ITO, CHENNAI vs. RENUKA PHILIP, BANGALORE

आदेश / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER:

The Revenue has raised the following grounds:- 2.

‘2.1 The Id. CIT(A) erred in directing the Assessing Officer to allow deduction on account of indexed value of buildings at ₹65,02,943/- when no building existed at the time of sale of property. 2.2 The Id. CIT(A) ought to have noted that the sale deed clearly mentioned that the property sold as 'land' and no buildings are mentioned in the sale deed to give effect for indexation.

2.3 The Id.CIT(A) erred in adoption of P W D rates for extension of building during the F.Y. 1995-96 and F.Y. 1996-97 when there was no evidence available for extension of building during the financial years 1995-96 & 1996-97 to prove that improvement was actually carried out on the existing property’’.

The Brief facts of the case are that the assessee is an 3. individual having income from Capital Gains and Interest income and filed Return of income on 31.07.2005 admitting total income of �1,11,107/- and Return of income was processed u/s.143(1) of the Act. Subsequently, the ld. Assessing Officer having reasons to believe that the income has escapement assessment issued notice u/s.148 of the Act. In compliance to notice, the assessee filed a letter to consider & 1419/Mds /13 :- 3 -: & C.O.No.140/Mds/13 in ITA 1418/13) the return filed earlier for the purpose of re-assessment. The ld.

Assessing Officer issued notice u/s.142(1) of the Act and the ld. Authorised Representative of assessee appeared from time to time and filed information. The assessee sold house property by executing eight separate sale deed on 26.04.2004, each sale deed value being �18,00,000/-. The ld. Assessing Officer found the market value of the property as per Sub Registrar Office, record �22,73,412/- which is higher than sale consideration and applied the deeming provisions u/s.50C of the Act and worked out deemed sale consideration of eight sale deeds at �1,81,87,296/-, whereas assessee has admitted actual sale consideration of �1,44,00,000/- (being �18,00,000/- X 8 sale deeds) and the ld. Assessing Officer has made an addition u/sec. 50C of the Act �37,87,296/-. The assessee has claimed exemption u/s.54 of the Act on sale of residential house as per statement of total income. But the ld. Assessing Officer on perusal of the sale deed is of the opinion that the assessee is not eligible for exemption u/s.54 of the Act but u/sec. 54F of the Act. The ld. Assessing Officer on perusal of sale deed is of the opinion that the vacant land was sold by the assessee but not the residential house and the assessee has wrongly claimed the exemption u/sec. 54 of the Act and is not eligible for index cost of construction of sold property. On perusal of computation of total income, the assessee has claimed exemption u/s.54 of the & 1419/Mds /13 :- 4 -: & C.O.No.140/Mds/13 in ITA 1418/13) Act on purchase of a new Residential flat on 25.10.2004 at Bangalore and the ld. Assessing Officer on perusal of the sale deed of Bangalore flat found that the Bangalore Development Authority (BDA) has development comprehensive flats at Bangalore city and marked schedule of property were the assessee flat come within commercial usage. The ld. Authorised Representative explained that the said purchased at Bangalore was converted into residential property and approved by Bangalore Development Authority. The conversion was made within time frame stipulated u/s.54F of the Act. The ld. Authorised Representative produced evidence and order of re- assessment of nature of property from Bruhat Bangalore Mahanagara Palika alongwith photos explaining that the said property was utilized for Residential purpose. But the ld. Assessing Officer having considered the facts and provisions of Sec. 50C of the Act calculated sale consideration at market value �1,81,87,296/- and has denied the index cost of construction but allowed the value of �2,00,000/- for 4 grounds and 64 sq.ft as on 01.04.1981 and with cost indexation has worked out �5,60,000/- and calculated Long Term Capital Gains at �1,76,27,296/- and allowed exemption u/s.54F of the Act on investment in residential flat at Bangalore �1,15,67,790/- and worked out adjusted Long term capital gain at �60,59,506/- and assessed total income and passed order u/s.143 r.w.s. 147 of the Act dated & 1419/Mds /13 :- 5 -: & C.O.No.140/Mds/13 in ITA 1418/13) 31.12.2009. Aggrieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals). Subsequently, under provisions of Sec. 263 of the Act, the Commissioner of Income Tax- 10, Chennai has set aside the order passed u/s.143 of the Act r.w.s.

147 dated 31.12.2009 and Revision order dated 31.03.2013 giving effect to Sec. 263 directions was passed by declining exemption u/s.54F as the assessee has purchased commercial property and converted into residential and assessee has not discharged his burden cast to prove that reinvestment qualify for deduction u/s.54F of the Act and the assessee claim u/s.54F of the Act of �1,15,67,790/- was rejected and assessee filed an appeal before Commissioner of Income Tax (Appeals).

As against the order u/se. 143(3) r.w.s147 of the act, in the 4. appellate proceedings, the ld. Authorised Representative of the assessee argued the grounds and reiterated the submissions of the assessment proceedings and alleged that the assessee was deprived for claim of cost of construction on property and challenged the applicability of provisions of Sec. 50C of the Act. The ld. Commissioner of Income Tax (Appeals) considered the grounds of appeal and found that the ld. Assessing Officer has adopted guideline value as per Sec. 50C of the Act for property at �1,81,87,296/- against sale consideration of �1,44,00,000/-. Further, the ld. Assessing Officer & 1419/Mds /13 :- 6 -: & C.O.No.140/Mds/13 in ITA 1418/13) has allowed fair market value of land to the extent of 2,00,000/- as on 01.04.1981 and allowed deduction u/s.54F of the Act. The assessee has objected to the action of the ld. Assessing Office on invoking provisions of Sec. 50C of the Act and rejected the cost inflation indexation on building and the assessee filed also additional grounds before Commissioner of Income Tax (Appeals) on 25.01.2011 challenging the ld. Assessing Officer’s action. The ld. Authorised Representative explained that the property sold was land with residential building and was acquired prior to 01.04.1981. Further, the assessee has incurred cost of improvement by way of additions to building �20,00,000/- for the financial year 2005-2006, �10,00,000/- for financial year 2006-2007. Further as per the terms of the purchaser of the property the assessee demolished entire residential building before Registration of property and the assessee is also entitled for cost of improvement of building construction after 01.04.1981. The ld. Commissioner of Income Tax (Appeals) considering the facts and the assessee submissions and the objections on invoking provisions of Sec. 50C of the Act directed the ld. Assessing Officer to refer to valuation cell on 16.02.2012. In response, the District Valuation Officer (DVO) filed report dated 13.12.2012 estimating the value of property as on 26.04.2004 at �1,63,69,000/- as against Sub-Registrar guideline value u/sec. 50C of the Act & 1419/Mds /13 :- 7 -: & C.O.No.140/Mds/13 in ITA 1418/13) �1,81,87,296/-. The assessee filed objections to the valuation report on communication of the ld. Commissioner of Income Tax (Appeals).

The ld. Authorised Representative alleged that the valuation officer has allowed cost adjustment for deficiencies attached to the property @5% as against @ 25% and same was rejected. The ld. Commissioner of Income Tax (Appeals) on the ground of applicability of Sec.50C of the Act. directed the ld. Assessing Officer to adopt the value declared by the District Valuation Officer (DVO) �1,63,69,000/- as sale consideration for calculation of capital gains.

4.1 On the next ground of claim of cost acquisition of land and building the assessee in the Income Tax return claimed fair market value of cost of land, as on 01.04.1981 at �14,00,000/- and addition/cost of construction/ improvements to building in financial years 1995-96 �20,00,000/- and in 1996-1997 �10,00,000/-. The ld. Assessing Officer rejected the claim of the assessee of cost of building as the property sold was vacant land as described in the Registered sale deed and considered only fair market value of land as on 01.04.1981 at �2,00,000/-. The ld. Authorised Representative explained that the property alongwith residential Building was owned by the assessee prior to 01.04.1981 and subsequently, assessee made extension of the building and the value of the building as on 01.04.1981 including four grounds and 28 sq.ft with building 8000 sq.ft & 1419/Mds /13 :- 8 -: & C.O.No.140/Mds/13 in ITA 1418/13) being �14,00,000/- and the addition of new building area of 4000 sq.ft in financial year 1995-96 being �20,00,000/- and in the financial year 1996-1997 2000sq.ft with cost of �10,00,000/-. The residential building was sold in the financial year 2004-05 and prior to sale the building was let out continuously by the assessee and was receiving Rental income and offered to tax under income from House property and filed return of income. The ld. Authorised Representative further submitted that the building is located in the prime area and the buyer wanted to put structure as per their designs and requirement and not willing to take possession of existing building. Therefore, building was demolished prior to registration of sale deed. Further supported the existence of Building, the assessee has filed computation of income disclosing Rental income from house property along with copies of Income Tax Return prior to assessment year 2005-2006. The ld. Commissioner of Income Tax (Appeals) considering the facts and the identifiable evidence is of the opinion that there is a existence of building on land and the assessee has in earlier assessment years has offered rental income. Due to terms and prerequisite condition of Builder, the assessee has demolished the building prior to registration of sale deed. Since the facts are duly supported with evidence of residential building existing on the land and the rental income from building was offered to tax with Income Tax Department and the ld. & 1419/Mds /13 :- 9 -: & C.O.No.140/Mds/13 in ITA 1418/13) Commissioner of Income Tax (Appeals) is of the opinion that the assessee is eligible for indexation of cost of building in the computation of capital gains.

4.2 The third issue being that the assessee could not furnish details of cost of construction incurred during the financial year 1995- 96 and 1996-97 and methodlogy of fair market value of building �14,00,000/- as on 01.04.1981. The ld. Commissioner of Income Tax (Appeals) in order to arrive at a probable value of cost of construction of the building relied on the PWD rates for calculating construction cost and calculated fair market value of the building at page 7 of his order and gave directions to the ld. Assessing Officer to consider index cost of acquisition of Building and calculated Long Term Capital Gains.

4.3. The last ground being the assessee has claimed deduction in return of income investment in residential house u/s.54 of the Act �1,15,67,970/- and the same was rejected by the ld. Assessing Officer but alternatively allowed investment in new Residential property u/s.54F of the Act. The ld. Commissioner of Income Tax (Appeals) considered the facts of vacant land and judicial decisions and highlighted the claim of deduction u/s.54F of the Act that the (ld. CIT- X, Chennai vide his revision order u/s.263 of the Act dated 14.03.2012, set aside the assessment to the extent to allowing & 1419/Mds /13 :- 10 -: & C.O.No.140/Mds/13 in ITA 1418/13) deduction u/s.54 of the Act and directed the ld. Assessing Officer to examine the assessee’s claim of deduction u/s. 54F of the Act whether new property purchased is a residential property or not, and the assessment was set aside and is pending before ld. Assessing Officer.

Since the subject matter of deduction of u/sec. 54F of the Act is pending before ld. Assessing Officer as per order of the ld.CIT-X, u/s.263, the ld. Commissioner of Income Tax (Appeals) has concluded that the ld. Assessing Officer shall calculate exemption u/s.54F of the Act on proportionate basis and allow Long Term Capital Gains as referred in his order at page 9 as under:-

Full value of consideration as per DVO’s report r.w.s. 50C : 1,63,69,000/- Less: indexed cost of land + buildings as discussed above : 65,023,943/-

Long term capital gains : 98,66,057/- Less: Deduction u/s.54F of the Act.

Actual investment in new property : �1,15,67,970/-* Deduction available u/s.54F on Proportionate basis 1,15,67,970 X 98,66,057/- 1,63,69,000/- 69,72,341/- ----------------- Net taxable long term capital gains 28,93,716/- ---------------- Note* Subject to the outcome of the set aside assessment to be completed by the Assessing Officer, as per the directions of the CIT’s order u/s.263 of the Act’’.

Further gave a direction to the ld. Assessing Officer on the disputed issue to assesses the Long term capital gains on sale of the property & 1419/Mds /13 :- 11 -: & C.O.No.140/Mds/13 in ITA 1418/13) at �28,93,716/- as against �60,59,506/- earlier determined u/s.143(3) r.w.s. 147of the Act dated 31.12.2009. Aggrieved by the Commissioner of Income Tax (Appeals) order, the Revenue assailed an appeal before Tribunal.

4.4 Before us, the ld. Departmental Representative reiterated the submissions on findings of the ld. Assessing Officer and also referred to the assessment order were the ld. Assessing Officer has not allowed the claim of building in calculation of Long Term Capital gains.

The ld. Commissioner of Income Tax (Appeals) has erred in directing the ld. Assessing Officer to allow deduction of Cost Inflation Indexed value of building �65,02,943/-. The ld. Commissioner of Income Tax (Appeals) has ignored the findings and the information in sale deed of non existence of building and adoption of PWD rates for extension of building in the financial years 1995-96 and 1996-97 were no evidence was produced by the assessee on the improvement carried out in the existing Residential property and prayed for set aside of the order of Commissioner of Income Tax (Appeals).

4.5 Contra, the ld. Authorised Representative of the assessee reiterated the submissions of assessment proceedings alongwith evidence and submissions made before ld. Commissioner of Income Tax (Appeals) and the grounds raised on disputed issue. Further, ld. Authorised Representative explained that the ld. Commissioner of & 1419/Mds /13 :- 12 -: & C.O.No.140/Mds/13 in ITA 1418/13) Income Tax (Appeals) has considered the facts and having been satisfied has calculated index cost of acquisition of property as on 01.04.1981 both land and building and also Building extensions in the financial year 1995-96 and 1996-1997. The ld. Commissioner of Income Tax (Appeals) has adopted PWD rates as the standard rates available in the state of Tamil Nadu and also the genuine facts being that the assessee is a owner of the building prior to 01.04.1981 and was in possession. The assessee on the request of the builder demolished building including improvements and in support of existence of building, the ld. Commissioner of Income Tax (Appeals) has perused the Income Tax returns of the assessee for the assessment year 2003-04 and 2004-05 in respect of rental income from the building and produced copies of Income Tax return to substantiate the claim and prayed for dismissing the appeal.

4.6 We heard the rival submissions, perused the material on record and material evidence filed. The crux of the disputed issue argued by the ld. Departmental Representative that the Commissioner of Income Tax (Appeals) erred in directing the ld. Assessing Officer for allowing deduction of cost indexation value of building �65,02,943/-. The ld. Authorised Representative argued that the assessee is in possession of the building prior to 01.04.1981 and extension of the building are made in the financial year 1995-96 and & 1419/Mds /13 :- 13 -: & C.O.No.140/Mds/13 in ITA 1418/13) 1996-97 and were let out. The rental income from Building was offered for income tax and produced copy of income tax return for assessment year 2004-05 and copy of Residential Electricity bill and Drew our attention to the copy of Income Tax Return of assessment year 2004-05 were the assessee has offered rental income under the house property and disclosed property tax receipts. The ld. Commissioner of Income Tax (Appeals) has elaborately discussed on the existence of Building in his order and having satisfied with Building existence applied PWD rates and calculated index cost of acquisition. We found from the order of assessment and Commissioner of Income Tax (Appeals) that At the request of the buyer/Builder, the property was demolished and sale deed was executed. The ld. Authorised Representative drew our attention to the copies of the Electricity bill of residential to support that the building was in Habitation and rental income was derived. So, considering the apparent facts and material on record and evidence, we found the Commissioner of Income Tax (Appeals) based on examination of the facts of existence of building and Income Tax Returns was of the opinion that the building was in existence and the assessee was offering income from house property in the income tax return. Hence, we are not inclined to interfere with the order of Commissioner of Income Tax (Appeals) and dismiss the Revenue appeal. & 1419/Mds /13 :- 14 -: & C.O.No.140/Mds/13 in ITA 1418/13)

Now, we take up C.O.No.140/Mds/2013 in ITA 5.

No.1418/Mds/2013:- The assessee has ground Nos. 2 & 3 were the ld. Commissioner of Income Tax (Appeals) erred in confirming determination of sale consideration of �1,63,69,000/- as against actual consideration of �1,44,00,000/-.

5.1 The ld. Authorised Representative argued that the Commissioner of Income Tax (Appeals) has adopted the value determined by the DVO. We found that the ld. Assessing Officer has adopted the Sub-Registrar value as per provisions of Sec. 50C of the Act.�1,81,87,296/-. The ld. Commissioner of Income Tax (Appeals) on the basis of the submissions of the assessee referred to the valuation cell and District Valuation Officer has estimated the value of the property of �1,63,69,000/-. This valuation report was communicated to the assessee and the assessee filed submissions on 04.03.2013 in respect of cost adjustment for the deficiencies attached to the property allowed at 5% and the ld. Commissioner of Income Tax (Appeals) has calculated capital gains which is not disputed, so considering the apparent facts, we confirm the order of Commissioner of Income Tax (Appeals) on this issue. The ground of the assessee in Cross Objection is dismissed. & 1419/Mds /13 :- 15 -: & C.O.No.140/Mds/13 in ITA 1418/13) 5.2. The next ground raised by the assessee with respect to cost adjustment made by the DVO at 5% and the claim of the assessee being 25%.

5.3 The ld. Authorised Representative submitted copy of the valuation report issued to the assessee. We found that the DVO has calculated the value of property based on the information and details submitted. The contention of the assessee for claim of 25% adopted was argued. The ld. Commissioner of Income Tax (Appeals) could not understand the reasons envisaged by the assessee how such deficiencies attached to the property will adversely affect the value of the property. The ld. Commissioner of Income Tax (Appeals) has rejected the cost adjustment of 25% and we found the ld. Commissioner of Income Tax (Appeals) considered these fact and DVO report and directed the ld. Assessing Officer to adopt value as per DVO for calculation. Therefore, we do not find any infirmity and dismiss the ground in Cross Objection filed by the assessee.

5.4 The third and fourth ground raised by the assessee is that the Commissioner of Income Tax (Appeals) erred in not accepting the plea of the cost of building and estimated cost of allowance at 5% towards cost adjustment without any reasons. We on perusal of the Commissioner of Income Tax (Appeals) order at page 6, found the & 1419/Mds /13 :- 16 -: & C.O.No.140/Mds/13 in ITA 1418/13) probable value of cost of construction of building in financial year 1981-82, 1995-96 and 1996-1997 based on the PWD rates was applicable to the state of Tamil Nadu was calculated at 50% of probable cost of construction adopted for building existing as on 01.04.1981 falling in financial year 1981-1982 as the building being old. We found the reasons recorded by the ld. Commissioner of Income Tax (Appeals) that the assessee could not submit any details of cost of construction incurred for the financial year 1995-96 and 1996-1997 nor assessee was able to file any details of method on methodology in arriving at fair market value of land and building �14,00,000/-. We are of the opinion that the ld. Commissioner of Income Tax (Appeals) has rightly considered the facts with basic reasons in respect of cost of construction of old building and we dismiss the ground of the assessee.

5.5 The last ground raised by the assessee that the Commissioner of Income Tax (Appeals) mentioned about the proceedings of u/s.263 of the Act pending and the claim is subject to outcome of the set aside assessment to be completed by the ld. Assessing Officer in proceedings u/sec. 263 of the Act. The ld. Authorised Representative contention that the ld. Commissioner of Income Tax (Appeals) ought to have appreciated that it is a concurrent authority. We on perusal of the calculation of Long Term Capital Gains & 1419/Mds /13 :- 17 -: & C.O.No.140/Mds/13 in ITA 1418/13) on sale of property at page 9, the ld. Commissioner of Income Tax (Appeals) has made a note in respect of revisionary proceedings and proportionately allowed the claim. Subsequently, the ld. Authorised Representative explained that the order of Sec. 263 on appeal was dismissed and the appeal has been admitted in the High Court and the ld. Assessing Officer has passed the consequential revisionary order on 31.03.2013 giving effect to the direction excluding deduction u/s.54F of the Act and the disputed Revisionary proceedings are pending before High Court. Therefore, we are of the opinion that the ld. Commissioner of Income Tax (Appeals) was correct in his order to make observations and we dismiss the ground of the assessee.

5.6 In the result, the Cross-Objection filed by the assessee is dismissed.

The ld. Assessing Officer has initiated penalty proceedings on the basis of assessment order passed u/s.147 r.w.s. 143(3) of the Act dated 31.12.2009. In the penalty proceedings, the ld. Authorised Representative of the assessee appeared and filed details and explained the fact of computation of capital gains and exemption claimed by the assessee and the disputed issue being the assessee before the sale of property as per terms with Builder, the assessee has & 1419/Mds /13 :- 18 -: & C.O.No.140/Mds/13 in ITA 1418/13) demolished the building existing prior to 01.04.1981 and subsequent construction works. The ld. Assessing Officer relied on the sale deed and found mentioned as vacant land and the assessee has sold vacant land and therefore declined the claim of Sec. 54F of the Act. Further, the assessee has purchased property as disclosed in the return of income on 25.10.2004 and the same was disallowed in the assessment proceedings. The ld. Assessing Officer has allowed deduction u/s.54F instead of Sec. 54 of the Act. Further, the assessee was claiming property alongwith existence of building from 01.04.1981 and also incurred additional construction cost in the financial years 1995-96 and 1996-97. The ld. Assessing Officer has not considered these facts and allowed only indexation in respect of vacant land as per 01.04.1981. Considering all these facts and objections, the ld. Assessing Officer has passed assessment order on 31.12.2009 and levied minimum penalty of 100% �12,11,900/-. Aggrieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals).

6.1 In the appellate proceedings, the ld. Commissioner of Income Tax (Appeals) has considered the submissions, objections and findings of the ld. Assessing Officer and found that the assessee has disclosed actual sale consideration received as against Sub-Registrar value on application of deeming provisions of Sec. 50C of the Act and & 1419/Mds /13 :- 19 -: & C.O.No.140/Mds/13 in ITA 1418/13) the ld. Assessing Officer has disallowed the deduction u/sec. 54 of the Act by treating property sold as vacant land. The contention of the ld. Assessing Officer being the assessee has sold vacant land and the claim u/s.54 of the Act is not allowable and therefore the assessee has furnished inaccurate particulars and penalty is levied. The ld. Commissioner of Income Tax (Appeals) found that the additions in assessment proceedings by the ld. Assessing Officer shall not give way for penalty, when deeming provisions of Sec. 50C of the Act accepted. The penalty is leviable only in cases of concealment or submitting inaccurate particulars and the penalty cannot be sustained based on the guideline value being fair market value which is a deeming provisions and therefore does not attract penalty and relied on the Co-ordinate Bench decision in the case of ACIT vs. Meenakshi (2009) 125 TTJ 856/319 ITR 262 and provisions of Sec. 271(1)(c) of the Act shall not attract were there are no particulars of concealment or submission of inaccurate particulars. The assessee has claimed exemption u/s.54 of the Act subsequent to sale of residential house property and the rental income of the property was disclosed under income from House Property and Return of Income was filed disclosing Rental income in the assessment years 2003-04 and 2004-05. The fact that the assessee demolished building before registration shall not be a reason that vacant land was sold for levy of penalty though & 1419/Mds /13 :- 20 -: & C.O.No.140/Mds/13 in ITA 1418/13) ld. Assessing Officer allowed exemption u/s.54F of the Act. The ld.

Assessing Officer was under bonafide belief and not considered the factual aspects that the Building was existed before to date of sale.

With this findings, ld. Commissioner of Income Tax (Appeals) has deleted the penalty. Against the order of Commissioner of Income Tax (Appeals), the Revenue has assailed an appeal before us.

6.2 Before us, the ld. Departmental Representative argued that the ld. Commissioner of Income Tax (Appeals) has erred in deleting the penalty and the ld. Assessing Officer had disallowed claim u/s.54 and 54F of the Act in the revision proceedings and assessee is not eligible for exemption as the property purchased is in the nature of commercial property and prayed for allowing the appeal.

6.3 Contra, the ld. Authorised Representative relied on the orders of the ld. Commissioner of Income Tax (Appeals) and vehemently opposed the grounds.

6.4 We heard the rival submissions, perused the material on record and judicial decisions. The crux of the issue being whether the assessee is guilty or submitted inaccurate particulars in the assessment proceedings. It was explained that the assessee is the owner of the land and building before 01.04.1981 and subsequently undertook construction works as extension of Building and as per terms of sale & 1419/Mds /13 :- 21 -: & C.O.No.140/Mds/13 in ITA 1418/13) with purchaser, the building was demolished and sale deed was executed by the assessee. The fact that the penalty order arised out of the assessment order passed u/s.143(3) r.w.s. 147 of the Act dated 31.12.2009 and the ld. Commissioner of Income Tax (Appeals) in the quantum proceedings having satisfied that there is existence of Building and allowed index cost acquisition as deduction from sale consideration. The proceedings under Sec. 263 of the Act are being contested at higher forums and has not attained finality. The Revenue before us argued on the basis of Revision order passed u/s.263 of the Act which is not appropriate. The facts of the assessment proceedings have been considered by the ld. Commissioner of Income Tax (Appeals) and satisfied with evidence and also there is no concealment or furnishing of inaccurate particulars as the assessee has claimed exemption u/s.54Fof the Act and also disclosed Rental income from the building in earlier assessment years, we consider the Apex Court decision of CIT vs. Reliance Petro Products Pvt. Ltd 322 ITR 158(SC) and the levy of penalty cannot be automatic and addition in assessment proceedings cannot be a gateway for levy of penalty. We also draw support from the principles laid down in case of CIT vs. Manjunatha Cotton and Ginning Factory, 359 ITR 565, (Karnataka) were it was held that the penalty proceedings are not automatic and they are distinct. Considering the factual matrix, legal decisions and & 1419/Mds /13 :- 22 -: & C.O.No.140/Mds/13 in ITA 1418/13) assessment records, we are not inclined to interfere with the order of Commissioner of Income Tax (Appeals) and dismiss the appeal of the Revenue.

Order pronounced on Friday, the 22nd day of July, 2016, at Chennai.