearly stated that from the copy of the award of the S.D.O. and Land Acquisition Officer, it is clear that the assessee got Rs. 4,65,398.64 out of Rs. 5,45,559.73. It was also stated that proportionate interest which fell to his share comes to Rs. 72,104. In the letter dt. 28th March, 1970 it was stated that copy of the award of the S.D.O. and the Land Acquisition Officer is enclosed and which is self-explanatory. It is stated therein that the copy of the statement showing money refundable to the assessee was also attached. In both the letters the question regarding quantum of interest also there is some averment. In the letter dt. 28th March, 1970 there is no reference of the sum of Rs. 4,65,398.64. But in the letter dt. 4th March, 1970 there is clear reference of this amount. In any view of the matter this amount which was received by the assessee is clearly borne out from award, the copy of the which was filed by the assessee along with the return. So practically there is no substance in the mater, whether the letter of 4th March, 1970 was annexed along with the return or no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was any capital gain to the assessee. 5. The assessee has all along been taking the plea that property in question was agricultural and as such there was no capital gain. 6. The assessee has also been under the impression that the receipt in question was casual or non-recurring. 7. No doubt that the Tribunal gave finding that the property in question was not agricultural. But against that finding the assessee moved application for referring the matter to the Hon'ble High Court under s. 256(1) of the IT Act, 1961. Whether a land is agricultural or not is mixed question of fact and law. 8. From the evidence on record it is also clear that in the Revenue records initially the property was entered as "agricultural land". 9. The matter of compensation is not final. It is still in dispute with the opposite parties, namely Shri Chuttanlal and Harish Chandra. Shri Abdul Basir filed suit No. 66 of 1951 in the Court of Civil Judge. Ajmer for redemption. In that suit Seth Bhagchand Soni and others are made as defendants. The Trial Court passed a decree in the suit holding that the defendants are entitled to Rs. 49,489.41 P. It was also ordered that the defendants would be entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the party himself. It imports a design and purpose and an absence or honest belief. Whether the accompanying state of mind, variously described above exists or not is a question to decided on the facts and circumstances of each case." 19. There is no evidence worth the name from which it could be established that there was any fraud or gross or wilful neglect on the part of the assessee in not disclosing the amount in question as capital gains. On the other hand, in view of the facts, circumstances, probabilities and hard facts of life it is a debatable point whether a particular land is agricultural or not. The assessee has all along been under the bona fide and honest belief that the land and the building attached with it were agricultural land. This is clear from the fact that right from the very beginning uptill now the assessee has taking the pleas that the land in question was agricultural. Such a belief at the time of filing of the return could not be ruled out. When the assessee filed the return there was no finding of the Tribunal that the property in question was not agricultural. As a matter of fact, this finding only came recently. We are to see whether at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the absence of the Explanation the assessee has to show and this burden is upon him that his failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part. Now, this burden is not of the same nature as the burden which rests on the prosecution in a criminal case where the prosecution has to establish the guilt of the accused beyond reasonable doubt nor upon the revenue in establishing the reasonable doubt nor is it of the same nature as the burden which lies upon the revenue in establishing that the assessee has concealed the particulars of the his income or furnished inaccurate particulars of such income. It is a burden akin to that in a civil case where the determination is made on preponderance of probabilities. It is also not necessary that any positive material should be produced by the assessee in order to discharge this burden which rests upon him. The assessee may claim to have discharged the burden by relying on the material which is on record in the penalty proceedings, irrespective of whether it is produced by him or by the revenue. The only question to which the IT authority has to address itself is whether on the material o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are not discussing those decisions in detail. In the case of Hindustan Steel Ltd., the Supreme Court observed as under:-- An order imposing penalty for failure to carryout a statutory obligation is the result of a quasi-criminal proceeding and penalty will not ordinarily in imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. Penalty will not also be 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 venical 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." According to this decisions also it is clear that even if there was technical or venical breach of the provisions of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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