Commissioner of Income Tax vs Smt. B. Saroja Devi

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 u/s

256(2) of the Income Tax Act, 1961.

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in cancelling the penalty of Rs. 33,153 imposed

u/s 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, and 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 Income Tax 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 u/s 271(1)(c) of the Act. Therefore, penalty is eligible 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 u/s 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 eligible u/s 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 any evasion of income from this property. Under such circumstances, the Tribunal

came to the conclusion that levy of penalty of Rs. 2,153, u/s 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 for 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 accountant, who in 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 u/s 271(1)(e) of the Act. Accordingly, we answer the question referred to us in the affirmative and against the Department. No

costs.