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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: Shri Joginder Singh & Shri G Manjunatha
Date of hearing 26-02-2018 Date of pronouncement 09-03-2018 O R D E R
Per G Manjunatha, AM :
This appeal filed by the assessee is directed against order of the CIT(A)-42, Mumbai dated 30-08-2016 and it pertains to AY 2009-10.
The brief facts of the case are that the assessee is a co-operative society, assessed under the status of AOP, filed its return of income for the assessment year 2009-10 on 30-09-2009 declaring total income of Rs.5,70,75,332. The assessment has been completed u/s 143(3) on 21- 11-2011 determining total income at Rs.7,62,25,025 interalia making addition towards re-computation of long term capital gains from sale of 2 ITA 1091/Mum/2017 property by disallowing certain expenditure and also denying benefit of indexation towards cost of acquisition and interest on FDR. Thereafter, the AO initiated penalty proceedings u/s 271(1)(c) of the Act. After considering the explanations furnished by the assessee, the AO levied penalty u/s 271(1)(c) in respect of additions made towards re- computation of long term capital gain and interest received from FDR on the ground that the assessee has furnished inaccurate particulars of income within the meaning of section 271(1)(c) of the Act, and accordingly levied penalty of Rs.48,94,728 which is 100% of tax sought to be evaded.
Aggrieved by the penalty order, the assessee has preferred appeal before the CIT(A) to argue that the AO was erred in holding that the assessee has furnished inaccurate particulars in respect of its income under the head ‘Long Term Capital Gain’ and income from other sources without appreciating the fact that it has filed revised return rectifying the mistake in not adopting consideration as per the provisions of section 50C of the Act and also, the error committed in respect of interest earned on FDR while filing return of income. The CIT(A), after considering relevant submissions of the assessee held that the assessee has furnished inaccurate particulars of its income and accordingly the AO was right in levying penalty u/s 271(1)(c) of the Act.
The relevant portion of CIT(A)’s order is extracted below:-
3 ITA 1091/Mum/2017
Decision: The facts of the case, as summarized above, and the relevant orders and written submissions made are all duly considered. Since all the grounds of appeal are connected to the imposition of penalty the same are decided together.
The assessee has claimed that there is no case of furnishing of inaccurate particulars and that it is only a matter of difference of opinion. The assessee claims that while imposing the penalty the AO has relied upon the order of the CIT(A) without giving his own mind. It was claimed that the omission to declare interest incomes of Rs. 60,76,811/- by it was due to ignorance of law and a mistake. It was further claimed that the AO had subsequently allowed deduction of Rs. 52,93,501/-u/s 80P(2)(d) of the Act in respect of the interest received from co-operative banks also. In respectof the capital gains the assessee claimed. That the Fair - Market Value of the property as on-01.04.1981 supplied by the Collector of Stamp Duty is only a difference of opinion since the assessee had relied upon the valuation given by a Registered Valuer. The assessee also claimed that it had earlier agreed to give the development rights to M/s Apex Construction but the agreement was cancelled and the assessee had to give a compensation of Rs. 41 lacs to this party. The assessee t claims that this sum of Rs. 41 lacs was an allowable deduction even though it cannot be termed as cost of improvement as admitted by the assessee. The assessee claimed that it had made certain deposits with the Municipal Corporation in the earlier financial years for development of' the property and with the development agreement these deposits became infructuous and the same were claimed as cost of the plot. As per the assessee this does not constitute furnishing of inaccurate particulars. The assessee also claimed that the Stamp Valuation Authority had declared the value of the land at Rs. 9,22,71,000/- but the AO got a separate detail of assessable Stamp Duty in respect of the 750 sq. ft. carpet area from the Stamp Valuation Authority. The assessee claims that the original valuation should have been accepted by the AO since it is to be presumed that the value of the office premises has already been covered in the consideration declared for registering the development agreement. The assessee has explained that the AO has allowed a deduction, of Rs. 25,00,000/- as cos, of improvement incurred in F. Y. 2008-09 whereas this expense was incurred in the year 2002 but it settled and paid only in the F.Y. 2008-09. The assessee claims that the AO should have given the benefit of indexation on the whole amount of Rs. 25,00,000/- from the year 2002. The assessee also claimed that the AO has not allowed other minor claims of cost of improvement. The assessee has also claimed that penalty cannot be levied also because the assessee had not acted dishonestly or with a malafide motive.
The submissions of the assessee are considered. The assessee has not been successful a, the level of the C1T(A) on the disallowances and additions for which the AO has held the assessee to be guilty of furnishing inaccurate particulars. In the appellate proceeding also the assessee has not been able to make out a case for not furnishing inaccurate particulars. The penalty levied under the Income Tax Ac, is a Civil liability and there is no requirement of proving mens rea as held by the Supreme Court also.
On the merits of the penalty the facts of the case have been elaborately dealt with by the AO in the assessment order as well as in the penalty order and it is no, a case of non-consideration of the submissions made by the assessee. Further it is necessary to note that as Explanation 4(c) below ' Section 271(1) the manner of computati.on of Iax sought to be evaded is prescribed and it does not-lay down the condition that only the net addition is to be considered. The penalty is levied on the tax difference between the total income assessed and the tax chargeable if such total income was " reduced by the amount of income in respect of which inaccurate particulars have been filed. There is no requirement of considering only the net incomes. Therefore the claims of the assessee to the contrary are rejected. As regards the capital gains, it is held that the AO was correct to ascertain the assessable Stamp Duty in respect of the office premises admeasuring 750 sq. ft. since the development agreement had not quantified its value at the time of registration of the document Further it is held that the AO was correct to ascertain the Fair Market Value as on 01.04.1981 from the Collector of Stamp. It is also held that the submission of the assessee that such value should have been ascertained u/s 55A of the Act is misplaced as the section 55A before its amendment in 2012 was not invocable to find a lower FMV as on 01.04.1981. The claim of the assessee that the compensation paid to M/s Apex Construction is a cost of improvement is also not correct This payment 4 ITA 1091/Mum/2017 is not a cost of improvement of the ass, since i, is essentially a case of bereach of contract Is a civil dispute. Similarly the assessee cannot claim that the amount of Rs. 25.00.000/- paid to M/s A.K. Patel Enterprises in lieu of its bill of Rs. 25,57,033/- pertains to the year 2002 and the indexation should be allowed from that year. It is seen that the bill was raised only on 30.04.2008 and was paid also on 10.05.2008 and the contention of the assessee is not as per law. Similarly the other claims of the assessee are held to be vague and untenable. In view of the above it is held that the assessee has furnished inaccurate particulars of its income and the penalty of Rs. 48,94,7287- levied by the AO is confirmed.”
The Ld.AR for the assessee submitted that the Ld.CIT(A) was erred in confirming penalty levied by the AO, without appreciating the fact that the difference between income returned as per revised return filed and income assessed by the AO after giving effect to the order of ITAT stands reduced to Rs.7,12,669. The assessee further submitted that even the addition sustained by the ITAT, is in respect of disallowance of certain expenses and also due to wrong application of indexation of cost of acquisition of the property; therefore, the said addition cannot be considered as furnishing of inaccurate particulars of income within the meaning of section 271(1)(c) of the Act, so as to levy penalty.
On the other hand, the Ld.DR strongly supported the order of the CIT(A).
We have heard both the parties, perused the materials available on record and gone through the orders of authorities below. The AO levied penalty u/s 271(1)(c) of Rs.48,94,728 on the basis of addition made in respect of long term capital gain and income from other sources being interest received on FDR. The AO has levied penalty on the basis of 5 ITA 1091/Mum/2017 addition made in assessment order passed u/s 143(3) of the Act. It is the contention of the assessee that the addition made by the AO, consequent to giving effect to ITAT’s order, stands reduced to Rs.7,12,669, which is also on account of wrong application of indexation to cost of acquisition and disallowance of certain expenses.
Having heard both the sides, we find merits in the arguments of the assessee for the reason that the addition made by the AO finally stands reduced to Rs.7,12,669 after giving effect to the order of ITAT. We further notice that the addition sustained by ITAT is mainly on account of disallowance of certain expenses made by the AO and also due to wrong application of indexation to cost of acquisition. Therefore, we are of the view that the AO was erred in holding that the assessee has furnished inaccurate particulars of income in respect of long term capital gain and income from other sources being interest received on fixed deposits. Though the ITAT, has sustained partial addition made by the AO in respect of re-computation of long term capital gain from sale of property, such addition is made due to disallowance of certain expenses, deposits with BMC and wrong application of indexation to cost of acquisition of the property. Mere disallowance of certain expenses / deductions cannot be considered as furnishing of inaccurate particulars of income within the meaning of section 271(1)(c) of the Act. Therefore, we are of the considered view that the AO was erred in levying penalty
6 ITA 1091/Mum/2017 u/s 271(1)(c) of the Act; hence, we direct the AO to delete penalty levied u/s 271(1)(c) of the Act. 8. In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 09th March, 2018.