TaxTMI 
TaxTMI 
2014 (4) TMI 1215
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....e assessee to give the details of the transaction. The assessee vide letter dt. 24th Dec, 2009 filed the requisite details as called for by the AO which are as under : "(i) Index-II, dt. 11th April, 2004 Giving details of purchase of land at Mohamadwadi Bearing S. No. 14/Hissa No. 11/admeasuring total area of 31.5 R (i.e. 2927.5 sq. mtr.); (ii) Index-II, dt. 6th Oct., 2006 Giving details of sale of land at S. No. 14/Hissa No. 11/admeasuring total area of 31.5 R. (iii) Copy of articles of agreement dt. 28th March, 2007 entered by the assessee with Mr. Ashwini G. Joneja, for purchase of land at mohamadwadi, S. No. 14/Hissa No. 5B+6D+6A+7A with development rights for an agreed amount of Rs. 63,00,000. (iv) 7/12 extract of the property at S. No. 14/Hissa No. 11 area 0.49 R (v) Village Form No. 7, dt. 15th May, 2006." 2.2 The assessee claimed that the land sold and subsequently purchased "along with development rights is agricultural land and is liable for capital gain tax. However, the AO did not accept the contention of the assessee on the following grounds : "1. The land in question at Mohamawadi is within 8 Kms. of Pune Municipal Corporation. 2. Form No. 7, dt. 15th May, 200....
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.... per cent of the tax sought to be evaded. 3. Before the CIT(A) the assessee reiterated the same submissions as made before the AO, It was submitted that the assessee has sold/transferred his land at Mohamadwadi for total consideration of Rs. 75,00,000. The assessee has acquired/purchased the said land on 13th April, 2004 for total consideration of Rs. 12,29,380 including stamp duty and registration charges from Salim Sadruddin Khoja & Ors. and the same has already been reflected in the books of accounts. The assessee has received net gain of Rs. 62,70,620 on sale of the aforementioned land. During the filing of IT return for the year under consideration, the consultant of the assessee inadvertently and through oversight claimed the exemption under s. 54B of IT Act and shown the income from capital gain at nil even though the assessee had short-term capital gain of Rs. 62,70,620. 3.1 It was argued that the assessee voluntarily accepted for the agreed addition in respect of deduction wrongly claimed by his consultant in the above-said transfer of property during the assessment proceedings. The assessee has already paid the income-tax of Rs. 8,50,000 against the above-said income-ta....
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....t of transfer of agricultural land at Mohamadwadi were furnished while filing the return of income; The appellant has further stated that, however, while calculating the capital gains in respect of the above property, inadvertently and having no mala fide intention through oversight the tax consultant claimed the deduction. Though the appellant, submits that the same when found to be incorrect, the addition made by the AO was voluntarily agreed in respect of wrong claim of exemption under s. 54B and the taxes due thereon have also been paid subsequently. It has also been stated that the capital receipts in respect of the aforesaid property sold have been reflected in the regular books of account and the return of income filed. It has also been submitted that the appellant did not have taxation knowledge and that his return of income had been prepared by the chartered accountant and the entire particulars were furnished by him inadvertently and without any malafide intention and through oversight claimed the exemption. However, during the assessment proceedings the appellant submits that suo motu the claim of exemption under s. 54B was withdrawn and also voluntarily agreed to the ad....
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.... (Jd) 551; (6) Rajendra Kumar v. ITO [2005] 94 TTJ (Jd) 280; (7) Hindustan Steel Ltd vs. State of Orissa [1972] 83 ITR 26 (SC). 3.4 In the present case, it is undisputed that during the regular assessment it was pointed out to the assessee that the ownership for the Mohamadwadi property by assessee being less than 36 months, the capital gains earned was short-term capital gain and thus was not entitled for exemption under s. 54B of the Act. Therefore, the disallowance made by the AO, on this account was accepted by the assessee and was not further contested in appeal, The appellant has submitted that due to inadvertent typographical/clerical error, the year of acquisition was mentioned in the statement of computation as 1999 instead of the correct year i.e. 2004, though the appellant has calculated the cost of index by considering the actual year of acquisition as 2004-05 and not 1999 is also a point which cannot be ignored and prima facie indicates the bona fide conduct of the appellant. The appellant has also not concealed the details of purchase/sale of the property from the Department as the details of the sales and purchases have been provided though the exemption claimed u....
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....tails, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part.' This judgment of the Hon'ble Apex Court therefore, emphasizes that mere making of a claim of deduction which was not allowable by itself would not amount to furnishing inaccurate particulars of income. In fact, every legal disallowance under the provisions of the Act cannot lead to the conclusion that there was furnishing of inaccurate particulars of income on the part of the assessee. 3.5.1 The appellant has also cited the decision in the case of Kanbay Software India (P) Ltd. v. Dy. CIT (supra). In the aforesaid judgment it was held that: 'By no stretch of logic or rationale it could be said that imposition of penalty under s. 271(l)(c) has a cause and effect relationship with addition being made to the returned income per se. An addition being made to income does, because of impact of Expln. 1, effectively raise a presumption against the assessee but that is an entirely rebuttable presumption and the scheme of rebuttal is provided in the Explanation itself. The scheme of s. 271(l)(c) visualizes imposition of penalty when the assessee has concealed i....
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.... assessee's counsel it was held, cannot be treated as an instance of deliberate defiant in CIT v. Siddharth Enterprises [2010] 228 CTR (P&H) 579 : [2010] 322 ITR 80 (P&H). 3.5.4 In the case of CIT v. Caplin Point Laboratories Ltd. (supra) it was held that the wrongly claimed deduction under ss. 80HHC and 80-I by showing the interest income as 'business income' instead of income from other sources' cannot be held as concealment of income or furnish of inaccurate particulars of income and accordingly the penalty under s. 271(1)(c) was deleted. 3.5.5 Following Reliance Petro Products, cited supra, it was held in CIT v. SAS Pharmaceuticals [2011] 244 CTR (Del) 51 : (2011) 60 DTR (Del) 258 : [2011] 335 1TR 259 (Del) that there is no concealment or non-disclosure as the assessee had made a complete disclosure in the IT return. It further held that unless it is found that there is actually a concealment or nondisclosure of the particulars of income, penalty cannot be imposed. There is no such concealment or non-disclosure as the assessee had made a complete disclosure in the IT return. Similarly, in the case of CIT v. Dharampal Premchand Ltd. [2010] 329 ITR 572 (Del) als....
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....ven though the capital gains arising in his hands were in the nature of short-term capital gains and not long-term capital gains, and also as the assessee had no valid or bona fide explanation in support of such erroneous claim, penalty under s. 271(l)(c) was patently eligible. 4. The learned CIT(A) grossly erred in inferring that possibly the assessee agreed to the addition only with a view to buying peace and avoiding litigation without appreciating that the assessee had agreed to the said addition without any choice and only after the AO brought to his notice the unambiguous provisions of the Act in this regard. 5. The learned CIT(A) grossly erred in failing to appreciate that in the facts and circumstances of the case, the conduct of the assessee in claiming deduction under s. 54B, which would have resulted in evasion of tax but for detection by the AO could by no means be routinely treated as inadvertent and bona fide. 6. The learned CIT(A) grossly erred in giving any credence to the assessee's plea that the return had been prepared by the chartered accountant who had claimed the deduction without any mala fide intention. It ought to have been appreciated by the CIT(A) ....
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....nce Petroproducts (P) Ltd. (supra) has upheld the penalty levied by the AO under similar circumstances and the order of the Tribunal was reversed. 6.2 Referring to the decision of the Hon'ble Supreme Court in the case of MAK Data (P.) Ltd. v. CIT [2013] 358 ITR 593/38 taxmann.com 448 (SC) he submitted that the Hon'ble Supreme Court in the said decision has held that the statute does not recognise defects such as voluntary disclosure, buy peace, avoid litigation, amicable settlement etc. under the Expln. 1 to s. 271(1)(c) of the IT Act. It has been held in the said decision that the voluntary disclosure does not release the assessee from the mischief of penalty proceedings under s. 271(1)(c) and the law does not provide that when an assessee makes a voluntary disclosure of his concealed income he had to be absolved from penalty proceedings. He accordingly submitted that the order of the CIT(A) being contrary to law should be reversed and that of the AO be restored. 7. The learned counsel for the assessee on the other hand heavily relied on the order of the CIT(A). He submitted that it is not an agreed addition but was an erroneous claim and therefore, the decision of the H....
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....20th Jan., 2012 had stated that he had voluntarily accepted for the agreed addition in respect of deduction wrongly claimed by his consultant. The relevant observation of the CIT(A) at para 3.2 of the order reads as under : "3.2 During the course of appellate proceedings, vide letter dt. 20th Jan., 2012 following written submission was filed by the appellant in this regard : (a) Note on sale of land and capital gain on sale of land During the year under review, the appellant has sold/transferred his land at Mohammadwadi for total consideration of Rs. 75,00,000. The appellant has acquired/purchased the said land on 13th April, 2004 for total consideration of Rs. 12,29,380 including stamp duty and registration charges from Salim Sadruddin Khoja & Others and same has already been reflected in the books of account. Xerox of purchase and sale deed is enclosed herewith for your kind perusal. The appellant wishes to draw your kind attention to the fact that, the appellant has received net gain on sale of above said of Rs. 62,70,620 and during the filing of IT return for the year under review, the consultant of the appellant inadvertently through oversight claimed the exemption under s....
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....e of the assessee that it was under a bona fide belief that these two amounts could be claimed as revenue expenditure. The assessee was a company which must be having professional assistance in computation of its income, and its accounts were compulsorily subjected to audit. The Tribunal erred in law in deleting the penalty in respect of the amount of Rs. 1 lakh claimed as deduction on account of payment of income-tax and the amount of Rs. 13,24,539 debited under the head 'Equipment written off, in the P&L a/c of the assessee". 8.3 We find the Hon'ble Supreme Court in the case of MAK Data (P) Ltd. (supra) has observed as under : "6. We have heard counsel on either side. We fully concur with the view of the High Court that the Tribunal has not properly understood or appreciated the scope of Expln. 1 to s. 271(l)(c) of the Act, which reads as follows : 'Explanation 1.- Where in respect of any facts material to the computation of the total income of any person under this Act, - (A) Such person fails to offer an explanation or offers an explanation which is found by the AO or the CIT(A) or the CIT to be false, or (B) Such person offers an explanation which he is not ab....
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....nd blank share transfer deeds duly signed, have been impounded in the course of survey proceedings under s. 133A conducted on 16th Dec, 2003, in the case of a sister concern of the assessee. The survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Consequently, it is clear that the assessee had no intention to declare its true income. It is the statutory duty of the assessee to record all its transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year. The AO, in our view, has recorded a categorical finding that he was satisfied that the assessee had concealed true particulars of income and is liable for penalty proceedings under s. 271 r/ws. 274 of the IT Act, 1961. 10. The AO has to satisfy whether the penalty proceedings be initiated or not during the course of the assessment proceedings and the AO ....
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....s not been added by the assessee thereby leading to underassessment of income. Under these circumstances when penalty was levied by the AO and confirmed by the High Court, the Hon'ble Supreme Court deleted the penalty by observing as under (short notes) : "Held, allowing the appeal, that the facts of the case were peculiar and somewhat unique. Notwithstanding that the assessee was a reputed firm and had great expertise available with it, it was possible that even the assessee could make a 'silly mistake'. That fact that the tax audit report was filed along with the return and that it unequivocally stated that the provision for payment was not allowable under s. 40A(7) of the Act indicated that the assessee made a computation error in its return of income. The contents of the tax audit report suggested that there was no question of the assessee concealing its income or of the assessee furnishing any inaccurate particulars. Apart from the fact that the assessee did not notice the error, it was not even noticed even by the AO who framed the assessment order. All that had happened was that though a bona fide and inadvertent error, the assessee while submitting its return, ....