IN THE INCOME TAX APPELLATE TRIBUNAL
"C" Bench, Mumbai
Before Shri Vijay Pal Rao, Judicial Member, and
Shri D. Karunakara Rao, Accountant Member
ITA No. 1585/Mum/2013
(Assessment year: 2006-07)
Pashmina Holdings Limited The Dy. Commissioner of
New Hind house, Narottam Income tax , Circle-2(2)
Vs.
Morarjee Marg, Ballard Estate Aayakar Bhavan, M.K. Road
Mumbai-400 001. Mumbai-400 020.
(Appellant) (Respondent)
Permanent Account No. : AAACP 4177 E
Assessee by : Shri Nitesh Joshi
Revenue by : Shri Sunil K. Agarwal
Date of hearing : 07/07/2014
Date of Pronouncement : 10/07/2014
ORDER
Per Vijay Pal Rao, Judicial Member:
This appeal by the assessee is directed against the order dated
30/11/2012 of CIT(A) arising from penalty order passed under section
271(1)(c) of the Income tax Act for the assessment year 2006-07. The
assessee has raised the following grounds :-
"1. The ld. CIT(A) erred in partly upholding the action of the ld.
Dy. Commissioner of Income tax (hereinafter referred to as
`Assessing Officer') levying penalty u/s. 271(1)(c) of the Income tax
Act, 1961 (the Act).
2. The appellant submits that it had filed full, true, correct
and complete particulars of its income and has neither concealed
its income not filed any inaccurate particulars of income and the
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CIT(A) erred in upholding the action of AO levying penalty u/s.
27191)(c).
3. The appellant submits that addition has been made by AO
merely on the ground that Income was assessable under a
different head i.e. under the head "profits & gains of business or
profession" as against under head "Capital gains" as per the
return of income filed by the appellant and the ld. CIT(A) failed to
appreciate that this could not be a ground for levy of penalty u/s.
271(1)(c) .
4. The appellant submits that AO be directed to delete the
penalty levied u/s. 271(1)(c) of the Act."
2. In the computation of income the assessee claimed long term
capital loss after indexation of Rs.27,26,887/- on the account of sale of
immovable property in the shape of agricultural land along with farm-
house. The AO noted that in the P&L Account the assessee has shown
profit on sale of asset Rs.31,55,215/- as business income but claimed as
long term capital loss in the computation of income. The AO asked the
assessee to furnish details of property purchased and sold by the
assessee. The AO treated the purchase and sale of property as business
income and assessed to tax. The assessee carried the matter up to this
Tribunal but could not succeed as the Tribunal in the quantum appeal
has held the income from sale from various properties by the assessee
has to be considered as business income. The AO initiated penalty
proceedings and levied the penalty of Rs.9,85,308/- being 100% of tax
sought to be evaded on this account. The assessee challenged the levy of
penalty before CIT(A). However, CIT(A) has confirmed the levy of penalty
vide impugned order.
3. Before us, the ld. AR of the assessee has submitted that the
assessee purchased the property in question in the year 2002 to 2005
which were finally sold in the year 2005 thereby the assessee after
claiming the benefit of indexation has claimed long term capital loss of
Rs.27,26,887/-. The ld. AR has referred the details of purchase and sale
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of property and submitted that all the properties on plots of land along
with buildings which are adjoining as it is clear from the GAT Number of
these properties. He has pointed out that sale of these properties is only
during the year under consideration and there is no sale either in the
earlier year or in subsequent year. Therefore, through sale transaction
the entire property purchased by assessee was sold during the year
under consideration. This is not a regular business activity of assessee,
and further, since the year 2002 the assessee has been showing these
properties as fixed assets in the balance sheet till these are sold in the
year under consideration. Therefore, it is a case of change of head of
income by the AO on which penalty can be levied as there was no
concealment of income or furnishing of incorrect particulars of income.
In support of his contention he has relied upon the decision of Hon'ble
Jurisdictional High Court in the case of CIT vs. Bennett Coleman & Co.
Ltd. (215 Taxmann 93) and submitted that the Hon'ble High Court has
held that there is only a change of head of income and in the absence of
the fact that the claim of assessee was not bonafide the Tribunal deleted
the penalty imposed under section 271(1)(c) of the Act and there is no
reason to interfere with the order of the Tribunal . He has relied upon the
order of this Tribunal dated 11/1/2012 in case of Sukdham Construction
& Developers Ltd. vs. DCIT in ITA No.2172/Mum/2011 for assessment
year 2005-06 and submitted that an identical issue has been considered
and decided by this Tribunal by holding that treatment of income
whether capital gain or business income is a debatable issue and even if
the claim of the assessee as a capital gain was not accepted the same
could not ipso facto lead to the conclusion that the assessee concealed
particulars of income or furnished inaccurate particulars of income. The
ld. AR has further contended that the intention of the assessee is clear
from the treatment of these properties as fixed assets in the balance
sheet and further these properties were let out by the assessee during
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the intervening period which shows that the assessee intended to retain
these properties as capital assets. Some of the properties were sold after
3 years and therefore, the claim of the assessee as capital gain/loss from
the sale of these properties is a bonafide claim.
4. On the other hand the ld. DR has relied upon the orders of
authorities below and submitted that claim of the assessee has been
rejected by the AO by recording the reasons and which has been
confirmed by this Tribunal in the quantum appeal. Therefore, the claim
of the assessee can not be said to be a bonafide claim when the assessee
itself has shown income from sale of these properties as business income
in the P&L Account and only to avoid tax, the assessee has claimed it as
capital loss.
5. We have considered the rival submissions as well as relevant
material on record. The assessee had purchased various plots of land
and in some cases along with building from the year 2002 to 2005. There
is no sale of any of the plot of land since 2002 up till 20th September
2005 when majority of these plots except two were sold. There is no
dispute that these land and buildings have been shown by the assessee
in the balance sheet right from the first year of acquisition as fixed asset.
Further, the assessee has not carried out any repeated transactions of
sale and purchase but all the plots were sold in the year under
consideration. The assessee let out this property during this period and
offered the rental income as income from house property which supports
the claim of the assessee as bonafide claim that the intention of the
assessee was to retain this property for a long period and not to sell, to
earn the profit at the earliest possible occasion. The issue of treatment of
capital gain or business income arising from sale and purchase of the
immovable property is a debatable issue. Though the claim of the
assessee has been rejected and the treatment of business income has
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been confirmed by this Tribunal however, keeping in view of the fact that
it was not a regular activity of the assessee and there is no prior or
subsequent instance of purchase and sale of property by the assessee
the rejection of claim by taking a different view does not ipso facto
warrant levy of penalty when there is no finding that the claim of the
assessee is a bogus claim or absolutely impossible/inaccurate claim. The
assessee has furnished all the relevant particulars regarding purchase as
well as sale of property in question. Even the immovable properties were
shown as fixed assets in the balance sheet of the assessee right from
beginning. Therefore, non-acceptance of the claim would not constitute
concealment of particulars of income or furnish inaccurate particulars of
income. The assessee let out some of the property after acquisition which
shows the assessee's intention was to retain property for a longer period
and not to hold simply to resell at the earliest possible occasion. The
facts and circumstances of the case do support the bonafide claim of the
assessee . The Hon'ble Jurisdictional High Court in the case of CIT vs.
Bennett Coleman & Co. Ltd. (supra), has observed in para -3 as under :-
"3. So far as question (ii) is concerned, the respondent-
assessee had claimed premium on redemption of debentures as
income from capital gains. Whereas the assessing officer held that
the redemption of debentures is revenue receipt assessable to tax
under the head income from other sources. The CIT(A) confirmed
the order of assessing officer. The respondent- assessee did not file
any further appeal on the quantum proceedings. Thereafter,
assessing officer levied penalty under section 271(1)(c) of the Act
on the respondent- assessee. The CIT(A) also confirmed the levy of
penalty upon the respondent- assessee . On further appeal, the
Tribunal held that there is no dispute with regard to the fact that
the respondent- assessee had disclosed that the amount received
as premium on redemption of debentures in its computation of
income. Further, the Tribunal records that it is not the case of the
department that the respondent-assessee had concealed any
particular of income or furnished inaccurate particulars of income
by stating incorrect facts. The assessing officer considered the said
premium received on redemption of debentures to be taxable
under the head income from other sources while the respondent
assessee considered the same to be taxable under the head capital
gains. In view of the fact that there is only a change of head of
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income and in the absence of any facts that the claim of the
assessee was not bonafide, the Tribunal deleted the penalty
imposed u/s. 271(1)(c) of the Act. The Revenue has not been able
to point out that the finding of the Tribunal is perverse. In these
circumstances, we see no reason to entertain the proposed
question (ii).
5.1 The assessee had disclosed all the particulars regarding the
income from sale of property as long term /short term capital gain and
after the benefit of indexation claimed as capital loss. An identical issue
was considered and decided by this Tribunal in case of Sukdham
Construction & Developers Ltd.(supra), in para-3 to 3.1 as under :-
"3 We have considered the rival contention as well as the relevant
material on record. In this case the assessee declared the income
of Rs.1,01.85,887/- which was claimed as short term capital gain.
The Assessing Officer treated the income from purchase and sale
of shares as business income and accordingly shown the total
income of the assessee at Rs.1.02,42,338/-. Thus, it is clear that
as far as the quantum of income as declared by the assessee and
finally assessed by the Assessing Officer is concerned, there is no
change except some minor disallowance of loss on account of
speculative loss by the Assessing Officer. Thus the penalty has
been levied by the reason of treatment of capital gain declared by
the assessee as business income, which clearly shows that as far
as the quantum on account of capital gain or expenditure, no
mistake was found by the Assessing Officer, but there was a
difference of view and opinion as the assessee declared said
income as short term capital gain, which was treated by the
Assessing Officer as business income. Accordingly, the claim of
the assessee treating the income from sale and purchase of shares
as capital gain cannot be treated as impossible view or absolutely
illegal and incorrect treatment of income. The Tribunal while
deciding the issue in quantum appeal has concluded in paras 7 &
8 as under.
"Taking the totality of the facts and circumstances of this
case into consideration, we are of the considered view that
there is no infirmity in the orders of the Revenue authorities
in treating the purchase and sale of shares by the assessee
company as adventure in the nature of trade and accordingly
assessing the profit under the head "profits and gains of
business".
Before parting with this appeal, it may be pertinent to mention
that our attention was invited to the assessment order for the
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subsequent assessment wherein the Assessing Officer has not
treated the transactions of sale and purchase of shares as
business. The short term capital gain has been assessed by the as
declared by the assessee. In our considered view, the subsequent
assessment order will not cloud the finding of the Revenue
authorities in the year under appeal, which is based on the facts
and circumstances as prevailing in the year under appeal. There is
no discussion in the assessment order for assessment year 2006-
07 about the transactions taking place in that year. Therefore, the
said assessment order, in our view, does not affect the decision of
the revenue authorities in the year under appeal. Finding no merit
in this appeal of the assessee, we dismiss the same. "
3.1 Thus, it is clear that even for the subsequent year i.e. AY
2006-07, the income admitted by the assessee as capital gain was
accepted by the Assessing Officer. Therefore, the issue of
treatment of the income is a debatable issue and the view taken by
the assessee in treating the same as capital gain, though was not
acceptable but could not ipso facto lead to the conclusion that the
assessee concealed the particulars of income or furnished
inaccurate particulars of income. Accordingly, in view the
decision of the Hon'ble Supreme court in the case of Reliance
Petroproducts P Ltd reported in 322 TR 158(SC), the penalty is not
justified in the facts of the present case; accordingly, we delete the
penalty levied by the lower authorities."
5.2 In view of the above discussion, facts and circumstances of the
case as well as the decisions relied upon by the assessee we hold that
rejection of capital gain/loss in the case of the assessee does not warrant
levy of penalty and accordingly, the same is deleted.
6. In the result appeal of the Assessee is allowed.
Order pronounced in the open court on 10th July, 2014.
Sd/- Sd/-
(D. KARUNAKARA RAO) (VIJAY PAL RAO )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 10/07/2014.
Jv.
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Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT(A) Concerned, Mumbai
The DR " " Bench
True Copy
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.
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