Shri Gautam Chawla, Prop. M/s R.G. International, Gali No. 139, Gali Post Office, Sadar Bazar, Delhi. Vs ITO, Ward 39(3), New Delhi.
December, 25th 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES `C' NEW DELHI
BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER
SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER
ITA NO. 5143/DEL/2013
Shri Gautam Chawla, vs ITO,
Prop. M/s R.G. International, Ward 39(3),
Gali No. 139, Gali Post Office, New Delhi.
Sadar Bazar, Delhi.
Appellant by: Shri Inderjit Ahuna, Adv.
Respondent by: Shri Satpal Singh, Sr. DR
O R D E R
PER CHANDRAMOHAN GARG, J.M.
This appeal has been filed by the assessee against the order of the
CIT(A)-XVIII, New Delhi dated 24.7.2013 in Appeal No. 65/2012-13 for AY
2009-10 by which the CIT(A) upheld the penalty order passed u/s 271(1)(c) r/w
section 274 of the Income Tax Act, 1961 confirming the penalty of
2. Although the assesse has raised as many as seven grounds in this appeal
but except ground no.1, other grounds are argumentative and supportive to the
main ground no. 1 which reads as under:-
"1. The learned CIT(A) was not justified to uphold the
penalty of Rs.8,22,041/- levied u/s 271(1)( c) of the I.T.Act."
3. Briefly stated the facts giving rise to this appeal are that the assessee filed
return of income on 30.9.2009 declaring income of Rs.3,92,189/-. The case was
selected for scrutiny through CASS and after necessary verification, the AO
made addition of Rs. 39,90,498/- as income from long term capital gain.
Subsequently, the AO issued notice to the assessee for levy of penalty u/s
271(1)(c) of the Act. After considering the explanation of the assessee, the AO
imposed penalty on the assessee with the following conclusion:-
" As discussed above, the assessee is found covered by
the clause (A) of Explanastion-1 to section 271 (1) of !.Tax
Act. Therefore, it is established that the explanation offered by
the assessee in respect of charging of Long Term capital gains
of Rs. 39,90,498/- on sale of Bhiwadi Land, Building and Plant
& Machinery at the time of framing assessment u/s 143(3) vide
order dated 26.12.2011 and again during the course of penalty
proceedings was not found supported with corroborative
evidences. Thus, the default, in question, is patent on the part
of the assessee and the assessee is liable to levy of penalty u/s
271(1)(c) of the Act on the amount concealed of Rs.
39,90,498/-. I, therefore, impose a penalty of Rs. 8,22,041/-
u/s 271(1)(c) read with Explanation-1 thereto, which is
equivalent to 100% of tax sought to be evaded."
4. Being aggrieved by the above penalty order, the assessee preferred an
appeal before the CIT(A) which was also dismissed by passing the impugned
order. The relevant operative part of the order reads as under:-
"Further, even if it is accepted that the appellant has
voluntarily withdrawn the claim of Exemption under section
54F, the case of the appellant is squarely covered by the
decision of the Honble Delhi High Court in the case of CIT vs.
MAK Data Ltd vide order dated 22.1.2013 in ITA No.415/2012
has on the issue of levy of penalty in the case of disclosed
income, disclosed after enquiry conducted by the Assessing
Officer has held as under:-
A survey u/s 133A was conducted on the assessee's
premises in the course of which certain documents belonged to
certain entities who had applied for shares in the assessee
company were found. The AO called upon the assessee to
prove the nature and source of the monies received as share
capital, the creditworthiness of the applicants and the
genuineness of the transactions. The assessee offered Rs. 40.74
lakhs as income from other sources "to avoid litigation and to
buy peace". It was made clear that in making the surrender,
there was no admission of concealment. The AO completed the
assessment by adding the said sum and levied penalty u/s
271(1)(c) for furnishing inaccurate particulars of income u/s
271 (1)(c). This was upheld by the CIT(A) though reversed by
the Tribunal (included in file) on the ground that there was no
material to show any concealment and even in the penalty
order it was not specified as to the particular credit in respect
of which the penalty was being imposed. It was also
emphasized by the Tribunal that the assessee had made it clear
while surrendering that there was no admission of
concealment and that the offer was made in a spirit of
settlement. On appeal by the Department to the High Court,
HELD reversing the Tribunal:
When the AO called upon the assessee to produce evidence as
to the nature and source of the amount received as share
capital, the creditworthiness of the applicants and the
genuineness of the transactions the assessee simply folded up
and surrendered the sum of Rs. 40.74 lakhs by merely stating
that it wanted to "buy peace". In the absence of any
explanation in respect of the surrendered income, the first part
of clause (A) of Explanation 1 to s. 271(1)(c) is attracted
because the nature and source of the amount surrendered are
facts material to the computation of total income. The absence
of any explanation regarding the receipt of the money, which
is in the exclusive knowledge of the assessee leads to an
adverse inference against the assessee and is statutorily
considered as amounting to concealment of income under the
first part of clause (A) of the Explanation to s. 271(1)(c) and
penalty has to be levied.
In view of the aforesaid, I hold that the Assessing Officer has
rightly charged the appellant company with concealment and
furnishing of inaccurate particulars. Accordingly, the penalty
u/s 271 (1 (c) of the Act is being sustained."
5. We have heard arguments of both the sides and carefully perused the
relevant material placed on record. From the quantum assessment order, we
observe that as per order sheet entry dated 19.11.2011, the AR was asked to file
the details in respect of property sold and purchased during the year under
consideration and in response to the same, the assessee filed revised
computation of its income on 26.12.2011 by stating that the assessee earned
Rs.39,90,948 as long term capital gain at Bhiwadi, Rajasthan and to offset the
LTCG, the assessee purchasds a residential flat from Shri Vrijesh Kumar Gupta
and made payment of Rs. 40 lakh on various dates through cheques. It was also
stated that unfortunately the assessee could not get possession of the
property/flat due to dispute in the factory of the seller and deal could not
materialise and agreement of sale was cancelled and the seller returned the
payment of Rs.40 lakh through various cheques issued by Axis Bank Ltd. The
assessee further explained that due to these circumstances, the assessee could
not avail exemption u/s 54 of the Act, therefore, the assessee surrendered LTCG
to be taxed and also submitted challans for tax deposited by him of Rs.8,20,000.
6. From the penalty order, we observe that the assessee also reiterated its
explanation during the penalty proceedings but the AO held that the act of the
assessee found covered by clause (a) to Explanation (1) to section 271(1) of the
Act. The CIT(A) upheld the penalty by following the decision of Hon'ble
Jurisdictional High Court of Delhi in the case of CIT vs MAK Data Ltd. order
dated 22.01.2013 in ITA No.415/2012. On careful perusal of the order of the
Jurisdictional High Court of Delhi in the case of MAK Data Ltd, we note that
the case was related with surrender of Rs. 40.74 lakh received as share capital.
In this case, when the AO called upon the assessee to produce evidence as to the
nature and source of the amount received in share capital, the creditworthiness
of the applicants and the genuineness of the transactions, the assessee simply
folded up and surrendered the same amount by merely stating that it wanted to
buy peace. The Hon'ble Jurisdictional High Court held that in absence of any
explanation in respect of surrendered amount the first part of clause (a) of
Explanation 1 to section 271(1)(c) is attracted because the nature and source of
the amount surrendered are facts material to the computation of total income.
7. In the light of factual matrix of the present case, we observe that the facts
of this case are clearly distinguishable from the case of CIT vs MAK Data Ltd.
(supra) as the present case is related to the withdrawal of claim of section 54 by
the assessee. From the operative part of the quantum assessment order, we
observe that the assessee in its letter dated 26.12.2011 had clearly mentioned the
circumstances beyond the control of the assessee wherein the seller Mr. Vrijesh
Kumar Gupta cancelled the agreement to sell a flat to the assessee and returned
the advance of Rs.40 lakh through cheques of Axis Bank to the assessee. The
assessee further explained that unfortunately the deal of purchase of flat could
not materialise, therefore, he offered the amount of long term capital gain for
taxation and also deposited tax of Rs.8.20 lakh to the exchequer and the assessee
also submitted copies of the challan tax deposited along with explanation dated
26.12.11 which shows sincerity and truthfulness of the assessee during the
quantum proceedings and in this situation, it can safely be presumed that the
assessee offered an explanation during quantum and penalty proceedings which
was quite sustainable and hence, the AO was wrong in holding that the assessee
did not furnish any explanation towards amount of long term capital gain which
was offered for tax during the relevant year under consideration. We may also
note that the provisions of the Act envisaged u/s 54(1)(ii) of the Act also provide
that the amount of long term capital gain should be utilised within a period of
three years. In the extant case, the assessee tried hard to purchase a flat from
Mr. Vrijesh Kumar Gupta to enjoy effect of section 54 of the Act but the deal
failed due to dispute in the family of the seller and finally during the year under
consideration, the assessee offered the amount of long term capital gain for
taxation and also paid the tax within prescribed limit, therefore, the authorities
below were wrong in holding that the assessee did not furnish any explanation in
this regard and the AO grossly erred in holding that the case of the assessee is
found covered by clause (a) of Explanation 2 to section 271(1)(c) of the Act
because the assessee furnished a plausible explanation during the quantum
proceedings which was also filed before the AO during penalty proceedings.
Hence, we reach to a logical conclusion that the AO imposed penalty on the
basis of wrong premises and erroneous interpretation of the provisions of the
Act and the same was wrongly upheld by the CIT(A). Accordingly, we are
inclined to hold that penalty is not leviable on the assessee in the present case.
Hence, sole ground of the assessee is allowed and thus, impugned order is set
aside with a direction to the AO that penalty levied on the assessee is hereby
cancelled and deleted.
8. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 22.12.2014.
(R.S.SYAL) (CHANDRAMOHAN GARG)
ACCOUNTANT MEMBER JUDICIAL MEMBER
DT. 22nd DECEMBER, 2014
Copy forwarded to:-
4. C.I.T. 5. DR