Mrs. Pooja Rohit Bhandari,, Pune vs Assessee

ITO, Ward-2(1), Pune .. Respondent

Appellant by : Shri Vipin Gujrathi Department by : Shri Y.K. Bhaskar Date of Hearing : 10-06-2015 Date of Pronouncement : 30-06-2015

ORDER

PER R.K. PANDA, AM :

The above 2 appeals filed by the assessee are directed

against the common order dated 30-09-2013 of the CIT(A)-II, Pune

relating to Assessment Years 2005-06 & 2006-07 respectively. For

the sake of convenience, these were heard together and are being

disposed of by this common order.

2. Levy of penalty of Rs.21,39,266/- u/s.271(1)(c) of the I.T. Act

by the Assessing Officer and upheld by the CIT(A) for A.Y. 2005-06

(Rs. 43,91,971/- for A.Y. 2006-07) is the only issue raised by the

assessee in the grounds of appeal for both the years.

3. First we take up ITA No.174/PN/2014 for A.Y. 2006-07 as

the lead case. Facts of the case, in brief, are that the assessee

is an individual and filed her return of income on 30-07-2008

declaring total income of Rs.2,75,990/-. During the course of

assessment proceedings the AO noted that the assessee sold part 2

of land at S.No 277 situated in the industrial area at Maan, Pune

to M/s W B Engineers Pvt. Ltd on 29-3-2005 for a consideration of

Rs. 2,30,00,000/- and the balance portion of the said land was

sold in the subsequent A.Y. 2006-07 to M/s. Global Infrastructure

on 13-4-2005 for a consideration of Rs. 1,50,00,000/-. Thereafter

the land was transferred to Sakal Papers Ltd for a consideration of

Rs. 2,95,00,000/-. The assessee claimed that land to be of the

nature of agricultural land as per sec 2(14)(iii) of the Act and

accordingly the profit derived from its sale was claimed to be

exempt and not liable to tax. The assessee filed the 7/12 extract of

the land and contended that the land was agricultural land and

the same was used for agricultural activities on which grass was

cultivated and that the grass cultivation involved human labour

and skill and was not grown spontaneously.

4. It was also submitted before the Assessing Officer that there

was not much profit as expenditure was equal to the income and

hence no agricultural income was declared. The assessee also

claimed that she had incurred the expenditure on the development

of the said land for the use of agricultural purpose and till the date

of transfer of the land it was not converted to non-agricultural use.

The said land was purchased in the month of June 2000 and was

cultivated for agricultural purposes for 5 years. However, when the

fact gathered by the Assessing Officer was confronted to the

assessee, the assessee filed letter dated 16-12-2008 and admitted

that it was a capital asset and the claim made to be a bonafide

mistake and there was no deliberate intention to evade tax. The

assessee also stated that the distance from PCMC limit remained

un-noted due to oversight and hence made the wrong claim of

exemption by mistake. The Assessing Officer was also of the 3

opinion that the said land transaction was adventure in the nature

of trade and profit on the sale of land to be worked out as business

profits.

5. The assessee's explanation in this regard was not found to be

acceptable to the Assessing Officer who observed that when the

land was purchased, the assessee was hardly 19 years old and

subsequently migrated to Chennai after March 2005 and that her

father was the sole controlling authority on the basis of the power

of attorney and who had also obtained loan from Janata Sahakari

Bank, Pune on hypothecation/mortgage of the said land. The

Assessing Officer thus treated the said transaction as an adventure

in the nature of trade and treated profit/gain on sale of land as

business income. The assessee, thereafter, challenged the action of

the Assessing Officer before the Ld. CIT(A) treating the said land as

the capital asset and claimed that it was beyond 8 kms of the

PCMC limits and hence the same cannot be treated as capital asset

u/s. 2(14) and, therefore, the profit or gain on transfer was not

taxable.

6. The assessee also challenged the action of the Assessing

Officer in treating the profit on sale of the plot of land as business

income and contended to treat the same as capital gain. The

assessee, to prove her stand, also produced certificates of the

Kamgar Talathi, Maan, Tal: Mulshi, Dist: Pune and filed the same

under Rule 46A with a request to admit the said certificate as an

evidence.

7. The Ld. CIT(A) called for a report of the Assessing Officer in

this regard. The Assessing Officer in his report denied the claim of

the assessee that the said certificate was submitted during 4

assessment proceedings. In the comments the Assessing Officer

noted that the certificate obtained from the Asstt. Diiector, Town

planning in respect of the distance of land was communicated to

the assessee and in response the assessee had filed letter dated

16-12-2008 admitting the mistake and stated that the distance

from the PCMC limit remained unquoted through oversight. The

Assessing Officer thus objected for admitting the certificate

obtained by the assessee from Kamgar Talathi dated 14-1-2010.

The Ld. CIT(A) with respect to one of the issues i.e. of treatment of

the gain/profit on sale of land accepted the contention of the

assessee that the sale of the plot of land cannot be treated as an

adventure in the nature of trade and held the same to be assessed

under the head 'Capital gain'. However on the second issue

whether the said land is an agricultural land the contention of the

assessee was rejected and held that the land in question was

within 8 kms of the PCMC limits. The Ld. CIT(A) also rejected the

request of the assessee to admit the additional evidence furnished

before him under Rule 46A. It may be pertinent to note that in

further appeal filed by the assessee the Tribunal upheld the order

of the Ld CIT(Appeals). In its observation regarding the nature of

the said land, the Tribunal has held as under:

"7. We find that assessee is taking contradictory stand before the A.O. and before CIT(A) on this particular aspect. When the assessee files a certificate from the Talathi, she has to first of all controvert how the certificate given by the another competent authority is not correct. But she prefers to be silent on this important certificate. So far as the rejection of the evidence by the Ld. CIT(A) is concerned, we admit the evidence in the form of certificate issued by Kamgar Talathi in the interest of justice. As Tribunal being last fact finding /authority, the assessee should have every opportunity to prove his/her cast. Even if the said certificate is admitted, the same is not much more help to the assessee. Assessee has filed the copy of the said certificate at page 11 of the compilation which is in Marathi and English translation at page no. 12. We have anxiously perused the certificate issued by the Kamgar Talathi and we find that it is general in nature. If the assessee has to destroy the evidence against her, then she should have filed such certificate which should be supported by a proper map, as the 5

distance cannot be determined on the basis of local enquiries as mentioned by the 'Kamgar Talathi' in his certificate. Determination of distance is a technical subject and same cannot be concluded or determined on basis of local enquires. Hence, certificate of Talathi which is filed by the assessee does not support her case on this point."

8. During the penalty proceedings the Assessing Officer after

considering the submission filed by the assessee held that the

assessee had made a wrong claim of the land in question to be of

the nature of agricultural land and the same was clearly a capital

asset which is confirmed by the office of Town Planning &

Valuation Department and also admittedly accepted by the

assessee in the course of assessment proceedings to be a mistake

of treating the land as an agricultural land exempt and not liable

for tax. The Assessing Officer, regarding the certificate of Talathi

produced before the Ld CIT(A), noted that the assessee not only

made a wrong claim before the Assessing Officer but also before

the Ld. CIT(A) during the appellate proceedings. The Assessing

Officer thus levied minimum penalty of Rs.43,91,971/- for A.Y.

2005-06 and Rs.21,39,266/- for A.Y. 2006-07 after having

satisfied that the assessee had concealed the particulars of income

for both the assessment years i.e. A.Y. 2005-06 and A.Y. 2006-07.

9. Before CIT(A) it was submitted that the Assessing Officer is

unsure of the fact whether it is concealment of particulars of

income or furnishing inaccurate particulars of income and the

assessment order refers to deliberate attempt to evade the tax

whereas the penalty order refers to concealment of particulars of

income. The assessee drew the attention of the CIT(A) to the

statement of income and accounts which reflect the factum of sale

of land and a noting below which shows that the assessee sold

agricultural land beyond 8 kms from the local limits of municipal

corporation and profit on the same being non-taxable not included 6

in the computation of income. The assessee also drew the attention

of the CIT(A) towards the observation of the ITAT Pune that on the

issue of nature of land, whether it is agricultural or non-

agricultural, the CIT(A) and the Assessing Officer have not given

any clear finding. The assessee stated that on the issue of distance

of 8 kms in paras 7 and 8 of the order, ITAT has clearly indicated

that there is evidence in support of the contention of the assessee

but the same has not been accepted resulting in negation of the

claim and, therefore, at best this is the case of erroneous claim and

not a case of concealment of particulars of income as concluded by

the Assessing Officer. The assessee submitted that the Assessing

Officer has chosen to ignore the judicial precedents cited before

him in the submission dated 5-8-2011 in support of the

proposition that there is no case of levy of penalty. The assessee

further placed reliance on the decision of the Hon'ble Karnataka

High Court in the case of CIT Vs Manjunatha Cotton Ginning

Factory vide ITA No 2564/05 dated 13-12-2012, the decision of

Amritsar Bench of the Tribunal in the case of DCIT Vs Pathankot

Primary Co-op. Development Bank Ltd., reported in 142 TTJ

401(Asr) and the decision of Hon'ble Punjab & Haryana High Court

in the case of CIT Vs Rajiv Bhatara reported in (2013) 94 DTR 137

(P&H) in support of the claim.

10. However, the Ld.CIT(A) was also not satisfied with the

explanation given by the assessee and upheld the penalty levied by

the Assessing Officer by observing as under :

"3.4 The submission made by the appellant has been carefully considered and the material on record perused. The word 'conceal' means to hide, to keep secret. The phrase 'concealed the particulars of his/her income' would include false deduction or exemptions claimed by the assessee in his/her return. The word 'conceal' involves a knowledge on the part of the assessee of the real income when giving the particulars. Concealment might arise even if the statement as to 7

the income is guarded one, as for e.g. the enquiry should be made to ascertain the correct income. If there is deliberate underestimate of income, an inference of concealment can be drawn. Concealment of income may arise in various ways. The appellant in the present case has not included the profit arising out of the sale of land treating the same as non-taxable being not a capital asset u/s 2(14) (iii) of the Act. The appellant has taken a stand that the said land was an agricultural land situated beyond the distance of 8 kms, the limit of the municipal corporation. However, during the course of assessment proceedings the Assessing Officer found the land to be situated in the industrial zone at Maan. Further enquiries carried out by the Assessing Officer with the office of the Town Planning Agricultural Dept and the Asstt. Director of Town planning revealed that the said land was situated within 8 kms to the extent limit Chinchwad Municipal corporation (PCMC) w.e.f. 11-9-1997. The appellant on being confronted with the aforesaid fact admitted vide letter dated 16-12-2008 that it was a capital asset and the claim was bonafide mistake and there was no deliberate intention to evade tax. The appellant also stated that distance from PCMC limit remained un-noted due to oversight and hence made the wrong claim of exemption by mistake. It has already been seen that the said plot of land was purchased by the appellant when she was hardly 19 years old and who subsequently migrated to Chennai and her father being the sole controlling authority on the basis of power of attorney had also obtained loan amounting to Rs.

3.02 crores" from Janata Sahakari Bank, Pune on the hypothecation/mortgage of the said land. The appellant after having admitted the land to be a capital asset again challenged the action of the Assessing Officer before the Ld CIT(A) and again stated the land to be beyond 8 kms of the municipal corporation limits and for which certificates of Talathi Maan, Mulshi Taluka was produced which however, was not admitted as additional evidence u/r 46A though the same was allowed to be admitted by the ITAT and it has been observed that even if the certificate is admitted, the same is not much more help to the assessee as the same was found to be of 'general in nature1 and the same was not considered to support the case of the appellant. It was also noted by the ITAT that the appellant has been taking contradictory stand before the Assessing Officer and the CIT(A) on this particular aspect. The ITAT even considered the judicial decisions relied upon by the appellant and noted that the assessee has failed to prove the land in question is beyond distance of 8 kms from the local limit of PCMC. The appellant during the assessment proceedings had admitted the mistake and conceded the income to be taxable under capital gains and had even furnished the detailed working of the same vide letter dated 26-12-2008. The Ld. CIT(A) in his order has clearly noted that during the appellate proceedings the contradictory stand taken by the appellant was an afterthought and a device to escape the legitimate tax liability. The Asstt. Director Town Planning in its letter dated 8-12-2008 had specifically mentioned that the land was situated within 8 ms of the extended limits of PCMC w.e.f. as early as 11-9-1997 and the purchase of land was made by the appellant during A.Y. 2000-01. Thus the fact on record clearly indicate that the appellant along with her father who had been instrumental in utilizing the land through Power of Attorney were fully aware of the land being situated within 8 kms of the PCMC limits and within the industrial zone. The appellant at no point of time have objected to the certificate given by the Asstt. Director of Town Planning nor even controverted its correctness rather chose to file a certificate from the Talathi which has been found to be of no help to the appellant. Thus the appellant had consciously filed inaccurate particulars and 8

concealed the income arising out of the sale of land. The findings of the Hon'ble ITAT clearly point out to the fact that the issue was neither debatable as claimed by the appellant nor an erroneous claim made by her. It is a clear case of concealment of income and a deliberate act of omission on the part of the appellant in filing inaccurate particulars. Thus the case laws relied upon by the appellant even before the Assessing Officer of the apex court in CIT Vs Reliance Petroproducts P. Ltd, 322 ITR 158 is not applicable to the facts of the present case as in that case the details supplied by the assessee in the return was not found to be incorrect or erroneous and that was held to not attract penalty u/s 271(1)(c) as all relevant information was disclosed in the return of income filed by the assessee. In the present case the appellant has not disclosed all the relevant information in the return of income and rather deliberately chose to claim the income exempt by filing inaccurate particulars and thereby concealing the income as the details filed in the return were found to be incorrect.

3.5 The claim thus made was not bonafide rather it was with a malafide intent. A wrong claim by itself does not warrant penalty if the facts relating to the same are disclosed. In order to call the particulars as accurate the assessee must believe that the said particulars are accurate on fact and disclosure which has been made in any part of the return which is incorrect or false to the knowledge of the assessee if that fact is established such disclosure cannot take it out from the purview of the act of furnishing of inaccurate particulars thereby concealment of the particulars for the purpose of levy of penalty. Thus the reliance placed by the appellant on the apex court decision in the case of Reliance Petroproduct Pvt. Ltd (cited supra) before the Assessing Officer as on the fact the said case law do not apply as it does not pertain to disclosure of claim or difference of opinion rather it is a case of filing inaccurate particulars. The Hon'ble Supreme Court clarified in Dilip N Shroff Vs JCIT (2007) 291 ITR 519 (SC) that Explanation-l raised a legal fiction by reason whereof the burden of proof shifts from the Department to the assessee. However, legal fiction can be given full effect only when the conditions precedent thereof is satisfied. The word 'inaccurate' signifies a deliberate act or omission on the part of the assessee. Such deliberate act must be either for the purpose of furnishing inaccurate particulars or concealment of income. It also held that under explanation-l the Assessing Officer is required to arrive at a finding that the explanation offered by the assessee in the event he offers one, was false. He must be found to have failed to prove that such explanation is not only bonafide but all the fact relating to the same and material to the income were not disclosed by him. The Assessing Officer in the present case has clearly given a finding as to how and in what manner the appellant had furnished inaccurate particulars of her income.

3.5.1 Thus in view of the Explanation I to sec 271(1)(c) which provides that where in respect of any fact, material to the computation of the total income of any person, such person fails to offer an explanation or offers an explanation which is found to be false or offer an explanation which he is not able to substantiate and fail to prove that such explanation is bona fide and that all the fact relating to the same and material to the computation of income have disclosed by him then the amount added or disallowed shall be deemed to represent the income in respect of which particulars have been concealed for the purposes of sec 271(1)(c). Thus in view of Explanation I to sec 271(1)(c), the primary onus is on the assessee to prove that there was no concealment. The fact of the present case do 9

not show the conduct of the appellant to be bonafide and innocent rather the contumacious conduct of the appellant can reasonably be inferred.

3.5.2 The other case of the apex court relied upon by the appellant before the Assessing Officer during penalty proceedings, of UOI Vs Rajasthan Spinning and Weaving Mills, 23 DTR 158 held that only conscious or deliberate wrong doing would attract penalty and on facts the aforesaid decision of the apex court in fact supports the present case as it has already been seen that the action of the appellant is of consciously and deliberately furnishing inaccurate particulars thereby concealed the income knowing fully well that the land in question was a capital asset u/s 2(14) the profit of which was taxable. The decision of Punjab & Haryana High' Court in the case of CIT Vs Rajiv Bhatara relied upon by the appellant, the assessee in that case had appended the copy of the cheque received from the Collector and the certificate obtained from Sub Divisional Engineer, PWD, wherein it was shown that the distance of the village in which the land of the assessee was situated 8.2 kms from the municipal limit of Sonepat Municipal, along with the return itself. In the present case the appellant has not furnished any such particulars so as to claim and substantiate that the land was beyond the limits of 8 kms from Municipal Corporation.

In fact in the present case the land was situated in the industrial zone of Maan and the certificate from the Town Planning authority clearly revealed that the land was within 8 kms limits of PCMC w.e.f. 11.09.1997 itself. Thus, the intention of the appellant of consciously concealing the income by furnishing inaccurate particulars becomes evident. The assessee in the aforesaid case relied upon by the appellant had given the basis on which the income had been claimed to be non-taxable a fact which is totally absent in the present case of the appellant. The appellant in the present case had committed an error which was not inadvertent rather has intended to conceal its income by furnishing inaccurate particulars, which the appellant knew it to be false. The Assessing officer in the present case had positive and definite material to show that the said land was within the 8 kms limit of municipality, a fact which was absent in the case relied by the appellant. Hence, on facts the case relied upon by the appellant is distinguishable. 3.5.3 In a recent decision in the case of CIT Vs Manjunatha Cotton & Ginning Factory, ITA No. 2564 of 2005 order dated 13.12.2012 also relied upon by the appellant, the Karnataka High Court has dealt with various principles governing penalty.

It has been held that for the applicability of section 271(1)(c), conditions stipulated therein must exist and the facts as brought out above clearly show that the conditions u/s 271(1)(c) exist and hence the levy of penalty is justified. The Court with respect to the satisfaction of A.O. for initiation of penalty proceedings has held that the provisions of section 271(1)(c) makes it abundantly clear that satisfaction should be that assessee has concealed particulars of his income or furnished inaccurate particulars of such income and even in the absence of those expressed words or findings recorded in the assessment proceedings, if a direction is mentioned, it constitutes satisfaction of the Assessing Officer. Thus in view of the above, the decision relied upon by the appellant is in fact favour of the revenue.

3.5.4 A false claim should certainly warrant penalty as held in CIT Vs Escorts Finance Ltd (2010) 328 ITR 44 (Del). Where untenable claim for set off of carried forward loss was made in the case of a partner, 10

such a claim could not be accepted as bona fide, so that penalty is exigible - ACIT Vs Dinesh Goel (2011)10 ITR (Trib) 330 (Del).

3.5.5 In ACIT Vs Kanchenjunga Advertising (P) Ltd (2011) 10 ITR 649 (Del), where a claim for bad debt was found to have been wrongly made and inferable in the fact of the case as a device adopted to mislead the Assessing Officer with relevant fact not disclosed, penalty is leviable.

3.6 In view of the above fact and circumstances of the case, the minimum penalty u/s 271(1)(c) of the Act, @ 100% of the tax sought to be evaded levied by the Assessing officer for A.Y. 2005-06 at Rs. 43,91,971/- and for A.Y. 2006-07 at Rs. 21.39.266/- is upheld and the ground of appeal no. 2 raised by the appellant is dismissed for both the years under consideration."

11. Aggrieved with such order of the CIT(A) the assessee is in

appeal before us with the following grounds :

"1. On the facts and in the circumstances of the case and in law the honourable Commissioner of Income Tax (Appeals) - II, Pune erred in confirming the penalty of Rs. 21,39,266/- levied under section 271(1)(c) of the Income Tax Act, 1961 without appreciating the facts of the case and law in proper perspective. The appellant hereby prays that the penalty levied under section 271(1)(c) may please be deleted.

2. The appellant hereby reserves the right to add, amend, alter, delete, or raise any additional ground/s on or before the date of hearing."

Identical grounds have been taken for A.Y. 2005-06.

12. The assessee has also raised additional ground in A.Y. 2006-

07 which reads as under :

"The learned AO has levied and the honourable CIT (A) has confirmed the penalty under section 271(1)(c) at Rs. 21,39,266/- considering the profit on transfer of land under question as "Profits and Gains of Business". The issue under which head of income the profit should be taxed has reached finality by the honourable ITAT's Order dated 31st January 2013 and the honourable ITAT has confirmed that the income under consideration is taxable as "Capital Gain". The appellant, therefore prays that penalty under section 271(1)(c) may please be reduced with reference to the capital gain on transfer of land under consideration instead of penalty levied with reference to profits and gains of the business"

Similar additional ground has been taken in A.Y. 2005-06. 11

13. After hearing both the sides and considering that no new

facts are required to be looked into the additional ground raised by

the assessee for both the years is admitted for adjudication.

14. The Ld. Counsel for the assessee while arguing for both the

years strongly challenged the order of the CIT(A). Referring to page

3 of the paper book the Ld. Counsel for the assessee drew the

attention of the Bench to the note given below the computation of

total income for A.Y. 2006-07 which stated that the assessee

during the year has sold agricultural land beyond 8 kms from the

local limits of municipality. Profit on the same being non-taxable

not included in the computation of total income. Referring to page

13 of the paper book he drew the attention of the Bench to the

similar noting in the computation statement for A.Y. 2006-07. He

submitted that full details were there and the assessee has not

concealed any particulars of her income. Further, the assessee

during the course of hearing before the Tribunal has also filed

certificate from the Talathi which states that the land sold by the

assessee is at a distance of approximately more than 25 kms from

PMC and is approximately more than 9 kms from PCMC.

14.1 Referring to the decision of the Hon'ble Supreme Court in the

case of Reliance Petroproducts Ltd. reported in 322 ITR 158 he

submitted that the Hon'ble Supreme Court in the said decision has

held that mere making of the claim which is not sustainable in law

by itself will not amount to furnishing the inaccurate particulars

regarding the income of the assessee. He also relied on the

following decisions and submitted that under somewhat similar

circumstances penalty has been finally deleted :

1. CIT & Another Vs. Manjunath Cotton Factory reported in 359 ITR 111 (Kar.) 12

2. CIT Vs. Escorts Finance Ltd. reported in 328 ITR 44 (Delhi.)

3. CIT Vs. Rajiv Bhatara reported in 360 ITR 121 (P&H)

4. ACIT Vs. Kanchenjunga Advertising Pvt. Ltd. reported in 51 SOT 125 (Delhi) (Tribunal)

5. ACIT Vs. Dinesh Goel reported in 52 SOT 132 (Delhi) (Tribunal)

He accordingly submitted that the order of the CIT(A) upholding

the penalty levied by the AO should be cancelled.

14.2 Referring to the additional ground filed by the assessee he

submitted that since the Tribunal has categorically given a finding

that the income is capital gain and not business income, therefore,

penalty, if any, should be restricted to the tax sought to be evaded

on the amount of capital gain and not on the business income.

Since the tax on the capital gain is lesser than the tax on business

profit, therefore, suitable direction may be given for reducing the

penalty so computed by the AO.

15. The Ld. Departmental Representative on the other hand

heavily relied on the order of the CIT(A). He submitted that the

land in question was within 8 kms from the PCMC. Despite the

admission by the assessee before the AO that it was a mistake, the

assessee is still trying to justify her wrong claim by producing

certain documents to substantiate that the land sold is beyond 8

kms from the municipal limits. The Ld. Departmental

Representative submitted that the Tribunal has given a categorical

finding that the assessee was unable to demolish the evidence

gathered by the AO against her. Further, the Tribunal after

considering the certificate issued by the Talathi has also held that

the same is not supported by any proper map and the distance has 13

been determined by the Talathi on the basis of local enquiry for

which the Tribunal has categorically held that the same will be of

no help to the assessee. Further, the CIT(A) has already

distinguished various decisions cited before him and which are

being relied on by the Ld. Counsel now. Since it is a clear case of

concealment of income and furnishing of inaccurate particulars of

income, therefore, the penalty levied by the AO and upheld by the

CIT(A) should be confirmed. The Ld. Departmental Representative

however submitted that the penalty can be reduced treating the

income as capital gain since the Tribunal being the final fact

finding authority has held that such income to be in the nature of

capital gain.

16. We have considered the rival arguments made by both the

sides, perused the orders of the Assessing Officer and the CIT(A)

and the Paper Book filed on behalf of the assessee. We have also

considered the various decisions cited before us. We find in the

instant case the assessee sold certain land and treated the same as

agricultural land which is beyond 8 kms from the local limits of

municipality and treated such income as non taxable being

exempt. We find during the course of assessment proceedings the

AO on the basis of information gathered by him confronted the

same to the assessee to which the assessee admitted her mistake

vide letter dated 16-12-2008 and accepted that the said land in

question cannot be treated as an agricultural land exempt from

capital gain tax. The assessee also admitted that the land in

question is within 8 kms of the Municipal limits. The relevant

observation of the Assessing Officer in the assessment order for

A.Y. 2006-07 at para 10 and 11 are as under :

14

"10. On receipt of the above reply from the assessee this office has made the enquiries from the office of Town Planning & Valuation Department Pune Branch Pune and The Asstt. Director of Town Planning vide his office letter No. Mouje Mann/ Tal. Mulshi/ S.No. 277 No. 1,2,&3 / ADTP/5513/ dated 8.12.2008 has clarified that -

1) The land under transaction is situated within 8 K.M. from the extend limit of Pimpri - - Chinchwad Municipal Corporation with effect from the date 11.09.1997.

2) As per the modification under section 20 of Maharshtra Regional & Town Planning Act 1966 in the sanctioned Regional Plan of Pune district under Notification dated 23.6.2002 land is included in Industrial Zone.

The above facts were communicated to the assessee vide this office letter dated 08.12.2008 and his attention was drawn to the fact that the explanation offered by him in the letter dated 28.11.2008 has become redundant in view of the clarification from the above authority and the land is clearly situated in Municipal Corporation and it cannot be Agricultural land in view of the provisions of Sec. 2(14)(iii)(b) of the Act. The assessee was therefore given an opportunity to explain as to why the income earned on sale of land should not be taxed accordingly.

11. The assessee vide letter date 16.12.2008 has admitted mistake in considering the land as agricultural land as a capital asset. It is submitted in the letter that it was a case of bona fide mistake and not a deliberate mistake in order to evade any taxes. In fact in computation of income, note regarding claim of exemption was also mentioned while filing the return. Distance from PCMC limit remained unnoted over sight. Accordingly claim for exemption of capital gain was made by mistake without any intention or desire to hide or conceal the income so as to avoid the imposition of tax thereon."

The above finding given by the Assessing Officer could not be

controverted by the Ld. Counsel for the assessee. Therefore, the

fact remains that the land in question is not an agricultural land.

As regards the other issue, i.e. the distance of the land from the

PCMC is concerned, we find the Tribunal has already given a

categorical finding that the land in question is within 8 kms from

the PCMC as per the certificate given by the Asst. Director of Town

Planning. The above certificate also remains unchallenged. The

certificate produced by the assessee from the Talathi was also

considered by the Tribunal and was rejected on the ground that it

is general in nature and the certificate issued on the basis of local

enquiry is not supported by any proper map. The Tribunal has 15

further held that distance cannot be determined on the basis of

local enquiries as mentioned by the "Kamgar Talathi" in his

certificate. Thus, the land in question is neither agricultural land

nor situated beyond a distance of 8 kms or more from the

municipal area, i.e. PCMC herein question. Under these

circumstances the question that arises is as to whether penalty

can be levied u/s.271(1)(c) of the I.T. Act.

16.1 We find from the various details furnished by the assessee in

the paper book as well as the submissions made before the AO,

CIT(A) and the Tribunal that the assessee has consciously and

deliberately concealed her particulars of income and furnished

inaccurate particulars of income arising out of the sale of land.

Even the Tribunal in its order has also mentioned that the

assessee has taken contradictory stand before the AO and the

CIT(A) on this particular aspect. In our opinion, it is a clear case of

concealment of income and a deliberate act of omission on the part

of the assessee in filing the inaccurate particulars of income. The

note given by the assessee in her computation statement will not

absolve the assessee from the mischief of penalty u/s.271(1)(c) of

the I.T. Act since it was very much known to the assessee that the

land in question was neither agricultural land nor situated beyond

a distance of 8 kms from the municipal limits. Therefore, the

various decisions relied on by the Ld. Counsel for the assessee will

not be of any help to the assessee. Had it been a bonafide mistake

or bonafide omission or commission, the decisions would have

been applicable but when the particulars given by the assessee

consciously to defraud the revenue by not paying the legitimate tax

due, the decisions will not come to the help of the assessee. Under

these circumstances and in view of the detailed reasoning given by 16

the CIT(A) upholding the levy of penalty we do not find any

infirmity in the same. Accordingly, the order of the CIT(A) is

upheld so far as the levy of penalty is concerned.

17. However, coming to the quantum of penalty to be levied, it is

the submission of the Ld. Counsel for the assessee that since the

profit has been held by the Tribunal to be of long term capital gain

and not business income, therefore, the penalty should be

restricted to the quantum of tax sought to be evaded. We find

merit in the above contention of the Ld. Counsel for the assessee.

Since the tax on long term capital gain is lower than the tax on the

business income, therefore, the penalty should be restricted to the

tax sought to be evaded which in the instant case will be the tax

sought to be evaded on the capital gain and not on business

income. Since the Tribunal has already held that the income in

question is long term capital gain, therefore, the tax sought to be

evaded is on the long term capital gain which is lower than the tax

computed by the AO on the business income. We therefore direct

the AO to recompute the penalty treating the income as long term

capital gain which has attained finality after the order of the

Tribunal. We hold and direct accordingly. The additional ground

raised by the assessee is accordingly allowed whereas the other

grounds are dismissed.

ITA No.173/PN/2014 (A.Y. 2005-06) :

18. The facts in the impugned appeal are identical to the facts in

ITA No.174/PN/2014 for A.Y. 2006-07. We have already upheld

the order of the CIT(A) confirming the levy of penalty u/s.271(1)(c)

of the I.T. Act. However, the additional ground raised by the

assessee has been accepted and the AO has been directed to

recompute the penalty treating the income on which penalty has 17

been levied as capital gain as against business income held by the

AO. Following the same reasonings, the additional ground raised

by the assessee for the impugned assessment year is also allowed

and the other grounds are rejected.

19. In the result, both the appeals filed by the assessee are

partly allowed.

Pronounced in the open court on 30-06-2015.

Sd/- Sd/- (VIKAS AWASTHY) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER

satish Pune Dated: 30th June, 2015

Copy of the order forwarded to :

1. Assessee 2. Department 3. CIT(A)-II, Pune 4. CIT-II, Pune 5. The D.R, "B" Pune Bench 6. Guard File

By order

// True Copy // Senior Private Secretary ITAT, Pune Benches, Pune