TaxTMI 
TaxTMI 
2009 (4) TMI 206
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....closures of entire income during the year have been furnished along with return of income and during the course of assessment proceeding. The assessee further submitted that in the issue of surrender of rights a case before the Hon'ble Bombay High Court has since been pending as has been stated already during the course of assessment proceedings and unless and until the Hon'ble Bombay High Court decides the matter the income relating to surrender of rights and income from interest to be considered as sub-judice. At the same time it has been further stated that the assessment order passed under s. 143(3) r/w s. 147 of the Act has been appealed before the CIT(A). Accordingly, a request has been made by the assessee to keep the penalty proceedings in abeyance till disposal of the appeal by the CIT(A). 2.1 Subsequently, the CIT(A) vide order dt. 4th March, 2002 decided the appeal against the assessee and confirmed the addition/disallowances made in the assessment order. The assessee was given another opportunity to furnish a reply/explanation to the penalty proceedings initiated under s. 271(1)(c) on receipt of the appellate order. In response to the same the assessee's representati....
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....was not in progress, the assessee meanwhile entered into an agreement with Shri Tejraj Gowani on 23rd Dec., 1991 for selling his 50 per cent undivided share in the joint venture for Rs. 1.73 crores plus Rs. 1.65 crores towards expenses incurred. In the agreement the assessee was liable to obtain the consent of Shri P.N. Mehta to the assignment and transfer of the assessee's share and interest in the property in favour of Shri Tejraj Gowani. Since the assessee could not get the consent of Shri P.N. Mehta for assignment of rights to Shri Gowani, the assessee on 12th May, 1993 wrote a letter to Shri Gowani terminating the agreement dt. 23rd Dec., 1991 and cancelling the joint power of attorney. The letter had been acknowledged in the office of Shri Tejraj Gowani on 17th May, 1993. On 12th April, 1994, the assessee along with the other co-owner Shri Pankaj Mehta entered into an MoU with M/s Gaurav Overseas (P) Ltd. (GOPL) for transferring the rights of all the parties in the Divya Prabha property to GOPL for a consideration of Rs. 39,34,84,000 of which the assessee's share amounted to Rs. 9,44,00,000. The assessee transferred his 50 per cent interest in the project to GOPL vide MoU dt.....
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....) and the Tribunal. Therefore, it is clear that the assessee has not made any investment in acquisition of a new residential house and the claim made by the assessee is incorrect. The decision relied upon by the assessee regarding the levy of penalty was not applicable to the facts of the case as in the case of the assessee there was clear concealment of income and there was no difference of opinion between two authorities as far as the assessee's case is concerned. 3.1 Il is observed from the above discussion that the assessee has misrepresented the facts on all the three issues and has concealed income earned by him during the year under consideration. It is clear that in the present case the quantification of concealment or the inaccurate particulars of income is not a matter of estimate or guess work. In such a case the burden to prove that his case did not fall within the mischief of s. 271(1)(c) of the Act heavily rests on the assessee, especially after the various amendments. Reliance was placed on the Supreme Court's decision in the case of B.A. Balasubramaniam & Bros. Co. vs. CIT (1999) 157 CTR (SC) 556 : (1999) 236 ITR 977 (SC). The insertion of Explanation below s. 27....
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....sp; Rs. 9,47,99,851 --------------- 5. In respect to addition on account of capital gain on sale of flats (Rs. 88,22,250), it was submitted that while passing the penalty order the AO observed that regarding the claim of deduction under s. 54, the assessee has not furnished any evidence regarding acquisition of a new residential house. It was explained that the property was sold on 18th April, 1994 and copy of the agreement dt. 15th Sept., 1995 was filed before the AO showing that the assessee has entered into an agreement for purchase of a new flat; therefore, the assessee bona fidely made the claim under s. 54. It was further submitted that due to unavoidable circumstances, the company namely Sharan Pr....
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....e cleared the matter with Shri Gowani by making compensation payment of Rs. 1.50 crores, through Gowani's proprietorship concern M/s Karan & Co. Thereafter, the assessee and Shri P.N. Mehta entered into an agreement with M/s Gaurav Overseas (P) Ltd. (GOPL) and the property was transferred to GOPL on 13th Oct., 1994 as per MoU dt. 12th April, 1994. 6.1 On 12th Dec., 1994, Shri Tejraj Gowani filed a suit before the Hon'ble Bombay High Court for specific performance of the agreement dt. 23rd Dec., 1991 between him and the assessee and for cancelling the agreement dt. 13th April, 1994. 6.2 In the alternative, damage of twenty crores were sought. Under these circumstances, it was explained that the assessee was under bona fide belief that the amount received on transfer of rights on 'Divyaprabha' is disputed and hence, no income is assessed on such transfer. The entire transaction entered into between the assessee and Shri P.N. Mehta with GOPL came under litigation and the transaction as far as the assessee is concerned became 'pendentle lie'. The assessee was not sure whether he would be required to give specific performance or pay damage. Therefore, when the assessee filed his r....
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.... the property the assessee cannot transfer his 50 per cent rights to any third party without the consent of Shri P.N. Mehta. Consequently, in absence of Shri P.N. Mehta's consent, the deal was not materialized and the agreement with Shri Gowani was terminated by the assessee. 7.1 The CIT(A) was of the view that the agreement entered by the assessee with Shri Tejraj Gowani cannot be held as a valid agreement because there was no consent of the co-owner Mr. P.N. Mehta. The agreement between the assessee along with Shri P.N. Mehta and GOPL can be treated as valid because of this agreement was with the consent of Mr. P.N. Mehta, the co-owner of the property. It was noted by the CIT(A) that Hon'ble Bombay High Court vide order dt. 15th Oct., 1997 has rejected the petition filed by Shri Tejraj Gowani for specific performance. It was further noted by the CIT(A) that after following the required procedure and even pursuant to the agreement public notices are issued in various local newspapers on 12th, 13th and 15th May, 1994 inviting objections, if any to the proposed transfer of the property to GOPL. Since no objection was received, the possession of the property was handed over to GOP....
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....ther disclosed the capital gain while filing return of income originally nor disclosed the capital gain while filing the return in response to notice under s. 148 as the assessee was under bona fide belief that these receipts are not taxable in the year under consideration as the matter is sub-judice before the Hon'ble Bombay High Court. Payments in the balance sheet have been shown as advance only. It was further explained that the assessee has filed computation of income and no defect whatsoever was pointed out in view of provisions of s. 139(9) by the AO; therefore, it cannot be held that the return filed by the assessee was a defective one and the assessee has furnished inaccurate particulars. The return filed originally was accepted. Thereafter, proceedings. under s. 148 were initiated and again return was filed enclosing balance sheet etc. In the balance sheet, the amounts received from GOPL have already been shown as advance receipt. Therefore, this is not the case that the assessee has not furnished all the particulars of its statement of affairs. Reliance was placed on the decision in Seeyan Plywoods vs. ITO & Anr. (1998) 149 CTR (Ker) 332 : (1999) 238 ITR 395 (Ker). It wa....
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....d then along with return in response to notice under s. 148, as only advance has been shown in the balance sheet, which clearly shows that the assessee concealed particulars of income. It is a civil liability and therefore, the decision of the apex Court in the case in Union of India & Ors. vs. Dharamendra Textile Processors & Ors. (2008) 219 CTR (SC) 617 : (2008) 306 ITR 277 (SC) is clearly applicable on the facts of the present case. 8.4 Regarding the deduction under s. 54, reliance was placed on the observations of the AO and the CIT(A). It was submitted that a period of two years have already lapsed, therefore, there was no reason to claim deduction under s. 54 as the conditions are not satisfied. Accordingly, the penalties levied by the AO which are confirmed by the CIT(A) are liable to be confirmed further. 8.5 In reply, the learned counsel of the assessee again stressed upon the issue that penalties are not automatic. Additions have been confirmed by the Tribunal; however, for the purpose of levy of penalty, the issue has to be examined separately. It was further explained that each and every particulars were furnished as and when they were required. Complete details i....
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....the Tribunal. Penalty levied by the AO has confirmed by the CIT(A) as discussed above. The CIT(A) has found that the assessee had made wrong claim and therefore, has furnished inaccurate particulars for claiming the deduction which is not permissible under the provisions of law. We are in agreement with the findings of the learned CIT(A) that on false/wrong claim penalty is leviable. 10.4 The learned counsel of the assessee has placed reliance on various case laws. We have seen the ratio of those decisions and found that they are in respect of claim of deduction under ss. 80HHC and 80HH. The claim of deduction under ss. 80HHC and 80HH were debatable issue and on debatable issue, it has been held that no penalty is leviable. 10.5 Reliance has been placed on the decision in the case of CIT vs. Harshvardhan Chemicals & Mineral Ltd. 2004) 186 CTR (Raj) 552 : (2003) 259 ITR 212 (Raj). In this case penalty was levied on account of difference in deduction under ss. 80HHC and 80-I. The Tribunal deleted the penalty. On further appeal before the Hon'ble Rajasthan High Court, the High Court has held that: "the assessee having claimed some deductions which are debatable, it could not ....
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....spect to notice under s. 148 was filed. However, no note was appended in respect to long-term capital gain and interest earned thereon. On a query from the AO that why the amount of long-term capital gain including interest earned thereon should not be assessed during the year under consideration, a detailed reply was filed. 11.1 After considering the submissions and perusing the material on record, it was found that the assessee entered into an agreement on 13th April, 1994 with GOPL under which the assessee transferred 50 per cent interest in the said property to GOPL for Rs. 9.94 crores. It was found that on 28th Sept., 1994, after adjusting the professional fees paid to the consultant M/s Dhru & Co, the assessee had received full amount. It was also found that the possession has also been given by the assessee to GOPL. Accordingly, he was of the view that income has accrued to the assessee chargeable under the head 'Capital gains'. The AO also took note of the agreement with Shri Tejraj Gowani as well as the suit filed by Shri Gowani for specific performance against the assessee before the Hon'ble Bombay High Court. He also considered the contents of the order of the Hon'ble....
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.... would not constitute either of them and, therefore, in our opinion, no deduction would be permissible on this account." In respect of these contentions, the decision of the Hon'ble Bombay High Court in the case of CIT vs. Roshanbabu Mohammed Hussein Merchant (2005) 195 CTR (Bom) 106 : (2005) 275 ITR 231 (Bom) was taken into consideration wherein it has been held that: "where any encumbrance on the property is created by the assessee after it was acquired by the assessee free from all encumbrances, then no deduction is permissible in respect of the amount paid in discharge of such encumbrance." 11.3 After taking into consideration all these aspects/facts, it is amply proved that the capital gain accrued to the assessee during the year under consideration and therefore, was assessable in the year under consideration only. Neither the assessee disclosed the same while filing its original return nor disclosed in the return filed in response to notice under s. 148. Therefore, it cannot be said that due to bona fide intention, the assessee had not disclosed the amount of capital gains while filing the respective returns. Neither any note was appended along with the original ret....
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....may not be the income of the assessee or may not be assessable in the concerned year, therefore, various Courts have held that on technical and venial defects the penalty should not be levied being quasi-criminal in nature. There is no doubt to this proposition that penalty proceedings are distinct and separate to the quantum proceedings. On venial and on technicality, penalty should not be levied. However, in the present case neither any venial or technical defects as there is no doubt that the assessee had received the amount which is assessable as long-term capital gain during the year under consideration. The receipts which are accrued in the year under consideration cannot be deferred to the subsequent year as per provisions of law. Therefore, capital gain arose in the year under consideration has to be assessed in the year under consideration and accordingly the same was assessed. 15. Some of the ratio of the decisions relied upon by the learned counsel of the assessee are as under: 15.1 The reliance placed on the decision in the case of Calcutta Discount Co. Ltd. vs. ITO & Anr., it is seen that the facts of the present case and the facts before the Hon'ble Calcutta Hig....
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.... 210 CTR (SC) 259 : (2007) 292 ITR 11 (SC). In this case, the Hon'ble apex Court has held that: "if an explanation given by the assessee with regard to the mistake committed by him has been treated to be bona fide and it has been found as of fact that he had acted on the basis of wrong legal advice, the question of his failure to discharge his burden in terms of Explanation appended to s. 271 (1)(c) would not arise." 15.6 Again, the facts of the present case are totally different as the assessee has not acted upon on legal advice. The assessee has not disclosed the income neither in the original return nor in the return filed in response to notice under s. 148. The explanation of the assessee has been found not bona fide, therefore, penalty is leviable. 15.7 Reliance has also been placed on the decision in the case of CIT vs. Mannilal Tarachand (2001) 170 CTR (Guj) 466 : (2002) 254 ITR 630 (Guj). In this case, penalty was levied by the AO on account of non-disclosure of the capital gain arising on compulsory acquisition of land in the relevant assessment year under the belief that the capital gains would be liable to tax only on receipt of compensation. The capital gains w....