Sanjeev Lal Vs CIT (Supreme Court) Sale deed execution within time-limit is not the only way to avail 54F exemption, agreement to sell sufficies

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL Nos.5899-5900 OF 2014
(Arising out of SLP (c) Nos.16958-59 of 2013)
Sh. Sanjeev Lal Etc. Etc. Appellants
Versus
Commissioner of Income Tax, Chandigarh & Anr. Respondents
 
JUDGMENT
ANIL R. DAVE, J.
1. Leave granted.
2. As facts of both the appeals are similar, at the request of the
learned counsel appearing for the parties, both the appeals had been
heard together.
3. Being aggrieved by the judgments delivered by the High Court of Punjab and Haryana in ITA Nos. 153 & 154 of 2012 dated 29th January, 2013, these appeals have been preferred by the assessees.
4. The facts giving rise to the present litigation, in a nutshell, are as under:
A residential house, being House No. 267 situated in Sector 9-C, Chandigarh, was a self acquired property of Shri Amrit Lal, who had executed a Will whereby life interest in the aforestated house had been given to his wife and upon death of his wife, the house was to be given in favour of two sons of his pre-deceased son
- late Shri Moti Lal and his widow. One of the above stated grand children and the daughter-in-law of Shri Amrit Lal are the appellants in these appeals. Upon death of Shri Amrit Lal, possession of the house was given to his widow. His widow, Smt. Shakuntla Devi expired on 29th August, 1993. Upon death of Smt. Shakuntla Devi, as per the Will, the ownership in respect of the house in question came to be vested in the present appellants and another grandchild of late Shri Amrit Lal.
The appellants had decided to sell the house and with that intention they had entered into an agreement to sell the house with Shri Sandeep Talwar on 27th December, 2002 for a consideration of Rs. 1.32 crores. Out of the said amount, a sum of Rs.15 lakhs had been received by the appellants by way of earnest money. As the appellants had decided to sell the house in question, they had also
decided to purchase another residential house bearing house No.528 in Sector 8, Chandigarh so that the sale proceeds, including capital gain, can be used for purchase of the aforestated House No. 528. The said house was purchased on 30th April, 2003 i.e. well within one year from the date on which the agreement to sell had been entered into by the appellants.

S. 132B(4)(b)/ 240/ 244A: Assessee is entitled to interest on cash appropriated during search even if refund is directed in appeal proceedings

Chironjilal Sharma HUF vs. UOI (Supreme Court)

Pursuant to a search conducted u/s 132, cash of Rs. 2.35 lakhs was recovered. The AO passed an order u/s 132(5) in which he calculated the tax liability and appropriated the seized cash. An assessment order was also passed to the same effect. The AO’s order was finally set-aside by the Tribunal and it became final. Consequently, the assessee was refunded the amount of Rs. 2.35 lakhs with interest from 4.3.1994 (date of last of the regular assessments by the AO) until the date of refund. The assessee claimed that he is entitled to interest u/s 132B(4)(b) of the Act for the period from the expiry of period of six months from the date of order u/s 132(5) to the date of regular assessment order. In other words, as the order u/s 132(5) was passed on 31.5.1990, six months expired on 30.11.1990 and the last of the regular assessments was done on 4.3.1994, the assessee claimed interest u/s 132B(4)(b) from 1.12.1990 to 4.3.1994. HELD by the Supreme Court:

The department’s argument that the refund of excess amount is governed by s. 240 and that s. 132B(4)(b) has no application is not acceptable. S. 132B(4)(b) deals with pre-assessment period and there is no conflict between this provision and s. 240 or for that matter s. 244(A). The former deals with pre-assessment period in the matters of search and seizure and the later deals with post assessment period as per the order in appeal. The department’s view is not right on the plain reading of s. 132B(4)(b) and the assessee is entitled to simple interest at the rate of 15% per annum u/s 132B(4)(b) from 1.12.1990 to 4.3.1994. The interest shall be paid within two months from today.

Sec. 133(6): AO Can Launch Fishing And Roving Enquiry: Supreme Court

Kathiroor Service Cooperative Bank Ltd vs. CIT (Supreme Court)

S. 133(6): AO empowered to launch fishing and roving enquiry with a view to detect tax evasion

The ITO issued a issued a notice u/s 133(6) to the assessee-bank u/s 133(6) of the Act calling for general information regarding details of all persons who have made cash transactions and time deposits of Rs. 1,00,000/- and above for the period of three years between 01.04.2005 and 31.03.2008. The assessee claimed that s. 133(6) does not empower the ITO to conduct a roving or fishing enquiry into the affairs of the assessee or regarding the deposits made by its customers. It was also contended that the AO can only seek “case specific” or “area specific” information u/s 133(6). The High Court dismissed the Writ Petition. On appeal by the assessee to the Supreme Court HELD dismissing the appeal:

The legislative intention behind s. 133(6) was to give wide powers to the income-tax department to gather general particulars in the nature of survey and store those details in the computer so that the data so collected can be made use of for checking evasion of tax effectively. It would not fall under the restricted domains of being “area specific” or “case specific.” S. 133(6) does not refer to any enquiry about any particular person or assessee, but pertains to information in relation to “such points or matters” which the assessing authority issuing notices requires. This clearly illustrates that the information of general nature can be called for and names and addresses of depositors who hold deposits above a particular sum is certainly permissible (Karnataka Bank Ltd vs. Government of India (2002) 9 SCC 106 followed; M.V. Rajendran vs. ITO 260 ITR 442 (Ker) approved)

S. 271(1)(c) Penalty: Supreme Court Explains Entire Law On Voluntary Surrender

MAK Data P. Ltd vs. CIT (Supreme Court)

Under Explanation 1 to s. 271(1)(c), voluntary disclosure of concealed income does not absolve assessee of s. 271(1)(c) penalty if the assessee fails to offer an explanation which is bona fide and proves that all the material facts have been disclosed

The assessee filed a return of income for AY 2004-05 declaring an income of Rs.16 lakhs. During the course of the assessment proceedings, the AO noticed certain documents comprising of share application forms, bank statements, blank share transfer deeds etc had been impounded in the course of s. 133A survey proceedings conducted in the case of the assessee’s. The AO sought specific information regarding the documents from the assessee. In reply to the show-cause notice, the assessee made an offer to surrender Rs.40.74 lakhs with a view to avoid litigation and buy peace and to make an amicable settlement of the dispute. The AO assessed the said sum of Rs.40.74 lakhs to tax and levied penalty u/s 271(1)(c) for concealment of income and not furnishing true particulars. This was upheld by the CIT(A) though the Tribunal reversed it on the ground that the surrender was without admitting any concealment. On appeal by the department, the High Court (87 DTR 172 (Del)) reversed the Tribunal on the ground that as there was absolutely no explanation by the assessee for the concealed income of Rs.40.74 lakhs, the first part of clause (A) of Explanation 1 to s. 271(1)(c) is attracted. On appeal by the assessee to the Supreme Court HELD dismissing the appeal:
(i) The Tribunal has not properly understood or appreciated the scope of Explanation 1 to s. 271(1)(c). The AO shall not be carried away by the plea of the assessee like “voluntary disclosure”, “buy peace”, “avoid litigation”, “amicable settlement”, etc. to explain away its conduct. The question is whether the assessee has offered any explanation for concealment of particulars of income or furnishing inaccurate particulars of income. Explanation to s. 271(1) raises a presumption of concealment, when a difference is noticed by the AO, between reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence. When the initial onus placed by the explanation, has been discharged by him, the onus shifts on the Revenue to show that the amount in question constituted the income and not otherwise;
(ii) The assessee has only stated that he had surrendered the additional sum of Rs.40.74 lakhs with a view to avoid litigation, buy peace and to channelize the energy and resources towards productive work and to make amicable settlement with the income tax department. The statute does not recognize those types of defences under Explanation 1 to s. 271(1)(c) of the Act. It is trite law that the voluntary disclosure does not release the assessee from the mischief of penal proceedings. The law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he had to be absolved from penalty;
(iii) On facts, the surrender of income is not voluntary in the sense that the offer of surrender was made in view of detection made by the AO in the search conducted in the sister concern of the assessee. In that situation, it cannot be said that the surrender of income was voluntary. AO during the course of assessment proceedings has noticed that certain documents comprising of share application forms, bank statements etc have been impounded in the course of survey proceedings u/s 133A conducted in the case of the assessee’s sister concern. The survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Consequently, it is clear that the assessee had no intention to declare its true income;
(iv) It is the statutory duty of the assessee to record all its transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year. The AO has recorded a categorical finding that he was satisfied that the assessee had concealed true particulars of income and is liable for penalty proceedings u/s 271 read with s. 274 of the Act;
(v) The AO has to satisfy himself whether penalty proceedings be initiated or not during the course of the assessment proceedings. He is not required to record his satisfaction in a particular manner or reduce it into writing. The scope of s. 271(1)(c) has also been elaborately discussed by the Supreme Court in UOI vs. Dharmendra Textile Processors 306 ITR 277 (SC) and CIT vs. Atul Mohan Bindal 317 ITR 1 (SC). The principle laid down by this Court has been correctly followed by the Revenue and there is no illegality in the department initiating penalty proceedings in the instant case.
Contrast with Suresh Chandra Mittal 241 ITR 124 (MP) (affirmed in 251 ITR 9 (SC) that an offer to “buy peace” may be bona fide.

Supreme Court Lays Down Important Law On Accrual Of Income

CIT vs. Excel Industries Ltd (Supreme Court)

(i) Q whether income has accrued must be considered from a realistic & practical angle (ii) If Dept has accepted adverse verdict in some years, it cannot be allowed to challenge verdict in other years (iii) disputes as to the year of taxability with no/ minor tax effect should not be raised by Dept
Pursuant to the import-export policy of the Government, the assessee was entitled to make duty free imports of raw materials in respect of the exports made by it. The assessee accounted for the benefit of the entitlement to make duty free imports in the year of export but claimed that the benefit was not chargeable to income-tax in the year in which the exports were made but it was chargeable to tax only in the year in which the imports were availed of and the raw materials consumed. The AO rejected the contention and held that as the assessee was following the mercantile system of accounting, the right to receive the benefit accrued as soon as the export obligation was fulfilled and it was chargeable to tax in that year u/s 28(iv). On appeal, the CIT(A), Tribunal and High Court upheld the assessee’s stand. On appeal by the department to the Supreme Court, HELD dismissing the appeal:

(i) Three tests have been laid down by various decisions of the Supreme Court to determine when income can be said to have accrued: (a) whether the income is real or hypothetical; (b) whether there is a corresponding liability of the other party to pay the amount to the assessee & (c) the probability or improbability of realisation of the income by the assessee has to be considered from a realistic and practical point of view. Applying these tests, on facts, even if it is assumed that the assessee was entitled to the benefits under the advance licences as well as under the duty entitlement pass book, there was no corresponding liability on the customs authorities to pass on the benefit of duty free imports to the assessee until the goods are actually imported and made available for clearance. The benefits represent, at best, a hypothetical income which may or may not materialise and its money value is therefore not the income of the assessee. Also, from a realistic and practical point of view (the assessee may not have made imports), no real income accrued to the assessee in the year of exports and s. 28(iv) would be inapplicable. Essentially, the AO is required to be pragmatic and not pedantic (Shoorji Vallabhdas 46 ITR 144 (SC), Morvi Industries 82 ITR 835 (SC) & Godhra Electricity Co 225 ITR 746 (SC) followed);

(ii) Further, as in several assessment years, the Revenue accepted the order of the Tribunal in favour of the assessee and did not pursue the matter any further, it cannot be allowed to flip-flop on the issue and it ought let the matter rest rather than spend the tax payers’ money in pursuing litigation for the sake of it (Radhasoami Satsang 193 ITR 321 (SC) & Parashuram Pottery Works 106 ITR 1 (SC) followed);

(iii) Further, as the dispute was only as to the year of taxability and as the rate of tax remained the same the dispute raised by the Revenue is entirely academic or at best may have a minor tax effect. There was, therefore, no need for the Revenue to continue with this litigation when it was quite clear that not only was it fruitless (on merits) but also that it may not have added anything much to the public coffers. It is hoped that the Revenue implements its litigation policy a little more practically and a little more seriously.