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TMI Blog2022 (2) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... lify as capital assets, as per section 2(14) of the Act,thus income earned thereon being exempt from tax, we find has not been found to be outrightly false by the Revenue. As per section 2(14) of the Act rural agricultural lands specified therein do not qualify as capital assets. It is not the case of the Revenue that the lands sold were not rural agricultural lands which did not qualify as capital assets as per section 2(14) - contention of the assessee that it held land both as stock and as investments, has also not been controverted by the Revenue. Therefore, we agree with the CIT(A) that the explanation of the assessee that he mistakenly treated the said transaction as exempt from tax appears bonafide. Explanation is bonafide is, we find, supported by the fact that during assessment proceedings the assessee, realizing his mistake even before detection by the Revenue, returned the same to tax. The fact that the assessee surrendered the said income prior to detection by the Revenue is evident from the chronology of events pointed out to us by the Ld.Counsel for the assessee above showing that the income was surrendered on 16-11-16 before the assesses case was converted from li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO observed that the agricultural lands sold by the assessee were part of stock-in-trade and therefore the exemption claimed by the assessee treating the lands as not being capital assets as per section 2(14) of the Act was not available. Thereafter, vide order dated 16.06.2017, the Ld. AO also imposed penalty u/s 271(1)(c) of Income-tax Act, 1961 treating the addition of ₹ 1,90,16,868/-as representing the income in respect of which inaccurate particulars have been furnished. 4. Being aggrieved by the aforesaid penalty-order dated 16.06.2017, the assessee preferred appeal before Ld. CIT(A). The Ld. CIT(A) considered the submissions of assessee, referred to certain legal precedents and deleted penalty vide Para No. 2.3 to 2.6 of his order by observing as under: 2.3. I have carefully gone through the facts of the case and the penalty order of the AO and the submission of the appellant. In this case, the assessment was completed u/s.143(3) of the I.T. Act, on 23.12.2016 and total income was determined at ₹ 1,90,64,868/- making addition of ₹ 1,90,16,8687- on account sale of immovable property held as stock-in-trade. The assessee had claimed this land as agricul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and has obtained tax audit report considering the fact that turnover being sale of lands has increased prescribed limit u/s 44AB of the Act. Normally, agricultural land is classified as exempt asset u/s 2(14) of the Act and any gain arising on sale of investment in such land is exempt hence due to inadvertence, appellant might have shown such profit as exempt ignoring the fact that land sold during the year was stock in trade. 2.5 The AO has not denied the fact that land sold during the year in agricultural land hence due to inadvertence, such gain was claimed as exempt. This mistake is bonafide mistake and cannot be held to be intentional mistake to conceal income because gain in present case has become taxable only because land sold during the year was classified as stock in trade in spite of the fact that it was agricultural land and even appellant was also holding certain lands as investments hence under bonafide impression, that appellant has sold land out of such investment, he claimed profit as exempt. The AO has not pointed out that such mistakes are recurring in nature. The nature of asset held by appellant might have created confusion at the time of filing of return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held as under: Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income [Bona fide claim, disallowance of] - Assessment year 1999-2000 - Assessee claimed deduction of interest on tax free bonds - Assessing Officer asked assessee to give details of interest on tax free bonds - While preparing said details, assessee noticed that 6 per cent Government of India Capital Index Bonds purchased during year had been categorized as tax free bonds and, therefore, interest earned on such bonds had escaped tax - Thereupon Assessing Officer levied penalty under section 271(1)(c) upon assessee - Tribunal after recorded a finding of fact that there was aninadvertent mistake on part of assessee in claiming interest received on Government of India Capital Index Bonds as interest received on tax free bonds, deleted penalty levied upon assessee - Whether since it was not contended by revenue that above finding of fact by Tribunal was perverse, order of Tribunal deserved to be upheld -Held, yes [Para 2] [In favour of assessee]. The Hon'ble Agra ITAT in the case of Sarv Prakash Kapoor Vs DCIT 26 taxman.com256 has held as under: 9. We have heard the Id. Rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the matter to be considered not solely with reference to Dharamendra Textile Processors' case (supra) but along with the decision of Rajasthan Spg. Wvg. Mills' case (supra). In the case of Reliance Petroproducts (P.) Ltd. (supra) the Supreme Court further explained the matter and finally settled the controversy created in Dharamendra Textile Processors' case (supra). The Supreme Court in this case has analysed the facts in Dilip N. Shroff's case (supra) and found from the facts, that the explanation given by the assessee was bona fide nor did not assessee furnish any inaccurate particulars. It no doubt went on to observe that the element of mensrea was essential. The SupremeCourt in Dharamendra Textile Processors' case (supra) had pointed out only to this aspect of the decision in that, there was no necessity to prove mensrea on a plain reading of the provisions of section 271(1)(c) in the context of a penalty being a compensation for loss of revenue likely to have been occasioned by the acceptance of the return. It was further pointed out by the Supreme Court, that the reasoning in the conclusion on the merits in Dilip N. Shroff's case (supra) had not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd though wrongly claimed exemption from the capital gains tax, but that cannot be a case of penalty under section 271(1)(c) of the Act. It if has claimed any exemption after disclosing the relevant basic facts and under ignorance of the provisions of the Act, and not offered that amount for tax, in such cases, penalty should not be imposed. In such cases rather it is the duty of the A.O. to ask for further details and tax the income if it is liable to tax. In the case under consideration, we noticed that during the assessment proceedings, the assessee has offered the tax as and when the mistake has come to the notice of the assessee. Similarly, in the case of Sumerpur Truck Operators Union (supra) wherein it has been held that merely because assessee's claim of exemption under section 10(24) was not found to be tenable, penalty under section 271(1)(c) of the Act could not be levied. Similar view has been taken by the Hon'ble High Court of Calcutta in the case of Udayan Mukherjee (supra). The Apex Court while-dismissing the Departments! S.L.P. against the judgement of Madras High Court has held as under:- (313 ITR (statute) page no. 30) Mere addition not sufficient un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al income have been disclosed by him. 15. In the light of above discussion, if we consider the facts of the case under consideration, we find that the assessee has furnished complete facts regarding computation of capital gain, total sale consideration, calculation of long term capital gain, investment in residential house and others. The mistake on the part of the assessee is that the assessee invested a part amount of sale consideration/ capital gain in residential house instead of gross sale consideration and claimed deduction under section 54F. It is relevant to note that for claiming deduction under section 54 of the Act investment of capital gain is the requirement whereas for claiming dedication under section 54F investment of sale consideration is the condition. From the facts of the case it is a clear cut case of bona fide calculation mistake. Such mistakes are rectifiable during the course of assessment proceedings. Rectifications of such mistakes are not concealment of the Act. The A.O. though has invoked explanation-1 to section 271(1)(c) but he did not find that the explanation furnished by the assessee was a false explanation. Contrary to that the assessee has su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal and hold that this does not involve any substantial question of law. The appeal is accordingly dismissed, as being devoid of any substance. Further, reliance is also placed on ratio of decision of Hon'ble Ahmedabad ITAT in the case of SmtIndiraben H Patel v/s ACIT ITA no 3286/Ahd/2015 dated 27/02/2018 wherein it is held as under: 4. We have heard rival submissions. Case file perused. Both the parties reiterate their respective stands against and in support of the impugned penalty imposed by the Assessing Officer as upheld in lower appellate proceedings. We revert back to the relevant facts once again. We have sufficiently indicated that the assessee resides mostly in USA and her caretaker manages all of her domestic chorus including tax matters. It is evident that she had not declared the third transaction, proportionate cost of acquisition and interest income at the first instance. The fact however remains that the impugned sale deeds pertain to the very survey numbers. We observe in these facts that possibility of overlapping in such an instance cannot be completely ruled out. So is the case that once the assessee is not managing her affairs on her o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02/2013 submitted before the A.O that he had no objection to the reworking of the LTCG as per Sec. 112 of the Act. We have given a thoughtful consideration to the issue before us and are of the considered view that admittedly, as the particulars furnished by the assessee as regards the 0% debentures of Deutsche Investments India Pvt. Ltd, sold by him during the year under consideration were not found to be inaccurate, but however, there was an inadvertent mistake in computation of LTCG by him, therefore, it can safely be concluded that the assessee cannot besubjected to penalty under Sec. 271(1)(c) for furnishing of inaccurate particulars of income. We are of the considered view that raising of an incorrect claim in law cannot be construed as furnishing of inaccurate particulars of income. As it remains an admitted position that no information given by the assesses in its return of income in respect of either the amount of sale proceeds or the cost of acquisition of the structured product, viz. 0% debentures of Deutsche Investments India Pvt. Ltd. is found to be incorrect or inaccurate, therefore, the wrong computation of the LTCG can by no means be characterised as furnishing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had there been no scrutiny, this income would have escaped taxation. With these submissions, the Ld. D/R claimed that it s a clear case wherein the assessee has furnished inaccurate particulars of income and therefore the Ld. AO has rightly imposed penalty. He, therefore, prayed that the order of Ld. CIT(A) be set aside and that of the Assessing Officer be restored. 7. Per contra, the Ld. A/R drew our attention to the various documents placed in the Paper-Book filed by him. Referring to them, the Ld. A/R demonstrated the chronological events of scrutiny-proceedings conducted by Ld. AO as under: Date Proceeding 01.09.2015 Notice u/s 143(2) issued by CASS for Limited Scrutiny 27.06.2016 Notice u/s 142(1) issued by Ld. AO 16.11.2016 Reply-letter filed by assessee 28.11.2016 Case was converted into Complete Scrutiny after taking approval of PCIT 02.12.2016 Another notice u/s 142(1) issued by Ld. AO 16.12.2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rutiny only after the assessee himself has offered the impugned income to the Ld. AO vide letter dated 16.11.2016. The Ld. A/R further argued that having converted case into Complete Scrutiny on the basis of offer made by the assessee, it is thereafter on 02.12.2016 that the Ld. AO issued notice u/s 142(1) requiring the assessee as under: You are requested to furnish as under: 10. Justification for claiming Profits and Gains of Business or Profession of ₹ 1,90,16,868/- as exempt u/s 2(14) in Computation of Income. 11. In view of this, the Ld. A/R argued that it is the suomoto offer made by the assessee in his letter dated 16.11.2016 that prompted the Ld. AO firstly to convert the case into Complete Scrutiny on 28.11.2016 and secondly to confront the assessee in respect of impugned income on 02.12.2016. Thus, the Ld. A/R established that it was a voluntary offer made by the assessee on 16.11.2016, much prior to detection by Ld. AO. 12. Thereafter, the Ld. A/R argued that it is not a case of furnishing inaccurate particulars of income as understood by Ld. AO. He submitted that the assessee has got his accounts audited u/s 44AB and furnished audited financial s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to return income from sale of agricultural land, held as stock in trade, to tax. The charge of the Revenue being that the assessee had furnished inaccurate particulars of income to this effect. We do not find any infirmity in the order of Ld. CIT(A) who has, we find, after a careful consideration of the facts, which have remained uncontroverted and correct application of law, held that there was no furnishing of inaccurate particulars of income by the assessee so as to attract penalty u/s 271(1)(c) of the Act. 17. The finding of fact of the Ld.CIT(A) that the said transaction of sale of agricultural land was reflected in the audited profit and loss account of the assessee and the income therefrom disclosed in the return of income filed, though claimed as exempt u/s 2(14) of the Act, remains uncontroverted before us. 18. The explanation of the assessee for failing to return the said income to tax for the reason that it was under a false impression that the said lands constituted investments of the assessee and did not qualify as capital assets, as per section 2(14) of the Act,thus income earned thereon being exempt from tax, we find has not been found to be outrightly false by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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