SURAKSHA DEVELOPERS LTD,MUMBAI vs. ITO 7(2)(4), MUMBAI

This appeal by the assessee is directed against the order of the Commissioner of Income Tax-7, Mumbai ( in short ‘ CIT’) dated 21/2/2014 levying penalty of Rs.10,30,76,604/- under section 271(1)(c) of the Income Tax Act, 1961 (in short ‘the Act’) for the assessment year 2009-10.

2.1 The assessee company filed its return of income for assessment year 2009-10 on 29/09/2009 declaring NIL income. The assessee was a partner in M/s. Fine Developers with 12.5% capital contribution and 10% of share on profit. The case was taken up for scrutiny and the assessment was passed under section 143(3) of the Act vide order dated 26/12/2011 accepting the income as returned at NIL. The CIT-7, Mumbai on examination of the records of assessment for assessment year 2009-10 observed that in the relevant period, a new partner M/s. Housing Development & Infrastructure Ltd. joined the partnership firm M/s. Fine Developers which purchased a plot of land from Bhandary Metallurgical Corporation Ltd., for a consideration of Rs.28 cores. The said plot of land was revalued at Rs.268 crores and the assessee received an amount of Rs.22,90,59,118/- as compensation on retirement from the partnership firm. The said receipts were treated as capital receipts and credited to the assessee’s balance sheet under capital reserve. The Ld. CIT was of the opinion that since the assessee had transferred its rights in the capital assets of the firm, the receipt of Rs. 22,90,59,118/- was liable to be taxed under the head ‘Capital Gains’ and, therefore, the order of the assessment for assessment year 2009- 10 dated 26/12/2011 was erroneous and prejudicial to the interest of the Revenue. In consequence, thereof, an order u/s. 263 of the Act was passed on 21/05/2013, wherein the sum of Rs.22,90,59,118/- received by the assessee as retirement compensation was taxed as short term capital gains and the total income of the assessee was determined at Rs.22,90,59,120/-. Penalty proceedings under section 271(1)(c) of the Act were also simultaneously initiated by issue of requisite notices.

After taking into account the assessee’s objections and submissions in this regard, the Ld. CIT rejected them and vide the impugned order dated 21/02/2014 proceeded to levy penalty of Rs.10,30,76,604/- u/s. 271(1)(c) of the Act on the assessee, being 150% of the tax sought to be evaded.

2.2 Aggrieved by the order passed u/s. 263 of the Act dated 21/5/2013 for assessment year 2009-10, the assessee preferred an appeal before the Tribunal. At the outset of the hearing, it was brought to the notice of Bench that a Co-ordinate bench of this Tribunal in the assessee’s case in dated 18/12/2014, quashed the order passed under section 263 of the Act passed by the Ld. CIT for assessment year 2009-10. A copy of this order was placed before us by the Ld. Representative for the assessee.

2.3 We have heard both parties in the matter. We find that Co- ordinate Bench of this Tribunal in the assessee’s own case in its order in dated 18/12/2014 has quashed the order passed u/s. 263 of the Act passed by the Ld. CIT-7, Mumbai as per its finding rendered at para – 21 thereof. In view of the fact that the order u/s.263 of the Act dated 24/5/2013 for assessment year 2009-10 has been quashed, Consequently, the penalty of Rs.10,30,76,604/- levied under section 271(1)(c) of the Act vide the impugned order of the CIT-7, Mumbai dated 21/02/2014 does not now survive for consideration. In this view of the matter, we cancel the penalty of Rs.10,30,76,604/- levied u/s. 271(1)(c) of the Act vide order dated 21/02/2014 for assessment year 2009-10 passed by the Ld.CIT-7,Mumbai.

Consequently, the grounds raised by the assessee in this appeal do not require adjudication.

Order pronounced in the open court on 13/01/2016