No Penalty can be levied if inaccurate particulars were furnished due to wrong advice: ITAT

The facts in brief are that during the assessment proceedings it was found that the assessee had received sale consideration of Rs. 2,60,40,000/- on sale of agricultural land in Dehradun. The assessee had claimed this amount as exempt as it was sale of agricultural land. During the assessment proceedings, a detailed investigation was conducted and the it was held by Ld. AO the income derived from sale of such assets was liable to taxation and not Penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 was initiated for furnishing inaccurate particulars of income within the meaning of the Act.

On notices issued u/s 274 r.w.s. 271 of the Act the assessee claimed she was 72 years of age and a widow and due to wrong advise and out of innocence and belief that no tax was payable claimed so. However, the ld. AO did not find any substance in the plea and imposed penalty of Rs. 51,59,540/- on the basis of filing furnishing inaccurate.

The assessee then made an appeal to CIT(A) where the Penalty Order was set aside. Now Revenue has thus filed an Appeal with the Income tax Appellant Tribunal (ITAT).

ITAT Order

5. Heard the Ld. Representative of the assessee and Ld. Sr. DR and perused the record. It was contended for the Revenue that Ld. First Appellate Authority was carried away by the plea of ignorance and fallen in error in observing that the ld. AO has not recorded due to satisfaction for imposing penalty. On the other hand, it was submitted on behalf of the assessee that there were disputed facts which gave right to bonafide failure to submit income to tax. Assessee is an old woman and widow and thus, was ignorant of technicalities. It was submitted that the order of Ld. First Appellate Authority is correct and in regard to the cross objections it was submitted that the approval given by the Joint Commissioner of Income Tax- Range 30, New Delhi was not a valid approval and was given in a mechanical manner.

6. Now appreciating the submissions and matter on record it can be observed that as a matter of admitted fact, in the computation of income under the head of “income from capital gain” sale consideration of the agricultural land was reported by the assessee (page no. 2 of the paper book). The copy of sale deed on record shows that the assessee had executed three sale deeds which are on record at page no. 16 to 50 of the paper book and these three sale deeds whereof the sale consideration Rs. 71,82,000/-, 56,70,000/- and 1,31,88,000/- respectively and in all these as recital no. 7 it is mentioned that plot sold is situated more than 0.8 Km away from Municipal Limits.

6.1 The Assessment order establishes that the Ld. AO has taken into consideration recital while observing on page no. 2 para no. 3 of his order that “sale deed submitted by the assessee stated that all the three lands were situated more than 8 Kms away from the Municipal Limits.” Thereafter based upon the online searched maps of the villages where the land is situated, notices were issued u/s 133(6) of the Act to the Municipal Commissioner for furnishing certain information and maps. Thereafter, an Inspector of Income Tax was sent to Dehradun who along with a local Patwari and using certain Gazettes came to the conclusion that the three plots sold were within 6 kilometers from the western limits of Municipal Corporation, Dehradun.

6.2 Assessee claimed that in the wrong impression, the Municipal Limits were taken from the clocked hour as told by Patwari instead of point taken by the Ld. AO. She was not aware of other technicalities. In the reply which has been reproduced at page no. 8 of the assessment order it was mentioned that as she came to know of the real facts, she had immediately deposited Rs. 77,01,610/- as tax. However, the Ld. AO considered it to be a case of furnishing inaccurate particulars of income. The Ld. CIT(A) took into consideration various judicial precedents to conclude that no case was made out for imposing penalty.

7. The Bench is of considered opinion that in the assessment order the Ld. AO has not given any conclusive finding as to if the particulars furnished before the Tax Authorities were inaccurate to the knowledge of the assessee. There were certainly disputed facts. Revenue authority registering the sale deed had not made objection to the recital that land was outside the Municipal Area. It appears that the ld. AO had to himself take assistance of the local revenue and Municipal Authorities and technical expertise and apparatus to come to a decisive conclusion that three plots sold by assessee were within six kilometers from western limits of Municipal Corporation Dehradun. No reason was mentioned by the ld. AO to discredit the submission of assessee that on advise of Patwari they had taken the Municipal Limit from Ghantaghar (Clocked hour).

8. Hon’ble Delhi High Court in CIT(A) vs. Zoom Communications Pvt. Ltd. , 327 ITR 51 has held that:

“It is true that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bona fine. If the claim besides being incorrect in law is mala fide, Explanation 1 to Section 271(1)(c) would come into play and work to the disadvantage of the assessee.”

8.1 Ld. AO has also relied this judgment but failed to appreciate that on aforesaid observations the Assessee had to be rather benefited. It is a case where there was a bonafide opinion based on advise and confirmation by act of registration of sale deed that land was outside municipal limits. Ld. CIT(A) has rightly relied the judicial precedents to observe that Ld. AO had passed the order of issuance of notice u/s 271(1)(c) of the Act in an automatic manner upon making the addition.