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Order under section 254(1) of Income –tax Act Per Pawan Singh Judicial Member; 1. This appeal under section 253 of income tax act is directed against the order of Commissioner (Appeals) - 24 Mumbai dated 14.02. 2017. The sole ground of appeal raised by assessing in the present appeal is whether Commissioner (Appeals) erred in confirming the levy of penalty under section 271(1)(c) of the Act.
2. Brief facts of the case are that the assessment for relevant assessment year was completed under section 143(3) read with section 147 on 20.02.2017 determining the total income at Rs. 7,40,25,253/- against the returned loss of Rs. 12,39,115/-. The assessing officer while framing assessment order Just Textile made the addition Rs. 7,52,64,368/-. The assessing officer made the addition on account of Long term Capital Gain on sale of land. The assessing officer after service of notice under section 274 read with section 271(1)( c) and giving proper opportunity levied the penalty at 100% of tax sought to be evaded. The assessing officer levied the penalty of Rs. 85,27,453/-. On appeal before Commissioner (Appeals) the order of penalty was confirmed. Thus further aggrieved by the order of Commissioner (Appeals) the assessee has filed present appeal before us.
3. We have heard learned AR of the assessee and DR for the revenue and perused the material available on record. The learned AR of the assessee appearing on behalf of assessee argued that the addition on the basis of which penalty was levied by assessing officer has been deleted by Tribunal in assessee’s appeal in ITA No.1907/M/2015 vide order dated 21 March 2017. The learned AR of the assessee further filed order of coordinate bench of the Tribunal. The learned AR argued that when the addition has already been deleted by the Tribunal the penalty order is not sustainable. On the other hand the learned DR for the revenue not disputed the contention of the learned AR of the assessee and the decision of Tribunal.
4. We have considered the rival submission of the parties and have gone through the order of authorities below. We have seen the order of Tribunal in assessee’s appeal in quantum assessment. The coordinate 2 bench of the Tribunal in assessee’s appeal on quantum assessment in ITA No. 1907/M/2015, passed the following order; “14. We have considered rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements referred by lower authorities in their respective orders as well as cited by learned AR and DR during the course of hearing before us.
From the record, we found that original assessment was framed u/s.143(3) in the A.Y.2007-08, wherein capital gain so offered by the assessee was accepted by the AO. Thereafter without any tangible material, AO changed his opinion and recorded a satisfaction that income should be taxable in the A.Y.2008-09 and not in the Assessment Year 2007-08. We found that even when the completed assessment u/s.143(3) for the A.Y.2007-08 was reopened, assessment was completed on the very same income even in the re-assessment proceedings. Thus, there was change of opinion on the very same set of facts and circumstances. The issue is squarely covered by the decision of Supreme Court in case of Kelvinator India wherein Hon’ble Supreme Court observed that mere change of opinion is not sufficient for reopening assessment. One must keep in mind the difference between the power to review and power to re-assess and held that re- assessment has to be based on fulfilment of certain pre-condition and if the concept of change of opinion is removed, then in the garb of re- opening the assessment, review would take place. It was precisely observed by Hon’ble Supreme Court that after 01/04/1989 for exercising power of reopening permissible tangible material to come to the conclusion that there is an escapement of income. Reasons must have live link with the formulation of belief.
As per our considered opinion reason to believe that income chargeable to tax as escaped assessment is one of the conditions precedent for invoking the jurisdiction of the AO to reopen the assessment u/s.147. AO does not have any jurisdiction to review his own order. What cannot be done directly cannot be done indirectly.
Thus, the AO cannot initiate proceedings for the re-assessment on the basis of mere change of opinion. In the instant case before us on the basis of material available on record, AO has framed scrutiny assessment order u/s.143(3), thereafter, case was reopened and again assessment was framed u/s.143(3) r.w.s. 147 on the very same income. Thereafter, there was no tangible material before the AO to come to the conclusion that there is an escapement of income from assessment. Accordingly, we do not find any merit for reopening the assessment by the AO in the A.Y 2008-09.
Even on merits, we found that the Ld AO has wrongly applied provisions of section 48 to compute capital gain instead of section 50, applicable to the depreciable assets. In this case sale consideration was consolidated for land as well as Building, hence assessee has computed capital gain u/s 50 as there is no authentic method to bifurcate the sale consideration into land and' building separately. Therefore the assessee computed capital gain u/s. 50 though the same was having higher burden of tax as rate of tax on short term capital gain is higher than the long term capital gain and under section 50, benefit of indexation is also not allowable. However Ld AO ignored the same and applied section 48 of the Act which was also not following in spirit as he failed to grant benefit of indexation, not considered cost of building etc., We also found that AO has not given indexation for the cost of land, which was acquired by the assessee vide deed of partition dated 18/8/1990. Therefore the indexed value of this land in A Y 2008-09 , which works out to be Rs. 3,25,01,831/- (1,07,35,632/- X 551/182) should be considered for calculating long term capital gain u/s 48 of the Act. Further the sale consideration of Rs. 8,60,00,000/- is both for land as well as building, however Ld A 0 has not considered sale consideration pertaining to building portion on the plea that since the land was transferred for the purpose of redevelopment hence the main purpose of agreement is to transfer the land. The Ld AO failed to appreciate the fact that the conveyance deed as well as MOU clearly states the facts that the assessee company has transferred both land as well as building thereon.
In view of the above discussion, we do not find any merit for the addition so made by the AO. In the instant case before us the income 4 Just Textile from sale of land and building has been offered by the assessee in A Y 2007-08 and the same has been accepted not only in assessment U/s 143(3) but again the reassessment proceeding U/s 143(3) r.w.s. 147 of the Act. Even otherwise the income is assessable in the year 2007-08 as the MOU clearly states that all the control over the property transferred to the buyer on execution of MOU. Hon'ble Bombay High Court in case of Chaturbhuj Dwarkadas Kapadia Vs CIT(260 ITR 491)(Bom) held that "even arrangements confirming privileges of ownership without transfer of title could fall under Section2(47)(v) if the transferee is ready and willing to act upon the arrangements. " In the case of assessee the MOU has given deemed ownership to the transferee and the said MOU has finally acted upon with 45 days by entering into conveyance deed, hence the correct year of determination of capital gain is A Y 2007-08.
In the result, appeal of the assessee is allowed in terms indicated hereinabove.” 5. Considering the fact that the additions have been deleted by Coordinate Bench in assessee on the basis of which the penalty was levied by the assessing officer. In our view, the penalty order passed by assessing officer would not survive. Similar view was taken by Hon’ble Gujarat High Court in case of CIT Versus Shah Alloy Ltd [2013] 35 taxmann.com 532 (Gujarat). Hence the ground of appeal
raised by assessee is allowed.
6. In the result appeal of the assessee is allowed.