JAYANTILAL AMBARAM PATEL HUF,SURAT vs. ASSISTANT COMMISSIONER INCOME TAX , CIR.2(3), SURAT

Appellant respectfully submits that Hon’ble ITAT allowed appeal challenging finding of lower authorities to hold that claim u/s 10(37) of the Act made by the appellant was allowable and capital gain arising on sale of agricultural land is not exigible to capital gains tax. (copy of order enclosed). Since the disallowance itself is deleted penalty levied on addition cannot survive.”

At the outset of hearing, the learned Authorised Representative (ld. AR) of the assessee submits that the addition of long term capital gain (LTCG) on the basis of which penalty was levied by the Assessing Officer has been deleted by the Division Bench of this Tribunal in assessee’s own quantum appeal in dated 13/12/2019. The ld. AR submits that she has placed on record copy of decision of Division bench dated 13/12/2019. The ld. AR further submits that the land of assessee was acquired by the State Government for requirement of Surat Municipal Corporation (SMC) for setting up of Sewerage Treatment Plant under compulsory acquisition. The assessee claimed such compensation is exempted under Section 10(37) of the Act. However, the Assessing Officer treated such compensation as capital gain and levied penalty under Section 271(1)(c) of the Act. The division Bench of Surat Tribunal has already allowed the exemption under Section 10(37) of the Act, therefore, penalty order will not survive.

On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) for the revenue after going through the decision of the Division Bench of this Tribunal in assessee’s own case for same assessment year Jayantilal Ambaram Patel HUF Vs ACIT in ITA No. 518/Ahd/2017 dated 13/12/2019, relied on the orders of lower authorities.

I have considered the submissions of both the parties and have gone through the orders of the lower authorities carefully. I find that the ld. AR of the assessee has explained correctly all fact in her submission. I find that the Assessing Officer levied penalty on treating the compensation as long term capital gain and levied penalty under Section 271(1)(c) of the Act vide his order dated 23.03.2018, which was confirmed by ld CIT(A). I find that the Division Bench of this Tribunal in assessees own case in ITA No 518/Srt/2018, alongiwth other similarly situated assessees, accepted their contention that compensation received by them on account of compulsory acquisition of land is exempted under Section 10(37) of the Act. Considering the fact that once the addition of LTCG, on the basis of which penalty was levied has already been deleted, therefore, the penalty order under section 271(1)(c) dated 23/03/2018 will not survive. Accordingly, grounds of appeal raised by the assessee are allowed.