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Income Tax Appellate Tribunal, F Bench, Mumbai
Before: Shri Jason P. Boaz & Shri Sandeep Gosain
This appeal by the assessee is directed against the order of the CIT(A)- 34, Mumbai dated 28.11.2014 upholding the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 (in short, 'the Act') by the Assessing Officer (AO) in the case on hand vide order dated 11.03.2014.
The facts of the case, briefly, are as under: - 2.1 The assessee was a partner in the firm M/s. B. Alim Builders, from which she retired in the year under consideration w.e.f. 30.06.2004, i.e. in A.Y. 2005-06 and retirement dues of `2.98 crores was credited in her capital account. Since no return of income for A.Y. 2005-06 was filed, to offer the same to tax, the AO initiated proceedings under section 147 of the Act and after recording reasons in this regard, issued notice under section 148 of the Act. In response to notices issued the assessee filed a return of Mrs. Vanita H. Alimchandani income declaring income of `3,34,740/- constituting rental income and short term capital loss. On being queried regarding the taxability of the amount of `2.98 crores, the assessee’s response was that the profits and gains arising from transfer of capital assets by way of distribution of capital on dissolution of firm or AOP or BOI or otherwise was exigible to tax as income of the firm. The assessee’s explanation did not find favour with the AO, who held that the profit had arisen on revaluation of the assets and it is therefore exigible to tax in the assessee’s hands. The assessment for A.Y. 2005-06 was accordingly completed under section 143(3) r.w.s. 147 of the Act vide order dated 31.12.2010; wherein the assessee’s income was determined at `2,61,70,392/- on account of profits arising from revaluation of assets and in respect of which the AO simultaneously initiated penalty proceedings under section 271(1)(c) of the Act. This order of assessment dated 31.12.2010 for A.Y. 2005-06 was upheld by the CIT(A) vide order dated 19.03.2013. 2.2 Consequent to the order of the learned CIT(A) dated 19.03.2013 for A.Y. 2005-06, the AO issued another show cause notice to the assessee to show cause as to why penalty should not be levied under section 271(1)(c) of the Act in respect of the addition made on account of profits arising to the assessee on revaluation of assets of the firm in which she was partner. In response thereto, the assessee reiterated her submissions put forth in assessment proceedings, that settlement of dues of retiring partner does not attract any tax liability to the assessee as there is no transfer of asset to the retiring partner. The AO rejected the assessee’s contentions and holding that the assessee had committed a default within the meaning of Explanation 1 of proviso to section 271(1)(c) of the Act, proceeded to levy penalty of `86,96,280/- being 100% of the tax sought to be evaded. On appeal, the learned CIT(A) upheld the aforesaid penalty levied under section 271(1)(c) of the Act for A.Y. 2005-06 vide the impugned order.
3. Aggrieved by the above order of the learned CIT(A) confirming the levy of penalty under section 271(1)(c) of the Act for A.Y. 2005-06, the assessee has raised the following grounds in this appeal as under: - Mrs. Vanita H. Alimchandani “1. The order passed by the learned CIT (A) is bad in law.
2. The learned CIT (A) erred in dismissing the appeal filed by the appellant against levy of penalty of Rs.86,96,280/- u/s 271(1)(c) without passing a speaking order on the detailed explanations given in the letter dated 27.11.2014 of assessee's representative.
The learned CIT (A) erred in dismissing the appeal relying on Mumbai ITAT's order dt. 13.11.2014 in the case of Delleoitte Consulting India Pvt. Ltd. for A.Y. 2004-05 and 2005-06 in and 7651/M/2012 without appreciating the fact that in the said case the penalty related to assessee's claim for deduction of disallowable expenditure incurred in respect of it's A.E. and that the assessee had filed belated revised return withdrawing the claim for deduction of said expenditure.
The learned CIT (A) failed to note that appellant's bonafide belief that amount received on retirement from partnership firm is not taxable was based on decisions of High Court and Tribunals (Copy furnished to CIT (A» and that even if a default is committed under bonafide belief penalty is not justified as held by the Supreme Court in CIT v. Reliance Products 322 ITR 158.
The learned CIT (A) erred in relying on CIT(A)'s finding in assessment proceedings without appreciating that penalty proceedings are separate from assessment proceeding and in any case CIT (A) order has not become final.
The learned CIT (A) failed to note that as held by Calcutta High Court in CIT v. Calcutta Corp. 166 ITR 29 that where two opinions are possible, penalty is not justified.
It is prayed that penalty of Rs. 86,96,280/- levied by Assessing Officer u/s 271(1)(C) may be deleted.
The appellant craves liberty to add, amend, alter, and/or withdraw any of the above grounds of appeal.” 4.1 At the outset of the hearing of this appeal, the learned counsel for the assessee submitted and brought to the notice of the Bench that the assessee’s appeal in quantum proceedings against the order of the CIT(A)- 30, Mumbai dated 19.03.2013 for A.Y. 2005-06 has been disposed off by the order of the Coordinate Bench of this Tribunal in ITA No. 3172/Mum/2013 dated 13.02.2015, setting aside the order of the learned CIT(A) on both issues of taxability of retirement receipts and deduction under section 54F of the Act and restored these matters to the file of the learned CIT(A) for fresh adjudication. It was pleaded that in these
Mrs. Vanita H. Alimchandani circumstances, the penalty levied and confirmed under section 271(1)(c) of the Act by the AO/learned CIT(A) being based on the orders of the CIT(A)- 30, Mumbai dated 19.03.2013 having been set aside, the penalty so levied would not now survive for consideration and is to be set aside. A copy of the same has been placed on record.
4.2 The learned D.R. for Revenue agreed to this proposition put forth by the learned counsel for the assessee, but submitted that penalty proceedings under section 271(1)(c) of the Act be also set aside to the file of the AO for consideration in accordance with the decision of the learned CIT(A) on this issue in fresh adjudication to be made in accordance with the directions in the Tribunal’s order (supra).
4.3 We have heard the rival contentions and perused and carefully considered the material on record. We find, on a perusal of the order of the Coordinate Bench in the assessee’s own case for A.Y. 2005-06 in quantum proceedings in dated 13.02.2015, that the order of the learned CIT(A)-30 dated 19.03.2013 on the quantum addition has been set aside and restored to the file of the CIT(A) for fresh adjudication on the issue on which penalty levied under section 271(1)(c) of the Act has been upheld by the learned CIT(A) in the impugned order. In these factual circumstances, in which the quantum addition in respect of which the said penalty was levied having been set aside for fresh consideration and adjudication, the said penalty of `86,96,280/- levied under section 271(1)(c) of the Act for A.Y. 2005-06 in consequence thereof would not now survive for consideration before us in the present appeal. We, therefore, set aside the aforesaid penalty of `86,96,280/- levied under section 271(1)(c) of the Act for A.Y. 2005-06 and restore this matter to the file of the AO for fresh consideration and adjudication, consequent to the order of the learned CIT(A) on the quantum issue set aside to his/her file for fresh adjudication by the decision of the Coordinate Bench of this Tribunal in ITA No. 3172/Mum/2013 dated 13.02.2005. It is accordingly ordered.