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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI NABIN KUMAR PRADHAN
Instant appeal by the Department is directed against the order dated 10th March 2014, passed by the learned Commissioner (Appeals)–23, Mumbai, deleting the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 (for short "the Act") for the assessment year 2007–08.
Brief facts are, assessee a partnership firm filed its return of income for the impugned assessment year on 29th October 2007,
2 M/s. Raval & Co. declaring nil income. In the course of assessment proceedings, the Assessing Officer noticed that the assessee has claimed long term capital loss of ` 1,95,90,000 on account of sale of reversionary rights. On verifying the deed of conveyance between the assessee and Megus Estate and Hotels Pvt. Ltd. date 17th July 2006, it was noticed that the assessee has leased out the property to a third party for a period of 999 years. He, therefore, was of the view that for all practical purposes, the assessee has sold his rights over the property and it is left with no ownership. He, therefore, was of the view that the income derived from the transfer of its right over the property should be treated as income from other sources. He, therefore, sought explanation from the assessee on the issue. Though, assessee objected to the view expressed by the Assessing Officer but the Assessing Officer held that the amount of ` 65 lakh received by the assessee on the sale of reversionary right is chargeable to tax as income from other sources. Without prejudice, it was observed by the Assessing Officer, as the assessee has already leased the property for a period of 999 years, there is no question of assessee having any cost of acquisition of the reversionary right which has to be taken as nil. Ultimately, the Assessing Officer treated the amount of ` 65 lakh as income from other sources. Though, the assessee challenged the decision of the Assessing Officer by filing an appeal before the learned
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Commissioner (Appeals), however, the learned Commissioner (Appeals) sustained the addition. Against the order of the learned Commissioner (Appeals), assessee went in appeal before the Tribunal.
During the pendency of appeal before the Tribunal, the Assessing Officer initiated proceeding for imposition of penalty under section 271(1)(c) and ultimately passed and order on 28th March 2012, imposing penalty of ` 21,87,900, on the basis of addition made by the Assessing Officer. The penalty order passed by the Assessing Officer was challenged by the assessee before the learned Commissioner (Appeals). The learned Commissioner (Appeals), after considering the submissions of the assessee in the light of facts and materials on record as well as judicial precedents concluded that as the assessee has disclosed all material facts relating to sale of reversionary right and has also submitted the working of capital gain only because the Assessing Officer has entertained a different view regarding assessability of the amount received by the assessee, the view adopted by the assessee cannot be considered as an untenable view. He observed, since the assessee has disclosed all facts relating to computation of income in the return of income and has claimed the deduction under the bonafide belief that it has transferred a capital asset, imposition of penalty under section 271(1)(c) is not correct. Accordingly, he deleted the penalty imposed.
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We have considered the submissions of the parties and perused the material available on record. At the outset, learned Authorised Representative submitted before us that in the mean while the appeal filed by the assessee challenging the addition of ` 65 lakh as income from other sources has been decided by the Tribunal by restoring back the issue to the file of the Assessing Officer for deciding afresh. She submitted, by virtue of order of the Tribunal as there is no surviving addition against the assessee and consequentially no tax demand, the penalty under section 271(1)(c) also cannot survive. Learned Departmental Representative has also agreed that the Tribunal has restored back the issue of addition of ` 65 lakh to the fife of the Assessing Officer and as of now, there is no demand against the assessee. Having considered the aforesaid submissions of the assessee and perused the order passed by the Tribunal in ITA no.1617/Mum./ 2011, dated 29th April 2016, we have noted that the Tribunal has restored back the issue relating to addition of ` 65 lakh, whether to be treated as capital gain or income from other sources, to the file of the Assessing Officer for deciding afresh. Thus, for the present, there is no addition surviving against the assessee and consequentially, there is no demand with reference to such addition. That being the case, the question of imposing penalty under section 271(1)(c) will not arise. In view of the aforesaid, we do not find any reason to interfere with the 5 M/s. Raval & Co.
order of the learned Commissioner (Appeals). Grounds raised by the Department are, therefore, dismissed.
In the result, appeal stands dismissed. Order pronounced in the open Court on 24.08.2016