Sudhakar Eknath Avhad, Pune vs Assessee

Mr. Sudhakar Eknath Avhad, Assessing Officer of Income Tax, 10, Sheelavihar Colony, Ward - 6(2), Pune Vs. Erandawana, Pune-411004 (Appellant) (Respondent) PAN No. AFTPA6909A

Assessee By: Shri M.K. Kulkarni Revenue By: Shri P.S. Naik

Date of hearing : 10-06-2015 Date of pronouncement : 24-06-2015

ORDER

PER VIKAS AWASTHY, JM:-

This appeal of the assessee is directed against the order of

Commissioner of Income Tax (Appeals)-III, Pune dated 25-01-2011 for

the assessment year 2004-05, confirming the levy of penalty u/s.

271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as "the

Act").

2. This appeal of the assessee before the Tribunal is in second round.

Earlier, the appeal of the assessee was allowed by the Tribunal vide

order dated 12-09-2013. The Revenue filed Miscellaneous Application

No. 49/PN/2014 u/s. 254(2) highlighting the apparent factual error

recorded by the Tribunal while deleting the penalty vide order dated

12-09-2013. The Tribunal after examining the factual position recalled

its order on 10-10-2014 with the following observations: 2 ITA No. 1533/PN/2011, A.Y. 2004-05

"4. Both the parties have been heard. We find that an error has crept in the order of the Tribunal on account of wrong appreciation of facts relating to the addition made on account of capital gains, in particular in relation to the adoption of sale consideration for the purposes of computing capital gains. Under these circumstances, it would appropriate if the order of the Tribunal dated 12.09.2013 (supra) is recalled so that both the parties are allowed an opportunity to address the issues again and to enable proper appreciation of facts before adjudicating the imposition of penalty u/s 271(1)(c) of the Act. Therefore, the order of the Tribunal dated 12.09.2013 (supra) is recalled as above and the matter shall be posted for a fresh hearing before the regular Bench. Registry is directed to re-post the appeal in due course before the regular bench."

In the light of this background, the appeal is listed before the

Bench for de novo adjudication.

3. Before we proceed with the merits of the case it would be essential

to examine brief facts of the case. The assessee is an individual and is

conducting coaching class for law students. The assessee filed his

return of income for the assessment year 2004-05 on 31-01-2005

declaring total income of Rs.24,63,868/-. In the return of income, the

assessee inter alia offered Long Term Capital Gains of Rs.17,50,928/-.

During the course of scrutiny assessment, the assessee was given a

questionnaire in respect of income returned. The assessee filed revised

return of income on 02-11-2006 offering Capital Gain of Rs.25,19,296/-

as against Rs.17,50,928/- disclosed in the original return of income.

The assessee also offered income from house property which was not

disclosed by the assessee in his original return of income. On the basis

of information received in the purported revised return of income, the

Assessing Officer made additions/disallowances. The Assessing Officer

further observed that the second return of income was filed by the 3 ITA No. 1533/PN/2011, A.Y. 2004-05

assessee beyond the time limits specified u/s. 139(5) of the Act,

therefore, it cannot be considered as revised return of income. Penalty

proceedings u/s. 271(1)(c) were initiated against the assessee for not

disclosing income fully and truly in the return of income. Penalty u/s.

271(1)(c) of Rs.1,95,800/- was levied by the Income Tax Officer vide

order dated 11-05-2007.

Aggrieved by the penalty order u/s. 271(1)(c), the assessee

preferred an appeal before the Commissioner of Income Tax (Appeals).

The Commissioner of Income Tax (Appeals) vide impugned order

confirmed the levy of penalty.

Now, the assessee is in second appeal impugning the findings of

First Appellate Authority.

4. Shri M.K. Kulkarni appearing on behalf of the assessee submitted

that the assessee had sold land for Rs.29,00,000/-. The Long Term

Capital Gain was computed on the consideration receipt. However,

during the course of scrutiny assessment proceedings the Assessing

Officer directed the assessee to adopt the market value of the land as per

stamp valuation as required u/s. 50C of the Act. Accordingly, the

assessee filed revised return declaring the sale consideration of

Rs.36,50,000/- and computed the Capital Gains thereon. The ld.

Counsel for the assessee submitted that it is not a case of concealment

or furnishing of inaccurate particulars in terms of section 271(1)(c). The

Capital Gains have been revised by invoking the provisions of section

50C of the Act. To support his submissions the ld. Counsel placed

reliance on the judgment of Hon'ble Calcutta High Court in the case of

Commissioner of Income Tax Vs. Madan Theatres Ltd. reported as 260

CTR (Cal) 75.

4 ITA No. 1533/PN/2011, A.Y. 2004-05

5. Au contraire, Shri P.S. Naik representing the Department

submitted that the assessee had deliberately suppressed the sale

consideration of land. The assessee in the return of income filed on 02-

11-2006 has admitted the sale consideration as Rs.36,50,000/- and has

computed Long Term Capital Gains thereon. Whereas, in the original

return of income the assessee had disclosed sale consideration as

Rs.29,00,000/- only. The ld. DR further submitted that the stamp duty

of Rs.2,38,030/- claimed as expenses for transfer of the property

included penalty of Rs.1,14,030/- paid for contravention of law which is

not an allowable expenses in connection with transfer of property.

Further, the assessee in his original return of income did not show any

income from house property. However, in the return of income

subsequently filed during the course of assessment proceedings, the

assessee admitted rental income of Rs.3,000/- per month. The assessee

has not voluntarily disclosed all these suppressed incomes. It was only

during the course of scrutiny assessment proceedings, when

questionnaire was issued to the assessee, the assessee succumbed and

disclosed the actual sale consideration of land and rental income. The

ld. DR vehemently defended the impugned order and prayed for

dismissing the appeal of the assessee.

6. We have heard the submissions made by the representatives of

both the sides and have perused the orders of the authorities below. We

have also examined the judgment on which the ld. Counsel has placed

reliance. In the original return of income filed on 31-01-2005, the

assessee disclosed sale consideration of land situated at old S. No. 9 and

new S. No. 11 at Katraj, Pune as Rs.29,00,000/- and computed Long

Term Capital Gains of Rs.17,50,928/-. During the course of scrutiny

assessment when the Assessing Officer asked for certain details and

explanations after issuing questionnaire to the assessee, the assessee 5 ITA No. 1533/PN/2011, A.Y. 2004-05

filed second return of income on 02-11-2006 admitting annual rental

income of Rs.25,200/- and sale consideration of land as Rs.36,50,000/-.

It is pertinent to mention here that the Assessing Officer had asked the

assessee to compute Long Term Capital Gains by adopting market value

of land as per stamp valuation in accordance with section 50C of the Act

i.e. Rs.36,83,872/-.

The contention of the ld. Counsel for the assessee is that the land

has been actually sold for Rs.29,00,000/-. The consideration of

Rs.36,50,000/- has been shown in the revised return of income for

computing Long Term Capital Gains in accordance with the directions of

the Assessing Officer. We do not concur with the submissions of the

assessee. We observe that at the time of filing of second return of

income and in the statement of facts filed before Commissioner of

Income Tax (Appeals) at the time of filing appeal, the assessee admitted

the sale consideration of land as Rs.36,50,000/-. The relevant extract of

the 'statement of facts' is reproduced here-in-below:

"The assessee received sales proceeds of Rs.36,50,000/- on account of sale of land. According to Assessing Officer the assessee should have adopted Stamp Valuation Rs.36,83,872/- in view of S. 50C of the Income-tax Act."

Further, both the Assessing Officer and the Commissioner of

Income Tax (Appeals) have recorded in their findings that in the revised

return, while computing the capital gains the sale consideration was

adopted at Rs.36,50,000/-. This fact has not been denied by the ld.

Counsel for the assessee.

7. Thus, it is own admission of the assessee that land was sold for

Rs.36,50,000/- and not Rs.29,00,000/- as disclosed by the assessee in

his original return of income filed on 31-01-2005. Further, the assessee 6 ITA No. 1533/PN/2011, A.Y. 2004-05

in the second return of income filed on 02-11-2006 disclosed rental

income of Rs.25,200/- which was not earlier admitted by the assessee in

his original return of income. It is relevant to mention here that

subsequent return filed on 02-11-2006 by the assessee during the

course of scrutiny assessment proceedings cannot be accepted as revised

return under the provisions of section 139(5), as the same was filed

much after the lapse of time as specified under the Act. As per the

provisions of section 139(5), the revised return can be filed before the

expiry of one year of the end of relevant assessment year or before

completion of assessment, whichever is earlier. In the present case the

assessee should have filed revised return on or before 31-03-2006.

Whereas, the return was filed by the assessee on 30-11-2006 i.e. after

eight months of the last date on which revised return should have been

filed. Therefore, the subsequent return filed by the assessee cannot be

considered as revised return of income under the provisions of Act.

8. The assessee in support of his submission has placed reliance on

the decision of Hon'ble Calcutta High Court in the case of Commissioner

of Income Tax Vs. Madan Theatres Ltd. (supra). The contention of the

assessee is that when Capital Gains are computed by invoking the

provisions of section 50C and the assessee has computed Capital Gains

on actual sale price, it is not a case of filing of inaccurate particulars.

The penalty u/s. 271(1)(c) cannot be levied. The facts of the case relied

upon by the ld. Counsel is entirely different from the facts of the case in

hand. In the present case the assessee has not correctly disclosed the

sale consideration in the original return of income. The penalty has not

been levied for not adopting market price in accordance with the

provisions of section 50C but for not fully and truly disclosing the sale

consideration in the return of income. Therefore, the ratio laid down in 7 ITA No. 1533/PN/2011, A.Y. 2004-05

the case of Commissioner of Income Tax Vs. Madan Theatres Ltd. (supra)

will not be applicable in the present case.

9. From the appreciation of facts of the case, we are of the considered

opinion that the assessee has not fully and truly disclosed all material

facts which are necessary for the assessment. The assessee has

furnished inaccurate particulars of his income. The assessee in his

return of income suppressed the actual sale consideration of land and

also the rental income, thus, making him liable for levy of penalty u/s.

271(1)(c) of the Act. We do not find any infirmity in the order of

Commissioner of Income Tax (Appeals). The appeal of the assessee is

dismissed and the impugned order is upheld.

Order pronounced on Wednesday, the 24th day of June, 2015

at Pune

Sd/- Sd/-

(R.K. PANDA) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER

Pune, Dated: 24th June, 2015 RK/PS

Copy to

1 Assessee 2 Department 3 The CIT(A)-III, Pune 4 The CIT-III, Pune 5 The DR, ITAT, "A" Bench, Pune. 6 Guard file.

//True Copy// By Order

Private Secretary, Income Tax Appellate Tribunal, Pune