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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
This appeal by the Assessee is arising out of the order of CIT(A)-4 Mumbai, in appeal No. CIT(A)-4/Tr.336/Appeal(3)/I.T.O.-11(1)(3)/2014-15, dated 07-08-2015. The Assessment was framed by ITO Ward-11(1)(3), Mumbai for the A.Y. 2009-10 vide order dated 28-12-2011 under section 143(3) of the Income Tax Act, 1961(hereinafter ‘the Act’). The penalty under dispute was levied by the ITO Ward 11(1)(3), Mumbai vide order dated 12.03.2014 for AY 2009-10 under section 271(1)(c) of the Act.
The only issue in this appeal of assessee is against the order of CIT(A) confirming the levy of penalty by the AO under section 271(1)(c) of the Act on the issue of suppressed selling price of production of film by Rs. 45,83,375/-.
N. Chandra Global Infotainment Ltd. (A.Y:2009-10) 3. At the outset, the learned Counsel for the assessee stated that the quantum addition has been deleted by the Tribunal in for the AY 2009-10 vide order dated 07-06-2016 vide Para 8 to 11 as under: -
“8. We heard the parties and perused the record. We notice from the agreement dated 09-10-2006 entered between the assessee company and M/s AFL that the assessee herein is described as “assignor” and M/s AFL is described as “assignee”. The agreement further describes the rights and liabilities of each of the above said two persons. It can be noticed that the assessee, in its capacity of ‘assignor’ has obtained certain rights and liabilities and M/s AFL, in its capacity as ‘assignee’ has obtained its own rights and liabilities. There should not be any dispute that the rights and liabilities of the assignor and assignee are distinct and different. Accordingly, we are of the view that it may not be correct on the part of tax authorities to view the rights and liabilities of assignor and assignee as one and the same.
The assessee has transferred its rights and liabilities obtained by it, in its capacity as assignor, to Shri N. Chandra. The transaction has taken place in the month of October, 2008. Whereas the RBEL (successor of M/s AFL) has transferred its rights and liabilities obtained by it, in its capacity as assignee, to M/s Pen India P Ltd and the said transaction has taken place in the month of July, 2009. It can be noticed that both the transactions are in respect of two different rights and further they have taken place in two different periods. Accordingly, we are of N. Chandra Global Infotainment Ltd. (A.Y:2009-10) the view that the tax authorities are not justified in treating both the transactions as representing same rights and liabilities attached to the film.
Further, we notice that the assessee has adequately demonstrated the circumstances under which it has decided to transfer its rights for a sum of Rs.1.85 crores along with attached liabilities. According to the assessee, it has taken a commercial decision to transfer its rights with the purpose of reducing further losses. Even though it was contended by the revenue that the transaction has taken with a related person, yet no material was brought on record to show that the transaction value was less than the market price prevailing at that point of time. The Ld A.R has narrated the details of subsequent events and the same shows that the decision taken by the assessee has benefitted it. We also notice that the assessing officer has accepted the fact that the assessee has incurred loss and hence he has allowed the loss to the tune of Rs.19.00 lakhs. The dispute is with regard to the quantum of loss only. However, in view of the foregoing discussions, we are of the view that the reasoning given by the tax authorities to restrict the loss to Rs.19.00 lakhs cannot be considered to be correct one. Since the assessee has taken a commercial decision in the normal course of carrying on its business and since the assessing officer has not brought on record any material to show that identical transaction with identical set of facts could have fetched more price at the relevant point of time, we are of the view that there is no reason to disbelieve the consideration disclosed by the assessee. Further, we have also N. Chandra Global Infotainment Ltd. (A.Y:2009-10) noticed that the rights and liabilities available with the assessee and M/s AFL/RBEL cannot be considered to be the same.
Accordingly, we are of the view that the Ld CIT(A) was not justified in confirming the disallowance made by the AO. Accordingly, we set aside the order of Ld CIT(A) passed on this issue and direct the AO to delete the impugned disallowance of Rs.45.83 lakhs."
When this was confronted to the learned Sr. DR, he fairly conceded the position. We are of the view that since the quantum is deleted, the penalty cannot survive. Accordingly, we delete the penalty and allow the appeal of the assessee.
In the result, the appeal of assessee is allowed.