COMMISSIONER OF INCOME TAX Vs. RAJIV BHATARA

JUDGEMENT

(1.) This order shall dispose of IT Appeal Nos. 427 and 428 of 2009, as according to the learned counsel for the parties, the facts and the law point involved in both the appeals are identical. However, the facts are being taken from IT Appeal No. 428 of 2009. IT Appeal No. 428 of 2009 has been preferred by the Revenue under s. 260A of the IT Act, 1961 (in short, "the Act") against the order dt. 27th Feb., 2009, Annex. A. 7 passed by the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (in short, "the Tribunal") in ITA No. 324/Asr/2007, for the asst. yr. 1996-97. Both the appeals were admitted on 3rd May, 2010 to consider the following substantial questions of law:

(2.) Briefly, the facts necessary for adjudication of the controversy involved, as narrated in the appeal may be noticed. The assessee filed its IT return on 30th Sept., 1996 declaring income of Rs. 2,83,340 and agricultural income at Rs. 18,800. It was processed under s. 143(1)(a) of the Act. The assessee was earning rental income, interest from different firms and banks as well as agricultural income. Its case was selected for scrutiny and notices under ss. 142(1) and 143(2) of the Act were issued to the assessee. During the assessment proceedings, it was noticed that the assessee had received compensation against acquisition of land at village Kamaspur, Tehsil and District Sonepat at Rs. 30,96,724. The assessee annexed a note to the return claiming exemption from capital gain tax. The AO asked the assessee to substantiate his claim for exemption. The assessee filed written submissions dt. 18th Sept., 1998 including a copy of Gazette notification regarding acquisition of land. According to the assessed, the land was purchased between 7th June, 1993 to 6th July, 1993 through 13 different purchase deeds but the same were called for by the Land Acquisition Collector, Haryana and were never returned. The land belonging to different persons was about 40 kanals and the value of investment of each person including the assessee was at Rs. 9,02,419. However, no copy of purchase deed was ever produced before the AO. The AO collected the photocopy of the notification registered with the Halqa Patwari. The assessee pleaded before the AO that the impugned property was situated beyond 8 kms. from the municipal limits of Sonepat and claimed exemption from capital gain tax. The assessee produced a letter dt. 19th June, 1996 from SDE, Maintenance Sub Division PWD (B & R) Sonepat in this regard. The AO also independently inquired from the Land Acquisition Collector, Haryana, Faridabad as well as the Divisional and Town Planner, Haryana regarding the distance of the land of the assessee from the municipal limits of Sonepat. After collecting Information regarding the distance from various authorities, the AO came to the conclusion that the impugned property was situated within 8 kms. of municipal limits of Sonepat. Thereafter, the AO on the basis of this conclusion asked the assessee vide letter dt. 13th Oct., 1998 to show cause as to why the amount of capital gain be not treated as short-term capital gain liable to capital gain tax under the Act. The assessee submitted its reply dt. 26th Nov., 1998 stating that exemption was sought on the basis of certificate obtained from PWD authorities, Sonepat and as such the property could not be treated as capital asset for the purpose of determination of capital gain. Consequently, the AO rejected the claim of the assessee and brought the impugned capital gain under the capital gain tax. Assessment was completed under s. 143(3) of the Act at the total income of Rs. 56,31,400 vide order dt. 31st Dec., 1998, Annex. A. 1 against returned income of Rs. 2,83,330. The AO also initiated penalty proceedings under s. 271(1)(c) of the Act for furnishing inaccurate particulars of income. Notice under s. 274 r/w s. 271(1)(c) of the Act was issued on 18th Jan., 1999. Aggrieved by the order, the assessee filed an appeal before the CIT(A). Vide order dt. 28th Sept., 1999, Annex. A. 2, the CIT(A) dismissed the appeal. Not satisfied with the order, the assessee filed appeal before the Tribunal. Vide order dt. 28th Dec., 2000, Annex. A.3, the Tribunal allowed the appeal, set aside the order of CIT(A) and restored the matter for fresh adjudication by the CIT(A). The CIT(A) after considering the matter vide order dt. 21st June, 2001, Annex. A. 4 held that capital gain with reference to transfer of land in question was chargeable to tax confirming the action of the AO in making the addition of Rs. 30,96,724. The assessee did not prefer any appeal before the Tribunal against the order passed by the CIT(A). Thereafter, the AO proceeded to complete the penalty proceedings already initiated under s. 271(1)(c) of the Act for furnishing inaccurate particulars of its income by issuing show-cause notice on 17th Feb., 2006. After considering the explanation furnished by the assessee, penalty of Rs. 17,82,750 was imposed under s. 271(1)(c) of the Act vide order dt. 24th March, 2006. Aggrieved by the order, the assessee went in appeal before the CIT(A) who vide order dt. 29th March, 2007 deleted penalty of Rs. 17,82,750. Not satisfied with the order, the Revenue filed appeal before the Tribunal. Vide order dt. 27th Feb., 2009, Annex. A. 7, impugned herein, the Tribunal dismissed the appeal. Hence the present appeal by the Revenue.

(3.) Learned counsel for the appellant-Revenue submitted that an addition of Rs. 17,11,065 was sustained in the income of the assessee on account of capital gains arising from acquisition of agricultural land which was within 8 kms. from municipal limits of Sonepat. It was urged that the AO had rightly levied penalty under s. 271(1)(c) of the Act as the assessee had furnished inaccurate particulars in as much as certificate furnished by the assessee that the land was beyond 8 kms. from the limits of the Municipal Committee, Sonepat, was not correct. Relying upon the judgment of the apex Court in Union of India & Ors. vs. Dharamendra Textile Processors & Ors., 2008 306 ITR 277, it was submitted that the CIT(A) as well as the Tribunal were in error in deleting the penalty.