TaxTMI 
TaxTMI 
1975 (10) TMI 40
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....e land was actually acquired by the Government on 17th April, 1964. The amount of compensation was determined is September, 1968 and the assessee actually received the amount in June, 1969. 3. The assessee filed the return of income on 4th March, 1970 showing income from salary, house property and interest. But the assessee did not show any income under the head "Capital gains" in the return. The ITO after making full enquiries, decided that the land was not agricultural land and that compensation received in respect of the acquisition of the said land resulted in a capital gain of Rs. 3,27,994 and accordingly he included the same in the total income of the assessee. The assessment was completed on a total income of Rs. 3,46,347. The total income as determined was as under :- 1. Income from salary 1,690 2. Income from property 100 3. Income from other sources as shown by the assessee (as precautionary measure). 16,590 4. Capital gains as discussed above(Separate chart is enclosed) 3,27,374 . . 3,46,374 The ITO at the time of completing the assessment also stated as under : "Issue a notice under s. 274/271(1)(a) for late filing o....
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.... it was acquired by the Western Railway. It is also an undisputed fact that the assessee held only a paper title to the land the land was in actual possession of the mortgagee sir Seth Bhagchand Soni (Firm Moolchand Nemichand). As such the assessee was and still of the opinion that the receipts in the hands of the assessee is a casual income a windfall which is not taxable under the Act. As also the land being agricultural land, it does not come in purview of definition of capital asset as defined under s. 2(4) of the Act, hence no capital gains could be charged. As the amount of interest related to a period of four years and the it was taxable relying under s. 3 and s. 4 that income of several years cannot be taxed in one year and has to be taxed in relevant assessment as per rate applicable the assessee filed the returns of income for the asst. yrs. from 1965-66 to 1970-71, by bifurcating the interest income an accrual basis for every previous year. On these facts, your honour has initiate penalty proceedings here, we may be permitted to say that, there is no concealment and no inaccurate particular has been furnished by the assessee hence no penalty could be and should ....
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....ly from asst. yr. 1968-69. Ramachand Kundanlal Sarof, Bina vs. ITO Vidisha Indore Bench 1971 Tax XXXI(6)-73 Indore Bench. The relevant porton at page 76 is as under : "It will be seen that though the provision of s. 271(1)(c) of the IT Act, 1961 are held to be applicable in respect of the assessee for each of the assessment yeas under still so far as the quantum of penalty is concerned, it has not been stated nor it can be held that the amendment made in s. 27(1)(c) which is to come into effect from 1st April, 1968 has retrospective operation from strictly speaking, the amendment will be operative from the asst. yr. 1968-69 and not for any of the earlier assessment years." (3) Now on coming to the question of quantum of capital gain it is submitted that the valuation adopted as on 1st Jan., 1954 is very very low and quite unjudicious. This in no way can be made as basis of penalty. Even if the claim of mortgage of Rs. 2,06,000 is accepted in part by higher course the valuation placed by the learned ITO will badly shatter. All that is required to be placed is the full particulars of income and that the assessee has done. In these circumstances, there is no submitted, sin....
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....ter cannot be treated as having been filed as annexure to the return. Moreover this letter is not signed by the assessee but has been signed by the A.R. Return of income has to be signed by the assessee and if there is any annexure i.e., a part of the return and that should be signed by the assessee. Thus it is clear that no letter was annexed as stated in Part-IV of the return. Perusal of even this letter dt. 28th March, 1970 further reveals that there is no mention of capital gains therein and no exemption has been claimed in the said letter about capital gains. That letter only speaks about spreading over of interest of Rs. 73,391.32. Thus even this letter is of no relevance so far as penalty proceedings are concerned. It is the duty of the assessee to state a definite amount of profits or loss in respect of the each source of income in the return of income. So also is the case in regard to any item of income which the assessee claims to be shown in part-IV of the return that is why columns has been provided for showing particulars of the income as well as the amount of income. If the assessee claimed that no taxable capital gains were exempt from taxation it was his duty to hav....
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....by 18th Aug., 1970. It was only on 25th Aug., 1970 that the assessee submitted a reply to ITO's inquiry. In this letter there is no mention of his earlier alleged annexure which was said to have been filed along with the return of income. Thus for the first time the assessee had come forward with his case for non-inclusion of the capital gains in the assessee's total income, by his letter filed on 25th Aug., 1070. Thus it would be clear from the course of assessment proceedings that the assessee had at no time before the enquiry was started by the ITO come forward to disclose the capital gains for inclusion or non-inclusion in his return of income. The assessee's guilt has therefore been established. I, therefore, hold that the assessee had concealed and or furnished inaccurate particulars of his income when he filed the return on 4th March, 1970 and is therefore liable to penalty under s. 274(1)(iii) of IT Act, 1961" The learned IAC after considering the material on record found that the total amount of capital gains earned by the assessee amounted to Rs. 3,27,994 out of which deduction upto Rs. 5,000 is admissible leaving a net capital gain of Rs. 3,22,994. Accordingly, he imp....
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....he purchase of the land, the land was acquired by the Government. It was also stated that it was not a voluntary sale but a case of compulsory acquisition. It was also contented that the land was agricultural. In this respect it was further pointed out that the S.D.O. in his order of award has mentioned khata, Khasra number of the land. The assessee has further contended before the ITO vide his letter dt. 16th Jan., 1971 that the land was agricultural. The ITO did not agree that there was no capital gain and consequently he held that there was capital gain. Thus it was contended that right from the very beginning the assessee was also under the impression that the receipt was only causal. 7. It was further contended that in the return the assessee made a note that a letter annexed with the return may be seen. It was also contended that along with the return a letter dt. 4th March, 1970 was annexed and later on another letter dt. 28th March, 1970 was also submitted in which all the details were given. It was also contended that along with the return the assessee has given all the details, copies of the award given by the S.D.O. was also filed and copy of the statement showing the....
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.... that there were capital gains as a result of the acquisition of the property in question. Since the assessee failed to disclosed in the return the same as such there was clear concealment of income. The learned Departmental Representative also relied on the ratio of decision of the full Bench of the Kerala High Court decided on 10th Sept., 1974, the copy of which has been filed by him. This decision has not been reported so far as such it is not possible to give other citation. It was also contended that in the present case the returned income was less than 80 per cent of the finally assessee income as such Explanation to s. 271(1)(c) is applicable. In view of the explanation, the initial burden lay on the assessee to prove that there was no fraud or gross or wilful neglect on the part of the assessee in filing the return. From the material on record the assessee failing to discharge the initial burden which lay upon him and as such it should be presumed that there was concealment of income and the assessee also furnished inaccurate particulars of his income. It was further contended that in penalty proceedings no further material was produced by the assessee and as such the evide....
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....tion that there the total income returned is less than 80 per cent of the total income as assessed, the assessee has concealed the income or furnished inaccurate particulars of the assessee proving that failure to return the correct income did not arise from any fraud or gross or wilful negligence. The quantum of proof necessary would be that required in a civil case namely, preponderance of prohability." Now in the light of the laid down above, it is to be seen whether the assessee was able to discharge the initial onus which lay upon him. Before the learned IAC the assessee took the case in clear words. He observed as under:- Before me the main argument of the assessee was to the effect that the assessee had placed all relevant material before the ITO which was necessary for determination of the capital gains and therefore the assessee had no intention to conceal the income from this source if at all it was found taxable". The return in this case was filed on 4th March, 1970. In part IV of the return the assessee clearly stated as under:- Kindly see annexed letter." According to the learned counsel for the assessee this annexed letter is dt. 4th March, 1970. On the....
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....e elaborately contained in the letter annexed to the return. It is also clear that alongwith the return the assessee has filed copy of the award and details of the property acquired by the state Government. It is also undisputed fact that in the letter the actual amount of compensation given to the assessee was clearly mentioned. It means that at the time of filing the return the assessee made it clear that the assessee did receive the amount of compensation as a result of acquisition of the property in question. So from this fact itself it is clear that there could not be any concealment of income by the assessee. 14. Now the point for consideration remains whether letter of 4th March, 1970 was filed along with there turn or not. The learned IAC held that no such letter was filed along with the return. At the same time, he in his order discussed the letter dt. 4th March, 1970 holding that it was not signed by the assessee. It means that impliedly he accepted that letter dt. 4th March, 1970 was filed by the assessee. We may Point out here that the ITO at the time of making the assessment never held that the assessee did not send letter dt. 4th March, 1970 alongwith the return. I....
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....for this intervening period the assessee did not receive any interest. During the relevant previous years relating to the asst. yrs. 1965-66 to 1969-70 to assessee had no other income than salary income. A statement of salary received in each assessment year is enclosed herewith. As this income was below taxable limits hence no returns were filed in these years. Even through the Court has termed the payment of Rs. 84,523.33 as interest but the assessee feels that this is a part and parcel of the compensation receivable. Sir, as the Income-tax is leviable on receipt as per the nature in the hands of recipients and it was nothing to do with the treatment the paper gives. However, without conceding the above, it is submitted that if this amount is held taxable then it should be taxed in all the respective years to which is pertains. And with this view a return of income for 1965-66 is herewith filed showing the income from salary and interest as above. However, as the amount is paid only in the year 1969, no interest for late filing the return be please charged. For the remaining returns as the assessee has gone abroad, we shall file the same as soon as he returns. Similar....
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.... salary, and interest as above. However, as the amount is paid only in the year 1969 no interest for late filing the return be please charged. Return of income duly filed in any signed is enclosed herewith. Payment of tax under s. 140-A has also been made. I am enclosing herewith five Authorities in our favour. Submitted accordingly." In the letter dt. 4th March, 1970 the assessee clearly stated that from the copy of the award of the S.D.O. and Land Acquisition Officer, it is clear that the assessee got Rs. 4,65,398.64 out of Rs. 5,45,559.73. It was also stated that proportionate interest which fell to his share comes to Rs. 72,104. In the letter dt. 28th March, 1970 it was stated that copy of the award of the S.D.O. and the Land Acquisition Officer is enclosed and which is self-explanatory. It is stated therein that the copy of the statement showing money refundable to the assessee was also attached. In both the letters the question regarding quantum of interest also there is some averment. In the letter dt. 28th March, 1970 there is no reference of the sum of Rs. 4,65,398.64. But in the letter dt. 4th March, 1970 there is clear reference of this amount. In any view of the m....
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....970 stating that the assessee did receive compensation. He also gave all details in this letter. The contents of both the letters have been reproduced above. 4. The ITO for the first time on 2nd July, 1970 made certain enquiries. Before 2nd July, 1970 the IT Department never detected that there was any capital gain to the assessee. 5. The assessee has all along been taking the plea that property in question was agricultural and as such there was no capital gain. 6. The assessee has also been under the impression that the receipt in question was casual or non-recurring. 7. No doubt that the Tribunal gave finding that the property in question was not agricultural. But against that finding the assessee moved application for referring the matter to the Hon'ble High Court under s. 256(1) of the IT Act, 1961. Whether a land is agricultural or not is mixed question of fact and law. 8. From the evidence on record it is also clear that in the Revenue records initially the property was entered as "agricultural land". 9. The matter of compensation is not final. It is still in dispute with the opposite parties, namely Shri Chuttanlal and Harish Chandra. Shri Abdul Basir fi....
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.... achieve a the non-payment of taxes known to be due. This course of action typically would be affected by acts or conducts tinged with some elements of deceit, misrepresentation trick device, concealment or dishonesty." "Fraud implies "an intention to deceive" and in all matters it proceeds from an expectation of advantages to the party himself. It imports a design and purpose and an absence or honest belief. Whether the accompanying state of mind, variously described above exists or not is a question to decided on the facts and circumstances of each case." 19. There is no evidence worth the name from which it could be established that there was any fraud or gross or wilful neglect on the part of the assessee in not disclosing the amount in question as capital gains. On the other hand, in view of the facts, circumstances, probabilities and hard facts of life it is a debatable point whether a particular land is agricultural or not. The assessee has all along been under the bona fide and honest belief that the land and the building attached with it were agricultural land. This is clear from the fact that right from the very beginning uptill now the assessee has taking the pleas....
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....an be displaced if the assessee proves that the failure to return the correct income that is the total income assessed did not arise from any fraud or gross or wilful neglect on his part. If the assessee wants to repeal the legal fiction and throw the burden of bringing the case within s. 271(1)(c) against on the revenue as it would be in the absence of the Explanation the assessee has to show and this burden is upon him that his failure to return the correct income did not arise from any fraud or gross or wilful neglect on his part. Now, this burden is not of the same nature as the burden which rests on the prosecution in a criminal case where the prosecution has to establish the guilt of the accused beyond reasonable doubt nor upon the revenue in establishing the reasonable doubt nor is it of the same nature as the burden which lies upon the revenue in establishing that the assessee has concealed the particulars of the his income or furnished inaccurate particulars of such income. It is a burden akin to that in a civil case where the determination is made on preponderance of probabilities. It is also not necessary that any positive material should be produced by the assessee in o....
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.... if interpreted reasonably and fairly the only conclusion which could be drawn is that there was no fraud or gross or wilful neglect on the part of the assessee in not returning the entire assessed income. The other decisions relied on by the learned counsel for the assessee also more or less lay down the same law. Under these circumstances we are not discussing those decisions in detail. In the case of Hindustan Steel Ltd., the Supreme Court observed as under:- An order imposing penalty for failure to carryout a statutory obligation is the result of a quasi-criminal proceeding and penalty will not ordinarily in imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing t....