AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (8) TMI 673
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....ings, the Assessing Officer noted that prior to the sale of land in question resulting the capital gain, the assessee had carried out some of development work and also carved out the plots, thus the Assessing Officer was of the view that the assessee during the year under consideration, converted its investment into stock in trade and then sold the same. Accordingly, the Assessing Officer bifurcated the long term capital gain declared by the assessee into two parts i.e. long term capital gain and business income. Further the Assessing Officer has also recomputed the cost of acquisition and adopted the fair market value of the land in question as on 01/4/1981 at Rs. 3196/- and after indexation cost of acquisition was determined by the Assessing Officer at Rs. 25,089/- as against the cost of acquisition computed by the assessee as on 01/4/1981 at Rs. 98,125/-. Thus, the Assessing Officer has made the addition by bifurcating the capital gain into capital gain and business income and thereafter recomputed the capital gain on the basis of the cost of acquisition adopted by the Assessing Officer. The Assessing Officer has also disallowed the claim of deduction U/s 80C of the Act of Rs. 1....
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....laid down by the Hon'ble Supreme Court. Thus, the ld AR has submitted that the order passed by the Assessing Officer U/s 271(1)(c) of the Act is bad in law and liable to be quashed. 5. On the other hand, the ld DR has submitted that the assessee has inflated the cost of acquisition to reduce the tax liability which was deducted by the Assessing Officer in the scrutiny assessment. Further the assessee has carried out the development work and then divided the land in plots before the same were sold, therefore, the Assessing Officer in the assessment proceedings bifurcated the gain arising from the sale of the plots into two parts as per provisions of Section 45 of the Act and assessed the capital gain on the date of conversion of the asset into stock in trade and then profit arising thereafter was assessed as business income. Therefore, it is clear case of furnishing inaccurate particulars of income by the assessee attracting the penal provision U/s 271(1)(c) of the Act. He has relied upon the orders of the authorities below. 6. We have heard the rival submissions as well as the relevant material available on the record. The assessee has raised the legal ground of validity of i....
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....grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable. 61. The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate pa....
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....ty proceedings. The latter are separate proceedings that may, in some cases, follow as a consequence of the assessment proceedings. Though it is usual for the Assessing Officer to record in the assessment order that penalty proceedings are being initiated, this is more a matter of convenience than of legal requirement. All that the law requires, so far as the penalty proceedings are concerned, is that they should be initiated in the course of the proceedings for assessment. It is sufficient, if there is some record somewhere, even apart from the assessment order itself, that the Assessing Officer has recorded his satisfaction that the assessee is guilty of concealment or other default for which penalty action is called for. Indeed, in certain cases, it is possible for the Assessing Officer to issue a penalty notice or initiate penalty proceedings even long before the assessment is completed. There is no statutory requirement that the penalty order should precede or be simultaneous with the assessment order. In point of fact, having regard to the mode of computation of penalty outlined in the statute, the actual penalty order cannot be passed until the assessment is finalised. CO....
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....d material to the computation of his total income have been disclosed by him, no penalty could be imposed. (n) The direction referred to in Explanation IB to Section 271 of the Act should be clear and without any ambiguity. (o) If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. (p) Notice under Section 274 of the Act should specifically state the grounds mentioned in Section 271(l)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income (q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law. (r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. (s) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. (t) ....
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....cause notice so that the assessee would have the opportunity to meet those grounds. The Assessing Officer while ensuing the notice has to come to the conclusion whether it is a case of concealment of income or it is a case of furnishing of inaccurate particulars of income. The levy of penalty has to be clear as to the limb for which it is levied and the position being unclear, penalty is not sustainable. The ambiguity in specifying the limb for initiating the proceedings for levy of penalty renders the initiation invalid and consequential order passed U/s 271(1)(c) of the Act also invalid. Hence, in view of the fact that the Assessing Officer has not specified the limb and charge for initiation of penalty proceedings in the show cause notice then the impugned order passed by the Assessing Officer is not sustainable and liable to be quashed. 6.1 It is pertinent to note that in the show cause notice, the Assessing Officer has mentioned the charge as the assessee furnished inaccurate particulars of income or concealed the particulars of income whereas in the order passed U/s 271(1)(c), the Assessing Officer has stated that the assessee has furnished inaccurate particulars of income a....
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....4/1981 which is different from the estimation of cost of acquisition by the assessee. The second addition was made by treating the development work and carving out the plot of the land as conversion of the capital asset into stock in trade. It is not the case of the Assessing Officer that the assessee is in the business of real estate but clearly stated in the assessment order that the assessee is doing agricultural activities. Therefore, even if the assessee has carried out some development work and carving out the plots prior to the sale, the same would not amount to a trading or business activity when the land in question was otherwise accepted by the Assessing Officer up till this year as capital asset. Further the assessee was holding this land as a successor and the cost of acquisition was determined by estimation of fair market value as on 01/4/1981, therefore, the addition made by the Assessing Officer on both the counts would not amount to concealment of income or furnishing of inaccurate particulars of income. Even otherwise it is a bonafide claim of assessee to offer the entire gain as long term capital gain arising from sale of the land in question which is the only tra....