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Income Tax Officer, Ward-27(2), Room NO.1909, E-2, Dr. S.P.M.Civic Centre, Minto Road, New Delhi-110002 vs M/s Tarini Developers, A-10, Mansarovar Garden, New Delhi-110015
December, 30th 2014
ITA NO. 1888 & 1889/Del/2013
Asstt.Year: 2006-07

                 IN THE INCOME TAX APPELLATE TRIBUNAL
                      DELHI BENCH `H' NEW DELHI

          BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER
                            AND
          SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER

                           ITA No. 1888/Del/2013
                          Assessment Year: 2006-07

Income Tax Officer,               vs     M/s Tarini Developers,
Ward-27(2), Room NO.1909,                A-10, Mansarovar Garden,
E-2, Dr. S.P.M.Civic Centre,             New Delhi-110015
Minto Road,                              (PAN: AAEFT4007C)
New Delhi-110002
                        ITA No. 1889/Del/2013
                      Assessment Year: 2006-07

Income Tax Officer,                vs     Vardan Buildcon,
Ward 27(2),                               A-10C, Mansarovar Gardne,
New Delhi.                                 New Delhi.
                                           (PAN: AAFFV7307J)
(Appellant)                             (Respondent)

                    Appellant by: Shri Sudesh Garg, Adv.
                   Respondent by: Shri J.P. Chandrakar, Sr. DR


                               ORDER

PER CHANDRA MOHAN GARG, JUDICIAL MEMBER

       These appeals have been filed by the revenue against the order of

CIT(A)-XXIV, New Delhi dated 3.11.2009 in Appeal No. 229/08-09 and in

Appeal No.231/08-09 pertaining to AY 2006-07.


2.     The sole ground raised by the revenue in both the appeals is similar

except quantum of penalty which reads as under:-
                                                                          1
ITA NO. 1888 & 1889/Del/2013
Asstt.Year: 2006-07

               "On the facts and circumstances of the case, the ld.
              CIT(A) erred in:-
            (i) Deleting the penalty u/s 271(1)(c)of the Income Tax
            Act amounting to Rs.30,07,137/- imposed by AO."
3.     Briefly stated the facts giving rise to these appeals are as under:-

                   "2. Return of income was filed on 31.10.2006
           declaring business loss of Rs.6,727/-, Rs.7,182/- and
           Rs.6.224/- respectively. The AO assessed the income of the
           assessee     at     Rs.87,39,150/-,    Rs.93,18,090/-    and
           Rs.89,27,660/- after making an addition of Rs.87,45,880/-,
           Rs.93,25,2701- and Rs.89,33,8801- respectively. These
           additions were made by the AO after treating agricultural
           income declared by the assessee on sale of agricultural land
           as income under the head "Income from Business and
           Profession". The appellant had treated the profit on sale of
           land as exempt from tax on the ground that the land
           transacted in was agricultural land situated at a distance of
           more than 8 km from the limits of any municipality or
           cantonment and hence, was not a capital asset in terms of
           section 2(14) of the Act. On the other hand, the AO held that
           the transaction was a business transaction and therefore,
           the profit arising out of these transactions were business
           profits. In the penalty orders u/s 271(1)(c), the Assessing
           Officer has mentioned that "The AO rejected the attempt of
           the assessee to bring the transaction within the purview of
           income from capital gains and thereby escaped taxation by
           claiming shelter u/s. 2(14)." The appeals filed by the
           assessee's have been dismissed by the CIT(A), ITAT and
           Hon'ble Delhi High Court. The AO, therefore, initiated
           penalty proceedings u/s 271(1)(c) and issued notices to the
           appellants giving them an opportunity to explain as 10 why
           penalty u/s 271(1)( c) should not be levied on them. In
           response, the ARs of the appellants CA Surjit Singh and CA
           Samudar Jangir attended the proceedings. They impugned
           the penalty proceedings in all the three cases on the
           grounds that (i) the penalty proceedings were barred by
           limitation; (ii) the AO had not recorded satisfaction for
           initiating penalty proceedings by passing the assessment
           order; (iii) penalty proceedings are separate from
           assessment proceedings; (iv) assessees have neither

                                                                              2
ITA NO. 1888 & 1889/Del/2013
Asstt.Year: 2006-07

           concealed any particulars of income nor furnished
           inaccurate particulars of income; (v) the land transacted in
           was agricultural land and not a capital asset within the
           meaning of section 2(14) of the Act; and (vi) explanation 1
           to section 271(1)(c) for imposing penalty was not attracted
           since assessees had furnished an explanation which was
           bona fide and all facts relating to the same and material to
           the computation of its total income were disclosed in their
           respective returns of income. The AO, in turn, rejected each
           of the above contentions of the appellants and held that the
           appellants had furnished inaccurate particulars of their
           incomes/concealed the particulars of their incomes and
           therefore, they were liable for penalty u/s. 271 (1)(c). He
           treated the appellants as assessees in default and imposed
           individual penalties on them u/s. 271(1)(c) of the Act,
           amounting to Rs.29,43,863/- (Malika Developers),
           Rs.31,38,886/- (Vardan Buildcon), Rs.30,07,137/- (Tarini
           Developers)."
4.     The aggrieved assessees preferred appeals before the CIT(A) which were

allowed by passing the impugned order dated 23.1.2013 and the CIT(A)

directed the AO to delete respective penalties in all three appeals.

Consequently, the aggrieved revenue filed three separate appeals before "H"

Bench of the Tribunal with the sole ground as reproduced hereinabove.




5.     We have heard arguments of both the sides and carefully perused the

relevant material placed on record, inter alia assessment order, penalty order

and impugned order of the CIT(A) which deleted the penalty. Ld. AR, at the

very outset, submitted a copy of the decision of ITAT "E" Bench dated

30.5.2014 in Appeal No. 1890/Del/2013 for AY 2006-07 in the case of ITO vs

M/s Malika Developers and submitted that the Tribunal has deleted the penalty

in the case of Malika Developers and remaining two assessees viz. M/s Vardhan


                                                                             3
ITA NO. 1888 & 1889/Del/2013
Asstt.Year: 2006-07

Buildcon and M/s Tarini Developers are the respondents in the present appeals.

Ld. AR, drawing our attention towards operative part of the order of the

Tribunal dated 30.5.2014, submitted that the penalty imposed u/s 271(1)(c) of

the Income Tax Act, 1961 has been found to be not sustainable and hence the

appeal filed by the revenue in the case of M/s Malika Developers has been

dismissed, therefore, the present appeals pertaining to other two assessees viz.

M/s Vardhan Buildcon and M/s Tarini Developers also deserve to be dismissed

as the issue is squarely covered in favour of the assessee and against the

revenue, therefore, present appeals should also be dismissed in the same

manner.

6.     Replying to the above, ld. DR fairly admitted that the appeal of the

revenue in the case of M/s Malika Developers has been dismissed by the ITAT

"E" Bench vide its order dated 30.5.2014 (supra). However, ld. DR supported

the penalty order and submitted that the CIT(A) directed the AO to delete the

penalty on wrong premises and without any justified reason, therefore, the

appeal of the revenue may be allowed by setting aside the impugned order and

restoring that of the AO.

7.     On careful consideration of above submissions, we observe that the

CIT(A) allowed the appeal of the assessee with the following conclusion:-




                                                                              4
ITA NO. 1888 & 1889/Del/2013
Asstt.Year: 2006-07

        "4.15 The case of Suren Arvind Bhai Vakil Vs. ITO (2011) 137
        TTJ 613 (Ahm), the Hon'ble Tribunal held that "mere rejection
        of claim of assessee by relying on different interpretations
        does not amount to concealment of particulars of income or
        furnishing inaccurate particulars of income by assessee."
        Similarly, in the case of Dy. CIT Vs. Ajay Kumar Lal (2011) 12
        taxmann.com 491 (Ahm. Trib.), the Hon'ble Tribunal held that
        "Mere erroneous claim or mistaken bona fide belief is no
        ground for levying penalty u/s. 271(1)(c)". Further, in the case
        of ACIT Vs. Megji Mathradas (2011) 7 ITR (Trib.) 749 (Mum),
        the Hon'ble Tribunal held that "where assessee had disclosed
        full facts in connection with claim made in Return and
        disallowance in quantum assessment was due to different of
        judicial opinion between Assessing Officer and Assessee,
        penalty could not be levied u/s 271(1)(c)." In the case of
        Mahinder Siddhu Vs. ACIT (2010) 39 DTR 233 (Del Trib.), the
        Hon'ble Tribunal held that "in the absence of any falsity in the
        details submitted by the assessee regarding Computation of
        Income, penalty u/s 271(1)(c) is not leviable in respect of
        inadvertent wrong claim made by assessee for adjustment the
        Long Term Capital Loss against Short Term Capital Gains."
        4.16 In the light of the discussions in the preceding
        paragraphs and the judicial pronouncements cited therein, I
        am of the considered opinion that in the instant three cases,
        the appellants had revealed all the particulars of the
        transaction in their Returns of Income. It is a different matter
        that additions have been made in quantum assessment,
        treating the profits on purchase and sale of agricultural land
        as business profits and not as capital gains. Since, the
        appellants has not shown any mala fide intentions and has not
        filed any inaccurate particulars of income, penalty u/s
        271(1)(c) of the Act is not imposable in these cases. Therefore,
        penalty is imposed in these cases u/s 271(1)(c) are hereby
        deleted. "
8.     We may point out that ld. DR has not disputed the fact that the appellants

had revealed all the particulars of transactions in their return of income of

respective assessment years under consideration. We may also observe that

during the quantum proceedings, the AO treated the profits on purchase and sale


                                                                                5
ITA NO. 1888 & 1889/Del/2013
Asstt.Year: 2006-07

of agricultural land as business profits and not as capital gains and it is also not

in dispute that the assessee filed all details pertaining to the profits on purchase

and sale of agricultural land along with return of its income. Therefore, under

these circumstances, it cannot be said that there was some malafide intention of

the assessee and assessee filed inaccurate particulars of its income or has

concealed particulars of its income with conscious intention to evade tax.

9.     From careful reading of the order of the Tribunal in ITA No.

1890/Del/2013 dated 30.5.2014, we observe that the Tribunal in the case of M/s

Malika Developers deleted the penalty with following observations and

findings:-

               "6. At the outset, the Ld DR submitted that additions
        were confirmed by ITAT and further confirmed by Hon'ble
        Delhi High' Court. It was submitted that assessee deliberately
        declared the business profit as capital gain in order to avoid
        taxation. Therefore, there was existence of mens rea as the
        assessee had deliberately furnished wrong particulars and it
        was submitted that the case laws relied upon by Ld CIT(A)
        were not applicable to the facts of the present case.
        7. The Ld AR on the other hand, submitted that the land was
        purchased with a view to earn capital gain, .the Assessing
        Officer had made addition on deemed basis. It was further
        submitted that land was situated outside the municipal limit
        and full particulars were furnished and there was no
        suppression of facts. The Assessing Officer had made addition
        due to difference of opinion and not because of any other
        reasons.
        8. We have heard the rival submissions of both the parties and
        have gone through the material available on record. We find
        that though the assessee had lost upto the High Court in the
        quantum proceedings yet, losing a case in quantum
        proceedings is not a sufficient reason for imposing penalty u/s

                                                                                  6
ITA NO. 1888 & 1889/Del/2013
Asstt.Year: 2006-07

        271(1)( c) of the Act. The penalty proceedings u Is 271 (1 )(c)
        are separate proceedings distinct from the assessment
        proceedings and where revenue has to establish separately the
        existence of mens rea for imposition of penalty. The assessee
        had submitted full particulars regarding. sale and purchase of
        land and had claimed the profit as capital gain. From the
        particulars filed by the assessee, the Assessing Officer had
        come to know about the fact of sale of land, however, he
        rejected the claim of assessee and assessed the gain.' as'
        business income instead of capital gain as claimed by
        assessee. The Hon'ble Supreme Court in the case of Reliance
        Petro Products has held that if complete details of transactions
        has been revealed by the assessee in its return of income,
        penalty u/s 271(1)(c) will not be imposable just because the
        claims of the assessee are found to be legally not allowable.
        The facts and circumstances of the present case are squarely
        covered In favour of assessee vide the Judgment of Hon'ble
        Supreme Court in the case of Reliance Petroproducts Ltd.
        which has been relied upon by Ld CIT(A). Therefore, we do
        not find any infirmity in the order of Ld CIT(A)."






10.    On the basis of foregoing discussion, we are in agreement with the

conclusion of the Coordinate Bench of the Tribunal order dated 30.5.2014 that

as per decision of Hon'ble Apex Court in the case of Reliance Petroproducts

(supra), if complete details of transaction has been revealed by the assessee in

its return of income, then penalty u/s 271(1)(c) of the Act will not be imposable

just because the claims of the assessee are found to be legally not allowable. In

the instant case, the assessee furnished all particulars of purchase and sale of

agricultural land which brought profit to the assessee. During the quantum

proceedings, the AO treated the profit as business profit instead of capital gains

as claimed by the assessee, therefore, by any stretch of imagination, it cannot be


                                                                                7
ITA NO. 1888 & 1889/Del/2013
Asstt.Year: 2006-07

held that the assessee has furnished inaccurate particulars of its income or has

concealed particulars of its income. We further hold that merely because the

assessee proposed the impugned profits from sale and purchase of agricultural

land as capital gain but the AO assessed the same under the head of profits and

gains from business and profession, in this situation, penalty u/s 271(1)(c) of the

Act is not imposable as in any case, it cannot be said that the assessee has

furnished inaccurate particulars of its income or has concealed particulars of its

income before the AO during quantum proceedings. Thus, the CIT(A) was

right in deleting the penalty imposed by the AO and we are unable to see any

valid reason to interfere with the impugned order of the CIT(A) in this regard.

Accordingly, sole ground in both the appeals being devoid of merits is

dismissed.

11.     In the result, both the appeals of the revenue are dismissed.

        Order pronounced in the open court on 29th December, 2014.

        sd/-                                          sd/-

   (B.C. MEENA)                         (CHANDRA MOHAN GARG)
 ACCOUNTANT MEMBER                           JUDICIAL MEMBER

Dated          29th December, 2014
`GS'




                                                                                 8
ITA NO. 1888 & 1889/Del/2013
Asstt.Year: 2006-07

Copy of order forwarded to:

   1.   Appellant
   2.   Respondent
   3.   CIT(A)
   4.   CIT
   5.   DR
                               By Order



                               Deputy Registrar, ITAT




                                                        9

 
 
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