DEPUTY COMMISSIONER OF INCOME TAX -4(3)(2) , MUMBAI vs. M/S.SHANTANU SHEOREY AQUAKULT LIMITED(NEW NAME M/S. 52 WEEKS ENTERTAINMENT LIMITED), MUMBAI

We have gone through the arguments made by the learned Sr. Departmental Representative and also the order of CIT(A). We noticed from the above finding of CIT(A) that the assessee was not allowed opportunity to file supporting documentary evidences nor affidavit to support the contention. Even it not coming out of the order of CIT(A) when this appeal was fixed and whether opportunity was provided to the assessee to file documentary evidences or affidavit in support of condonation petition. Hence, to allow one more opportunity to the assessee, we set aside the order of CIT(A) and remand the matter back to his file for adjudicating the condonation of delay first and in case delay is condoned, he will decide the issue on merits. Needless to say that the CIT(A) will provide adequate opportunity of being heard to the assessee. This appeal of the assessee is set aside and allowed for statistical purposes.

The only issue in this appeal of Revenue is against the order of CIT(A) deleting the penalty levied by the AO under section 271(1)(c) of the Act. For this Revenue has raised the following ground No. 1: -

We have heard the rival contentions on this issue and gone through the facts and circumstances of the case. We noted that the CIT(A) has deleted the penalty by considering the submissions of the assessee, the penalty order of the AO and the assessment order. The CIT(A) deleted the penalty by observing as under: - “5.3.3. I have the considered the grounds on which the penalty has been levied by the AO and the detailed submissions made by the ld.AR. It is evident from the facts of the case that in the return of income filed the appellant has claimed loss of Rs.5,27,64,193/- on account of sale of capital assets as business loss because all the capital assets sold were used as business assets and such loss was duly assessed by the AO after detailed verification and obtaining explanation by order passed u/s. 143(3) dated 07.12.2009. During the original assessment proceedings, the appellant made detailed submissions which are enclosed with the appellant's paper book according to which the total loss of Rs.5.27 crores comprised of loss on sale of freehold land Rs.1.41 crores, loss on sale of buildings Rs.3.81 crores and small balance loss on account of sale of ITAs No. 5988 & 5710/Mum/2017 furniture fittings and plant and machinery. The said loss was claimed by the appellant by relying on section 32(1)(iii) of the Act and all the losses mentioned above were duly reflected in the audited balance sheet, in the schedule of assets. In view of the above detailed clarification filed with supporting evidences it is evident that company has made disclosures of transaction giving rise to loss in the return of income and the same were duly considered while passing assessment order u/s. 143(3).

We noted that the loss claimed by the assessee relying on section 32 (1) (iii) of the Act. However, in the re-proceedings the AO disallowed the said loss in entirety simply for the reason the loss could not be claimed as the assessee has not proved that the blocks in respect of the loss is claimed ceased to exist. The said loss on sale of land was remained to be separately shown as long term loss the return since it was bona-fidely believed that since land used for the business of the (fish farming during the relevant year) is a business asset, any loss arising there was to be treated as business loss similar to that on sale of building. These facts were brought to the notice of the AO during the assessment proceedings by way of submissions dated 10.02.2015. As such, the whole averment of the AO that evidence is brought on record as to the cessation of block is totally baseless. In view of the above, the assessee argued that there is no question, concealing any particulars of income, nor any furnishing of inaccurate particulars.

We find from the facts of the case that in the return of income filed the assessee has claimed loss of Rs.5,27,64,193/- on account of sale of capital assets as business loss because all the capital assets sold were used as business assets and such loss was duly assessed by the AO after detailed verification and obtaining explanation by order passed u/s 143(3) dated 07.12.2009. We also noted that during the original assessment proceedings the assessee made detailed submission which are enclosed with the assessee’s paper book and according to which the total loss of Rs.5.27 crores comprised of loss on sale of freehold land 8 ITAs No. 5988 & 5710/Mum/2017 Rs.1.41 crores, loss on sale of buildings Rs.3.81 crores and small balance loss on account of sale of furniture fittings and plant and machinery. The said loss was claimed by the assessee by relying on section 32(1)(iii) of the Act and all the losses mentioned above were duly reflected in the audited balance sheet, in the schedule of assets. In view of the above detailed clarification filed with supporting evidences, it may further be seen that company had made disclosures of transaction giving rise to loss in the return of income and the same were duly considered while passing assessment order u/s. 143(3) of the Act. We have also considered the loss incurred of Rs.5,27,64,193/- was not set off till today and therefore the loss has elapsed and hence there is no question of any concealment of income or any Tax to be evaded. We also noted that the return of income are filed by Chartered Accountants and whether the loss is allowable as business loss or capital gain loss, are for the consultants of the company to decide and the directors of the company are engaged in the business affairs and may not be fully conversant with the complication of the case law. In view of the same, we are of the view that the CIT has righty deleted the penalty and we confirm the same. The appeal of Revenue is dismissed.

In the result, the appeal of assessee set aside and allowed for statistical purposes and the appeal of Revenue is dismissed.