IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "D", MUMBAI
BEFORE SHRI B.R BASKARAN, ACCOUNTANT MEMBER AND
SHRI AMIT SHUKLA, JUDICIAL MEMBER
ITA No. 1286/Mum/2013
Assessment Year: 2004-05
ACIT-16(3) Shri Darshansingh Chadha
Matru Mandir, 2nd C/o. M/s. B. Asasingh &
Floor, R. No. 206, Vs. Sons, 409, V.P. Road
Tardeo Road, Mumbai 400 004
Mumbai 400 007 PAN:-AABPC 6695 C
(Appellant) (Respondent)
Assessee by : Shri Abhishek Tilak
Revenue by : Shri Love Kumar
Date of hearing : 19.03.2015
Date of Pronouncement : 10.04.2015
ORDER
PER AMIT SHUKLA, JM:
This appeal has been preferred by the Revenue against order
dated 29.11.2012, passed by the Ld.CIT(A)-27, Mumbai in relation to
penalty proceeding u/s 271(1)(c) for the A.Y. 2004-05. In grounds of
appeal the revenue has raised following ground:-
"Whether on the facts and circumstances of the case and in law,
the Ld. CIT(A) has erred in deleting the penalty levied u/s
271(1)(C) of the Act considering initiation of proceedings as in-
valid without appreciation that such imposing of penalty after
receipt of order ITAT was valid as per section 275(1A) of the I.T.
Act."
2 ITA No. 1286/Mum/2013
Assessment Year: 2004-05
2. Brief facts of the case are that assessee is an individual carrying
on the business of construction. The original return of income was filed
on 29.08.2004 declaring total income of Rs.9,20,940/- under the head
business. Later on assessee filed a revised return of income on
27.10.2005 declaring capital gain of Rs.28,39,703/- in addition to the
income returned originally. The aforesaid capital gain was offered on
the ground that on 01.05.2003 the assessee has converted his capital
assets, namely, land with structures of an old bungalow into stock in
trade, therefore, he was liable for the capital gains which is to be taxed
at the time of sale of stock in trade. During the course of scrutiny
proceedings the assessee filed revised computation of income on
15.12.2006, wherein the long term capital gain was shown at
Rs.20,61,218/- In the assessment order passed u/s 143(3) on
28.12.2006, the Assessing Officer adopted sale value of the newly built
flat sold as stock in trade, on the stamp duty rate as fair market value
on the date of conversion of capital asset into stock in trade and after
allowing indexed cost of acquisition, he computed the capital gains at
Rs.79.08 lakhs. He further disallowed the assessee's claim u/s 54 F. In
the first appeal, the Ld. CIT(A), vide order dated 26.02.2009 allowed the
assessee's claim for deduction u/s 54F however with regard to the
assessee's claim that FMV of the property on the date of conversion of
capital assets into stock in trade on 01.05.2003, should be considered as
per the valuation report furnished by the assessee before the AO, the
Ld. CIT(A) held that such a claim is not tenable in view of the decision of
Hon'ble Supreme Court in the case of Goetz India. After giving effect to
the first appellate order, the income was determined at Rs.29,87,660/-,
which included long term capital gains of Rs.20,61,218/-. In the second
3 ITA No. 1286/Mum/2013
Assessment Year: 2004-05
appeal filed by the revenue as well as the assessee, the assessee's claim
of exemption u/s 54F was denied on the ground that the investment
was made by the assessee in four flats in a residential unit. As regards
the consideration of valuation report filed by the assessee before the AO
for arriving at the FMV of the property on the date of conversion of
capital asset into stock in trade, the Tribunal set aside the issue to the
file of the AO to examine the same and held that decision of Hon'ble
Supreme Court in the case of Goetz India Ltd. is not applicable. In the
order giving effect, to the Tribunal order the AO accordingly disallowed
the claim u/s 54F.
3. In the penalty proceedings, the assessee submitted that the
capital gain was offered in the revised return which was filed before the
date of survey was carried out on 12.12.2005, as the revised return was
filed on 27.10.2005. Thus, disclosure of capital gain was voluntarily. The
claim u/s 54F made in the revised return was bona fide and appeal u/s
260 A has already been filed before the Hon'ble High Court, against the
order of the Tribunal which has been admitted by the Hon'ble High
Court. However, the Assessing Officer had levied the penalty, on the
ground that assessee's claim of exemption u/s 54F was wrong and
therefore, the ITAT had denied the claim.
4. The Ld. CIT(A) has deleted penalty after observing and holding as
under:-
"I have carefully considered the contents of the penalty
order and the appellant's submissions. At the outset, the only
issue for consideration in levying the penalty was the impugned
capital gains on conversion of capital assets into stock-in- trade
u/s. 45(2) of the Act. Having considered the appellant's
submissions dated 26.02.2010, the AO. has dropped the penalty
proceedings, which fact is also acknowledged by the present AO
4 ITA No. 1286/Mum/2013
Assessment Year: 2004-05
who levied the penalty. In other words, the present AO. sought to
reinitiate the penalty proceedings which were already dropped on
consideration of the facts. I am of the considered opinion that
such reinitiating is not allowed in law, there being no provision to
do so. In other words, the AO is clearly wrong in levying penalty
in a matter in which his predecessor has already reached a
satisfaction that it is not a fit case for levy of penalty. Secondly,
the A. O. at present has not fully given effect to the order of the
Hon'ble IT AT that he has not taken a decision as to the fair
market value of the property on the date 0 conversion, and
without arriving at such fair market value it is not possible to
compute the correct quantum of capital gains. Therefore, without
arriving at the correct quantum of capital gains, the A.O. cannot
allege that the appellant has furnished inaccurate particulars of
the same. Further, appellant offered capital gains to tax u/s.
45(2) of the Act in the revised return filed on 27-10-2005 which
was prior to the date of survey. Similarly, the notice u/s. 143(2)
of the Act issued on 12-07-2005 was also a statutory notice and
as on the date of issuing the said notice no enquiry was done by
the A.O. as to the impugned capital gains. In circumstances, it
cannot be stated that the appellant was compelled to disclose the
impugned capital gains on account of the action taken by the AO
a voluntarily. Further, the required details including that of the
valuation re arriving at the fair market value of the property,
were placed before the AO at the time of the assessment
proceedings and thus all the material facts were by the appellant.
In such circumstances, appellant cannot be alleged to be guilty
furnishing inaccurate particulars."
5. Before us, Ld. DR strongly relied upon the order of the AO and
submitted that firstly, the income under the head capital gain was
declared only when the scrutiny proceedings had commenced and
secondly, the assessee's claim for benefit under section 54F has been
decided against the Tribunal. Therefore, penalty has rightly been levied.
6. On the other hand, learned counsel submitted that against the
order of the Tribunal denying the exemption u/s 54F, the appeal has
been admitted by the High Court on this issue therefore, no penalty
should be levied as it is a debatable issue. Further, the assessee's claim
5 ITA No. 1286/Mum/2013
Assessment Year: 2004-05
was bona fide and such a bona fide claim is strongly supported by
catena of decision of High Courts wherein it has been held that if the
two residential houses have been purchased adjacent to each other
even with two different sale agreement, the assessee is entitled for
exemption u/s 54/54F. In support of his contention HE relied upon
following cases:-
i) CIT Vs. D. Ananda Basappa [(2009) 309 ITR 329 (Karn)]
ii) CIT Vs. Smt. V.R. Karpagam [(2014) 272 CTR 184 (Mad)]
iii) CIT Vs. Smt. K.G. Rukminiamma [(2011) 331 ITR 211 (Karn)]
iv) CIT Vs. Smt. Jyothi K. Mehta [(2011) 201 Taxman 79 (Karn) (MAG)]
v) CIT Vs. Syed Ali Adil [(2013) 352 ITR 418 (AP)]
vi) CIT Vs. Gita Duggal [[(2013) 357 ITR 153 (Del)]
vii) CIT Vs. Khoobchand M. Makhija [(2014) 43 taxmann.com 143 (Karn)]
7. After considering the rival submissions and on perusal of the
impugned order, it is seen that Ld. CIT(A) has noted a very important
fact that, earlier the Assessing Officer has dropped the penalty
proceedings after considering the assessee's explanation. Later on the
said penalty has been reinitiated without giving complete affect to the
order of the Tribunal and hence Ld. CIT(A) has rightly concluded that
the AO cannot be satisfied that the assessee has furnished the
inaccurate particulars of the income, when he has not arrived at the
correct quantum of capital gains. Till the time of issuance of notice u/s
143(2) and filing of revised return, there was no query or inquiry by the
AO with regard to the capital gains offered by the assessee therefore, it
cannot be held that revised return was not voluntary. Finally the penalty
has been levied on the ground that exemption u/s 54F is not available to
the assessee as the capital gain was invested in four flats. Assessee's
6 ITA No. 1286/Mum/2013
Assessment Year: 2004-05
claim for exemption u/s 54F can be held to be bona fide in view of in
various decisions of the Hon'ble High Court as well as the Tribunal,
wherein it has been held that, even if the assessee has
bought/constructed two or more flats which are adjacent to each other,
then same can be considered as "residential house", even if there are
different agreements for each units. In all the decisions relied upon by
the learned counsel these proposition has been upheld consistently.
Accordingly, we hold that no penalty is leviable on such a claim made by
the assessee u/s 54F as it was a bona fide claim. Accordingly, the order
of the Ld. CIT(A) deleing the penalty is upheld.
8. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on this 10th day of April, 2015.
Sd/- Sd/-
(B.R. BASKARAN) (AMIT SHUKLA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 10.04.2015
*Srivastava
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT(A) Concerned, Mumbai
The DR "D" Bench
//True Copy//
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.
|
