ACIT - 16(2), MUMBAI v. SMT. CECILIA HARESH CHAGANLAL, MUMBAI

ITA 2661/MUM/2013 | 2009-2010
Pronouncement Date: 05-11-2014

Appeal Details

RSA Number 266119914 RSA 2013
Assessee PAN AAFPJ1044E
Bench Mumbai
Appeal Number ITA 2661/MUM/2013
Duration Of Justice 1 year(s) 7 month(s)
Appellant ACIT - 16(2), MUMBAI
Respondent SMT. CECILIA HARESH CHAGANLAL, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 05-11-2014
Appeal Filed By Department
Bench Allotted C
Tribunal Order Date 05-11-2014
Assessment Year 2009-2010
Appeal Filed On 05-04-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH MUMBAI JH LAT; VJKSM+K] YS[KK LNL; OA JH LAT; VJKSM+K] YS[KK LNL; OA JH LAT; VJKSM+K] YS[KK LNL; OA JH LAT; VJKSM+K] YS[KK LNL; OA JH FOT; IKY JKO] U;KF;D LNL; DS LE{K JH FOT; IKY JKO] U;KF;D LNL; DS LE{K JH FOT; IKY JKO] U;KF;D LNL; DS LE{K JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE SHRI SANJAY ARORA ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO JUDICIAL MEMBER ITA NO. 2661/MUM/2013 ASSESSMENT YEAR: - 2009-10 ASSISTANT COMMISSIONER OF INCOME TAX MATRU MANDIR TARDEO ROAD MUMBAI 400 007. VS.` SMT. CECILIA HARESH CHAGANLAL 5 TH FLOOR BEACH VIEW CHAWPATTY SEA FACE MUMBAI 400 007. PAN: AAFPJ1044E ASSESSEE RESPONDENT ORDER PER VIJAY PAL RAO JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE OR DER DATED 30.1.2013 OF CIT(A) ARISING FROM THE PENALTY ORDER PASSED U/S 271( 1)(C) OF THE INCOME TAX ACT FOR THE A.Y. 2009-10. THE REVENUE HAS RAISED FOLLOW ING GROUND IN THIS APPEAL:- WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE PENALTY LEVIED U/S 271 (1)(C) OF RS. 66 19 900/- FOR FURNISHING INACCURATE PARTICULARS OF INCOME WITHOUT APPRECIATING THE FACT THAT FILING OF REVISED RETURN WAS INTENTIONAL TO EVA DE TAX AS CLEARLY EVIDENCE BY THE PAYMENT OF SELF ASSESSMENT TAX AMOUNTING TO RS. 74.12 LACS DURING ASSESSMENT PROCEEDINGS. 2. BRIEF FACTS EMERGING FROM RECORD ARE THAT THE ASS ESSEE IS AN INDIVIDUAL AND A SENIOR CITIZEN OF 80 YEARS AGE. FOR THE YEAR UNDER C ONSIDERATION THE ASSESSEE FILED REVENUE BY SHRI PREMANGAL ASSESSEE BY SHRI CHETAN KARIA DATE OF HEARING 9-10-2014 DATE OF PRONOUNCEMENT 5.11.2014 SMT. CECILIA HARESH CHAGANLAL 2 | P A G E THE RETURN OF INCOME ON 31.07.2009 WHEREIN LONG TER M CAPITAL GAINS OF RS. 5 84 27 373/- ON SALE OF PAINTINGS WERE OFFERED TO TAX AT THE NORMAL TAX RATE OF 20% APPLICABLE TO THE LONG TERM CAPITAL GAINS UNDER THE ACT. THEREAFTER THE ASSESSEE FILED REVISED RETURN ON 08-09-2009 WHEREIN T HE AFORESAID LONG TERM CAPITAL GAINS ARE OFFERED TO TAX AT THE CONCESSIONAL TAX RATE OF 10% UNDER PROVISO TO SUB SECTION (1) OF SECTION 112 OF THE ACT. IN OR DER TO SCRUTINIZE THE RETURN FILED BY THE ASSESSEE NOTICE U/S. 143(2) OF THE ACT WAS I SSUED ON 05-09-2010 FOLLOWED BY THE NOTICE U/S. 142 (1) OF THE ACT DATED 24-05-201 1. DURING THE PENDENCY OF SCRUTINY PROCEEDINGS ASSESSEE FILED THE SECOND REVI SED RETURN ON 11- 07 -2011 IN WHICH THE AFORESAID LONG TERM CAPITAL GAINS WERE OF FERED TO TAX BACK @ 20% TAX RATE AS IN THE ORIGINAL RETURN AND THE TAXES DUE ON THE IMPUGNED CAPITAL GAINS WERE PAID ALONG WITH INTEREST. WHILE COMPLETING THE ASSESSMENT THE AO. IN HIS ASSESSMENT ORDER NOTED THAT THE SECOND REVISED RETURN F ILED ON 11.7.2011 IS BEYOND THE TIME ALLOWED UNDER THE ACT AND THEREFORE N O COGNIZANCE CAN BE TAKEN THEREOF. ACCORDINGLY THE AO CONSIDERED THE FIRST REVI SED RETURN FILED ON 08-09- 2009 FOR THE PURPOSE OF ASSESSMENT. SECONDLY THE A.O . OBSERVED THAT BY OFFERING THE IMPUGNED LONG TERM CAPITAL GAINS TO TAX @ 10% T AX RATE ASSESSEE HAS GIVEN IT THE COLOUR OF LONG TERM CAPITAL GAINS ON SALE OF BO NDS DEBENTURES LISTED SHARES ETC. NOTED IN THE PROVISO TO SUB SECTION (1) OF SEC TION 112 OF THE ACT. IN THE OPINION OF THE A.O. ASSESSEE HAS MADE A WRONG CLAIM IN THE REVISED RETURN DATED 08-09-2009 BY OFFERING THE IMPUGNED CAPITAL GAINS AT 10% TAX RATE INSTEAD OF 20% TAX RATE AND THUS FURNISHED INACCURATE PARTICULA RS OF HER INCOME IN RESPECT OF THE SALE OF PAINTINGS. ACCORDINGLY THE A.O. INI TIATED PENALTY PROCEEDINGS U/S. 271 (1 )(C) OF THE ACT. BEFORE THE A.O. ASSESSEE S UBMITTED THAT OWING TO THE ADVICE GIVEN BY HER AUDITOR SHE WAS UNDER THE BONAFIDE IMPR ESSION THAT THE IMPUGNED CAPITAL GAINS ARE TAXABLE AT THE CONCESSIONAL RATE OF 10%. IT IS ALSO SUBMITTED TO THE AO THAT ON BEING ADVISED BY THE ANOTHER AUDITOR AT A SUBSEQUENT DATE THAT THE CONCESSIONAL RATE DOES NOT APPLY TO THE SALE OF PAI NTINGS BUT ONLY TO THE LISTED SMT. CECILIA HARESH CHAGANLAL 3 | P A G E SHARES AND SECURITIES THE ASSESSEE ONCE AGAIN FILED THE REVISED RETURN DATED 11/7/2011 OFFERING THE IMPUGNED CAPITAL GAINS TO TAX BACK AT THE 20% TAX RATE. HOWEVER THE A.O. WAS OF THE OPINION THAT THE SECOND REVISED RETURN WAS NOT ONLY OUT OF TIME BUT IT WAS ALSO FURNISHED ON ACCOUNT OF THE NOTICE ISSUED U/S. 143(2) OF THE ACT AND NOT OTHERWISE. RELYING UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATIONS PVT. LTD. (191 TAXMANN 179) THE A.O HELD THAT THE ASSESSEE MADE A DELIBERATE EFFORT TO FUR NISH INACCURATE PARTICULARS OF HER INCOME WITH A MALAFIDE INTENTION TO GET THE BEN EFIT OF LOWER TAX RATE. ACCORDINGLY THE ASSESSING OFFICER LEVIED THE IMPUG NED PENALTY. 3. THE ASSESSEE CHALLENGED THE ACTION OF ASSESSING O FFICER BEFORE CIT(A) AND CONTENDED THAT THE REVISED RETURNS WERE FILED BY THE A SSESSEE VOLUNTARILY AND TAXES DUE THERE ON WERE PAID. IT WAS FURTHER SUBMITTE D THAT THESE RETURNS WERE FILED THROUGH ONE SHRI M.B. THAKKAR CHARTERED ACCOUN TANT LOOKING AFTER THE INCOME TAX MATTERS OF THE ASSESSEE FOR THE PAST 20 YEARS. THEREFORE THE CONCESSIONAL RATE OF TAX APPLIED TO THE CAPITAL GAIN WAS COMPUTED AS PER THE ADVICE OF THE CHARTERED ACCOUNTANT WITHOUT CLAIMING T HE BENEFIT OF COST INDEX. THUS IT WAS PLEADED BEFORE THE CIT(A) THAT THE ACT OF FILING THE REVISED RETURNS AND CLAIMING CONCESSIONAL TAX RATE ON CAPITAL GAIN A RISING FROM SALE OF PAINTINGS WAS DUE TO BONAFIDE BELIEF WHICH WAS LATER ON CORREC TED WITHOUT ANY SHOW CAUSE NOTICE GIVEN BY THE DEPARTMENT. THE ASSESSEE CONTEN DED THAT THE ASSESSEE DID NOT FURNISH ANY INACCURATE PARTICULARS OF HER INCOM E AND THERE WAS ONLY A WRONG CLAIM OF A LOWER TAX RATE THEREON DUE TO THE BONAFI DE BELIEF HENCE THE PENALTY U/S 271(1)(C) CANNOT BE LEVIED. THE CIT(A) ACCEPTED THE E XPLANATION OF THE ASSESSEE AND WAS OF THE VIEW THAT ALL THE FACTS RELATED TO TH E IMPUGNED CAPITAL GAIN WERE FULLY DISCLOSED BY THE ASSESSEE IN THE RETURNS FILED BY HER. THE CIT(A) HELD THAT IN THE GIVEN FACTS AND CIRCUMSTANCES THE ASSESSEE CANN OT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS OF HER INCOME AND FURTHER THE EXPLANATION SMT. CECILIA HARESH CHAGANLAL 4 | P A G E FURNISHED BY HER IN THIS REGARD IS FOUND TO BE BONAF IDE. ACCORDINGLY THE PENALTY LEVIED U/S 271(1)(C) WAS CANCELLED BY THE CIT(A). 4. BEFORE US THE LD. DR HAS SUBMITTED THAT IN THE O RIGINAL RETURN THE ASSESSEE HAS OFFERED THE TAX AT THE RATE OF 20% ON CAPITAL GA IN ARISING FROM SALE OF PAINTINGS BUT SUBSEQUENTLY THE ASSESSEE FILED REVISED RETURN O N 8.09.2009 IN WHICH THE ASSESSEE HAD OFFERED TAX ON LONG TERM CAPITAL GAIN AT A CONCESSIONAL RATE OF 10%. BY DOING SO THE ASSESSEE HAS WRONGLY GIVEN THIS LO NG TERM CAPITAL GAIN ARISING FROM SALE OF PAINTINGS THE COLOUR OF LONG TERM CAP ITAL GAINS ON SALE OF BONDS DEBENTURES LISTED SHARES ETC. AS PER SECTION 112 OF THE ACT. THUS THE LD. DR HAS SUBMITTED THAT THIS IS NOT A CASE OF SOME BONAFIDE MI STAKE BUT IT WAS CLAIMED BY THE ASSESSEE TO OFFER LONG TERM CAPITAL GAIN UNDER A DIFFERENT CATEGORY WHICH IS ABSOLUTELY INCORRECT AND FALSE. THEREFORE THE ASSE SSEE HAD MADE A FALSE CLAIM BY FILING INACCURATE PARTICULARS OF HER INCOME TREATIN G THE SALE OF PAINTINGS WRONGLY UNDER THE PURVIEW OF PROVISIONS OF SECTION 112 OF T HE INCOME TAX ACT AND THEREBY PAYING LESS TAX AT THE RATE OF 10% INSTEAD OF 20%. T HE ASSESSEE RECEIVED THE REFUND ON THE REVISED RETURN OF INCOME BY CLAIMING CO NCESSIONAL RATE OF TAX. THEREAFTER THE ASSESSING OFFICER ISSUED A NOTICE U /S 143(2) ON 15.09.2010. UPON WHICH THE ASSESSEE AGAIN RE-REVISED HER RETURN AND OFFERED RIGHT RATE OF TAXATION AS DONE IN THE ORIGINAL RETURN. THE LD. DR HAS SUBMIT TED THAT THE SECOND REVISED RETURN IS NOT VOLUNTARY BUT ONLY AFTER THE NOTICE U/S 143(2) WAS ISSUED BY THE ASSESSING OFFICER. THE ABOVE ACTION AND CONDUCT OF TH E ASSESSEE PROVES THAT THE ASSESSEE WAS VERY MUCH AWARE OF THE CORRECT TAX OF RATE TO BE LEVIED ON THE SAID CAPITAL GAIN WHICH WAS APPLIED IN THE ORIGINAL RETU RN OF TAX THEN THE SAME WAS LOWERED IN THE REVISED RETURN AND AGAIN IT WAS CORREC TED IN THE SECOND REVISED RETURN. SUBMITTING THE CLAIM WHICH IS INCORRECT AND IMPERMISSIBLE IN LAW SMT. CECILIA HARESH CHAGANLAL 5 | P A G E AMOUNTS TO FURNISHING INACCURATE PARTICULARS OF INC OME. HE HAS RELIED UPON THE ORDER OF ASSESSING OFFICER PASSED U/S 271(1)(C). 5. ON THE OTHER HAND THE LD. AUTHORIZED REPRESENTAT IVE OF THE ASSESSEE SUBMITTED THAT THERE IS NO CONCEALMENT OR FURNISHING INACCURATE PARTICULARS OF INCOME WHEN THE ASSESSEE HAS MAINTAINED THE SAME INC OME IN ALL THE RETURNS OF INCOME. THE ONLY DIFFERENCE IN THE REVISED RETURN IS ON ACCOUNT OF FACT THAT IN THE ORIGINAL RETURN OF INCOME THE ASSESSEE DID NOT CLAI M INDEX COST AND THEREFORE AS PER THE ADVICE OF THE CHARTERED ACCOUNTANT THE ASSES SEE CLAIMED THE CONCESSIONAL TAX AT THE RATE OF 10% ON LONG TERM CA PITAL GAIN ARISING FROM SALE OF PAINTINGS. THE LD. AUTHORIZED REPRESENTATIVE HAS RAIS ED A LEGAL OBJECTION AGAINST THE LEVY OF PENALTY ON THE BASIS OF THE REVISED RETU RN AND SUBMITTED THAT NO PENALTY CAN BE LEVIED U/S 271(1)(C) ON THE BASIS OF THE REVISED RETURN BUT ONLY THE ORIGINAL RETURN HAS TO BE CONSIDERED FOR THE PURPOSE OF SECTION 271(1)(C). HE HAS SUBMITTED THAT THE ASSESSEE HAS CORRECTLY OFFERED TH E TAX IN THE ORIGINAL RETURN AND THEREFORE THERE IS NO QUESTION OF LEVY OF PENA LTY BASED ON THE REVISED RETURN WHEREIN THE ASSESSEE CLAIMED CONCESSIONAL RATE OF T AX AT 10% INSTEAD OF 20% DUE TO THE FACT THAT THE ASSESSEE DID NOT CLAIM INDEX CO ST WHILE COMPUTING LONG TERM CAPITAL GAIN. IN SUPPORT OF HIS CONTENTION HE HAS R ELIED UPON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. ONKAR SARAN & SONS (1992) 195 ITR 1 (SC) AS WELL AS THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF SHREE ASHRAY LAL VS. CIT (223 ITR 705) AND SUBMITTED THAT ONLY THE ORIGINAL RETURN OF INCOME SHOULD BE TAKEN INTO CONSIDERATION F OR DETERMINATION OF ASSESSEES LIABILITY FOR PENALTY U/S 271(1) AND IT CANNOT BE SAID THAT THE ASSESSEE CONCEALED PARTICULARS OF INCOME ALREADY SHO WN IN THE ORIGINAL RETURN MERELY BECAUSE SUCH INCOME WAS NOT SHOWN SUBSEQUENT LY IN THE REVISED RETURN. THE SECOND ARGUMENT OF THE LD. AUTHORIZED REPRESENTAT IVE IS REGARDING THE APPLICABILITY OF SECTION 271(1)(C) ONLY ON THE INCO ME DISCLOSED IN THE RETURN OF SMT. CECILIA HARESH CHAGANLAL 6 | P A G E INCOME AND NOT ON THE TAX APPLIED ON SUCH INCOME. HE HAS CONTENDED THAT THERE IS NO CONCEALMENT OR INCORRECT PARTICULARS OF INCOME I N ANY OF THE RETURN FILED BY THE ASSESSEE BUT THE ONLY DIFFERENCE IS THE RATE OF TAX APPLIED BY THE ASSESSEE IN THE REVISED RETURN. THEREFORE WITHOUT PREJUDICE TO THE CONTENTION OF THE ASSESSEE EVEN IF THE REVISED RETURN IS TAKEN INTO ACCOUNT NO PENALTY IS LEVIABLE BECAUSE THERE IS NO INACCURATE PARTICULARS OF INCOME BUT ON LY CONCESSIONAL RATE OF TAX WAS APPLIED. THE THIRD ARGUMENT OF THE LD. AUTHORIZED REPR ESENTATIVE IS REGARDING BONAFIDE MISTAKE. THE LD. AUTHORIZED REPRESENTATIVE HAS SUBMITTED THAT THE ASSESSEE IS A SENIOR CITIZEN OF 80 YEARS OLD AND DEPEN DENT UPON THE ADVICE OF THE CHARTERED ACCOUNTANT SO FAR AS THE INCOME TAX MATTER S ARE CONCERNED. THE ORIGINAL RETURN AS WELL AS REVISED RETURNS WERE FIL ED ON THE BASIS OF THE ADVICE OF CHARTERED ACCOUNTANT THEREFORE IF A MISTAKE IS COM MITTED BY THE CHARTERED ACCOUNTANT DUE TO INADVERTENCE OR OVERSIGHT THEN IT C ANNOT BE SAID THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INC OME BUT THE SAME FALLS UNDER THE BONAFIDE MISTAKE. IN SUPPORT OF HIS CONTENTION H E HAS RELIED UPON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF PRICE WATERHOSUE COOPERS PVT. LTD. (2012) 348 ITR 306 (SC). HE HAS FURTHER SUBMITTED THAT THE COMPUTATION OF INCOME AND FILING OF RETURN OF INCOME FALLS UNDER THE PROVISIONS OF SECTION 239 WHEREAS THE TAX COMPUTATION ON THE INCOME FALLS U/S 140A THEREFORE ANY INCORRECT PARTICULAR IN COMPUTATION OF TAX WOULD NO T AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. FURTHER THE ASSES SING OFFICER HAS NOT MADE ANY ADDITION IN THE INCOME OF THE ASSESSEE THEREFORE IN THE ABSENCE OF ANY ADDITION IN THE RETURN INCOME OF THE ASSESSEE THE PROVISIONS O F SECTION 271(1)(C) ARE NOT APPLICABLE. 6. IN REBUTTAL THE LD. DR HAS SUBMITTED THAT THE R ETURN OF INCOME IS FURNISHED IN THE PRESCRIBED FORM WHICH ALSO CONTAINS THE COMPU TATION OF TAX THEREFORE THE COMPUTATION OF TAX APPLICATION OF CORRECT RATE OF T AX IS PART AND PARCEL OF THE SMT. CECILIA HARESH CHAGANLAL 7 | P A G E RETURN OF INCOME. SECTION 140A MANDATES ONLY THE PAY MENT OF TAX AND ADJUSTMENT OF THE TAX NOT COMPUTATION OF TAX. HE HAS REFERRED T HE EXPLANATION 4 TO SECTION 271(1)(C) AND SUBMITTED THAT IF THE ASSESSEE PAYS LE SS TAX THAT WOULD HAVE BEEN CHARGED ON THE INCOME IN RESPECT OF WHICH PARTICULA RS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED HAD SUC H INCOME BEING THE TOTAL INCOME. THE DIFFERENCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND THE TAX THAT WOULD HAVE BEEN CHARGEABLE AT SUCH TOTAL INCOME HAVE BEEN REDUCED BY THE AMOUNT OF INCOME IN RESPECT OF WHICH PARTICULARS HA VE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED THEREFO RE THE CONCEALMENT OF THE INCOME WILL BE CONSIDERED IN THE CONTEXT OF THE TAX ASSESSED AND PAID BY THE ASSESSEE IS LESS THAN WHAT WOULD HAVE BEEN IF THE CO RRECT PARTICULARS OF INCOME WAS FURNISHED. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE QUESTION ARISES FOR OUR CONSIDERATION AN D ADJUDICATION IS WHETHER OFFERING THE TAX AT A CONCESSIONAL RATE APPLICABLE ON A DIFFERENT CATEGORY OF INCOME WOULD AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME ATTRACTING THE PROVISIONS OF SECTION 271(1)(C). THE FACTS IN THE C ASE OF THE ASSESSEE ARE NOT IN DISPUTE AS THE ASSESSEE FILED ITS ORIGINAL RETURN OF INCOME ON 31.07.2009 AND OFFERED THE LONG TERM CAPITAL GAIN ON SALE OF PAINTI NGS TO TAX AT THE NORMAL RATE OF 20% AS APPLICABLE ON SUCH LONG TERM CAPITAL GAIN . SUBSEQUENTLY THE ASSESSEE HAS FILED A REVISED RETURN ON 8.09.2009 AND OFFERED TH E TAX AT A CONCESSIONAL RATE OF 10% UNDER THE PROVISO TO SECTION 112(1) OF THE IN COME TAX ACT. IT IS PERTINENT TO NOTE THAT THE CONCESSIONAL RATE OF TAX @ 10% AS PER SECOND PROVISO TO SECTION 112(1) READ WITH SECOND PROVISO TO SECTION 48 IS APP LICABLE ON THE LONG TERM CAPITAL GAIN ARISING FROM SALE OF SECURITIES LISTE D BONDS SHARES ETC. IF THE ASSESSEE WHILE COMPUTING SUCH LONG TERM CAPITAL GAI N HAS NOT TAKEN THE BENEFIT OF INDEXED COST. THEREFORE AS PER THE PROVISIONS OF SECTION 112(1) OF THE INCOME SMT. CECILIA HARESH CHAGANLAL 8 | P A G E TAX ACT. AN OPTION IS AVAILABLE TO THE ASSESSEE IN RESPECT OF THE LONG TERM CAPITAL GAIN ARISING FROM SALE OF SUCH LISTED SHARES BONDS SECURITIES ETC. EITHER TO TAKE THE BENEFIT OF INDEXED COST OR APPLY CONCESSIONAL RA TE OF TAX AT 10% WHICHEVER IS BENEFICIAL TO THE ASSESSEE. THEREFORE THERE IS NO AMBIGUITY OR SCOPE OF ANY MISUNDERSTANDING ABOUT THE APPLICABILITY OF SECTION 112 OF THE INCOME TAX ACT ONLY ON THE LONG TERM CAPITAL GAIN ARISING FROM SAL E OF SUCH LISTED SHARES SECURITIES BONDS ETC. IN THE CASE IN HAND THE LONG TERM CAPITAL GAIN AROSE ON SALE OF PAINTINGS THEREFORE THE INCOME FROM LONG TERM CAPITAL GAIN FROM SALE OF PAINTINGS IS NOT ALLOWABLE FOR CONCESSIONAL RATE OF TAX AS PER THE PROVISO TO SECTION 112(1) OF THE INCOME TAX ACT. THE ASSESSEE HAS ALSO FILED A SECOND REVISED RETURN OF INCOME ON 11.7.2011 IN WHICH THE ASSESSE E OFFERED THE LONG TERM CAPITAL GAIN TO TAX AT THE RATE OF 20% AS IT WAS OF FERED IN THE ORIGINAL RETURN OF INCOME THOUGH THE SAID RETURN OF INCOME WAS TREATED AS INVALID BEING BARRED BY LIMITATION. THE PENALTY PROCEEDINGS HAVE BEEN INITI ATED BY THE AO BASED ON THE FIRST REVISED RETURN FILED BY THE ASSESSEE WHEREIN THE CONCESSIONAL RATE OF TAX WAS CLAIMED ON THE LONG TERM CAPITAL GAIN. THE AMOUNT O F LONG TERM CAPITAL GAIN REMAINS SAME IN ALL THE THREE RETURN OF INCOME FILE D BY THE ASSESSEE AND THE ONLY CHANGE AND DIFFERENCE IN THE ORIGINAL RETURN OF INCOM E AND FIRST REVISED RETURN OF INCOME IS THE RATE OF TAX APPLIED BY THE ASSESSEE. T HOUGH BY APPLYING CONCESSIONAL RATE OF TAX AT 10% ON THE GROUND THAT T HE ASSESSEE HAS NOT TAKEN THE BENEFIT OF INDEXED COST FOR COMPUTATION OF LONG TERM CAPITAL GAIN WOULD HELP THE ASSESSEE IF IN THE RETURN OF INCOME THE ASSESSEE H AS GIVEN THE IMPRESSION THAT THE LONG TERM CAPITAL GAIN IN QUESTION IS ARISING FROM THE TRANSFER OF LISTED SHARES BONDS SECURITIES ETC. HOWEVER IN THE RETURN OF IN COME THE ASSESSEE HAS SPECIFICALLY AND CATEGORICALLY MENTIONED THE CAPITA L GAIN ARISING FROM THE SALE OF PAINTINGS. THE SOURCE OF INCOME HAS BEEN EXPLAINED BY THE ASSESSEE IN ALL THE RETURN OF INCOME WHICH REMAINS SAME AND THEREFORE THERE IS NO CHANGE IN THE SOURCE OF INCOME AND THE CATEGORY OF INCOME WHICH I S SPECIFIED AS CAPITAL GAIN SMT. CECILIA HARESH CHAGANLAL 9 | P A G E FROM SALE OF PAINTINGS THEN EVEN IF THE ASSESSEE HA S APPLIED INCORRECT RATE OF TAX IN THE REVISED RETURN IT WOULD NOT CONSTITUTE THAT TH E ASSESSEE HAS CHANGED THE CLASS/NATURE OF INCOME ELIGIBLE FOR CONCESSIONAL TA X U/S 112(1) OF THE INCOME TAX ACT. WHEN THERE IS NO ATTEMPT ON THE PART OF THE AS SESSEE TO SHOW THE LONG TERM CAPITAL GAIN IN A DIFFERENT CATEGORY THEN MERELY BEC AUSE A CONCESSIONAL RATE OF TAX WAS APPLIED IN THE REVISED RETURN DOES NOT IFSO FACTO LEAD TO THE CONCLUSION THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME . EVEN OTHERWISE ALL THESE FACTS AND CIRCUMSTANCES SUPPORTS THE EXPLANATION OF THE ASSESSEE THAT THE CONCESSIONAL RATE OF TAX ON LONG TERM CAPITAL GAIN WAS APPLIED ON THE BASIS OF THE ADVICE OF THE CHARTERED ACCOUNTANT THEREFORE IT WAS A BONA FIDE MISTAKE. THIS EXPLANATION IN OUR VIEW IS QUITE REASONABLE AS PER THE EXPLANATION 1B OF SECTION 271(1) OF THE INCOME TAX ACT PARTICULARLY IN VIEW O F THE FACT THAT THE ASSESSEE DID NOT CLAIM THE BENEFIT OF INDEXED COST WHILE COMPUTING THE CAPITAL GAIN IN QUESTION. THIS IS NOT A CASE THAT THE LONG TERM CA PITAL GAIN IN QUESTION IS NOT ELIGIBLE FOR BENEFIT OF INDEXED COST. THE CLAIM OF CO NCESSIONAL TAX APPLIED ON THE LONG TERM CAPITAL GAIN THOUGH IS AGAINST THE PROV ISIONS OF INCOME TAX ACT HOWEVER IT IS BASED ON THE FACT THAT THE BENEFIT O F INDEXED COST WAS AVAILABLE TO THE CAPITAL GAIN IN QUESTION WHICH WAS NOT CLAIMED BY THE ASSESSEE. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF CIT(A) IN DELET ING THE PENALTY BY FOLLOWING THE JUDGMENT OF HONBLE HIGH COURT IN THE CASE OF PRICE WATERCOOPERS (SUPRA). 8. THE ASSESSEE HAS ALSO RAISED A LEGAL POINT THAT PENALTY CANNOT BE LEVIED BY CONSIDERING THE REVISED RETURN AND RELIED UPON THE DECIS ION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. ONKAR SARAN & SONS (SUPRA) AS WELL AS DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF SHRI ASH RAY LAL VS. CIT (SUPRA). WE ARE NOT INCLINED TO ACCEPT THE SAID CONTENTION OF TH E LD. AR AS IN THOSE CASES THE ISSUE BEFORE THE HONBLE SUPREME COURT AND HONBLE H IGH COURT WAS REGARDING SMT. CECILIA HARESH CHAGANLAL 10 | P A G E LEVY OF PENALTY BASED ON THE RETURN FILED IN RESPONS E TO NOTICE U/S 148 WHEREAS IN THE PRESENT CASE THE REVISED RETURN WAS FILED AS P ER THE PROVISIONS OF SECTION 139(5). THERE IS A MARKED DIFFERENCE BETWEEN THE RETU RN FILED IN RESPONSE TO A NOTICE U/S 148 AND REVISED RETURN FILED U/S 139(5). I N THE CASE OF RETURN FILED IN RESPONSE TO NOTICE U/S 148 THE ORIGINAL RETURN FIL ED U/S 139(1) REMAINS INTACT AND DOES NOT BECOME NONEST. WHEREAS IN THE CASE OF R EVISED RETURN FILED U/S 139(5) IT MERGES WITH THE ORIGINAL RETURN AND FOR A LL LEGAL AND PROCEDURAL PURPOSES THE ORIGINAL RETURN CEASE TO EXIST ON FIL ING OF A VALID REVISED RETURN. THEREFORE THE DECISION RELIED UPON BY THE LD. AR CANN OT BE APPLIED IN THE FACTS OF THE PRESENT CASE. 9. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT TODAY I.E 5 -11- 2014 SD/- SD/- (SANJAY ARORA) (VIJAY PAL RAO) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 5-11 -2014 SKS SR. P.S COPY TO: 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR C BENCH ITAT MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES MUMBAI