Law does not debar assessee from making a claim which he believes is plausible and knowing that it will be examined by AO
ABACUS Case Law Citation
ABCAUS 3371 (2020) (08) HC
Important case law relied upon by the parties:
Alpati Venkataramiah v/s. CIT – 57 ITR 185 (SC)
Union of India vs.Dharamendra Textile Processors
Sheshasayee Steel P. Ltd. v/s. ACIT – 421 ITR 46(SC).
CIT v/s. Balbir Singh maini398 ITR 531 (SC)
CIT Vs. Otis Elevator Co. Ltd.
D M Dhanukar vs CIT – 65 ITR 280 (Bom)
CIT Vs. M/s. Mansukh Dyeing & Printing Mills
CIT Vs. DCM Ltd. 359 ITR 101
CIT vs Sri Shraddha Textile Processors – 286 ITR 499
CIT Vs Reliance Petroproducts Pvt. Ltd., 322ITR 158 (SC)
CIT Vs. Goa Coastal Resorts & Recreation Pvt. Ltd.
Rishi R. Oswal Vs. CIT
Ashok Pai Vs. CIT, 292 ITR 11
Ashish Estates & Properties P. Ltd. Vs. CIT 257 Taxman 585 (Bom)
Manu Engineering Vs. CIT, 122 ITR 306
Ventura Textiles Ltd. vs. Commissioner of Income Tax
Virgo Marketing P. Ltd. Vs. CIT, 171 Taxmann 156
In the instant case, the assessee had challenged the order passed by the ITAT in confirming the levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961 (the Act).
During the relevant assessment year, the appellant assessee alongwith four others executed an agreement for sale in respect of a plot of land. The conveyance was to be executed only upon receipt of the entire consideration.
During the said AY, part consideration was received. However, the assessee in his return of income for the said financial year offered to tax his share in the consideration received though the conveyance was not executed and possession was not handed over of the said plot.
The Assessing Officer (AO) required the appellant to furnish details of capital gains earned during the said Assessment Year. The Appellant furnished the requisite information alongwith a copy of the sale agreement and after scrutinizing the same the AO accepted the capital gains arising on execution of the sale agreement as offered by appellant.
In the next two following assessment years the assessee received further part payments which he offered to tax in the relevant financial years. The final balance payment however was not paid by the purchaser who forcible took over the possession of the plot.
The AO issued notice under the provisions of Section 148 of the Act seeking to reopen the assessment for the relevant Assessment Year under Section 147 of the Act. The reason for reopening was objection with the manner in which capital gains arising from the sale agreement was offered to tax by the appellant on receipt basis.
The AO completed the reassessment for the relevant Assessment Year taxing the appellant’s share of capital gains arising on the entire sale consideration.
However, while completing the assessment AO also initiated penalty proceedings against the appellant for furnishing inaccurate particulars of income as a result of deferring the charge on capital gains arising pursuant to execution of the sale agreement with respect to the said plot.
Not satisfied with the replies of the assessee, the AO levied penalty on the appellant for furnishing inaccurate particulars of income as a result of the default committed by the appellant in not offering the capital gains arising out of the entire sale consideration in the relevant Assessment Year.
On appeal, the CIT(A) confirmed the levy of penalty. On further appeal the Tribunal dismissed the appellant’s appeal and confirmed the order of CIT Appeals.
Before the Hon’ble High Court the appellant made the following submissions:
- that agreement to sell does not constitute a sale u/s. 2(47)(i) of the Act.
- That Permission /license to enter is not possession under S. 53A of the Transfer of Property Act and hence does not constitute transfer u/s 2(47)(v) of the Act.
- Permission /license to enter is not possession under S. 53A of the Transfer of Property Act and hence does not constitute transfer u/s 2(47)(v) of the Act
- Unregistered agreement to sell on Rs.100 stamp paper does not result in a transfer u/s 2(47)(v)
- Agreement specifically provides for conveyance and possession only on full payment, pending conveyance all permissions etc. in the name of Vendors – hence no de facto transfer for the purposes of 2(47)(vi) of the Act.
- When dispute between assessee and revenue is year of taxability, penalty u/s 271(1)(c) should not be levied.
- Initiation of penalty for one offence and levy for another offence is not permissible
- That the assessee had not struck off the relevant clause and the notice u/s 274 was blank, which showed complete non-application of mind
The Hon’ble High Court observed that the Assessing Officer had to indicate in the statutory notice for which of the two limbs he proposes to impose the penalty and for this the notice has to be appropriately marked. If in the printed format of the notice the inapplicable portion is not struck off thus not indicating for which limb the penalty is proposed to be imposed, it would lead to an inference as to non-application of mind, thus vitiating imposition of penalty.
Further the Hon’ble High Court observed that the Hon’ble Supreme Court had held that mere making of a claim which is not sustainable in law by itself would not amount to furnishing inaccurate particulars.
The Hon’ble High Court noted that the Delhi High Court applied the said decision of the Supreme Court and further observed that law does not debar an assessee from making a claim which he believes is plausible and when he knows that it is going to be examined by the Assessing Officer.
On the facts, the Hon’ble High Court observed that the assessee had declared the full facts and the sale agreement at the first instance; the full factual matrix or facts were before the Assessing Officer while passing the assessment order. The appellant had never suppressed any material fact from the respondent. Hence it was a claim not found to be inadmissible. This was not the same thing as furnishing inaccurate particulars of income as contemplated under Section 271(1) (c) of the Act.
Accordingly, the Hon’ble High Court allowed the appeal and the order of penalty was deleted.
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