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TMI Blog2015 (6) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... ring 1 Hectare 34R for a consideration of Rs. 91 lakhs to Shri Liladhar Madhukar Patil, Pachora. However, as per sale deed the market price of the property was Rs. 1,15,50,000/-. It was further noted by the AO that the assessee had sold non agricultural land to Shri Atul Sanghavi, Pachora for a consideration of Rs. 15,51,000/-. During the course of assessment proceedings the AO asked the assessee to show cause as to why the provisions of section 50C of the I.T. Act be not made applicable in respect of property at Survey No.231 and why not market price of Rs. 1,15,50,000/- be adopted for calculation of capital gain income. The assessee neither attended nor furnished any written submission. Therefore, the AO, applying the provisions of section 50C of the Act, adopted market price of Rs. 1,15,50,000/- for calculation of income from capital gain and accordingly determined the long term capital gain at Rs. 99,45,876/-. 4. The assessee challenged the additions made by the AO determining the long term capital gain at Rs. 99,49,876/- before CIT(A). The Ld.CIT(A) while upholding the action of the AO in adopting the valuation as determined by the stamp duty valuation directed the AO to allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uance of notice u/s.148. Therefore, it is obvious that the AO intends to invoke the provisions of explanation 3 of section 271(1)(c) of the I.T. Act. It was submitted that the impugned property was sold out by the assessee in Open Public Auction at market price, as per permission granted by the department, to come out from the financial problems/crisis. It was further submitted that the assessee APMC is maintaining regular books of accounts, which are duly audited by the Special Auditor, Class-I, of Co-operative Department of Jalgaon. The co5 operative audit was not completed by the due date of filing of return of income and hence the then C.A was reluctant to audit the books of account and hence, the assessee was not provided with reports in the forms as per section 44AB of the IT Act, For the year under consideration it had received the co-op audit report as per letter dt. 18-04-2009. 7. It was further submitted that the assessee was facing acute financial problems/crisis and the assessee was under burden of heavy Bank loans. The copy of statement of Bank showing loan outstanding during the period of 30-10-2008 to 31-03-2011 (From the due date of filing the return and till the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons by which assessee was prevented for late filing the return of income. AO has not considered entire submissions of the assessee and merely brushed aside various facts stating, that, "reasonable cause of paucity of funds, cannot absolve anybody from filing return of income." 11. The assessee submitted that a look at the various documentary evidences clearly show that there was paucity of funds which prevented the assessee APMC for making payment of income tax, which is one of the precondition for filing the return of income. Therefore, the assessee was certainly prevented by reasonably cause for furnishing the return of income in time. 12. Relying on various decisions it was submitted that merely because the addition is confirmed by the first appellate authority, penalty cannot be levied automatically. For this proposition, the assessee also relied on the following decisions : 1. CIT Vs. Aarkay Saree Musuem reported in 187 ITR 147 (Bom.) 2. CIT Vs. Parmeshwari Das Satpal Barnala reported in (2008) 14 Taxmann 507 (P&H) 3. Gem Granites Vs. DY.CIT reported in (2009) 120 TTJ 992 (Chennai) 4. CIT Vs. Khoday Eswarsa & Sons reported in (1972) CTR 295 (SC) It was accordingly su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) was challenged. 16. Referring to the copy of the order giving effect to the order of the ITAT, Pune the Ld. Counsel for the assessee drew the attention of the Bench to the determination of income by the AO at Rs. 1,61,07,873/- as against the returned income of Rs. 2,02,69,504/- in the return of income filed in response to notice u/s.148. He submitted that in the penalty proceedings despite submissions made by the assessee regarding the sequence of events that has taken place the AO levied penalty of Rs. 58,35,106/- u/s.271(1)(c) of the I.T. Act which has been upheld by the CIT(A). 17. The Ld. Counsel for the assessee referring to the return of income filed submitted that the assessee has disclosed all material facts. The property in question was sold in public auction. Therefore, when the property is sold in public auction, the fair market value is the same price and not the value adopted by the AO. He submitted that although the AO and the CIT(A) have not given reasons as to under which section the penalty has been levied, however, it appears that the same has been levied by following the provisions of Explanation 3 to section 271(1)(c) of the I.T.Act. He submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin the ambit of Explanation 3 to section 271(1)(c) of the Act and accordingly it was held that no penalty should be levied on the petitioner assessee u/s.271(1)(c) of the I.T. Act. He submitted that the facts of the present case are squarely covered by the above decision of the Hon'ble Gujarat High Court. Since the AO in the instant case has issued the notice within the period of 2 years from the end of the relevant assessment year, therefore, penalty u/s.271(1)(c) of the I.T. Act cannot be levied in view of the Explanation 3 to provisions of section 271(1)(c) of the I.T. Act. 18. Even on merit the Ld. Counsel for the assessee submitted that even after amendment of section 10(20) the APMC's continued to be local authorities and there were wide spread misunderstanding. Only after the Hon'ble Supreme Court clarified about the definition of local authority that it was felt necessary to file the return of income from A.Y. 2009-10 onwards. Provisions of section 26AAB was introduced by the Finance Act, 2008 w.e.f., 01-04-2009 according to which any income of an Agricultural Product Market Committee or Board constituted in law for the time being in force for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs. In appeal the Ld.CIT(A) while upholding the adoption of provisions of section 50C allowed further relief of Rs. 25 lakhs being enhanced compensation paid to the owner of the land as part of the cost of acquisition. On further appeal by the assessee as well as the revenue the Tribunal vide order dated 20-03-2014 set aside the order of the CIT(A) wherein he has upheld the action of the AO in adopting provisions of section 50C. Similarly, the Tribunal also dismissed the appeal filed by the revenue by upholding the order of the CIT(A) in granting further deduction of Rs. 25 lakhs representing enhanced compensation paid to the owner of the land as a part of the cost of acquisition for the purpose of computation of capital gains. It is also an admitted fact that the total income determined by the AO after giving effect to the order of the ITAT is Rs. 1,61,07,873/- as against the returned income of Rs. 2,02,69,504/-. Under these circumstances, now we have to decide the leviability of penalty u/s.271(1)(c) of the I.T. Act which has been levied by the AO at Rs. 58,35,106/- and upheld by the CIT(A). 22. It is the submission of the Ld. Counsel for the assessee that where the notice u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961 does not file a return of income for an assessment year voluntarily within the normal period of limitation and no notice under s. 142(1) or 148 is issued to him till the expiry of the said period, he will be treated to have concealed his income and penalty will be leviable on him accordingly if he is later found to have had taxable income in that year. Thus, for the purpose of falling within the purview of Expln. 3, firstly, a person should not have been previously assessed (that is, a new assessee); secondly, he should have failed without reasonable cause, to furnish return of income for asst. yr. 1989-90 or any year subsequent thereto within two years from the end of the assessment year concerned; thirdly, that no notice should have been issued to him under s. 142(1) or s. 148 of the Act till the expiry of the two year period; and lastly, the concerned officer is satisfied that in respect of such assessment year, such person had taxable income. In such cases, Expln. 3 provides that such person shall be deemed to have concealed the particulars of his income within the meaning of cl. (c) of s. 271(1) of the Act for such assessment year. In such an eventuality, even if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 15. In the light of the aforesaid, it is apparent that the case of the petitioner does not fall within the ambit of Expln. 3 to s. 271(1) of the Act and as such, no penalty could be levied on the petitioner under s. 271(1)(c) of the Act for concealment of particulars of his income on the ground that the petitioner had failed to furnish return of income for the year under consideration. The impugned order, therefore, being contrary to the provisions of the Act, cannot be sustained." 24. Even otherwise also we find the Pune Bench of the Tribunal in the case of Agricultural Produce Market Committee (Supra) while deciding an identical issue had cancelled the penalty levied by the AO u/s.271(1)(c) of the I.T Act and upheld by the CIT(A) by observing as under : "5. In this case it is not in dispute that the assessee was treated as a local authority u/s. 10(20) of the Income-tax Act up to the A.Y. 2002-03. Subsequently, there was an amendment to section 10(2) of the Income-tax Act and the APMC was removed from the definition of the local authority. It is pertinent to note that the Finance Act, 2008 has introduced Sub-sec. (26AAB) to Sec. 10 and again the income of the APMC has been e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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