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Facts
The assessee, BHA Associates Pvt. Ltd., filed an appeal against the Ld. CIT(Appeals)'s order for AY 2005-06, which sustained a penalty levied under section 271(1)(c) of the Income Tax Act. The penalty was imposed following an addition of Rs. 40,03,349/- brought to tax as long-term capital gain in an assessment framed under section 153A(b) of the Act.
Held
The Tribunal noted that the quantum addition related to long-term capital gain, which was the basis for the penalty, had already been deleted by an earlier Tribunal order. Therefore, the Tribunal held that the penalty levied under section 271(1)(c) could not stand and directed the Assessing Officer to delete it.
Key Issues
Whether a penalty levied under section 271(1)(c) can be sustained when the underlying quantum addition, which formed the basis for the penalty, has been deleted by the Tribunal.
Sections Cited
271(1)(c), 153A(b)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “A” NEW DELHI
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI M BALAGANESH
Assessee by Ms. Shweta Bansal, CA Revenue by Shri Kanv Bali, Sr. DR सुनवाईक�तारीख/ Date of hearing: 18.03.2024 20.03.2024 उ�ोषणाक�तारीख/Pronouncement on आदेश /O R D E R PER C.N. PRASAD, J.M.
This appeal is filed by the assessee against the order of the Ld.CIT(Appeals)-30, New Delhi dated 21.02.2018 for the AY 2005-06 in sustaining the penalty levied u/s 271(1)(c) of the Act.
Ld. Counsel for the assessee, at the outset, submits that the Tribunal in dated 14.02.2024 deleted the addition made in the assessment framed u/s 153A(b) of the Act, wherein an amount of Rs.40,03,349/- was brought to tax under long term capital gain has been deleted and the copy of the order of the Tribunal is placed on record. Ld. Counsel for the assessee, therefore, submits that since the addition made in the quantum assessment has been deleted it is requested that the penalty levied by the Assessing Officer be deleted.
Ld. DR fairly submits that the quantum addition has been deleted by the Tribunal.
We have heard the rival submissions, perused the order of the Tribunal. We observe that the Tribunal deleted the addition made by the AO in respect of long term capital gains observing as under: -
“13. We have heard both the parties and also perused the relevant materials placed on record. The entire addition is based on the agreement to sale, which was unregistered between both the co-owners, i.e., the assessee as well as M/s Pravin Juneja HUF, wherein it mentions the amount of Rs.82,62,500/- and it has been treated as both the co-owners have received the same amount as per the sale agreement. One very important fact is that the agreement to sale was not converted to final sale deed and the same property has been sold to another person, i.e., Mrs. Neena Chaudhari for sum of Rs.78 lakhs. This is clearly evident from the copy of the sale deed dated 30th June, 2004 placed in the paper- book and also before the AO and CIT (A). Once the same property has been sold to one person, then to take cognizance of agreement to sale for taxing it as long term capital gain, is wholly unwarranted. Though, there is discrepancy in the agreement to sale, wherein, it is stated that Rs.8 lakhs was received by the assessee, then what happened to that Rs.8 lakhs because same does not find mention in the final sale deed. The agreement to sale was with a different party and that agreement to sale was never fructified and same was cancelled due to various discrepancies. Once the property has been sold as a whole to one person for an amount of Rs.78 lakhs, then we do not find any reason to justify such an addition based on agreement to sale with Smt. Krishna Dandona. Accordingly, the entire basis and reasoning given by learned CIT(A) cannot be sustained. One of the reason given by him that there is no agreement to sale entered with Mrs. Neena Chaudhari is not a reason for disbelieving the registered sale deed over unregistered agreement to sale, which was never acted upon. Thus, draft agreement to sale cannot be believed over the registered sale deed and therefore the addition made by the AO and sustained by the CIT(A), is deleted. Since, M/s. Pravin Juneja HUF was also the co-owner and similar finding has to be given, therefore, in the case of M/s. Pravin Juneja HUF as well, the addition is directed to be deleted.”
Since the addition made in the assessment framed u/s 153A(b)
of the Act has been deleted by the Tribunal the penalty levied on the basis of such addition cannot stand. Therefore, we direct the AO to delete the penalty levied u/s 271(1)(c) of the Act.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 20.03.2024