Penalty u/s 271(1)(c) Unjustified when Revised Return was filed before Receiving Notice u/s 148
1. Revised return of income filed on 16.7.2012 before receiving the notice issued by the A.O. u/s 148 of the Act and it is submitted that the revised return filed by the assessee is voluntary
2. Therefore, the A.O. cannot initiate the proceedings on the ground that assessee has concealed the income
3. Where there is a complete disclosure of facts and claim made by assessee though not found acceptable was bonafide, penalty u/s 271(1)(c) of the Act was not justified
1. Assessee is an individual, is engaged in the business of construction of residential apartments in the name and style of “Krishna Priya Constructions”
2. The assessee filed a return of income for the assessment year 2009-10 on 30.3.2010, admitting a total income of Rs. 8,51,809/-
3. The A.O. has completed the assessment u/s 143(3) of the Income-Tax Act, 1961 (hereinafter called as ‘the Act’) by determining total income of Rs. 9,51,809/-
4. Subsequently, there was a survey conducted in the case of M/s. VNC-GEV Housing Limited, it was found that assessee along with two others purchased two acres of land at Madhurawada, Visakhapatnam on 29.12.2006 for a total consideration of Rs.90 lakhs, in which the assessee is having 1/3rd share
5. It was also found that the assessee along with two co-owners entered into a Development Agreement on 15.7.2008 with M/s. VNC-GEV Housing, for the development of said land as per which assessee gets built up area of 33,240 Sq.ft. and 3,600 Sq.ft. parking area
6. The assessee and other co-owners had also handed over the possession of the property on 15.7.2008 received a refundable deposit of Rs. 2,25,00,000/-
7. Subsequently, the A.O. has issued show cause notice u/s 148 of the Act dated 12.7.2012 on the ground that there is an escapement of income in the hands of the assessee
8. Meanwhile, the assessee filed a revised return on 16.7.2012 by revising his total income at Rs.2,01,62,545/- admitting short term capital gain at Rs.1,92,10,735/-
9. The A.O. after verification of the details furnished by the assessee during the re-assessment proceedings, completed the assessment u/s 143(3) r.w.s. 147 of the Act accepted the return of income filed by the assessee
10. Subsequently, the A.O. has initiated the penalty proceedings by issuing a notice u/s 271(1)(c) of the Act on the ground that the assessee has concealed the income and called the explanation of the assessee
11. The assessee has submitted a detailed explanation before the A.O. that the assessee neither concealed the income nor filed inaccurate particulars and submitted that penalty proceedings may be dropped
12. However, the A.O. has not accepted the explanations given by the assessee and he has observed that the assessee has not disclosed the facts voluntarily and consequent to the detection by the department, assessee admitted the fact that he had earned the capital gains, it is a clear case of concealment. Accordingly, penalty u/s 271(1)(c) of the Act was levied
13. On being aggrieved, assessee carried the matter in appeal before the CIT(A)
14. The CIT(A) after considering the explanation of the assessee, he has observed that there is lot of force in the argument of Ld. Counsel for the assessee. However, the unimpeachable fact remains that the assessee having entered into a Development agreement with the builder for the development of his land and handed over the possession on 15.7.2008, assessee should have been offered the income received from the developer as a short term capital gain but assessee failed to admit it and therefore it is amounting to concealment of true particulars of income and confirmed the order passed by the A.O
15. On being aggrieved, assessee carried matter in appeal before the Tribunal
16. After hearing both parties, Honb. Tribunal deleted the penalty
We find that though the assessee has not disclosed short term capital gains in the original return filed, however, the assessee along with the return of income filed a balance sheet as on 31.3.2009, wherein he specifically mentioned, the amount received from the developer (paper book page no.14) and the same was explained before the A.O. (paper book page no.35). It is also the case of the assessee that notice u/s 148 of the Act was served on the assessee on 20.7.2012. However, the revised return of income filed on 16.7.2012 before receiving the notice issued by the A.O. u/s 148 of the Act and it is submitted that the revised return filed by the assessee is voluntary. The A.O. has acted upon the return filed by the assessee accepted the capital gains. Therefore, the A.O. cannot initiate the proceedings on the ground that assessee has concealed the income.
We find that there is a lot of force in the argument of Ld. Counsel for the assessee. That apart the assessee has disclosed the amount received by him along with the return of income, which was also explained to the A.O. Keeping in view of the above, by considering the facts and circumstances of the case, we are of the opinion that it is not a fit case to impose penalty u/s 271(1)(c) of the Act.
Apart from above, there are divergent views about the taxability of capital gains that, whether capital gain can be charged only on receipt of sale consideration or from the date on which development agreement was entered. In this context, the Hon’ble Allahabad High Court in the case of CIT Vs. Najoo Dara Deboo (supra) has held that the Capital gains can be charged only on receipt of the sale of consideration and not otherwise, when only the agreement is signed and no money is received....
The Hon’ble Bombay High Court in the case of CIT Vs. S.M. Construction (supra) has held that where there is a complete disclosure of facts and claim made by assessee though not found acceptable was bonafide, penalty u/s 271(1)(c) of the Act was not justified. By considering the facts and circumstances of the case and also keeping in view of the judicial precedents, we are of the opinion that this is not a fit case to impose penalty u/s 271(1)(c) of the Act. Thus, we cancel the penalty by reversing the order passed by the Ld. Commissioner.
Cases Referred to