DCIT CEN CIR I, MUMBAI v. THE METAL ROLLING WORKS LTD, MUMBAI

ITA 1982/MUM/2010 | 2002-2003
Pronouncement Date: 11-03-2011 | Result: Allowed

Appeal Details

RSA Number 198219914 RSA 2010
Assessee PAN AAACT1585G
Bench Mumbai
Appeal Number ITA 1982/MUM/2010
Duration Of Justice 1 year(s)
Appellant DCIT CEN CIR I, MUMBAI
Respondent THE METAL ROLLING WORKS LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 11-03-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted G
Tribunal Order Date 11-03-2011
Assessment Year 2002-2003
Appeal Filed On 11-03-2010
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH MUMBAI BEFORE SHRI N.V.VASUDEVAN (JM) AND SHRI RAJENDRA S INGH(AM) ITA NO.1982/M/2010 ASSESSMENT YEAR 2002-03 DY.CIT CENTRAL CIRCLE-1 MUMBAI M/S. THE METAL ROL LING WORKS LTD. 225/227J DADAJI ROAD TARDEO MUMBAI 400 034. PAN : AAACT 1585 G APPELLANT RESPONDENT REVENUE BY : SHRI PAVAN VED ASSESSEE BY : SHRI DARMESH SHAH O R D E R PER RAJENDRA SINGH (AM) THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 15.12.2009 OF THE CIT(A) FOR THE ASSESSMENT YEAR 20 03-04. THE ONLY DISPUTE RAISED BY THE REVENUE IN THIS APPEAL IS REGARDING D ELETION OF PENALTY LEVIED BY THE AO UNDER SECTION 271(1)(C ) OF THE INCOME-TAX A CT. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE HAD ACQUIRED A LEASEHOLD LAND BEARING PLOT NO.104 SION-MATUNGA(E) MUMBAI MEASURING 9620.05 SQ.METER BY WAY OF INDENTURE OF DEED OF 25. 11.1970. THE ASSESSEE HAD CONSTRUCTED A FACTORY AND ADMINISTRATION BUILDI NG ON THE SAID PLOT AND MANUFACTURING ACTIVITIES WERE BEING CARRIED ON. THE BUSINESS WAS CLOSED DUE TO LABOUR UNREST AND HEAVY LOSSES. THE ASSESSEE THEREF ORE DECIDED TO SELL THE 2 LAND. THE ASSESSEE ENTERED INTO MOU DATED 24.8.2001 WITH THE DEVELOPER M/S.MAITRI ASSOCIATES (IN SHORT M/S. MA) FOR TRANSF ER OF RIGHTS IN THE LAND FOR AN UPFRONT CONSIDERATION OF RS.6 CRORES AND 40% OF SAL E PROCEEDS FROM THE SALE OF THE UNITS TO BE CONSTRUCTED BY M/S.MA. BOTH THE PAR TIES HAD FILED FORM NO.37 I WITH THE INCOME-TAX DEPARTMENT FOR OBTAINING PERMIS SION. AS PER THE SAID APPLICATION THE TOTAL CONSIDERATION WAS SHOWN AT R S.14 01 64 316/- COMPRISING OF THE UPFRONT AMOUNT OF RS.6 CRORES AND ESTIMATED CONSIDERATION RS.8 01 64 360/- BEING THE 40% SHARE OF THE ASSESSE E IN THE SALE PRICE. UPON RECEIPT OF NOC AND THE UPFRONT AMOUNT OF RS.6 CRORE S THE DEVELOPMENT RIGHTS IN THE PROPERTY WAS TRANSFERRED TO M/S.MA ON 21.3.2 002 AND POSSESSION OF THE PROPERTY WAS ALSO GIVEN. 3. THE ASSESSEE FILED THE RETURN OF INCOME ON 31.10 .2002 DECLARING LOSS OF RS.1 26 49 993/-. IN THIS RETURN NO INCOME FROM TR ANSFER OF RIGHTS IN LAND WAS SHOWN. THERE WAS A SEARCH CARRIED OUT IN CASE OF TH E DIRECTORS OF THE ASSESSEE COMPANY ON 12.9.2006 AND ON THE BASIS OF PAPERS SEI ZED DURING SEARCH PROCEEDINGS UNDER SECTION 153C WERE INITIATED IN CA SE OF THE ASSESSEE IN RESPONSE TO WHICH THE ASSESSEE FILED RETURN OF INCO ME ON 1.10.2007 DECLARING TOTAL LOSS OF RS.3 12 60 897/- WHICH INCLUDED THE L ONG TERM CAPITAL LOSS OF RS.1 86 41 755/- ON ACCOUNT OF TRANSFER OF DEVELOPM ENT RIGHTS. THE COMPUTATION OF LONG TERM CAPITAL LOSS HAD BEEN MADE ON THE BASIS OF TOTAL CONSIDERATION OF RS.14 01 64 316/- MENTIONED IN THE FORM NO.37-I FILED WITH THE DEPARTMENT AND AFTER CONSIDERING THE INDEXED CO ST OF ACQUISITION. THE SAID COMPUTATION WAS MADE ON THE BASIS OF OPINION GIVEN BY THE COUNSEL MR. S. N. INAMDAR WHICH WAS BASED ON THE JUDGMENT OF HONBLE HIGH COURT OF MUMBAI IN CASE OF CHATURBHUJ DWARKADAS KAPADIA V CIT 260 ITR 491 AS PER WHICH THE POINT OF TRANSFER FOR THE PURPOSE OF CAPITAL GAIN W AS THE DATE OF THE 3 DEVELOPMENT AGREEMENT WHICH IN THIS CASE WAS 21.3.2 002. EARLIER THE ASSESSEE HAD OFFERED THE LONG TERM CAPITAL GAIN FROM TRANSFE R OF DEVELOPMENT RIGHTS IN THE ASSESSMENT YEAR 2006-07 IN THE RETURN FILED ON 30.11.2006. 4. DURING THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) R.W.S. 153C THE AO HAD EXAMINED THE TAXABILITY FROM VARIOUS ANG LES I.E. AS CAPITAL GAIN AS BUSINESS INCOME AND AS INCOME FROM OTHER SOURCES AN D ULTIMATELY TAXED THE INCOME FROM TRANSFER OF DEVELOPMENT RIGHTS AS CAPIT AL GAIN. THE AO ON EXAMINATION OF THE AGREEMENT NOTED THAT THE ASSESSE E HAD ASSIGNED ALL THE RIGHTS EXCEPT RIGHT OF TDR AND INCREASE OF FSI TO T HE DEVELOPER. THE ASSESSEE HAD ALSO OBTAINED PERMISSION FROM THE INCOME-TAX DE PARTMENT AFTER FILLING THE FORM NO.37-I IN WHICH THE CONSIDERATION HAD BEEN QU ANTIFIED. THE CONSIDERATION CLEARLY MENTIONED WAS RS.6 CRORES + 40% SHARE IN TH E SALE PRICE OF FLATS. THE ASSESSEE HAD RECEIVED THE SUM OF RS.6 CRORES I.E PA RT CONSIDERATION IN A.Y.2002-03 ITSELF. THE TRANSACTION WAS THEREFORE C OVERED UNDER SECTION 2(47)(V) AS TRANSFER BY WAY OF PART PERFORMANCE OF CONTRACT. THE APPLICABILITY OF SECTION 2(47)(V) WAS SUPPORTED BY THE JUDGMENT OF H ONBLE HIGH COURT OF MUMBAI IN CASE OF CHATURBHUJ DWARKADAS KAPADIA (SUP RA). THE ASSESSEE HAD HANDED OVER POSSESSION OF THE LAND AT THE TIME OF A GREEMENT ON 21.3.2002. THE APPORTIONED CONSIDERATION FOR TRANSFER WAS DETE RMINED BY THE AO UNDER THE PROVISIONS OF SECTION 269 UA(2) WHICH PROVIDED FOR DETERMINATION OF CONSIDERATION AS DISCOUNTED VALUE OF FUTURE PAYMENT S BY APPLYING INTEREST RATE OF 8% AS PROVIDED UNDER RULE 48 I OF THE I.T.RULES. THE DISCOUNTED VALUE WAS COMPUTED BY THE AO AT RS.34 02 51 805/- AS PER THE TABLE GIVEN BELOW : ASST.YEAR ACTUAL RECEIPTS DISCOUNTING FACTOR DISCOUNTED VALUE 2002-03 6 00 00 000 100 6 00 00 000 2003-04 10 05 200 108 9 30 741 2004-05 3 08 91 488 117 2 64 84 472 4 2005-06 7 78 25 620 126 6 17 80 486 2006-07 14 68 37 499 136 10 79 29 945 VALUE OF FLATS 1 72 91 558 136 1 27 14 380 2007-08 8 37 29 926 147 5 69 85 181 2008-09 2 13 06 326 159 1 34 26 600 43 88 87 617 34 02 51 805 4.1 THE AO THUS COMPUTED THE LONG TIME CAPITAL GAIN AT RS.18 14 45 690/- AFTER DEDUCTING THE INDEXED COST OF ACQUISITION OF RS.15 88 06 115/-. THE ASSESSMENT MADE BY THE AO WAS NOT CHALLENGED BY THE ASSESSEE. THE AO ALSO INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)( C ) OF THE INCOME-TAX ACT. 5. AT THE TIME OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C ) THE ASSESSEE SUBMITTED BEFORE AO THAT IT HAD NOT OFFERE D THE CAPITAL GAIN IN A.Y.2002-03 AS THE ASSESSEE WAS UNDER THE IMPRESSIO N THAT IT WAS TAXABLE IN A.Y.2006-07 IN WHICH THE CONSTRUCTION WAS COMPLETED AND THE FLATS WERE SOLD. THE ASSESSEE HAD ALSO FILED THE RETURN OF INCOME FO R A.Y.2006-07 ON 30.11.2006 IN WHICH IT HAD OFFERED THE LONG TERM CA PITAL GAIN FROM TRANSFER OF DEVELOPMENT RIGHTS. HOWEVER LATER WHEN THE PROCEEDI NGS UNDER SECTION 153C WERE INITIATED THE ASSESSEE DECLARED THE CAPITAL G AIN IN A.Y.2002-03 ON THE BASIS OF ADVICE GIVEN BY THE ADVOCATE MR. S.N.INAMD AR. IT WAS POINTED OUT THAT THE AO HIMSELF WAS NOT SURE AS TO THE YEAR OF TAXAB ILITY AND THE HEAD UNDER WHICH INCOME SHOULD BE TAXED AS WAS CLEAR FROM THE VARIOUS QUERIES RAISED BY HIM AT THE TIME OF ASSESSMENT. THE ASSESSEE HAD ALS O TAKEN SECOND OPINION FROM THE COUNSEL MR. SOLI DASTUR WHO OPINED THAT CA PITAL GAIN WAS TO BE TAXED IN A.Y.2006-07 TO 2008-09 IN PROPORTION TO THE POSS ESSION OF FLATS GIVEN TO THE ULTIMATE BUYERS. THE ASSESSEE ACCORDINGLY HAD REVIS ED THE RETURN OF INCOME FOR THE A.Y.2006-07 TO 2008-09. THE ASSESSEE HAD ACCEPT ED THE ASSESSMENT MADE BY THE AO IN ORDER TO SETTLE THE ISSUE AND TO AVOID PROLONGED LITIGATION AND ALSO BECAUSE OF THE FACT THAT OVERALL INCREASE IN TAX BY OFFERING THE INCOME IN A.Y. 5 2002-03 AMOUNTED TO ONLY RS.12 12 172/-. IT WAS ACC ORDINGLY URGED THAT THE ASSESSEE HAD NOT CONCEALED PARTICULARS OF INCOME OR FILED INACCURATE PARTICULARS OF INCOME AND THEREFORE NO PENALTY SHOULD BE IMPOSE D. 5.1 AO HOWEVER DID NOT ACCEPT THE CONTENTIONS RAISE D. IT WAS OBSERVED BY HIM THAT DIFFERENCE IN LEGAL OPINION WAS OF NO HELP TO THE ASSESSEE AS THE ASSESSEE HAD OBTAINED THE SECOND OPINION ONLY AFTER THE START OF ENQUIRIES BY THE DEPARTMENT IN THE MATTER. THE AO ALSO NOTED THA T THE ASSESSEE WAS NOT CORRECT IN STATING THAT THE LAW WAS NOT CLEAR. THE LAW WAS VERY CLEAR AND THE TRANSACTION WAS COVERED AS PART PERFORMANCE OF CONT RACT UNDER SECTION 2(47)(V). THE AO HAD SIMPLY ACTED IN THE ASSESSMENT UNDER THE PROVISIONS OF LAW WHICH WAS VERY CLEAR. THE ASSESSEE HAD THEREFOR E BY NOT OFFERING THE CAPITAL GAIN IN A.Y.2002-03 CONCEALED THE PARTICULA RS OF INCOME AND PENALTY WAS LEVIABLE. THE AO THEREFORE LEVIED THE PENALTY @ 100% OF TAX SOUGHT TO BE LEVIED WHICH WAS COMPUTED AT RS. 3 44 40 616/-. 6. THE ASSESSEE DISPUTED THE DECISION OF AO AND SU BMITTED BEFORE CIT(A) THAT PENALTY PROCEEDINGS WERE DIFFERENT FROM ASSESS MENT PROCEEDINGS AND MERELY BECAUSE THERE WAS ADDITION IN ASSESSMENT IT COULD NOT AUTOMATICALLY LEAD TO PENALTY. THERE WAS NO MATERIAL BROUGHT ON R ECORD TO SHOW THAT THE ASSESSEE HAD CONCEALED PARTICULARS OF INCOME OR FUR NISHED INACCURATE PARTICULARS OF INCOME. THE ASSESSEE HAD RECEIVED ON LY AN AMOUNT OF RS.6 CRORES IN A.Y.2002-03 AND THE BALANCE CONSIDERATION COULD NOT BE DETERMINED AT THAT POINT OF TIME. FURTHER IN CASE THE PROJECT WAS DELA YED BEYOND REASONABLE TIME THE DEVELOPMENT AGREEMENT COULD ITSELF BE TERMINATE D AND IN THAT CASE NO INCOME COULD HAVE ACCRUED. THE CIT(A) WAS SATISFIED BY THE EXPLANATION GIVEN. IT WAS OBSERVED BY HIM THAT ON THE DUE DATE OF FILI NG THE RETURN OF INCOME FOR 6 A.Y.2002-03 I.E. ON 31.10.2002 THE TOTAL CONSIDERA TION WAS NOT DETERMINABLE. THE ASSESSEE HAD ORIGINALLY OFFERED THE CAPITAL GAI N IN A.Y.2006-07 IN WHICH THE CONSTRUCTION WAS COMPLETE AND THE FLATS WERE SOLD. LATER WHEN NOTICE WAS ISSUED UNDER SECTION 153C THE ASSESSEE TOOK LEGAL O PINION AND DECLARED THE INCOME IN A.Y.2002-03. THE OPINION WAS ALSO TAKEN F ROM COUNSEL WHICH SHOWED THAT INCOME HAD TO BE TAXED IN A.Y.2006-07 TO 2008- 09. THE ASSESSEE THEREAFTER HAD REVISED THE RETURNS OF INCOME FOR TH OSE YEARS. THE ASSESSEE HAD ALSO PAID ADVANCE TAX OF RS.2.75 CRORES ON 16.6.200 6. THERE WAS THUS NO INTENTION TO EVADE TAX. CIT(A) FURTHER OBSERVED THA T PENALTY WAS NOT MANDATORY BUT DISCRETIONARY IN NATURE. HE REFERRED TO THE JUDGMENT OF HONBLE HIGH COURT OF GUJARAT IN CASE OF CIT VS MONYLAL THA RACHAND (254 ITR 630) IN WHICH IT WAS HELD THAT NO PENALTY UNDER SECTION 271 (1)(C ) COULD BE LEVIED WHEN THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT CAPITAL GAIN WAS TAXABLE IN THE YEAR WHEN ENTIRE COMPENSATION WAS RECEIVED. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE HIGH COURT OF CALCUTTA IN CASE OF CIT VS DH HOLI TEACO LTD. (231 ITR 65). HE ALSO REFERRED TO THE DECISION OF TRIBUNAL I N CASE OF KANBAY SOFTWARE INDIA PVT. LTD. VS DCIT (31 SOT 153). CIT(A) ACCORD INGLY CONCLUDED THAT NO PENALTY WAS LEVIABLE. ACCORDINGLY HE DELETED THE P ENALTY IMPOSED AGGRIEVED BY WHICH THE REVENUE IS IN APPEAL. 7. BEFORE US THE LEARNED AR FOR THE ASSESSEE REITER ATED THE SUBMISSIONS MADE BEFORE LOWER AUTHORITIES. IT WAS SUBMITTED THA T THE YEAR OF TAXABILITY WAS IN DISPUTE AND THERE WERE DIFFERENCES OF OPINION EV EN AMONGST THE COUNSELS. THE ASSESSEE HAD NOT CONCEALED ANY FACTS. IT HAD DE CLARED THE TRANSACTIONS IN THE RETURNS. HE REFERRED TO THE BALANCE SHEET FOR A .Y.2002-03 AT PAGE 50 OF THE PAPER BOOK IN WHICH THE SUM OF RS.6 CRORES WAS SHOW N AS ADVANCE AGAINST SALE OF PROPERTIES. HE ALSO REFERRED TO THE NOTE 7 OF TH E AUDITORS AT PAGE 56 OF THE 7 REPORT IN WHICH IT WAS MENTIONED THAT COMPANYS NET WORTH HAD BEEN COMPLETELY ERODED AND WITH AN OBJECTIVE TO TURN ARO UND IT HAD ENTERED INTO A PROPERTY DEVELOPMENT AGREEMENT FOR THE LAND AND IT HAD RECEIVED AN ADVANCE PAYMENT OF RS.6 CRORES. IT WAS POINTED OUT THAT AT THE TIME OF FILING RETURN OF INCOME FOR A.Y.2002-03 THERE WERE DECISIONS OF THE TRIBUNAL AS PER WHICH DEVELOPMENT AGREEMENT DID NOT AMOUNT TO TRANSFER. T HE REFERENCE WAS MADE TO THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN CASE OF ASIAN DISTRIBUTORS LTD 119 TAXMAN 171. IT WAS ALSO POINTED OUT THAT JUDGME NT OF HONBLE HIGH COURT OF MUMBAI IN CASE OF CHATURBHUJ DWARKADAS KAPADIA ( SUPRA) WAS DELIVERED ONLY ON 13.2.2003 I.E. AFTER THE FILING OF RETURN F OR THE ASSESSMENT YEAR 2002- 03. THE ISSUE WAS DEBATABLE AND THEREFORE IN SUCH C ASES NO PENALTY SHOULD BE IMPOSED. RELIANCE WAS PLACED ON THE FOLLOWING JUDGM ENTS. I) 288 ITR 570 (DELHI) IN CASE OF CIT VS INTERNATIO NAL AUDIO VISUAL CO. II) 265 ITR 25 (CAL) IN CASE OF DURGA KAMAL RICE MI LL VS CIT III) 288 ITR 670 (DELHI) IN CASE OF CIT VS NATH BRO S EXIM INTERNATIONAL LTD. (V) 13 SOT 218(MUM) IN CASE OF TELEBUILD CONSTRUCTI ON P LTD. VS ACIT. (VI) ITA 1886/M/2007 IN CASE OF PHARMACEUTICAL RESE ARCH ASSOCIATES INDIA P.LTD. 7.1 REFERENCE WAS ALSO MADE TO THE FOLLOWING JUDGME NTS IN SUPPORT OF THE CASE : I) 291 ITR 519 (SC) IN CASE OF DILIP N SHROFF VS JT.C IT II) 292 ITR 11 (SC) IN CASE OF T ASHISH PAI VS CIT III) 322 ITR 158(SC) IN CASE OF CIT VS RELIANCE PETROPRO DUCTS (P) LTD. 8 8. THE LEARNED DR ON THE OTHER HAND STRONGLY SUPPOR TED THE ORDER OF A.O. IT WAS POINTED OUT THAT IN THE BALANCE SHEET THE A SSESSEE HAD SHOWN THE AMOUNT AS ADVANCE AND NOT AS INCOME. IT WAS ALSO PO INTED OUT THAT EVEN AFTER THE JUDGMENT DATED 13.2.2003 OF THE HONBLE HIGH CO URT OF MUMBAI IN CASE OF CHATURBHUJ DWARKADAS KAPADIA (SUPRA) THE ASSESSEE DID NOT REVISE THE RETURN. IT WAS DONE ONLY AFTER THE PROCEEDINGS WERE INITIAT ED UNDER SECTION 153C. THE EXPLANATION OF THE ASSESSEE WAS THEREFORE NOT BONAF IDE AND DETAILS HAD NOT BEEN GIVEN TRULY AND FULLY. THEREFORE PENALTY WAS LEVIABLE. 9. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING LEVY OF PENALTY UNDER SECTION 271(1)(C ) FOR CONCEALMENT OF INCOME IN RESPECT OF ADDITION MADE I N THE ASSESSMENT ON ACCOUNT OF CAPITAL GAIN ARISING FROM TRANSFER OF LA ND AS PER DEVELOPMENT AGREEMENT DATED 24.8.2001. IN TERMS OF THE SAID AGR EEMENT CONSIDERATION FIXED WAS RS.6 CRORES UPFRONT MONEY AND 40% OF SALE PROCEEDS OF THE FLATS TO BE CONSTRUCTED BY THE DEVELOPER M/S. MA. THE ASSESS EE RECEIVED THE PART CONSIDERATION OF RS.6 CRORES ON 21.3.2002 ON WHICH DATE THE POSSESSION OF THE LAND WAS ALSO HANDED OVER TO THE DEVELOPER. THE ASS ESSEE BEFORE TRANSFERRING THE DEVELOPMENT RIGHTS AND HANDING OVER THE POSSESS ION OF LAND HAD ALSO TAKEN CLEARANCE FROM THE INCOME-TAX DEPARTMENT BY FILING FORM NO.37-I IN WHICH CONSIDERATION FOR TRANSFER WAS MENTIONED AT RS.14 0 1 64 316/- CONSISTING OF THE UPFRONT MONEY OF RS.6 CRORES AND 40% OF SHARE IN TH E VALUE OF FLATS TO BE CONSTRUCTED WHICH HAD BEEN ESTIMATED AT RS.8 01 64 316/-. THE ASSESSEE HOWEVER DID NOT DECLARE ANY CAPITAL GAIN IN RESPECT OF THE TRANSFER OF LAND IN THE RETURN OF INCOME FILED FOR A.Y.2002-03 ON 31.10.200 2. SUBSEQUENTLY THERE WAS A SEARCH CONDUCTED UNDER SECTION 132 OF THE INCOME- TAX ACT IN CASE OF DIRECTORS OF THE ASSESSEE COMPANY ON 12.9.2006 AND BASED ON THE DOCUMENTS 9 FOUND AND SEIZED AT THE TIME OF SEARCH PROCEEDINGS WERE INITIATED UNDER SECTION 153C IN CASE OF THE ASSESSEE COMPANY IN RES PONSE TO WHICH THE ASSESSEE FILED THE RETURN FOR A.Y.2002-03 IN WHICH THE CAPITAL GAIN WAS DECLARED IN RESPECT OF THE TRANSFER OF LAND ON THE BASIS OF CONSIDERATION OF RS.14 01 61 316/- AS STATED BY THE ASSESSEE IN FORM NO.37-I SUBMITTED BEFORE THE INCOME-TAX DEPARTMENT FOR OBTAINING CLEARANCE B EFORE TRANSFERRING THE LAND. THE ASSESSEE COMPUTED THE CAPITAL LOSS OF RS.1 86 4 1 755/- AFTER CONSIDERING THE INDEXED COST OF ACQUISITION. 9.1 THE AO ON EXAMINATION OF DOCUMENTS AND DEVELOPM ENT AGREEMENT NOTED THAT THE ASSESSEE HAD TRANSFERRED ALL THE RIGHTS IN THE LAND EXCEPT TDR AND INCREASE IN FSI TO THE DEVELOPER. THE ASSESSEE HAD ALSO RECEIVED THE PART CONSIDERATION OF RS.6 CRORES AND HAD HANDED OVER TH E POSSESSION OF LAND DURING ASSESSMENT YEAR 2002-03. THE ASSESSEE HAD ALSO QUAN TIFIED THE TOTAL CONSIDERATION OF RS.14 01 64 316/- IN THE FORM NO.3 7-I SUBMITTED TO THE INCOME-TAX DEPARTMENT. THE AO THEREFORE CONCLUDED T HAT THE CASE OF THE ASSESSEE WAS COVERED BY THE PROVISIONS OF SECTION 2 (47)(V) AS PER WHICH ANY TRANSACTION INVOLVING ALLOWING OF HANDING OVER POSS ESSION OF ANY IMMOVABLE PROPERTY IN PART PERFORMANCE OF CONTRACT AS REFERRE D IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT IS DEEMED TO BE TRANSFER. THE ASSESSEE IN THIS CASE HAD HANDED OVER THE POSSESSION IN PART PERFORMANCE OF T HE CONTRACT AND THEREFORE THE LAND WAS DEEMED TO BE TRANSFERRED IN A.Y.2002-0 3. THE AO ALSO NOTED THAT THE ASSESSEE HAD RECEIVED THE TOTAL CONSIDERATION O F RS.43 88 87 617/- INCLUDING THE UPFRONT MONEY OF RS.6 CRORES SPREAD O VER THE PERIOD FROM ASSESSMENT YEAR 2002-03 TO 2008-09. THE AO COMPUTED THE DISCOUNTED VALUE OF THE CONSIDERATION IN A.Y.2002-03 AT RS.34 02 51 805/- AS PROVIDED IN SECTION 269UA R.W.R. 48-I AND AFTER CONSIDERING THE INDEXED COST OF ACQUISITION OF THE 10 LAND LONG TERM CAPITAL GAIN WAS COMPUTED AT RS.18 1 4 45 690/- AND ADDED TO THE TOTAL INCOME. THE ASSESSEE ACCEPTED THE ADDITIO N MADE BY AO AND FILED NO APPEAL BEFORE THE CIT(A). THE AO ALSO INITIATED PEN ALTY PROCEEDINGS UNDER SECTION 271(1)(C ) AND LEVIED PENALTY @ 100% OF TAX SOUGHT TO BE EVADED AMOUNTING TO RS.3 44 40 616/-. CIT(A) HAS DELETED T HE PENALTY LEVIED BY THE AO AGGRIEVED BY WHICH THE REVENUE IS IN APPEAL BEFO RE THE TRIBUNAL. 9.2 THE CASE OF THE ASSESSEE IS THAT PENALTY PROCEE DINGS ARE DIFFERENT FROM ASSESSMENT PROCEEDINGS AND THAT PENALTY CANNOT BE L EVIED ONLY ON THE GROUND THAT ASSESSEE HAD ACCEPTED THE ADDITION. IT HAS ALS O BEEN SUBMITTED THAT THE ISSUE WHETHER CAPITAL GAIN CAN BE CHARGED ON THE BA SIS OF DEVELOPMENT AGREEMENT HAS BEEN A DEBATABLE ISSUE AND AT THE TIM E OF FILING OF THE RETURN OF INCOME THERE WERE DECISIONS OF THE TRIBUNAL THAT NO CAPITAL GAIN WAS CHARGEABLE. IT HAS BEEN POINTED OUT THAT THE JUDGME NT OF HONBLE HIGH COURT OF MUMBAI IN CASE OF CHATURBHUJ DWARKADAS KAPADIA VS C IT (260 ITR 491) IN WHICH IT HAS BEEN HELD THAT FOR THE PURPOSE OF CAPI TAL GAIN POINT OF TRANSFER WAS THE DATE OF DEVELOPMENT AGREEMENT WAS DELIVERED ON LY ON 13.2.2003 AND WAS NOT AVAILABLE AT THE TIME OF FILING THE RETURN OF I NCOME BY THE ASSESSEE FOR THE A.Y.2002-03. THE ASSESSEE HAD NOT DECLARED THE CAPI TAL GAIN UNDER THE BONAFIDE BELIEF THAT THE SAME WAS NOT TAXABLE. IT H AS ALSO BEEN SUBMITTED THAT THERE WERE DIFFERENCES OF OPINION EVEN AMONG THE CO UNSELS ONE OF WHICH STATED THAT CAPITAL GAIN HAD TO BE CHARGED IN A.Y.2002-03 WHILE OTHER OPINED THAT IT WAS TO BE TAXED IN ASSESSMENT YEARS 2006-07 TO 2008 -09. IT HAS ACCORDINGLY BEEN PRAYED THAT THE PENALTY SHOULD BE DELETED. 9.3 WE HAVE CAREFULLY CONSIDERED THE VARIOUS ASPECT S OF THE MATTER. IN OUR VIEW A CASE FOR PENALTY UNDER SECTION 271(1)(C ) HA S TO BE EVALUATED IN TERMS 11 OF THE PROVISIONS OF EXPLANATION 1 TO SECTION 271(1 )(C ) AS PER WHICH IN RESPECT OF ANY ADDITION TO THE TOTAL INCOME IF THE ASSESSEE FAILS TO OFFER ANY EXPLANATION OR EXPLANATION OFFERED IS FOUND TO BE FALSE OR THE ASSESSEE OFFERS EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO P ROVE THAT THE EXPLANATION IS BONAFIDE AND ALL MATERIAL FACTS RELATING TO THE COM PUTATION OF INCOME HAD BEEN DISCLOSED IT WILL BE A CASE OF DEEMED CONCEALMENT OF PARTICULARS OF INCOME. THE PENALTY UNDER SECTION 271(1)(C ) IS A CIVIL LIABILI TY AND WILLFUL CONCEALMENT IS NOT REQUIRED TO BE PROVED BY THE DEPARTMENT AS HELD BY THE HONBLE SUPREME COURT IN CASE OF DHARMENDRA TEXTILES PROCESSORS & OTHERS (306 ITR 277). THE ARGUMENT OF THE LEARNED AR THAT FOR LEVY OF PENALTY UNDER SECTION 271(1)(C ) IT IS REQUIRED TO BE PROVED THAT THE ASSESSEE HAD DELI BERATELY CONCEALED THE PARTICULARS OF INCOME OR FILED INACCURATE PARTICULA RS OF INCOME IN VIEW OF THE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF DILIP N. SHROFF VS JCIT (291 ITR 519) AND IN CASE OF T.ASHOK PAI VS CIT (292 ITR 11) CANNOT BE ACCEPTED AS THE SAID JUDGMENT HAD BEEN CONSIDERED BY THE HONBLE SU PREME COURT IN CASE OF DHARMENDRA TEXTILES PROCESSORS & OTHERS (SUPRA) AND THE VIEW TAKEN THEREIN HAD NOT BEEN UPHELD. HOWEVER WE AGREE WITH THE LEAR NED AR THAT EACH AND EVERY ADDITION IN THE ASSESSMENT CANNOT AUTOMATICAL LY LEAD TO PENALTY UNDER SECTION 271(1)(C ). EACH CASE HAS TO BE EVALUATED O N ITS OWN FACTS UNDER THE PROVISIONS OF EXPLANATION 1 TO SECTION 271(1)(C ). IN THIS CASE THE EXPLANATION GIVEN BY THE ASSESSEE IS THAT THE ISSUE WAS DEBATAB LE AND THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT NO CAPITAL GAIN WAS REQU IRED TO BE DECLARED IN A.Y.2002-03. 9.4 WE ARE UNABLE TO ACCEPT THE ARGUMENT THAT IT W AS A CASE OF BONANFIDE BELIEF THAT THE CAPITAL GAIN WAS NOT TAXABLE. THE P ROVISIONS OF SECTION 2(47)(V) ARE VERY CLEAR THAT IN CASE OF PART PERFORMANCE OF CONTRACT IN WHICH THE 12 POSSESSION HAD BEEN HANDED OVER AFTER RECEIVING PAR T CONSIDERATION IT HAS TO BE TREATED AS TRANSFER AND THE CAPITAL GAIN HAS TO BE LEVIED IN THE YEAR IN WHICH THE POSSESSION WAS HANDED OVER. IN THIS CASE THERE IS N O DISPUTE THAT THE ASSESSEE HAD RECEIVED THE PART CONSIDERATION OF RS.6 CRORES AND HAD ALSO HANDED OVER THE POSSESSION IN A.Y.2002-03 AND THEREFORE THE CAP ITAL GAIN WAS CLEARLY CHARGEABLE IN A.Y.2002-03. THE LEARNED AR FOR THE A SSESSEE SUBMITTED THAT THERE WERE DECISIONS OF THE TRIBUNAL AS PER WHICH T HE CAPITAL GAIN WAS NOT CHARGEABLE ON THE BASIS OF DEVELOPMENT AGREEMENT. H E HAS RELIED ON THE DECISION OF THE TRIBUNAL IN CASE OF DCIT VS ASIAN D ISTRIBUTORS LTD. (119 TAXMAN 171). WE HAVE PERUSED THE SAID ORDER OF TRIBUNAL AN D FIND THAT THE CASE IS DISTINGUISHABLE. IN THAT CASE AS PER THE DEVELOPMEN T AGREEMENT DATED 31.3.88 A SUM OF RS.1.80 CRORES WAS PAYABLE TO THE ASSESSEE IN INSTALLMENTS. THE ASSESSEE HAD RECEIVED A SUM OF RS.1.30 CRORES ON 31 .3.88 AND THE BALANCE SUM OF RS.50 LACS WAS TO BE RECEIVED IN MAY 1988. THE A O HAD HELD THAT THE ASSESSEE HAD TRANSFERRED THE POSSESSION OF LAND AND THE TRANSACTION AMOUNTED TO TRANSFER IN A.Y.1988-89. THE TRIBUNAL HOWEVER NO TED THAT AS PER THE AGREEMENT POSSESSION OF THE LAND WAS TO BE GIVEN O NLY ON PAYMENT OF LAST INSTALLMENT WHICH FELL IN MAY 1988 AND TILL SUCH TIME THE ASSESSEE HAD RIGHT TO REVOKE THE CONTRACT IN CERTAIN EVENTUALITY. THE REV ENUE HAD NO MATERIAL TO PROVE THAT POSSESSION OF THE LAND HAD BEEN GIVEN BY 31.3.88. IT WAS THEREFORE HELD THAT NO CAPITAL GAIN COULD BE CHARGED IN A.Y.1 988-89. IN CASE OF THE ASSESSEE IT IS NOT IN DISPUTE THAT THE POSSESSION O F THE LAND HAD BEEN HANDED OVER ON 21.3.2002 AND PART CONSIDERATION OF RS.6 CR ORES HAD ALSO BEEN RECEIVED AND THEREFORE THE CAPITAL GAIN WAS CHARGEABLE IN A. Y.2002-03 IN VIEW OF THE PROVISIONS OF SECTION 2(47)(V). THIS IS SUPPORTED BY THE JUDGMENT OF HONBLE HIGH COURT OF MUMBAI IN CASE OF CHATURBHUJ DWARKADA S KAPADIA (SUPRA). EVEN AFTER THE SAID JUDGMENT WAS DELIVERED THE ASSESSEE DID NOT REVISE THE RETURN. 13 AS REGARDS THE OPINION OF THE COUNSEL THAT THE CAPI TAL GAIN WAS CHARGEABLE IN A.Y.2006-07 TO 2008-09 THE SAID OPINION WAS TAKEN A FTER THE SEARCH CONDUCTED AND HAS NO RELEVANCE IN VIEW OF THE BINDING DECISIO N OF THE JURISDICTIONAL HIGH COURT WHICH HAD ALREADY BEEN DELIVERED. THE DISCLOS URE OF CAPITAL GAIN IN A.Y.2006-07 ALSO DOES NOT PROVE THE BONAFIDES OF TH E ASSESSEE AS THE SAID RETURN HAD BEEN FILED AFTER THE SEARCH HAD BEEN CON DUCTED. 9.5. THEREFORE THE PLEA OF THE ASSESSEE THAT IT WA S OF BONAFIDE BELIEF ON THE BASIS OF TRIBUNAL DECISION THAT NO CAPITAL GAIN WAS CHARGEABLE CANNOT BE ACCEPTED. WE ALSO NOTE THAT THE ASSESSEE HAD NOT DI SCLOSED TRULY AND FULLY ALL THE MATERIAL FACTS RELATING TO THE TRANSFER IN THE RETURN OF INCOME FOR A.Y.2002- 03. IN THE BALANCE SHEET FOR A.Y.2002-03 AND ALSO I N THE AUDIT NOTE THE SUM OF RS.6 CRORES RECEIVED BY THE ASSESSEE HAD BEEN SHOWN AS ADVANCE WHICH IS QUITE MISLEADING AS THE SUM OF RS.6 CRORES WAS NOT ADVANCE BUT PART OF THE SALE CONSIDERATION. THE ASSESSEE THUS IN THE RETURN OF I NCOME HAD HIDDEN THE FACTS THAT IT HAD ALREADY RECEIVED PART OF THE SALE CONSI DERATION. THE FACT THAT POSSESSION OF THE LAND HAD BEEN HANDED OVER WITHIN THE YEAR HAD ALSO NOT BEEN DISCLOSED. THE ASSESSEE THUS HAD NOT DISCLOSED TRUL Y AND FULLY ALL MATERIAL FACTS RELATING TO THE COMPUTATION OF INCOME AS REQUIRED I N THE EXPLANATION 1 TO SECTION 271(1)(C ) THE ASSESSEE IN THE RETURN OF IN COME HAD ALSO NOT STATED THAT IT WAS MAKING THE CLAIM ON THE BASIS OF SOME T RIBUNAL DECISIONS. CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES WE ARE OF THE CONSIDERED VIEW THAT THE EXPLANATION OF THE ASSESSEE CANNOT BE CONSIDERED BONAFIDE. THE LEARNED AR FOR THE ASSESSEE HAS ALSO PLACED RELIANC E ON CERTAIN JUDGMENTS OF THE HIGH COURTS AND TRIBUNAL AS MENTIONED IN PARA 7 EARLIER BUT ALL THE JUDGMENTS ARE DISTINGUISHABLE ON FACTS AND RELATE T O DIFFERENT SITUATIONS. AS WE HAVE MENTIONED EARLIER EACH CASE HAS TO BE EVALUATE D ON THE MERITS ON ITS OWN 14 FACTS AND ON THE FACTS OF THE PRESENT CASE WE ARE C ONVINCED THAT NON DISCLOSURE OF THE ASSESSEE OF THE CAPITAL GAIN IN A.Y.2002-03 WAS NOT BONAFIDE. THE LEARNED AR FOR THE ASSESSEE HAS ALSO RELIED ON THE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF CIT VS RELIANCE PETRO PROD UCTS PVT. LTD. (322 ITR 158). THE SAID CASE IS HOWEVER DISTINGUISHABLE. IN THAT CASE IT WAS HELD THAT DISALLOWANCE OF THE CLAIM MADE BY THE ASSESSEE IN T HE RETURN OF INCOME DOES NOT AMOUNT TO FILING INACCURATE PARTICULARS OF INCO ME. IN THE PRESENT CASE ADDITION HAS NOT BEEN MADE BECAUSE OF DISALLOWANCE OF ANY CLAIM IN THE RETURN OF INCOME. THE ADDITION HAS BEEN MADE FOR NOT DISCL OSING THE INCOME IN THE RETURN AND SUCH ADDITION AS WE HAVE HELD EARLIER AM OUNTS TO DEEMED CONCEALMENT OF PARTICULARS OF INCOME AS PER EXPLANA TION 1 TO SECTION 271(1)(C). 9.6 IN VIEW OF THE FOREGOING DISCUSSION WE ARE OF THE CONSIDERED VIEW THAT PENALTY UNDER SECTION 271(1)(C ) IS LEVIABLE IN THI S CASE AND THE ORDER OF CIT(A) DELETING THE PENALTY CANNOT BE SUSTAINED. THE ORDER OF CIT(A) IS ACCORDINGLY SET ASIDE AND PENALTY LEVIED BY AO IS UPHELD. 10. IN THE RESULT APPEAL OF THE REVENUE IS ALLOWED. 11. ORDER WAS PRONOUNCED IN THE OPEN COURT 11.03.2 011. SD/- SD/- ( N.V.VASUDEVAN ) (RAJENDR A SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 11.03.2011 AT :MUMBAI COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 15 3. THE CIT(A) MUMBAI CONCERNED 4. THE CIT MUMBAI CITY CONCERNED 5. THE DR G BENCH ITAT MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI ALK