ITO WD 2(5), THANE vs. MORESHWAR A. RACKVI (HUF), THANE

Income Tax Officer, Moreshwar A. Rachvi (HUF) Ward 2(5) 3/37 Anand Ashray Ram R. No. 16, 6th Floor, Ashar IT Mandir Rd, Vs. Park, B Wing, Midc Wagle Indl Bhyander (W) Mumbai Estate, Thane(W) Mumbai-400 604 .. Appellant Respondent PAN No. AADHM7775H Revenue by .. Shri B. Satyanarayana Raju, DR Assessee by .. Shri Vinay D Mulye, AR Date of hearing .. 12-04-2017 Date of pronouncement .. 12-04-2017 O R D E R PER MAHAVIR SINGH, JM:

This appeal by the Revenue is arising out of the order of CIT(A)-1, Mumbai, in appeal No. 706/14-15 dated 30-11-2015. The Assessment was framed by ITO Ward 2(1), Mumbai for the A.Y. 2010-11 vide order dated 24-03- 2014 u/s 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’). The penalty was levied by ITO Ward 2(1), Thane u/s 271(1)(c) of the Act vide his order dated 16-09-2014.

Moreshwar A. Rachvi (HUF)AY:10-11 1.2 Whether on the facts and in the circumstances of the case, and in law, the Hon'ble CJT(A) erred in not appreciating the fact that the additions made by the A.O. in the order u/s 143(3) read with section 147 dated 24.03.2014 pursuant to re-opening of the case u/s 148, were accepted by the assessee which confirms that the capital gain pertained to the year under consideration and had the case not been re-opened u/s 148, the assessee would not have offered the relevant transactions for taxation.

1.3 Whether on the facts and in the circumstances of the case, and in law, the Hon'ble CIT(A) erred in not appreciating that the argument of the assessee that the issue was under litigation did not prevent the fact that capital gain had accrued and only the amount of consideration was under challenge.”

(ii) New Survey No. 82, Hissa No. 3 (S. No. 82, H.No.3)

(iii) New Survey No. 133, Hissa No. 4 (S.No. 133, H.No. 4)

(iv) New Survey No. 82, Hissa No. 13 & New Survey No. 84, Hissa No. 14 (S.No. 82, H.No 13 &S. No. 84, H. No.1)

(v) New Survey No. 41, Hissa No. 9 & New Survey No. 43, Hissa No. 6 (S.No. 41, H.No. 9 & S.No. 43, H.No. 6) Page 2 of 7

Moreshwar A. Rachvi (HUF)AY:10-11 (vi) New Survey No. 53, Hissa No.1 & New Survey No. 67, Hissa No.7 (S. No. 53, H. No.& S.No. 67, H. No. 76)”

The AO reopened the assessment and computed the long term capital gain on the following three properties: -

“

The long term capital gain was computed at Rs.80,65,405/-. As regards to the balance of three properties the AO was convinced that three transactions of the following: - “(i) S No.82, H No.13& S No.84 H No.1 (ii) S No.41, H No.9 & S No.43 H No.6

S No.53, H. No.1 & S. No.67 H No.7” (iii) were cancelled and no gain arising out of the same. The AO initiated the penalty proceedings under section 271(1)(c) of the Act and levied the penalty for furnishing inaccurate particulars of income qua the long term capital gain assessed at Rs. 80,65,405/-. The AO levied a minimum penalty at 100%, which work out at Rs. 16,61,473/-. Aggrieved, assessee preferred the appeal before CIT(A), who deleted the levy of penalty by observing in Para 9 and 10 as under: -

Moreshwar A. Rachvi (HUF)AY:10-11 “9. I have carefully considered the appellant's submissions, observations of the AO in the assessment order and penalty order, and the facts of the case. The return of income was filed in this case on 24.10.2011 showing an income of Rs. 4,58,030/-. Though the appellant had entered into sale transactions in respect of ancestral plots through six registered deeds during the period relevant to current assessment year but no capital gains had been declared from these transactions on the ground that the transactions had not achieved finality and were under litigation. In this regard it was submitted that the karta of HUF Shri Moreshwar A. Rackvi had entered into all these transactions at rates which were very low as compared to the Stamp duty valuation rates/ market price. Shri Moreshwar A. Rackvi, the karta of HUF passed away on 27.10.2010 and his legal heirs filed suits in Civil Court Thane, in respect of all the six transactions. Ultimately, three of the said six transactions were cancelled vide Cancellation deeds dated 16.12.2011, 22.12.20 11 and 13.02.20 13. The amounts received as per Regd. deeds in respect of these properties were returned. Copies of such cancellation deeds were filed before the AO and have again been placed on record. Two of the balance three transactions achieved finality through deed of confirmation / settlement through Court orders dated 2.07.2012 and 20.01.2014, a copy of which has been placed on record. Vide these Settlement- deeds additional compensation was paid to the legal heirs as a result of which legal heirs accepted the transactions already entered into earlier. The third transaction is still under litigation. The appellant had brought these facts to the notice of the AO vide his letter dated 21.02.2014 and had also filed detailed working of the Long Term Capital Gains resulting on these three

Moreshwar A. Rachvi (HUF)AY:10-11 transactions on the basis of sale consideration received by him.

Moreshwar A. Rachvi (HUF)AY:10-11 Act was issued to it on 27.09.2012, but the appellant has already accepted the long term capital gain worked out by the AO with reset to this property by adopting Fair market value of the same. Thus, at the time of filing of the return of income, the appellant did not know whether the transactions initiated in respect of the sale of these properties were final or not and therefore in the return of income filed on 24.10.20 11 the appellant had not shown any long term capital gains from the transactions entered into by him with respect to the ancestral properties. Therefore, it cannot be said that the appellant had furnished any inaccurate particulars of income or had concealed any particulars of income. The AO therefore, was not justified in levying penalty u/s. 271 (1)(c) of the I.T. Act. The penalty levied in this case amounting to Rs. 16,61,473/- is therefore, directed to be sdeleted.”

Aggrieved, now Revenue is in second appeal before us.