TaxTMI 
TaxTMI 
2017 (12) TMI 999
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.... of the Act on 15.9.2010 declaring total income of Rs. 2,74,57,560/-. Later he filed a revised return of income on 27.12.2010 declaring revised total income of Rs. 10,15,47,560/-. The main sources of income of the assessee was under the heads income from house property, capital gains and other sources like dividend and interest from bank etc. He was one of the working partners of a partnership firm M/s Saltee Estate which was subjected to tax audit u/s 44AB of the Act during the year. As such the due date of filing the return of income for the assessee (being a partner in a firm) u/s 139(1) of the Act was 30.9.2010. Hence the revised return filed u/s 139(5) of the Act on 27.12.2010 was a valid revised return. A search was conducted u/s 132 of the Act on 25.2.2009 and subsequent dates at the residence of the assessee and also at the business premises of his group companies. Pursuant to the search, search assessments for the Asst Years 2003-04 to 2008-09 were completed u/s 143(3) / 153A of the Act on 31.12.2010, whereas the regular assessment for the Asst Year 2009-10 was completed u/s 143(3) of the Act on 31.12.2010. Number of additions were made in those assessments which were agit....
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.... any problem. Further vide clauses 13 and 14 thereof it was stipulated that the Transferor has assured the Transferee that it shall get the plan sanctioned, prepared as per prevailing rules and regulation of the competent authority of different Govt. department of Govt of West Bengal & Central Govt. Bidhannagar Municipality have sanctioned the plan up to a height of 75 metres and/or more subject to NOC from Airport Authority of India. Transferor has assured to get the plan sanctioned upto maximum height of 75 metres mentioned hereinbefore. If the Transferor fails to get plan sanctioned, then the transferor shall refund the entire amount received from Transferee within one month. The Transferor shall, at his cost and responsibility get the lease deed modified from Urban development (UD) department, to the extent that the land can be used for construction of building for use of information Technology Industry. Vide clause 4 of consideration part, it is stated that the consideration amount shall be paid to the share holders of Graphitech and this will be valid discharge of payment. 3.2.1. Out of the sale consideration Rs. 16.51 cr., a sum of Rs. 6,00,90,000/- was paid in AY 2006-07....
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.... transferee, by incurring huge expenditure they got the building plan prepared and cooperated with the transferor to get them approved by the Municipality and according to them, such building plans were almost approved and at the final stage of receiving the amounts and issue formal sanction letter. However, it was effectively thwarted by the transferor only to concoct the story of non approval of plans by the Municipality. He further alleged that for the first time by way of letter dated 22.11.2007, Mr. B. K. Jain, Advocate informed the transferee that the transferor deposited only the share certificates but no share transfer deeds. In these circumstances, specific performance of contract was prayed for. 3.2.4. While the matter stood thus, there was a search and seizure operation at the premises of Saltee Group of companies on 25.2.2009 by the Income Tax Department u/s 132 of the Act including the residential and business premises of the assessee. Subsequently, the parties entered into a settlement pursuant to which T.S No. 216 of 2007 was dismissed and the other TS No. 222 of 2007 was decreed. Under the terms of settlement, the transferor agreed to transfer the 100% shares exc....
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.... consideration at Rs. 16.51 crores and assessed the sums of Rs. 7,40,90,000/- as income from other sources for the Asst Year 2010-11 as disclosed in the revised return by the assessee. 3.4. The ld CITA in his order appreciated the contentions of the assessee and deleted the additions of Rs. 6,00,90,000/- and Rs. 1,40,00,000/- made by the ld AO in Asst Years 2006-07 and 2007-08 in the search assessments framed and also held that the same are to be treated only as advance received by the assessee against share sale consideration and further held that capital gains arose only in Asst Year 2010-11 as per the compromise decree entered into and revised MOU dated 25.5.2009. 3.5. Arguments of the Revenue in Search Assessments In the search assessments for the Asst Years 2006-07 and 2007-08, it was the contention of the revenue that the parties intended the transfer of a particular number of shares of a particular company for a particular consideration and ultimately the same thing happened even after the Court recording the compromise decree, as such for all practical purposes, what was enforced is only the MOU dated 4.8.2005, as such the date of contract for sale is 4.8.2005 only....
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.....)137 ITR 540 (Cal), wherein it was held that : When shares in the joint stock company were the subject-matter of transfer, the provisions of the Transfer of Property Act, were not conclusive and it should be seen whether there was transfer in accordance with the provisions of Companies Act and the transfer of the interest in the shares from the transferor to the transferee was independent of the requirement of its registration for the purposes of the Companies Act. Further reliance was placed on a decision in the case of CIT vs. Bhaskar Mitter reported in (1994) 73 Taxman 437 (Cal) at para 8 at p. 442 referred in MAYNAK PODDAR (HUF) vs. WEALTH TAX OFFICER (2003) 262 ITR 0633. In this decision, this Court observed : "....... An assessee is liable to pay tax only upon such income as can be in law included in his total income and which can he lawfully assessed under the Act. The law empowers the ITO to assess the income of an assessee according to law and determine the tax payable thereon. In doing so, he cannot assess an assessee on an amount, which is not taxable in law, even if the same, is shown by an assessee. There is no estoppel by conduct against law nor ....
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....25.5.2009, concluded that the capital gains on transfer of shares of Graphitech Ltd is to be offered only in Asst Year 2010-11. But due to confusion prevailing in this regard as to the year in which the said capital gain is to be offered, the assessee offered the same in respect of the cheque component alone , in the original return of income filed on 15.9.2010 for the Asst Year 2010-11. However, the assessee had duly paid the entire taxes due on the said capital gains transaction (including cash component portion) for the Asst Year 2010-11 as under :- 50,00,000/- in the form of advance tax 1,00,00,000/- in the form of part of self assessment tax 78,58,600/- in the form of self assessment tax From the above , it could be seen that eventhough the assessee did not offer the cash component of Rs. 7,40,90,000/- in the capital gains on sale of shares of Graphitech Ltd in the original return filed on 15.9.2010, the entire taxes due thereon on the capital gains were paid before the date of filing the original return of income. 4.1. The ld AO pursuant to the search conducted on the assessee and his group on 25.2.2009, proceeded to process the search assessm....
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....sh component of share sale consideration only in the revised return filed on 27.12.2010 and that the proceedings for the search assessments had been initiated by issuance of notice u/s 142(1) of the Act dated 7.7.2010 itself, the assessee in order to escape from the taxation at higher rate and for the purpose of savings on interest and immunity from penalty, had come forward to offer the cash component of share sale consideration of Rs. 7,40,90,000/- in the revised return. Hence there was malafide on the part of the assessee by not offering the same in the original return filed for the Asst Year 2010-11 on 15.9.2010 and accordingly initiated penalty proceedings u/s 271(1)(c ) of the Act for the same. d) The ld AO thereafter proceeded to levy penalty u/s 271(1)(c ) of the Act in the sum of Rs. 2,28,93,810/- on the cash component of Rs. 7,40,90,000/- on the following reasons:- (i) That the cash component of the transaction came to the notice of the department in consequence of the search operation conducted on 25.2.2009. (ii) The department was thus in possession of the material indicating cash component in the transaction of shares. (iii) Since the depa....
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....nscious decision clearly given in his earlier consolidated Order Nos. 236-242/CC-VII/CIT(A)C- I/Kol/10-11 dated 06.08.2012 for the A.Ys. 2003-04 to 2009-10 that the sum of Rs. 7,40,90,000/- received in cash as advance/earnest money in the F.Ys 2005-06 & 2006-07 against the proposed sale of 9,30,000 shares of M/s Graphitech India Ltd. was a part of the sale consideration of Rs. 14,01,00,000/- assessable to capital gain only in the A.Y. 2010-11 by virtue of the Hon'ble Court's order dated 25.05.2009 following which those shares were actually & effectively sold in May 2009 (A.Y. 2010-11) after finalization of the deal. 4. For that in view of the facts and circumstances of the case the Ld. CIT(A) is wholly wrong and unjustified in confirming the above penalty u/s 271(1)(c) without at all considering or otherwise overlooking his own conscious decision clearly given in his recent Order No. 172/CC-VII/CIT(A)C-I/13-14 dated 14.02.2012 that the cash component of Rs. 7,40,90,000/- (received as advance/earnest money in earlier years) was part of the sale consideration of Rs. 14,01,00,000/- assessable only under the head "Capital Gain" in A.Y. 2010-11 as was already decided in the afo....
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.... Asst Year 2010-11 even though the same was offered to tax by the assessee under that head in the revised return filed on 27.12.2010. In other words, it was held by this tribunal that the cash component of Rs. 7,40,90,000/- should be treated as share sale consideration only and only capital gains is to be computed thereon (Incidentally it would be pertinent to mention that this fact has been accepted by the ld CITA also in his appellate order dated 17.2.2014 for the Asst Year 2010-11 while confirming the levy of penalty u/s 271(1)(c ) of the Act). 6.1. Now coming to the validity of levy of penalty on this cash component of Rs. 740.90 lacs u/s 271(1)(c ) of the Act for the Asst Year 2010-11, we find that it is not in dispute that the assessee had received the cash component of the subject mentioned transaction amounting to Rs. 7,40,90,000/- as per the MOU dated 4.8.2005 in Asst Years 2006-07 and 2007-08, which was not disclosed by him in his regular books of accounts. On the face of it, it might look undisclosed receipt. But in the search proceedings, it surfaced that the assessee was in receipt of the cash component of Rs. 740.90 lacs only towards the share sale consideration , ....
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....iew that the cash component and the cheque portion of share sale consideration should be taxed only in Asst Years 2006-07 and 2007-08. Hence it could be seen that the revenue had actually changed its stand while framing the regular assessment for the Asst Year 2010-11 u/s 143(3) of the Act by making double addition for capital gains i.e once in Asst Years 2006-07 / 2007- 08 and again in Asst Year 2010-11. We have already held in the quantum appeals in respect of the subject mentioned share sale transaction that capital gains on the same arises only in Asst Year 2010-11 , which has been duly offered by the assessee in the original as well as in the revised return of income and paid the entire taxes thereon as stated hereinabove. We also find that the ld AO had duly acted on the revised return filed by the assessee on 27.12.2010 and completed the assessment for the Asst Year 2010-11 u/s 143(3) of the Act by only making a meager addition to the income by Rs. 15,000/-. Hence there cannot be any concealment of income or filing of inaccurate particulars of income that could be attributed on the part of the assessee in respect of cash component of share sale consideration of Rs. 740.90 la....
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....decided independent thereof. It, therefore, seems that two views are possible viz., the income could be that of the following previous year or it could also be that of the relevant previous year. When two views are possible then penalty cannot be imposed on account of concealment in respect of the relevant previous year when the account could be disclosed in the following previous year. Secondly, that this amount was claimed to be the amount at the hands of the partners as it was shown in the capital accounts of the partners. At the same time, the partners in their revised returns had shown this amount in their account. Such returns have since been accepted by the revenue. Therefore, the income did not belong to the assessee but to the partners. Though on identical grounds yet the decision in the quantum proceeding cannot be treated to have reached finality for the purpose of penalty proceedings. The question has to be determined independent of the said finding and decided accordingly. Again he submits when it cannot be conclusively determined that whether this amount is an income of the assessee or at the hands of the partners included in their capital account. Therefore, when two....
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.... circumstances of the case, as was held in National Textiles' case (supra), no reasonable and positive inference could be drawn. Because of the two stands taken by Income-tax Authority in this case by adding the amount in the income of the assessee and again accepting the same at the hands of the partners, the Income-tax Authority cannot fall back on one and reject the other. In Ashok Timber Industries' case (supra), in a similar circumstance, it was held that it could have been treated to be an income of the following previous year when it is shown as the opening balance of that previous year. Thus, also, two views are possible. When two views are possible and when no clear and definite inference can be drawn, in a penalty proceeding, penalty cannot be imposed. 6.4. Now let us come to the decision of the Hon'ble Delhi High Court relied upon by the ld DR in the case of CIT vs Usha International Ltd reported in (2012) 27 taxmann.com 227 (Del HC) , we find from the perusal of the said judgement, the facts and decision rendered thereon are as under:- Facts * The assessee had made a claim for deduction in terms of section 35CCA in its original return which ....
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....ged to a simple crossing i.e., '& Co.'. * The bank account had been opened in a fictitious name, merely, for the purpose of misappropriating the amount of Rs. 10 lakhs allegedly donated by the assessee to the trust. Further evidence is supplied by the fact that the entire amount of Rs. 10 lakhs was withdrawn by issue of four 'self' or bearer cheques. Finally the account was closed. * The above fact show that the purpose for which the account was opened in the bank was only to take away the amount of Rs. 10 lakhs, purportedly given as a donation to the donee-trust in order to claim the relief under section 35CCA which would reduce the taxable income of the assessee. The amount never left the coffers of the assessee; it also did not reach the donee-trust. It was brought back to the assessee. However, a receipt had been filed by the assessee company purporting to be issued by the donee-trust. Obviously the genuineness of the receipt, in the background of the facts and circumstances, was open to serious doubts. [Para 13] * The contention that the assessee was also a victim of a fraud played by several persons acting in concert cannot be accept....
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....ected by the revenue authorities or before that stage. [Para 19] * Both the Commissioner (Appeals) and the Tribunal, have not examined the facts of the present case in the manner expected of them. The Tribunal has merely based its conclusion on certain previous orders without any discussion of the facts of the present case. * The question of concealment of income and whether the revised return was filed voluntarily or not is a question of fact to be examined and decided upon the facts and circumstances of the each case and, therefore, it was not permissible to the Tribunal to merely rely on earlier orders where this issue was considered and penalties were cancelled. It may be that in those cases also similar claims for deduction were involved; nevertheless, the question of concealment and the relevance of filing a revised return withdrawing the claim for deduction are all fact-dependent, and merely because in one case it was held that there was no concealment, it does not follow, as a matter of law, that in all such cases penalty cannot be imposed. At best, those earlier cases could only have a persuasive value. The Tribunal has committed an error in upholding the....