The order of the Bench was delivered by
Chandra Poojari (Accountant Member)- All these appeals by different assessees are directed against different orders of the Commissioner of Income-tax (Appeals) for the assessment year 2010-11.
ITA Nos. 245, 246, 247, 248, 249, 250, 253, 255/Mds/2016
In these appeals, the issue is with regard to sustaining the addition by the Commissioner of Income-tax (Appeals).
ITA Nos. 237, 238, 239, 240, 241, 242, 243, 244 and 251/Mds/2016
In these appeals, the issue is with regard to levy of penalty under section 271(1)(c) of the Income-tax Act, 1961. Since the issues are common, we consider the facts narrated in ITA Nos. 253 and 237/Mds/2016 for the purpose of adjudication.
2. The assessee has raised the first ground with regard to non-admitting the appeal by the Commissioner of Income-tax (Appeals) without assigning reasons in respect of quantum addition.
3. The facts of the case as narrated in ITA No. 253/Mds/2016 are that the assessee, an individual is having income from business, capital gains and other sources. The assessee filed his original return of income for the assessment year 2010-11 on March 29, 2012, admitting a total income (Rs.7,31,544). In the statement of income filed with the return of income for the assessment year 2010-11, the assessee had admitted the sale of agricultural land at Neelankarai for Rs. 2,19,69,043 and claimed an exemption of Rs. 1,90,00,000 under section 54B of the Act towards the investment in the purchase of agriculture land at Mahabalipuram. Subsequently, a combined survey under section 133A was conducted in the case of Shri Ameerdeen of M/s. Alpha Commercials and the group of cases on September 13, 2012. In the sworn statement of Shri Ameerdeen stated that he himself and his family members (thirteen co-owners) together had sold a land situated at Neelankarai to M/s. Kannammal Educational Trust and admitted that the land sold was an urban land only and no agricultural activities were carried out on the said land. Hence, the land was capital asset in nature. The present assessee is one such co-owner out of the total 13 co-owners of the impugned land sold out.
3.1 The Assessing Officer noticed from the above facts that the income chargeable to tax under the head "Capital gains" had escaped assessment. Accordingly, the Assessing Officer issued a notice under section 148 of the Act to the assessee on October 25, 2012. In response to the notice under section 148, the assessee filed a return income for the assessment year 2010-11 on December 27, 2012, admitting an income Rs. 7,31,554 (excluding the capital gains of Rs. 1,90,27,203) after withdrawing the earlier deduction claimed under section 54B at Rs. 1,90,00,000 and paid the taxes on declared such capital gains. The reassessment was completed by determining the total income of Rs. 1,96,98,760 (including long-term capital gains of Rs. 1,90,27,203) on March 8, 2014.
3.2 The penalty proceedings of the Act for furnishing inaccurate particulars of income and for concealing the particulars of income, were also initiated by the Assessing Officer by issuance of a notice under section271(1)(c) of the Act on March 8, 2014.
3.3 During the course of the reassessment proceedings and the penalty proceedings, the learned authorised representative furnished a letter dated August 12, 2014, which reads as follows :
"Out of the sale consideration, the assessee has instructed M/s. Alpha Commercials to pay the money to the seller of the agricultural land at Mahabalipuram and claimed exemption under section 54B of the Act being part performance of the contract. As the said Alpha Commercials has used the money for the business purposes and has not paid the money as per the agreement."
From the above, it was noticed by the Assessing Officer that the assessee had not actually either invested the amount in the purchase of the property or invested in the Capital Gains Account Scheme within the stipulated time as provided under the Act. Further, it was observed by the Assessing Officer capital gains arising out of the sale proceeds of the Neelankarai property to the notice of the Department only when the sworn statement of Shri Ameerdeen was recorded during the course of survey operations conducted at the business premises of M/s. Alpha Commercials, which otherwise would have escaped the assessment. Accordingly, the Assessing Officer observed that the claims made by the assessee, firstly, with regard to the issue of agricultural land at the first instance and, secondly, regarding the investment in the agriculture land for the claim of deduction under section 54B, were factually wrong.
3.4 On the basis of the facts mentioned above, the Assessing Officer recomputed income of the assessee and assessed the income at Rs. 1,96,98,760 under section 143(3) read with section 147 of the Act on March 8, 2014, as against the taxable income declared at Rs. 7,31,554 in the original return of income filed on March 29, 2012. The Assessing Officer also initiated the penalty proceedings under section 271(1)(c) for filing particulars of income and for concealing the particulars of income and order under section 271(1)(c) was passed on September 26, 2014, by levying a penalty of Rs. 39,13,426. The assessee went in appeal before the Commissioner of Income-tax (Appeals) challenging the quantum addition.
4. In this case, there was a delay of 175 days in filing all these appeals before the Commissioner of Income-tax (Appeals). The assessee filed a condonation petition before the Commissioner of Income-tax (Appeals) stating as follows :
"The assessment order for the assessment year 2010-11 dated March 8, 2014, and in this regard the assessee submits that the appeal against the assessment order ought to have been filed within 30 days from the said date of service. However, as admitted in the sworn statement September 13, 2012, the assessee was under the mistaken impression about the correctness of surrender of the claim of exemption under section 54B of the Act in the computation of total income formed part of the original return of income. In the sworn statement the assessee admitted his/his ignorance of law inasmuch as the said ignorance should construed in both ways consequent to the interpretation of said provisions in the Act to the factual matrix of the case.
The assessee, therefore, had remitted the taxes quantified in the re-assessment order and wanted to purchase peace with the Depart ment ignoring the professional advice received on the wrong order passed which was based on the inadmissible evidence of sworn state ment recorded in the survey proceedings.
At the same breath the assessee submits that the acceptance of the stand of the Revenue and payment of taxes in relation thereto would bring down the curtains relating to the assessment year 2010-11 which was his bona fide understanding and, however, the Assessing Officer has proposed to levy penalty under section 271(1)(c) of the Act in September, 2014, which action of the Assessing Officer is separately opposed on all facets.
Based on the professional advice received in connection with the penalty proceedings in September, 2014, the assessee was informed about the invalid order passed by the Assessing Officer on reopening the proceedings of 147 of the Act for the assessment year 2010-11 based on the sworn statement recorded at the time of survey and the said mistake in not challenging the reassessment order under consideration was realised in the presentation of the appeal belatedly today along with this petition for condonation of delay.
In view of the legal complexities of the present case and further in view of the unreasonable attempt of the Assessing Officer in penalising the assessee under section 271(1)(c) of the Act would constitute reasonable cause for the belated filing of the appeal for the assess ment year 2010-11 and, accordingly, the assessee prays for the admission of the appeal in the interest of justice."
4.1 However, the Commissioner of Income-tax (Appeals) observed that there was no sufficient and reasonable cause for not filing the present appeal, before him, against the reassessment order dated March 8, 2014, within the stipulated period of 30 days from the receipt of the impugned order and rejected the condonation petition and decided the issue on the merits. Against this, the assessee is in appeal before us.
5. As seen from the condonation petition filed by the assessee before the Commissioner of Income-tax (Appeals), the main contention of the assessee's counsel is that due to wrong professional advice and as per the bona fide understanding with the Department, at the time of survey operation, the assessee has accepted the quantum addition on the premise that the Department would not initiate penalty proceedings. However, after passing the reassessment order dated March 8, 2014, the Assessing Officer initiated penalty proceedings, vide notice dated March 8, 2014, under section 274 read with section 271(1)(c) of the Act. The assessee replied to that notice, vide letter dated August 12, 2014, that the assessment order dated March 8, 2014, was delivered on August 12, 2014. The assessee was of the opinion that the Assessing Officer would not levy penalty in this case. However, the Assessing Officer has given a fresh opportunity of hearing to the assessee on September 25, 2014, wherein the assessee's representative requested the Assessing Officer to drop the penalty proceedings since the demand raised has been paid. Finally, on September 25, 2014, the assessee came to the conclusion that the Assessing Officer would levy penalty and therefore, he took a decision to file the appeal against the reassessment order dated March 8, 2014. Accordingly, the assessee filed the appeal before the Commissioner of Income-tax (Appeals) on September 26, 2014, on the bona fide belief that the Assessing Officer would not levy penalty has been vanished.
6. On the other hand, the learned Departmental representative submitted that the assessee cannot wait for the decision of the Assessing Officer, to levy penalty or not to levy penalty so as to file the appeal in case of quantum addition. There is no legitimate or bona file belief in filing the appeal belatedly. Simply because the Assessing Officer has initiated the penalty proceedings and proposed to impose penalty under section 271(1)(c) of the Act and again, quantum addition cannot be done. The reason for not filing the appeal in time is based on his own assumptions and presumptions. The assessee cannot take away the legal right of the Assessing Officer in taking penalty action against the erring assessee. The plea of the Revenue is that the Assessing Officer proposed to impose penalty under section 271(1)(c) of the Act. Therefore, the assessee intended to file the present appeal beyond the stipulated time is not a reasonable cause to file the appeal belatedly. According to the Departmental representative, the assessee is supported by the advocates and chartered accountants and it cannot be said that the assessee was in lack of professional advice. The learned Departmental representative, relied on the order of the Commissioner of Income-tax (Appeals) and submitted that the appeal of the assessee was rightly unadmitted by the Commissioner of Income-tax (Appeals).
7. We have heard both the parties and perused the material on record. In this case, the delay before the Commissioner of Income-tax (Appeals) is only 175 days in filing the appeals. The assessee filed condonation petition as narrated in earlier paragraph. The reasons stated by the assessee is that he has bona fide belief that the Assessing Officer would not levy penalty and close the issue. However, to his surprise, the Assessing Officer initiated penalty proceedings, vide order dated March 8, 2014. The assessee requested the Assessing Officer on several occasions not to levy penalty and the assessee filed a revised return of income on the basis of mutual understanding between the Department and arrived at during the search conducted and there was certain lapses on the part of the assessee like filing of original return due to lack of professional advice. Further, it was stated that the assessee has already paid capital gains before filing the return of income. However, the Assessing Officer finalised the penalty order and it came to the notice of the assessee on the last day of hearing of penalty proceedings on September 25, 2014, that the Assessing Officer is going to levy penalty under section 271(1)(c) of the Act in these assessment years. Hence, the assessee filed appeals against the quantum addition before the Commissioner of Income-tax (Appeals) on September 26, 2014. As per the Commissioner of Income-tax (Appeals), this cannot be a reasonable cause to file the appeals belatedly and the assessee cannot wait for the result of penalty proceedings in filing the appeal. This observation of the Commissioner of Income-tax (Appeals) is unwarranted. Thus, in our opinion, there is superficial approach to the problem by the Commissioner of Income-tax (Appeals). The matter has to be considered in the light of human probabilities. The reason stated by the assessee in these cases is that he was waiting for the outcome of the penalty proceedings. Therefore, we have to consider, whether reasonable prudent person would do so. The inference of such delay has to be drawn on the basis of circumstances available on record and conduct of the assessee. After considering the surrounding circumstances and applying the test of human probabilities, one has to reasonably conclude that the plea of the assessee is genuine. The explanation offered by the assessee for the delay cannot be rejected as false or devoid of merits. As held by the Madras High Court in the case of Sreenivas Charitable Trust v. Deputy CIT [2006] 280 ITR 357 (Mad), the expression "sufficient cause" should be interpreted to advance substantial justice. Therefore, advancement of substantial justice is the prime factor while considering the reason for condoning the delay. In these cases, the issue on merit is with regard to allowability of exemption under section 54B of the Act. The assessee took a plea that sale consideration was given to M/ s. Alpha Commercials, wherein one of the co-partners of the property is a partner of that firm for the purpose of investment in agricultural land so as to avail of deduction under section 54B of the Act. Refusal to condone the delay would result in a meritorious case being thrown at the very threshold, cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a case would be decided on the merits after hearing the parties. On this point, it is pertinent to draw the ratio laid down by the Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji [1987] 167 ITR 471 (SC) wherein it was held as under (page 472) :
"(1) Ordinarily, a litigant does not stand to benefit by lodging an appeal late.
(2) Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties.
(3) 'Every day's delay must be explained' does not mean that pedantic approach should be made. Why not every hour's delay, every second's delay ? The doctrine must be applied in a rational, common sense and pragmatic manner.
(4) When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.
(5) There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs serious risk.
(6) It must be grasped that the judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so."
7.1 In our opinion, when substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right for injustice being done because of non-deliberate delay. In our opinion, the delay in this case is very short, i.e., 175 days and there is no question of inordinate delay, when the reason stated by the assessee was a reasonable cause for not filing the appeal. We have gone through the reason for delay as discussed in earlier paragraph. The Madras High Court in the case of CIT v. K. S. P. Shanmughavel Nadar [1985] 153 ITR 596 (Mad) considered the delay of condonation and held that there was sufficient and reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. Accordingly, the Madras High Court condoned nearly 21 years of delay in filing the appeal. When compared to 21 years of delay considered by the court, the delay of 175 days before the Commissioner of Income-tax (Appeals) in filing the appeal cannot be considered to be inordinate or excessive.
7.2 Further, the co-ordinate Bench of the Tribunal, Chennai in the case of People Education and Economic Development Society (PEEDS) v. ITO [2006] 100 ITD 87; [2008] 296 ITR (AT) 36 (Chennai) (Third Member) condoned the delay of more than 600 days, wherein, the Accountant Member was a party (dissented). Thus, as held by the Madras High Court in the case of Srinivas Charitable Trust cited supra, there was no hard and fast rule can be laid down in the matter of condonation of delay and courts should adopt a pragmatic approach and the courts should exercise their discretion on the facts of the each case keeping in mind that in construing, the expression "sufficient cause" the principle of advancing substantial justice is of prime importance and the expression "sufficient cause" should receive a liberal construction. Therefore, this judgment of the Madras High Court says that in order to advance substantial justice, which is of prime important, the expression "sufficient cause" should receive a liberal construction. In these cases, in our opinion, the short delay of 175 days is on account of bona fide belief by the assessee that the Assessing Officer should not levy penalty and the assessee was waiting for the dropping of penalty during this period and when the assessee came to know on September 25, 2014, that the Assessing Officer is going to confirm levy of penalty, immediately on September 26, 2014, the assessee filed appeals before the Commissioner of Income-tax (Appeals) challenging the addition. Hence, in our opinion, when delay is for short period of 175 days, it is to be condoned as held by the Supreme Court in the case of Mrs. Sandhya Rani Sarkar v. Smt. Sudha Rani Debi, AIR 1978 SC 537, since the condonation of delay is the discretion of this court and it would depend on each case. In our opinion, when there is sufficient cause for not filing the appeal within the period of limitation, the delay has to be condoned and if we do not condone the delay, it would amount to legalise an illegal order and it is appropriate to exercise the power with the intention that this Tribunal would deliver justice rather than legalise injustice on technicalities. Therefore, this short delay of 175 days is condoned.
8. The ground raised by the assessee on the merits is with regard to allowability of deduction under section 54B of the Act. Since the Commissioner of Income-tax (Appeals) decided the issue on the merits without condoning the delay, is not appropriate. Hence, we remit the issue to the file of the Commissioner of Income-tax (Appeals) with a direction to decide the same afresh. He shall not be prejudiced by the earlier finding of the Commissioner of Income-tax (Appeals) on the merits in that order. Accordingly, this issue is allowed for statistical purposes. In the result, the appeals in ITA Nos. 253, 248, 249, 246, 255, 245, 247, 250/Mds/2016 are allowed for statistical purposes.
9. In ITA No. 237/Mds/2016, the grievance of the assessee is with regard to levy of penalty under section 271(1)(c) of the Act.
10. The facts of the case are that the assessee, an individual is having income from business, capital gains and other sources. The assessee filed his original return of income for the assessment year 2010-11 on March 29, 2012, admitting a total income of Rs. 7,31,554. In the statement of income filed with the return of income, for the assessment year 2010-11, the assessee had admitted the sale of agricultural land at Neelankarai for Rs. 2,19,69,043 and claimed an exemption of Rs. 1,90,00,000 under section54B of the Act towards the investment in agricultural land at Mahabalipuram. Subsequently, a combined survey under section 133A was conducted in the case of one Shri Ameerdeen of M/s. Alpha Commercials and the group of cases on September 13, 2012. In the sworn statement of Shri Ameerdeen, he stated that he himself and his family members (13 co-owners) together had sold a land situated at Neelankarai to M/s. Kannammal Educational Trust and admitted that the land sold was an urban land only and no agricultural activities were carried out on the said land. The assessee, Shri S. S. M. Ahmed Hussain, is one such co-owner out of the total 13 co-owners of the impugned land sold out.
10.1 From the perusal of the above facts, the Assessing Officer noticed that the income chargeable to tax under the head of Capital gains had escaped assessment. Accordingly, the Assessing Officer issued a notice under section 148 of the Act to the assessee on October 25, 2012. In response to the notice under section 148, the assessee filed a return of income for the assessment year 2010-11 on December 27, 2012, admitting an income of Rs. 7,31,554 (excluding capital gains of Rs. 1,90,27,203) after withdrawing the earlier deduction claimed under section 54B at Rs. 1,90,00,000 and paid the taxes on the declared such capital gains. The reassessment was completed in determining the total income of Rs. 1,96,98,760 (including long-term capital gains of Rs. 1,90,27,203 on March 8, 2014.
10.2 The penalty proceedings of the Act for furnishing inaccurate particulars of income and for concealing the particulars of income, was initiated by the Assessing Officer by issuance of a notice under section271(1)(c) of the Act on March 8, 2014. The following reasons were recorded for the issuance of notice under section 271(1)(c) :
"(i) In the statement of income filed along with the original return of income the assessee has claimed exemption under section 54B of the Act towards the capital gains arising out of the agricultural land sold at Neelankarai, Chennai.
(ii) During the course of combined survey operations conducted at the business premises of Shri Ameerdeen, it was stated by him that no agricultural activity was carried out at the Neelankarai land and the land was only an urban land. Therefore, the assessee's claim of exemption under section 54B of the Act was wrong.
(iii) Further, the assessee neither invested the amount of sale consideration of impugned land in the purchase of agricultural lands nor did he deposit in the Capital Gains Account Scheme, within the stipulated period as provided in the Act. Hence, the long-term capital gains of Rs. 1,90,27,203 was brought to tax.
In response to the penalty show-cause notice issued by the Assessing Officer, the learned authorised representative furnished a letter dated August 12, 2014, which reads as follows, 'out of the sale consideration, the assessee has instructed M/s. Alpha Commercials to pay the money to the seller of the agricultural land at Mahabalipuram and claimed exemption under section 54B of the Act being part performance of the contract. As the said Alpha Commercials has used the money for the business purposes and has not paid the money as per the agreement."
10.3 From the above, it was noticed by the Assessing Officer that the assessee had not actually either invested the amount in the purchase of the property or invested in the Capital Gains Account Scheme within the stipulated time as provided under the Act. Further, it was observed by the Assessing Officer that the capital gains arising out of the sale proceeds of the Neelankarai property came to the notice of the Department only when the sworn statement of Shri Ameerdeen was recorded during the course of survey operations conducted at the business premises of M/s. Alpha Commercials, which otherwise would have escaped the assessment.
10.4 In response to the fresh opportunity of being heard, the learned authorised representative requested the Assessing Officer to drop the penalty proceedings since the demand raised on account of the capital gains was paid by the assessee. However, it was held by the Assessing Officer that the penalty proceedings could not be dropped just because the assessee had remitted the demand raised by the Department. Further, it was also observed by the Assessing Officer that the act of withdrawal of exemption by the assessee was not voluntary and the same was under taken only after the action under section 133A of the Act in one of the business premises of Shri Ameerdeen, one of the co-owners of the impugned property. Accordingly, it was held by the Assessing Officer that the assessee had failed to disclose all the material facts truly and wholly in the original return of income, therefore, had intentionally and wilfully claimed the exemption under section 54B of the Income-tax Act to evade payment of taxes knowing the fact that no such transaction had actually taken place. Accordingly, the Assessing Officer imposed a minimum penalty under section 271(1)(c) at 100 per cent. of the tax sought to be evaded which worked out at Rs. 39,13,426. Aggrieved, the assessee went in appeal before the Commissioner of Income-tax (Appeals).
11. The Commissioner of Income-tax (Appeals) observed that the original return of income for the assessment year 2010-11 was filed on March 29, 2012, which was filed beyond the due date for filing of return of income as stipulated under section 139(1) of the Act. The return of income filed on December 27, 2012, in response to notice under section 148 of the Act, cannot be considered as revised return of income as claimed by the assessee in his written submissions filed before the undersigned. The revised return of income can be filed only when the original return of income is filed under section 139(1) of the Act. The present return was filed in response to the notice under section 148 of the Act.
11.1 The Commissioner of Income-tax (Appeals) further observed that from the perusal of the assessment order passed under section 143(3) read with section 147 of the Act dated March 8, 2014, for the assessment year 2010-11 in the case of the assessee, it is revealed that a survey operation was carried out in the case of the firm M/s. Alpha Commercials at Jhaver Plaza, No. 1, Nungambakkam High Road, Chennai-34, on September 13, 2012. Shri Ameerdeen, who is the managing partner of the said firm, had admitted in his sworn statement that the land at Neelankarai was sold to M/s. Kannammal Educational Trust by 13 co-owners. All the co- owners had filed the return of income for the assessment year 2010-11 claiming the said land as agricultural land and claimed exemption under section 54B of the Act. However, as ascertained during the course of the survey operations and from the sworn statement Sh. Ameerdeen, the land at Neelankarai was an urban land and no agricultural activity was being carried out on the said land. The present assessee, Shri S. S. M. Ahmed Hussain, is also one of the partners in the firm M/s. Alpha Commercials and he is also one of the 13 co-owners of the impugned land at Neelankarai which was sold to M/s. Kannammal Educational Trust.
11.2 Consequent to the survey under section 133A, the return of income filed by the assessee, vide acknowledgment No. 001524 was perused by the Assessing Officer and it was noticed that the assessee had claimed the impugned land as agricultural land and claimed exemption from capital gains under section 54B of the Act. Hence, there was a reason to believe that the resultant capital gain on sale of the urban land at Neelankarai for a sale consideration of Rs. 2,19,69,043 had escaped assessment within the meaning of section 147 of the Act. Accordingly, a notice under section 148 of the Act was issued to the assessee on October 25, 2012, and in response to this notice, the assessee filed the return of income on December 27, 2012, admitting a total income of Rs. 7,31,554. However, as per the computation of income enclosed with the return of income, the assessee had disclosed the capital gain separately amounting to Rs. 1,90,27,203 and paid taxes thereon.
11.3 Further, the Commissioner of Income-tax (Appeals) observed that the income for the assessment year 2010-11 was assessed at Rs. 1,96,98,760. The penalty proceedings under section 271(1)(c) were also initiated separately for concealment of particulars of income and for furnishing inaccurate particulars of income. The Commissioner of Income- tax (Appeals) further observed that during the penalty proceedings under section 271(1)(c), the Assessing Officer noticed that the assessee had neither invested the sale consideration from the impugned land in the purchase of agricultural land as required under section 54B of the Act nor did he deposit the same in the Capital Gains Account Scheme within the stipulated period as provided in the Act. The learned authorised representative pleaded that the said amount of sale consideration was utilised by the firm, M/s. Alpha Commercials, for the business purposes and had not paid the money to the seller of the agricultural land.
11.4 The Commissioner of Income-tax (Appeals) is also noticed from the above that the capital gains arising out of the sale proceeds of the impugned land at Neelankarai came to the notice of the Department from the sworn statement of Shri Ameerdeen recorded during the course of survey operation under section 133A in the case of M/s. Alpha Commercials. Therefore, the contention of the assessee that he had voluntarily disclosed the capital gains in the revised return of income, was factually incorrect. Firstly, the return of income could not be revised since the original return was not filed under section 139(1). Secondly, the subsequent return filed by the assessee was only in response to the notice under section 148 of the Act which was issued to him after the detection of the discrepancies noticed during the survey operation. Thirdly, in the original return of income, the assessee had treated the impugned land as agricultural land knowing fully the fact that the same was not an agricultural land and neither any agricultural activities were being carried out on the said land. Had there not been a survey in the business premises of M/s. Alpha Commercials, this true fact would never have been detected. Therefore, the element of voluntary disclosure, as claimed by the assessee, is missing in this entire process which would come to the rescue of the assessee.
11.5 According to the Commissioner of Income-tax (Appeals), the assessee has also raised another issue before the Assessing Officer, during the penalty proceedings and also during the appellate proceedings is that he had preferred an appeal against the reassessment order dated March 8, 2014, before the Commissioner of Income-tax (Appeals) and the same has not reached the finality. Therefore, it was pleaded that the penalty proceedings initiated by the Assessing Officer was not warranted at this point of time. The Commissioner of Income-tax (Appeals), further observed that the instant penalty order was passed on September 26, 2014, and the letter from the assessee to the Assessing Officer pleading for drop ping of the penalty proceedings on the grounds that he has preferred appeal before the Commissioner of Income-tax (Appeals) is also dated September 26, 2014. The appeal against the reassessment order dated March 8, 2014, in the instant case before the Commissioner of Income-tax (Appeals) is also dated September 26, 2014, which is delayed by 175 days. From the perusal of the sequence of events it is noticed that the appeal against the re- assessment order dated March 8, 2014, was filed only when it became definite to the assessee that the Assessing Officer was imposing penalty. Therefore, the filing of the appeal against the reassessment order was not a bona fide and spontaneous response from the assessee. The petition for condonation of delay of 175 days in filing the appeal against that the reassessment order for the assessment year 2010-11 filed by the asses see before the Commissioner of Income-tax (Appeals) was considered and after taking into account all the relevant facts and circumstances, it was finally rejected being devoid of any merit and bona fide character. Moreover, the appeal of the assessee against the reassessment order dated March 8, 2014, for the assessment year 2010-11 also stands dismissed on the merits of the case as well.
11.6 According to the Commissioner of Income-tax (Appeals), the grounds of appeal raised by the assessee are found to be devoid of any merits and he has not found any force in the submissions of the assessee that the Assessing Officer has erred in not appreciating the facts of the case and the assessee was not given sufficient opportunity of being heard. Further, the Commissioner of Income-tax (Appeals) observed that all the relevant grounds of appeal were properly and thoroughly dealt with by the Assessing Officer during the reassessment proceedings and also during the penalty proceedings. Moreover, these issues have been thoroughly analysed during the appellate proceedings as well. Accordingly, he observed that the act of withdrawal of exemption by the assessee in the return of income filed in response to the notice under section 148 was not a voluntary one and has been undertaken only after the Department's action under section 133A in the case of M/s. Alpha Commercials. In support of his findings, the Commissioner of Income-tax (Appeals) relied on the ratio of the judgments of the different courts which are squarely applicable to the present case of the assessee. Against this, the assessee is in appeal before us.
12. The learned authorised representative submitted that the Assessing Officer erred in imposing penalty under section 271(1)(c) of the Act after framing the reassessment under section 143(3) read with section 147 of the Act without assigning proper reasons and justifications. According to him, the Assessing Officer erred to appreciate that the provisions of section 271(1)(c) of the Act had no application to the facts of the case and ought to have appreciated that rejection of the claim under section 54B of the Act in the computation of long-term capital gains which formed part of the original return of income but not automatically lead to the conclusion on the concealment of income for furnishing inaccurate particulars of income, thereby vitiating the action in imposing such penalty.
12.1 The learned authorised representative further submitted that the Assessing Officer failed to appreciate that the Explanation below section271(1)(c) of the Act was not considered as well as totally ignored in the impugned order and ought to have appreciated that the rejection of the said claim of tax exemption under section 54B of the Act was not considered as mala fide, thereby vitiating the action in relation thereto. According to the learned authorised representative, the Assessing Officer failed to appreciate that the claim of deduction under section 54B of the Act on the facts and in the circumstances of the case was correct and proper and ought to have appreciated that the surrender of such claim in the survey was not sacrosanct and not relevant for the purpose of the provisions governing the levy of penalty under consideration.
12.2 The learned authorised representative, further submitted that the Assessing Officer failed to appreciate that the details of objections filed on September 26, 2014, was not taken into consideration before passing the impugned order and ought to have appreciated that the issue raised by the assessee being debatable in nature, the levy of penalty in such circumstances was wrong, erroneous, unjustified, incorrect and not sustainable in law.
12.3 The learned authorised representative also submitted that the Assessing Officer failed to appreciate that there was full disclosure of the transaction of the sale of agricultural land at Neelankarai, Chennai in the original return of income filed and ought to have appreciated that in the absence of suppression of the material facts relating to the transaction, the levy of penalty in relation thereto was wrong, erroneous, unjustified, incorrect and not sustainable in law and the order of the assessment has not reached finality and ought to have appreciated that the appeal against the reassessment order is pending for decision before the first appellate authority. The Assessing Officer failed to appreciate that the order impos ing penalty under section 271(1)(c) of the Act was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law.
12.4 According to the learned authorised representative, there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles of natural justice would be nullity in law. Further, the learned authorised representative submitted that during the appellate proceedings, the assessee furnished further written submissions on December 22, 2015, reiterating the earlier stand taken before the Assessing Officer during the penalty proceedings. The assessee has reiterated that he had voluntarily and truly offered the full amount received as sale consideration as per sale agreement as income for capital gain purposes in the assessment year 2010-11 and, therefore, his intention was true and honest. The assessee has also pleaded that even though the capital gain was assessable only in the assessment year 2013-14, however, in order to settle the matter amicably with the Department he had offered the capital gains in the assessment year 2010-11 itself by offering voluntarily in the revised return filed on mutually agreed basis with the Department. This fact, argued the assessee, was also mentioned in the revised return filed by him. Hence, the learned authorised representative submitted that the withdrawal of the exemption claimed was based on the mutual agreement to maintain good relationship with the Department and to purchase peace and to settle the matter amicably. Therefore, it was submitted by the assessee's counsel that there was no concealment of any particulars of income which attracted the penalty proceedings under section 271(1)(c) of the Act.
12.5 Further, the learned authorised representative, relied on the following judgments :
(i) CIT v. Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC) ;
(ii) CIT v. Cholamandalam Investment and Finance Co. Ltd. [2014] 364 ITR 680 (Mad) ;
(iii) CIT v. Tube Investments of India Ltd. 93 CCH 234 (Mad) ;
(iv) Dr. T. Surayanarayana Rao v. ITO [2012] 31 CCH 135 (Hyd) ;
(v) Asst. CIT v. M. Ravinder 33 CCH 676 (Hyd) ;
(vi) Hoe Leather Garments Ltd. v. Deputy CIT 29 CCH 321 (Hyd) ; and
(vii) CIT v. Balaha Chemicals Agencies (TC (Appeal) Nos. 906 to 908 of 2013, dated December 16, 2015).
13. The learned Departmental representative relied on the order of the Commissioner of Income-tax (Appeals).
14. We have heard both the parties and perused the material on record. Under the provisions of section 271(1)(c) of the Act, the Income-tax Officer can exercise his jurisdiction to make an order by way of penalty ; he has to be satisfied that the assessee has concealed the particulars of his income or furnishing of inaccurate particulars of such income. In the present case, the charge against the assessee is that he had concealed the particulars of income that he has received income by way of sale of agricultural land and the income earned from sale of land is liable to be taxed and the assessee has not entitled for deduction under section 54B of the Act. It is no doubt that there is a dispute regarding the taxability of income from sale of land.
However, there is a dispute regarding the allowability of deduction under section 54B and the issue regarding allowability of deduction under section54B of the Act is remitted by us to the Assessing Officer for fresh consideration in the earlier paragraph while adjudicating the quantum addition. The findings in those proceedings are not binding the proceedings relating to penalty. The penalty proceedings are independent from the assessment proceedings and it is not the continuation of assessment proceedings. In the penalty proceedings, the Assessing Officer has to be satisfied that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. In other words, it must be, at the outset, established by the Revenue that the amount which is said to have been concealed or not disclosed by the assessee in his return of income, constitute the income of the assessee. It is only then further the question, as to whether the income has been concealed or whether the assessee can give satisfactory explanation as to why, he has not disclosed a particular amount, will arise which was his income.
15. In the penalty proceedings, the Assessing Officer requires to perfectly establish that the receipt constituted as an income in the hands of the assessee in the relevant assessment year and the assessee deliberately concealed and furnished inaccurate particulars of income. Further, in the penalty proceedings, in cases, if the assessee able to place any other evidence, which was not placed before the Assessing Officer at the time of assessment, it is open to the Assessing Officer to come to a different conclusion. It is also open to the Tribunal to come to a different conclusion in the penalty proceedings to that of one relating to quantum addition. Thus, it is open to the Tribunal to take up penalty proceedings and go into the question, whether the assessee is liable for penalty under section271(1)(c) of the Act, or not, though we have remitted the issue relating to quantum addition to the file of the Assessing Officer for fresh adjudication. In other words, the findings in quantum proceedings are not binding in penalty proceedings and the Tribunal, on consideration of facts and circumstances of the case, regarding the concealment of income or furnishing of inaccurate particulars of income can adjudicate the penalty proceedings independently, as held by the Bombay High Court in the case of CIT v. Balraj Sahani [1979] 119 ITR 36 (Bom).
16. Now, coming to the issue of levy of penalty under section 271(1)(c) of the Act, it is to be seen that the assessee filed his original return of income for the assessment year 2010-11 on March 29, 2012, wherein the assessee had admitted the sale of agricultural land at Neelankarai and also claimed an exemption under section 54B of the Act as reinvestment in the purchase of property. There was a survey under section 133A in the case of Shri Ameerdeen of M/s. Alpha Commercials and the group of cases on September 13, 2012. In the sworn statement recorded, Shri Ameerdeen stated that he himself and his family members (13 co-owners) together had sold a land situated at Neelankarai to M/s. Kannammal Educational Trust and admitted that the land sold was an urban land only and no agricultural activities were carried out on the said land and the assessee, herein is one such co-owner of the property. Later, a notice under section 148 was issued on November 27, 2012. In response to the notice, the assessee filed a revised return on December 27, 2012, declaring an income of Rs. 11,64,684 what is declared in the original return and also disclosed capital gains of Rs. 75,25,896, after withdrawing the deduction under section 54B of the Act at Rs. 80,00,000 and paid taxes thereon. According to the Assessing Officer, the assessee had intentionally and wilfully claimed the exemption under section 54B of the Act to evade tax after knowing the fact that no such transaction has actually taken place. Accordingly, the Assessing Officer levied penalty under section 271(1)(c) of the Act at 100 per cent. of tax sought to be evaded.
17. Now, the issue for our consideration is, whether the assessee wilfully claimed wrong deduction under section 54B of the Act. Before the Assessing Officer, it was given an explanation regarding this claim that out of the sale consideration, the assessee has instructed M/s. Alpha Commercials to pay the money to the seller of the residential property. Hence, the assessee has claimed exemption under section 54F of the Act being part performance of the contract and the said Alpha Commercials has used the money for the business purposes and has not paid the money as per the agreement. According to the Assessing Officer, the assessee has not actually invested capital gains arising out of sale proceedings in purchase of any residential property or deposited in Capital Gains Account Scheme. In the penalty order, the Assessing Officer after considering the explanation of the assessee was of the opinion that the assessee has to offer the above amount in the original return filed and not at the stage of revised assessment proceedings. Therefore, the explanation of the assessee was not accepted by the Assessing Officer as well as by the Commissioner of Income-tax (Appeals). We find that the Assessing Officer failed to understand that the assessee has originally disclosed the details of receipts from sale of property at Neelankarai and also claimed deduction under section54F/54B of the Act, and it is also not disputed that the assessee has paid the money to M/s. Alpha Commercials, where one of the co-owners of the property was a partner therein. The assessee had a bona fide belief that M/s. Alpha Commercials, according to the mutual agreement, invested the money in residential property so as to facilitate the assessee to have a benefit under section 54F/54B of the Act. However, the Assessing Officer has not considered the explanation offered by the assessee as bona fide and he simply rejected the explanation by saying that the assessee has made a wrong claim in the original return of income and failed to disclose all material facts truly and wholly. According to the Assessing Officer, had it been there is no survey, the assessee's claim would have been gone unnoticed. However, it is not the case of the Assessing Officer that the assessee's claim was false or bogus. Neither the Assessing Officer nor the Commissioner of Income-tax (Appeals) examined the claim of the assessee that whether the assessee has given money to M/s. Alpha Commercials for the purpose of investment in residential property. The Assessing Officer observed that just because the assessee has remitted the demand raised by the Department, it cannot be a reason for levying the penalty. However, he has not found the claim of the assessee that the assessee has handed over the money to M/s. Alpha Commercial for investment in residential property. Further, when the assessee has given an explanation that he has given money to Alpha Commercials for the purpose of investment in residential house, it is the duty of the Assessing Officer to examine the records of M/s. Alpha Commercials to find out whether, the claim of the assessee is genuine or not. The Assessing Officer without making investigation, cannot presume that the explanation given by the assessee is false or bogus. In the present case, the assessee submitted a detailed explanation before the Assessing Officer. Thereafter, it is the duty of the Assessing Officer to establish that the assessee has concealed income or furnished inaccurate particulars of income. In the present case, the Assessing Officer has accepted the amount offered by the assessee as his income and levied penalty without making any enquires and investigation to disprove that the explanation given by the assessee is either false or bona fide. Therefore, in our opinion, the penalty cannot be levied in the present case. The above view of ours is fortified by the judgment of the Andhra Pradesh High Court in the case of CIT v. Chennupati Tyre and Rubber Products 90 CCH 181 and the decision of the co-ordinate Bench of the Tribunal in the case of Sri Balaji Educational and Charitable Public Trust v. Asst. CIT 44 CCH 402 (wherein the author is a co-author). In view of the above, we are inclined to delete the penalty levied in this case. Accordingly, applying the same ratio, we are inclined to delete the penalty levied in all the appeals and allow the appeals in ITA Nos. 237, 238, 239, 240, 241, 242, 243, 244 and 251/Mds/2016.
18. In the result, the appeals of the assessee in ITA Nos. 253, 248, 249, 246, 255, 245, 247, 250/Mds/2016 are allowed for statistical purposes and ITA Nos. 237, 238, 239, 240, 241, 242, 243, 244 and 251/Mds/2016 are allowed.
The order pronounced in the open court on Wednesday, the 4th of May, 2016, at Chennai.