B.L. Chhibber, Accountant Member - (1.) THE only grievance projected in this appeal by the Revenue is that the learned CIT (Appeals) Surat is not justified in deleting the penalty of Rs. 24,950 levied under Section 271(1)(c)of the Income-tax Act, 1961.
(2.) The assessee, Late Pirojsha Fakirji Jokhi has since expired on 27-3-1975 and the penalty under Section 271(1)(c) has been levied on his wife and legal heir Smt. Jalamai Jokhi. The facts in brief are that one Shri P.D. Parekh entered into an auction in the open bid for the purchase of lease-hold rights in a plot situated in Worli in Bombay on 14-1-1946. The amount to be paid for this purchase of plot was Rs. 15,100 and as Shri Parekh was short of funds, he entered into co-ownership with the assessee for subscription of this money on equal basis. This fact has also been admitted and accepted by the ITO. Subsequently, the appellant claimed to have entered into a sub-agreement with his brother Shri Faramroz Jokhi for again an equal co-ownership of the appellant's share when in effect it was claimed that half the property belonged to Sri P.D. Parekh and one quarter of this property to both the assessee and Sri Faramroz Jokhi, the assessee's brother. Immediately after the purchase of the lease rights, the entire plot was requisitioned by the State Government which was released in part in the year 1968 and the balance in the year 1971. Ultimately, the plot was sold to one M/s. Kavi Apartments Co-operative Housing Society Ltd., Bombay for a consideration of Rs. 4,89,930. Originally the difference between the sale price and the purchase price was considered as taxable as capital gain and 50% of such gains were taxed in the hands of Sri P.D. Parekh and 25% each in the hands of the assessee and Sri Faramroz Jokhi. 3.1 It is significant to note that the original return of income was furnished by the assessee and the assessment was completed under Section 143(3). Evidently, the ITO had satisfied himself in regard to the correctness of the claim of the deceased, as is evidenced by his findings in para 2 of the assessment order which reads as follows :- 2. The assessee during the year has shown long-term capital gain on the sale of Worli plot wherein he had l/4th interest along with Shri Faramroz F. Jokhi, his brother and Shri Pallonji D. Parekh 3rd party. Later on, the CIT considered the assessment as erroneous and in so far as it was prejudicial to the interest of revenue and took a view that the ITO had erred in accepting the assessee's version. The CIT also felt that the transaction could be treated as an adventure in the nature of trade. He, therefore, set aside the original assessment order and directed a fresh assessment vide his order dated 17-3-1975. The assessee died within ten days of the order of the CIT and the burden was cast on the legal representative to face the situation of a fresh assessment. It is fairly clear from the assessment order passed in pursuance of the order of the CIT under Section 263 that the ITO did not make any fresh enquiry in regard to the correctness of the claim of the deceased that he had only 1 /4th share in the capital gain. The main thrust of the ITO's fresh order was on the question whether the profit could be treated as a business income. He, no doubt, gave a fresh opportunity to the legal representative, who, in the absence of any knowledge about the transaction and availability of any material, was helpless in providing the requisite information which was in the knowledge of the deceased. The ITO completed the assessment holding: (i) that the deceased had one half share in the profit; and (ii) the profit was derived from an adventure in the nature of trade. 3.2 On appeal, the learned AAC accepted the plea on behalf of the legal representative that there was no element of business in the transaction but he did not accept the contention put forth on behalf of the deceased that he had only 1 /4th share in the capital gains. Para 7 of the order of the AAC reads as under : The appellant's arguments that the appellant is very pious and religious man and has distributed all his moneys in charity, according to me, has no relevance with the matter under consideration. As discussed earlier, the amount given to Sri Faramroz Jokhi, is only out of income received by the appellant and, therefore, it is clearly taxable in the hands of the appellant. 3.3 The matter was taken in further appeal to the Tribunal who dismissed the appeal holding as under : We are unable to accept the submission of Shri D.T. Desai, the learned C.A., that there was an oral agreement as alleged. There is nothing to show that the brother of the assessee contributed half of what was spent by the assessee in order to get the share in the leasehold interest of the plot and in order to have derequisitioning of the plot. Simply because one brother of the assessee writes to his other brother in 1971 that he will get his share on the Worli plot being sold, it cannot be said to have been established that the assessee was under an obligation to give any share to his brother. The letter dated 19-6-1971 is silent on the question as to how much would be the share of the brother of the assessee, if at all he had any share. There is no satisfactory evidence to show that the brother of the assessee had any share in the share of the assessee in the leasehold interest of the said plot. 3.4 On the basis of the above facts, the Assessing Officer initiated penalty proceedings under Section 271(1)(c). He was of the opinion that by declaring l/4th share in the plot of land instead of one-half share, the assessee had concealed the particulars of income. He further noted that the fact that the assessee owned one-half and not 1 /4th portion of the plot has been confirmed by the A.A.C. and the Tribunal. In response to the show-cause notice it was pleaded before the Assessing Officer that the assessee had since expired and his widow and legal heir was unable to give any additional evidence because the whole information lay with the assessee who was no more. However, it was contended before the Assessing Officer that the assessee had not concealed the particulars of income and that he had not deliberately furnished any inaccurate particulars and hence no penalty was leviable in view of the judgment of the Supreme Court in the case of CIT v. Anwar Ali [1970] 76 ITR 696. Influenced by the fact that the action of the authorities below had been confirmed by the Tribunal, the Assessing Officer rejected the explanation furnished by the assessee and levied the impugned penalty.
(3.) THE assessee appealed before the CIT (Appeals) and during the course of proceedings detailed arguments were furnished which have been reproduced by the CIT (Appeals) in his order. After taking into consideration the detailed submissions filed before him, the learned CIT (Appeals) deleted the penalty observing as under : On consideration of the same it will be seen that there is difference of opinion between the authorities in adding the amount as undisclosed income. In the original assessment the ITO was fully satisfied that the claim of the appellant was correct. THE working of the capital gain was given in the relevant portion of the return showing that the capital gain arose. As two brothers were interested in the property, l/4th share was shown belonging to his brother and hence not relating to the income. This view was accepted by the ITO but subsequently the order was set aside. During the course of reassessment proceedings, the claim of the appellant could not be established because by that time he was dead. THEre was nobody to substantiate the claim. THErefore, it is really a change of opinion. Moreover, when there was mention in the return, it is not concealment which is done deliberately in defiance of law and was guilty of conduct contumacious or dishonest and acted in conscious disregards of its obligation, which gives rise to contumacious character liable for penalty for 'concealment of income'. THEre was no concealment of facts but it was only change of opinion of different authorities. Further the circumstances that the appellant was no more to establish the fact that l/4th share was belonging to the assessee's brother. It is not that the brother of the assessee did not accept the contention of the appellant because he has shown the income in his return, which has been accepted by the ITO and also paid the tax. Under the circumstances and considering the arguments advanced by the learned representative of the appellant regarding so many aspects of the case including the limitation of action, IAC's approval, burden of proof, applicability of the provisions of penalty which has been discussed in detail, I am of the opinion that it is not a fit case for imposition of penalty. It has been held by the Supreme Court itself that even if the same amount may be good for revenue for assessment but it is not a good ground for imposing penalty on that basis. Considering all these aspects of the case, I am satisfied that this is not a fit case for imposing penalty. THErefore, the penalty imposed by the ITO is cancelled.;