9911796707
TMI Blog2009 (4) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... turn of income and during the course of assessment proceeding. The assessee further submitted that in the issue of surrender of rights a case before the Hon'ble Bombay High Court has since been pending as has been stated already during the course of assessment proceedings and unless and until the Hon'ble Bombay High Court decides the matter the income relating to surrender of rights and income from interest to be considered as sub-judice. At the same time it has been further stated that the assessment order passed under s. 143(3) r/w s. 147 of the Act has been appealed before the CIT(A). Accordingly, a request has been made by the assessee to keep the penalty proceedings in abeyance till disposal of the appeal by the CIT(A). 2.1 Subsequently, the CIT(A) vide order dt. 4th March, 2002 decided the appeal against the assessee and confirmed the addition/disallowances made in the assessment order. The assessee was given another opportunity to furnish a reply/explanation to the penalty proceedings initiated under s. 271(1)(c) on receipt of the appellate order. In response to the same the assessee's representative stated that against the order of the CIT(A), appeal has been filed before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Tejraj Gowani on 23rd Dec., 1991 for selling his 50 per cent undivided share in the joint venture for Rs. 1.73 crores plus Rs. 1.65 crores towards expenses incurred. In the agreement the assessee was liable to obtain the consent of Shri P.N. Mehta to the assignment and transfer of the assessee's share and interest in the property in favour of Shri Tejraj Gowani. Since the assessee could not get the consent of Shri P.N. Mehta for assignment of rights to Shri Gowani, the assessee on 12th May, 1993 wrote a letter to Shri Gowani terminating the agreement dt. 23rd Dec., 1991 and cancelling the joint power of attorney. The letter had been acknowledged in the office of Shri Tejraj Gowani on 17th May, 1993. On 12th April, 1994, the assessee along with the other co-owner Shri Pankaj Mehta entered into an MoU with M/s Gaurav Overseas (P) Ltd. (GOPL) for transferring the rights of all the parties in the Divya Prabha property to GOPL for a consideration of Rs. 39,34,84,000 of which the assessee's share amounted to Rs. 9,44,00,000. The assessee transferred his 50 per cent interest in the project to GOPL vide MoU dt. 13th April, 1994. 2.3 The assessee has stated that Shri Tejraj Gowani had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestment in acquisition of a new residential house and the claim made by the assessee is incorrect. The decision relied upon by the assessee regarding the levy of penalty was not applicable to the facts of the case as in the case of the assessee there was clear concealment of income and there was no difference of opinion between two authorities as far as the assessee's case is concerned. 3.1 Il is observed from the above discussion that the assessee has misrepresented the facts on all the three issues and has concealed income earned by him during the year under consideration. It is clear that in the present case the quantification of concealment or the inaccurate particulars of income is not a matter of estimate or guess work. In such a case the burden to prove that his case did not fall within the mischief of s. 271(1)(c) of the Act heavily rests on the assessee, especially after the various amendments. Reliance was placed on the Supreme Court's decision in the case of B.A. Balasubramaniam Bros. Co. vs. CIT (1999) 157 CTR (SC) 556 : (1999) 236 ITR 977 (SC). The insertion of Explanation below s. 271 w.e.f. 1st April, 1964 was strengthened by an amendment w.e.f. 1st April, 1976 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has entered into an agreement for purchase of a new flat; therefore, the assessee bona fidely made the claim under s. 54. It was further submitted that due to unavoidable circumstances, the company namely Sharan Property Investment (P) Ltd. who seized and possessed of the land was not able to give the possession of the flat before the stipulated period; therefore, it was beyond the control of the assessee. However, investment was made by the assessee and all these particulars were furnished before the AO, therefore, was not justified in levying the penalty on this amount. 5.1 After considering the submissions of the assessee, the CIT(A) found that penalty levied by the AO is justified on this amount. As the fact that the assessee has sold his residential flat on 18th April, 1994 and to get benefit under s. 54 of the Act, the assessee had to purchase a new residential house within two years i.e. on or before 18th April, 1996. The assessee had failed to produce any evidence to show that he has purchased a new residential house before 18th April, 1996. By further noting that whatever the document has been filed in the form of agreement along with the return of income cannot prove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction as far as the assessee is concerned became 'pendentle lie'. The assessee was not sure whether he would be required to give specific performance or pay damage. Therefore, when the assessee filed his return of income for asst. yr. 1995-96, he had shown the amount received from his solicitors as an advance received from them. It was stated that the assessee is not guilty in any manner of making any concealment of income. It was also submitted that the assessee entered into a valid agreement initially with Shri Gowani and subsequently with GOPL. It was further explained that the circumstances that existed at the time of filing the return of income have to be seen. What has to be seen is that whether on 17th June, 1996 i.e. at the time of filing the return of income, the assessee had acted in a bona fl11e manner or not. The basis on which addition has been made is the order of the Bombay High Court rejecting the plea of specific performances which was passed on 15th Oct., 1997 i.e. more than a year after the return was filed. It was also explained that though the Hon'ble Bombay High Court has rejected the plea of specific performance, however, it has been observed that Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... newspapers on 12th, 13th and 15th May, 1994 inviting objections, if any to the proposed transfer of the property to GOPL. Since no objection was received, the possession of the property was handed over to GOPL on 13th Oct., 1994. Therefore, there cannot be any dispute to the legal position that there is income by way of capital gain and is chargeable in the year in which transfer of the capital asset takes place in view of charging provision of s. 45 of the Act. The CIT(A) observed that the year of taxability cannot be postponed or preponed to any other year irrespective of any circumstances. Accordingly, the CIT(A) held that capital gain on such income assessed by the AO was justified and the order of the AO has been confirmed by the CIT(A) and then by the Tribunal. 7.2 The CIT(A) noted that the assessee, while filing return on 17th June, 1996, has enclosed copy of computation of income only with the return of income. The CIT(A) noted that the balance sheet of the assessee was audited on 5th Aug., 1996 i.e. much after filing of return. It was further noted that there was no mention of surrender of rights of the property 'Divya Prabha' and there was no audit note on the issue. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has not furnished all the particulars of its statement of affairs. Reliance was placed on the decision in Seeyan Plywoods vs. ITO Anr. (1998) 149 CTR (Ker) 332 : (1999) 238 ITR 395 (Ker). It was further submitted that though quantum additions have been confirmed by the Tribunal, however, penalty proceedings are distinct and separate from the quantum proceedings and an independent view has to be taken while considering levy of penalty. From the day one, the assessee is claiming that the amount received on account of transfer of assets to GOPL are not taxable, therefore, for the purpose of levy of penalty, this amount cannot be taken into consideration. 8.1 Regarding the amount of interest, it was submitted that this is a consequential receipt. The principal itself is under dispute, therefore, the interest received on this amount cannot partake the character of income and therefore, at least penalty on this amount cannot be levied. Reliance was placed on the decision in Calcutta Discount Co. Ltd. vs. ITO Anr. (1961) 41 ITR 191 (SC). 8.2 It was further submitted that a sword still hanging on the assessee as the suit is still pending before the Hon'ble Bombay High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , for the purpose of levy of penalty, the issue has to be examined separately. It was further explained that each and every particulars were furnished as and when they were required. Complete details in respect of transfer of properties were filed during the course of assessment proceedings. 9. We have heard the rival submissions and considered them carefully. We have also perused the material and various case laws relied upon by the learned counsel of the assessee as well as by the learned Departmental Representative. After considering the submissions and perusing the material on record. we find that the CIT(A) was justified in confirming the penalty levied by the AO. We will discuss the penalty item-wise in the following manner: 10. First, we will take up the penalty levied at Rs. 88,22,250 on account of long-term capital gain on sale of flat. 10.1 The residential property was sold on 18th April, 1994, therefore, the assessee should have purchased the new residential house before 18th April, 1996. However, undisputedly, no residential house was purchased or acquired upto the date i.e. 18th April, 1996. The assessee has filed return on 17th June, 1996 originally. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l deleted the penalty. On further appeal before the Hon'ble Rajasthan High Court, the High Court has held that: "the assessee having claimed some deductions which are debatable, it could not be said that it has concealed any income or furnished inaccurate particulars of income and penalty under s. 271(1)(c) could not be levied." 10.6 The facts in the present case are totally different. The assessee has not fulfilled the conditions to claim deduction under s. 54, even though the assessee had made claim of deduction. The deduction was claimed in the original return and again was claimed in the return filed in response to notice under s. 148. If is held that the claim of the assessee was wrong and false, therefore, penalty is leviable. 10.7 In the present case, there is no debatable issue as the assessee has to fulfil the conditions prescribed under s. 54 to claim deduction. The conditions are undisputedly not satisfied, therefore, we hold that the assessee has made wrong/false claim, therefore, penalty under s. 271(1)(c) is exigible. 10.8 Reliance has also placed on the decision of CIT vs. Smt. B. Saroja Devi (1999) 236 ITR 203 (Mad). In this case the property income was asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ni as well as the suit filed by Shri Gowani for specific performance against the assessee before the Hon'ble Bombay High Court. He also considered the contents of the order of the Hon'ble Bombay High Court which has been reproduced in the assessment order. It was noted by him that Hon'ble Bombay High Court had turned down the request of Shri Gowani for the specific performance of the agreement entered between the assessee and GOPL. Hon'ble High Court has held that the suit filed by Shri Gowani for specific performance is not maintainable; however, Shri Gowani would only be entitled for damages if he succeeds. After taking into consideration all these facts, the AO concluded that the assessee had transferred his rights in the property in the year under consideration to GOPL against consideration of Rs. 9.44 crores and consequently worked out capital gain chargeable to tax on Rs. 84,91,01,000 which was assessed under the head 'Long-term capital gain'. The AO also added interest earned on this amount to the income of the assessee as the same was also not shown by the assessee. The CIT(A) also confirmed the action of the AO in respect of both these additions. The matter was carried in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue to bona fide intention, the assessee had not disclosed the amount of capital gains while filing the respective returns. Neither any note was appended along with the original return or filed in response to notice under s. 148. The assessee is trying to take benefit of the entry in balance sheet where the amount received is shown as, advance. This action, in our considered view, is just to evade tax and to mislead the Department. A proper MoU along with other co-owner Shri P.N. Mishra was entered into by the assessee. As per the agreed terms of MoU, the amount of consideration was received. Shri P.V. Mehta who is a co-owner with the assessee had disclosed this amount as long-term capital gain while filing his return of income. However, the assessee, due to the reasons known to him has not disclosed the receipts for the purpose of capital gain. There was no other condition to be fulfilled by the assessee or by the party with whom the MoU was entered. All the conditions prescribed under the MoU were satisfied and then only the amount of consideration of Rs. 9.44 crores related to the assessee was paid. The total consideration for transfering the rights of the property in 'Diviyaprab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce placed on the decision in the case of Calcutta Discount Co. Ltd. vs. ITO Anr., it is seen that the facts of the present case and the facts before the Hon'ble Calcutta High Court in the case of Calcutta Discount Co. Ltd. are entirely different. This decision was rendered in respect to assuming jurisdiction under s. 34 to issue notice in respect of assessment made beyond the period of four years but within the period of eight years from the end of the relevant order. 15.2 The issue here before us is not assuming jurisdiction but concealment of income. Therefore, the ratio of the decision relied upon by the learned counsel of the assessee is not applicable in any way on the facts of the present case. 15.3 Reliance has been placed on another decision of the apex Court in the case of K.C. Builders Anr. vs. Asstt. CIT (2004) 186 CTR (SC) 721 : (2004) 265 ITR 562 (SC). Again we find that the facts of the present case and the facts before the Hon'ble Supreme Court are different. In this case, the facts were whether levy of 'penalty under s. 271 (1)(c) and prosecution under s. 276 are simultaneous. In this case, revised return was filed estimating higher cost of construction of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquisition of land in the relevant assessment year under the belief that the capital gains would be liable to tax only on receipt of compensation. The capital gains were disclosed in the return of later year. On these facts, penalty under s. 271(1)(c) was held not to be leviable. 15.8 However, facts in the present case are totally different as in this case, there was a transfer of property and money has been received during the year under consideration. However, the assessee has not disclosed neither in the original return nor in the return filed in response to notice under s. 148. Therefore, in these circumstances, it is held that penalty is leviable. 15.9 We have seen the other case laws and found that the facts in those cases are also distinguishable with the facts of the assessee's case. In those cases neither the facts relate to debatable claim nor on account of wrong legal advice and then penalties were deleted; however, the facts in the present case that profits have been accrued on transfer of property to GOPL and the assessee has shown that profit neither in the original return nor in the return filed in response to notice under s. 148. Therefore, cases on which reli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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