COMMISSIONER OF INCOME-TACT VS B SAROJA DEVI, 2000 PTD-MADRAS-HIGH-COURT-INDIA 2397 (1997)

Income-tax---

----Penalty---Concealment of income ---Assessee admitting ownership of house and lands---Income from house assessed on notional basis---Income from sale of land assessed as capital gains--No concealment of income-- Penalty could not be levied---Indian Income Tax Act, 1961, S.271(1)(c).

The assessee was a film artiste, in whose assessment in the assessment year 1973-74, a number of additions were made. Penalty of Rs.33,153 was levied by the Inspecting Assistant Commissioner in respect of two of the items, namely, an addition of Rs.2,153 estimated, as income from self-occupied .residential property and Rs.25,000 in respect of capital gains out of sale of certain lands. The Tribunal found that the construction of .the house went on till the end of February, 1973, and the assessee had another house during the period. The income from the property was assessed on the basis of notional income. It was not established by the Department that there, was any evasion of income from this property. Under such circumstances, the Tribunal came to the conclusion that the levy of penalty in respect of income from property under section 271(1)(c) was-not warranted. As regards the capital gains, it was found that this property, which stood in the name of her husband, was admitted as her property in pursuance of a settlement petition filed before the Commissioner and that the acquisition of the property was in 1965-66. The Tribunal, therefore, cancelled the penalty. On a reference:

Held, that the facts on record showed that there was no concealment' of income or furnishing of incorrect particulars in the matter of notional income derived from the house property. The Tribunal was justified in deleting the penalty in respect of income from property. The lands were treated as belonging to the assessee on her voluntary admission. As the lands and their sale were disclosed to the department, it could not be said that there was any concealment with regard to capital gains. In view of this factual position, the Tribunal was correct in deleting the penalty.

C. V. Rajan for the Commissioner.

P. P. S. Janarthana Raja for Subbaraya Aiyar, Padmanabhan and Ramanani for the Assessee.

JUDGMENT

K. A. THANIKKACHALAM, J.---Pursuant to the direction of this Court in T. C. P. No.88 of 1982, the Tribunal referred the following question for the ,opinion of this Court under section 256(2) of the Income Tax Act, 1961:

"Whether, on the facts and in the circumstance of the case, the Appellate Tribunal was, justified in cancelling the penalty of Rs.33,153 imposed under section 271(1)(c) of the Income Tax Act, 1961, for the assessment year 1973-74?"

The assessee is a film artiste, in the assessment year 1973-74, in whose assessment, a number of additions were made. Penalty of Rs.33,153 was levied by the Inspecting Assistant Commissioner in respect of two of the items, namely, an addition of Rs.2,153 estimated as income from self-occupied residential property and Rs.25,000 in respect of capital gains out of Gowrivakkam lands. On appeal, the Tribunal found that the construction of the property and the properties themselves were under the purview of the Income-tax Officer. The assessee had claimed that the residential property was occupied only in April 1971. The Tribunal found that the income was a notional one and that there is no positive information that the assessee had really occupied it notwithstanding the fact that it was ready for occupation and hence there was no case for penalty in respect of this amount of Rs.2,153, especially since all the particulars of ownership of the property were disclosed.

As regards the capital gains, it was found that this property, which stood in the name of her husband was admitted as her property in pursuance of a settlement petition filed before the Commissioner of Income4ax and that the acquisition of the property was in 1965-66. The Tribunal found that even the addition in respect of the cost of acquisition did not justify levy of penalty as the addition was due to the assessee's admission. Also the tax on capital gains would not merit penalty. It was found that it was admitted, with a view to purchase peace with the Department even as stated in the communication addressed by the assessee to the Commissioner of Income-tax while admitting cost of acquisition for tax purposes. It was further found that apart from this fact, there was nothing in the assessment order or the penalty order to justify the imposition of penalty.

Before us, learned standing counsel for the Department submitted that when the assessee herself has admitted the ownership of the property, the Department has established concealment under section 271(1)(c) of the Act. Therefore, penalty is exigible in respect of both the items of property. The fact, that the assessee went in for a settlement would not prevent the Department to proceed with the levy of penalty under section 271(1)(c) of the Act. It was, therefore, pleaded that the Tribunal was not correct in deleting the penalty levied on both the items of property.

On the other hand, learned counsel appearing for the assessee while supporting the order passed by the Tribunal contended that the Tribunal on the basis of facts came to the conclusion that there was no concealment of income and, therefore, penalty is not exigible under section 271(1)(c) of the Act.

We have heard both the learned standing counsel for the Department as well as learned counsel for the respondent assessee.

The first item relates-to a sum of Rs.2,153 estimated as income from self-occupation of the property as Sadasivanagar, Bangalore. It was let out, only during the subsequent year it had been vacated by the previous tenant by the end of January, 1971, and it was the assessee's case that it was vacant thereafter. However, the assessee's husband mentioned that he was in occupation of the building from January 1, 1973. The property itself was under the scrutiny of the Income-tax Officer. There is no firm basis, to controvert that the property was occupied only in April 1971, notwithstanding her husband's letter, which was written two years later. It was a matter of fact that the construction went on till the end of February 1973, and the assessee had another house during the period. The income from the property was assessed on the basis of notional income.. It was not established by the Department that there was nay evasion of income from this property. Under such circumstances, the Tribunal came to the conclusion that levy of penalty of Rs.2,153, under section 271(1)(c) of the Act is not' warranted. The facts on record would go to show that there was no concealment of income or furnishing of incorrect particulars in the matter of notional income derived from the property at Sadasivanagar, Bangalore. Therefore, we consider that there is no infirmity in the order passed by the Tribunal in deleting the penalty of Rs.2,153.

In so far as the capital gain of Rs.25,000 in respect of Gowrivakkam lands is concerned, the assessee admitted that this property belongs to her, in a -petition filed before the Commissioner of income-tax. The admission is only of the purpose of taxing the income and not for the levy of penalty. The properties covered by the settlement petition and the order of the Tribunal should be applied to this property also. We are concerned with the capital gains on the sale of this property. This property was also under the scrutiny of the Income-tax Officer. The property was treated as (belonging to the assessee on her voluntary admission. This admission was made as a measure of compromise subject to the condition that penalty will not be levied. Admittedly, the property was originally purchased in the name of the account, who is turn sold the same to the husband of the assessee. Since, the assessee admitted that the purchase money belongs to her, the Department came to the conclusion that the property belongs to her. Inasmuch as both the properties and the sale of a property was disclosed to the Department, it cannot be said that there is any concealment with regard to capital gains. In view of this factual position, we consider that the Tribunal was correct in deleting the penalty of Rs.25,000 levied under section 271(l)(c) of the Act. Accordingly, we answer the question referred to us in the affirmative and against the Department. No costs.

M.B.A./4125/FCOrder accordingly.