Acit, Pune vs Assessee

Asstt. Commissioner Income Tax, (Central)-8, Pune. .... Appellant

Vs.

Late Ramchandra M. Jhamtani Legal Heir Shri Manohar M. Jhamtani Flat no.3, Monica Apartment Pimpri, Pune PAN : AANPJ8573C .... Respondent

Assessee by : Mr. Pramod Shingte Department by : Mr. P.S. Naik Date of hearing : 01.01.2015 Date of pronouncement : 04.03.2015

ORDER

PER G. S. PANNU, AM

The captioned appeal by the Revenue, is directed against the order of

the Commissioner of Income Tax (Appeals)-V, Pune, dated 18th April 2012,

which, in turn, has arisen from an order dated 30th June 2010, passed by the

Assessing Officer u/s 271(1)(c) of the Income-tax Act, 1961

(in short "the Act") pertaining to the assessment year 2007-08.

2. In this appeal, the solitary grievance of the Revenue is against the

action of the learned Commissioner (Appeals) in deleting the penalty of

Rs.47,37,930/-, imposed by the A.O. u/s 271(1)(c) of the Act.

3. Briefly put, the relevant facts are as follows:- The assessee individual

filed a return of income for the assessment year 2007-08 on 24th October

2007, declaring a total income of Rs.1,08,73,528/-, which inter-alia, included

incomes under the head "House Property", "Business Income", "Capital Gains"

as well as "Income From Other Sources". It emerges from record that the 2

assessee expired on 30th December 2007 and subsequently on 22nd January

2009, a survey action u/s 133A of the Act was carried out at the business

premises of Shri Jairam R. Jhamtani, son of the deceased assessee. During

the course of survey, a development agreement duly registered on 22nd

February 2007, was found which was entered by the deceased assessee with

others in respect of the sale of land bearing survey no.1326, Chikhali. It was

noticed that in the original return of income filed on 24th October 2007, for the

assessment year 2007-08, gain arising from the aforesaid transaction was not

declared. The legal heir of the deceased assessee Shri Manohar R. Jhamtani,

admitted in a statement recorded u/s 131 of the Act that the total sale

consideration was Rs.1.77 crores and the cost of acquisition of the land was

Rs.57 lakhs. The said legal heir admitted that there was a short term capital

gain of Rs.1.20 crores for which he agreed to file a revised return of income for

the assessment year 2007-08, which was filed on 20th March 2009, declaring a

total income of Rs.2,28,73,530/- which, inter-alia, included short term capital

gain on sale of Chikhali land which was hitherto not declared in the original

return of income filed by the deceased assessee. The aforesaid return of

income was subject to the scrutiny assessment u/s 143(3) dated 31st

December 2009, whereby the returned income was accepted. Subsequently,

the A.O. held that the assessee guilty of furnishing of inaccurate particulars of

income qua the non-declaration of short term capital gain on Chikhali land in

the original return of income within the meaning of section 271(1)(c) of the Act.

Accordingly, the A.O., vide order dated 30th June 2010, imposed penalty of

Rs.47,37,930/- u/s 271(1)(c) of the Act.

4. In appeal, the assessee contended before the learned Commissioner

(Appeals) that, as a legal heir, the revised return of income was filed

incorporating hitherto undeclared income on a bonafide ground. The legal heir,

who was representing the assessee, asserted that the return of income was 3

revised immediately after knowing the facts which showed his bonafide intent.

The legal heir also pointed out that he was under a bonafide belief that the

income was to be offered on receipt basis and for that matter an amount of

Rs.59 lakhs was shown in the books of account for the assessment year 2008-

09. It was pointed out that the amount reflected in the assessment year 2008-

09, was reduced from the total amount of capital gain after filing the revised

return of income for the assessment year 2007-08. The learned Commissioner

(Appeals) observed that considering the statement of the legal heir as well as

the fact that the assessee had expired on 30th December 2007, the penalty u/s

271(1)(c) of the Act could not be levied. Accordingly, he directed the A.O. to

delete the penalty of Rs.47,37,930/- u/s 271(1)(c) of the Act. Against the

aforesaid, the Revenue is in appeal before the Tribunal.

5. Before us, the learned D.R. has assailed the order of the learned

Commissioner (Appeals) by pointing out that in this case, the undeclared

capital gain was detected as a consequence of a survey action which took

place on the business premises of the legal heirs of the deceased assessee

on 22nd January 2009. It was also pointed out that in the original return of

income filed on 24th October 2007, assessee did not declare any income on

sale of Chikhali land and, therefore, the said income declared in the revised

return of income filed on 20th March 2009, would not mitigate the rigors of

section 271(1)(c) of the Act.

6. On the other hand, the learned Representative for the respondent

assessee has relied upon the order of the learned Commissioner (Appeals) in

support of the case of the assessee. The learned Representative has also

furnished a Paper Book pointing out that the legal heir bonafidely filed the

revised return of income incorporating the income relatable to the sale of land 4

at Chikhali as and when it came to the notice during the course of survey

action u/s 133A of the Act.

7. We have carefully considered the rival submissions. As the facts of the

case show the income in dispute is the short term capital gain earned by the

deceased assessee on sale of land at Chikhali. The question is as to whether

the disclosure of Rs.1.20 crores made by the assessee in the revised return of

income filed by the legal heir on 20th March 2009, constitutes a bonafide

disclosure, considered in the background that in the original return of income

filed by the assessee himself on 24th October 2007, it did not contain this

income. Factually speaking, the said income has arisen on account of a

development agreement duly registered on 22nd February 2007 i.e., a date

which falls within the previous year relevant to the assessment year under

consideration. In the course of survey action on 22nd January 2009, the legal

heir was called upon to explain the transaction reflected by the development

agreement dated 22nd February 2007, which was found by the survey party in

the course of survey action. Ostensibly, the legal heir was called upon to

explain the transaction since the assessee had expired on 30th December

2007 and income from such transaction was also not found declared in the

original return of income filed on 24th October 2007. It is quite reasonable to

infer that the legal heir could not be expected to be fully aware of the

transaction and also the reason why it was not declared by the deceased

assessee while filing the original return of income on 24th October 2007. The

legal heir explained that he was ready to disclose the income from this

transaction in the assessment year 2007-08 by filing a revised return of

income and that an amount of Rs.59 lakhs from the same transaction was

already disclosed for the assessment year 2008-09. It was explained that the

legal heir was under bonafide belief that the income was to be disclosed on

receipt basis and for that reason a sum of Rs.59 lakhs was disclosed for the 5

subsequent assessment year 2008-09. In our considered opinion, the

bonafides of the legal heir who has filed the revised return of income

incorporating the impugned income cannot be doubted because in the

absence of the deceased assessee himself, there could not be any person

having first hand knowledge as to the manner in which the income was

declared in the original return of income filed on 24th October 2007. Therefore,

in our view, in the instant case, having regard to the peculiar circumstances, it

can be deduced that it is a case of bonafide disclosure done by the legal heir

with respect to an income transacted by the assessee himself during his life

time. Under these circumstances ,to say that the assessee had deliberately

made an incorrect particulars of income in the original return of income qua

the impugned transaction would be unjustified because the assessee having

expired on 30th December 2007, had no chance of carrying through his

explanation, if any. In any case, even the Revenue has not lead any material

to point out reasons weighing with the assessee to do so in the original return

of income so as to invite the penal provision of section 271(1)(c) of the Act.

Considering the entirety of the facts and circumstances of the case, we find

that the learned Commissioner (Appeals) made no mistake in deleting the

penalty imposed u/s 271(1)(c) of the Act. The order of the learned

Commissioner (Appeals) is hereby affirmed.

8. In the result, the appeal of the Revenue is dismissed.

Order pronounced on 04 th March 2015.

Sd/- Sd/- (SUSHMA CHOWLA) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER

Pune, Dated: 04 th March 2015. Pradeep 6

Copy of the order is forwarded to: - 1) The Assessee; 2) The Department; 3) The CIT(A)-V, Pune; 4) The CIT-Central, Pune; 5) The DR "B" Bench, I.T.A.T., Pune; 6) Guard File. By Order //True Copy// Assistant Registrar I.T.A.T., Pune