DINESH SUNDERJI SHAH,MUMBAI vs. ASSESSING OFFICER, WARD-15(1)(1), MUMBAI

ITA No. 275/Mum/2024, is filed by Mr. Dinesh Sunderji Shah (assessee / appellant) for A.Y. 2018-19, against the appellate order passed by the National Faceless Appeal Centre, Delhi [the learned CIT (A)], dated 30th November, 2023, wherein the appeal filed by the assessee against the

The assessee has raised following grounds of appeal: - “1) On the facts of case the learned AO erred and learned CIT(A) erred in confirming of not determining Long Term Capital Loss Rs 3,39,66,946/and allowing the same to be carried forward.

Accordingly, the explanation offered by the assessee was not considered satisfactorily and the claim of the Long Term Capital Gain was rejected. Consequently, the assessment order under Section 143(3) read with section 144B of the Act was passed on 22nd May, 2021, wherein there is an addition under Section 56(2)(X) of the Act of ₹11,50,540/-, and denial of carry forward of Long Term Capital Loss of ₹339,66,946/-, determining the total income of the assessee at ₹ 83,76,480/-.

Assessee aggrieved with the same preferred the appeal before the learned Commissioner of Income-tax (Appeals). The learned CIT (A) deleted the addition under Section 56(2) of the Act. However, the claim of Long Term Capital Loss did not find favor and same was confirmed. The reason for confirming the action of the learned Assessing Officer was that assessee failed to explain the reason why he got allotment cancelled since substantial payments were made against the purchase of both these flats. He further held that as there is a transfer of allotted flats of the assessee in favour of the builders, provisions of Section 50C of the Act and 56(2)(x)(b) of the Act are applicable in this case. Since, the assessee has not taken prevailing market value of the flats whose allotments were cancelled and returned back to the builder, the long term capital loss cannot be allowed to the assessee. Therefore, he confirmed the action of the learned Assessing Officer.

The assessee has submitted two different paper books, one containing 49 pages and another containing 18 pages along with several judicial precedents. The learned Authorized Representative explain the facts of the case and stated that assessee has surrendered his right to acquire a flat, which is capital asset, on extinguishment of such right, the assessee received consideration and computed the capital loss therein. On such transaction provisions of Section 50C of the Act does not apply.

He further submitted that the claim of long term capital loss was denied to the assessee without any reason. He referred to the cancellation letters for both the flats placed at page no.4 to 11 of Paper Book no.1 and submitted that whether the transaction has been cancelled by the assessee or by the seller does not make the transaction invalid. He therefore submitted that assessee should be allowed Long Term Capital Loss.

The learned Departmental Representative vehemently supported the orders of the lower authorities and stated that the assessee has surrendered the allotment of house property of two flats which does not amount to transfer of assets and therefore, the loss is correctly denied the assessee.

We have carefully considered the rival contentions and perused the orders of the lower authorities. The facts

The learned CIT (A) agreed that there is a transfer and capital gain is chargeable, however, he held that provisions of Section 50C of the Act and Section 56(2)(X) of the Act applies. This observation of the learned CIT (A) clearly shows that computation of capital gain is required to be made on these transactions.

Now, question arises is that whether on this transaction, provision of Section 50C of the Act applies or not. The Provisions of Section 50C of the Act applies only when capital assets transferred is ' land or building or both." In this case assessee has transferred 'right to acquire' the

Accordingly, solitary ground raised in this appeal is allowed and the learned Assessing Officer is directed to allow carry forward of capital loss of ₹3,39,60,946/- to the assessee.

In the result, ITA No.275/Mum/2024 is allowed.

ITA No. 274/Mum/2024, is filed by the assessee against the confirmation of penalty under Section 271(1)(c) of the Act for A.Y. 2012-13 by appellate order dated 30th November, 2023, by the NFAC, wherein the appeal filed by the assessee against the penalty order passed by the learned Assessing Officer under Section 271(1)(c) of the Act dated 8th October, 2021, for A.Y. 2012-13, levying the penalty of ₹4,25,262/-, was confirmed. The assessee is aggrieved with that and is in appeal before us.

Assessee has raised following grounds of appeal:-

The brief facts of the case shows that assessee filed his return of income declaring total income of ₹2,10,075/-. Subsequently, the information was received from investigation Wing that assessee is a director on board of Bharat Wire Ropes Pvt. Ltd. and for A.Y. 2009-10, he has disclosed income of ₹2,74,578/- and for impugned assessment year, he had paid premium to Birla Sunlife Insurance Limited, which does not commensurate with the return of income of the assessee. The return filed by the assessee for A.Y. 2010-11 and 2012-13, were not available. Notice under Section 148 of the Act was issued on 30th March, 2019, in response to which assessee filed his return of income on 11th December, 2019, declaring total income of ₹23,30,520/-. The assessment under Section 143(3) read with section 147 of the Act was passed on 24th December, 2019 at a total income of ₹ 23,30,520/-. This is so because of the reason that assessee has offered income which was covered for the reopening of the assessment. The learned Assessing Officer initiated the penalty proceedings under Section 271(1)(c) of the Act for the additional income offered by the assessee in return in response to notice under Section 148 of the Act for concealment of income. After several notice issued to the assessee the assessee furnished the reply on 3rd March, 2021, stating that there is no concealment of income. The learned Assessing

Assessee preferred an appeal before the learned CIT – A disposed of the appeal on 30/11/2023 dismissing the appeal of the assessee holding that assessee has concealed his income by filing inaccurate particulars of income. He further found that assessee has SUO Moto enhanced the income in the return of income filed against notice under section 148 cannot be a criteria for providing the relief from penalty to be levied under section 271 (1) (C). Assessee himself has stated that he had claimed interest of ₹ 4,045,732/– paid against the salary income of ₹ 24 lakhs. But the assessee did not explain how the interest paid against the loan is an allowable expenses against the salary income. Thus the argument of the appellant does not have any force and substance. He further held that had the assessee's case not been selected for the assessment, the amount of salary income suppressed in the original return would have gone on

The learned authorised representative has filed a paper book containing 14 pages and relying upon certain judicial precedents. He referred to the decision of the honourable Kerala High Court in case of principal Commissioner of income tax versus Ambady Krishna Menon (ITA number 75 of 2020) dated 20/5/2024 wherein on identical facts and circumstances the penalty under section 271 (1) (C) of the act is deleted. He further referred to the decision of the coordinate bench in case of ACIT Ltd in ITA number 5935/M/2014 for assessment year 2005 – 06 dated 28/3/2018. He therefore submitted that the penalty cannot be levied.

The learned departmental representative vehemently supported the orders of the learned lower authorities.

We have carefully considered the rival contention and perused the orders of the learned lower authorities as well as the various judicial precedents relied upon before us.. The facts clearly shows that the assessee filed original return of income by the salary income of ₹ 24 lakhs was disclosed and income from other sources loss of ₹ 1,445,732 was claimed. Resulting into the net taxable income of ₹ 954,268. The case of the assessee was reopened where the reasons was not with respect to the claim of income from other sources of loss of ₹ 4,045,732/–. While filing the return of income under section 148 of the income tax act the assessee did not

Assessee has placed reliance on the decision of the honourable court Kerala High Court in case of Shri Ambady Krishna mennon (supra) wherein after recording the facts in para number 8, findings have been recorded in paragraph number nine the lead to the penalty as under:-

Accordingly solitary ground of appeal of assessee is allowed.

In the result both the appeals are allowed.