VIPUL A SAPANI,MUMBAI vs. ITO 22(2)(4), MUMBAI

O R D E R

PER PAWAN SINGH, JM:

1. On the facts and in the circumstances of the case and in law, the Learned CIT(A)-33 erred in confirming the penalty levied u/s 271(1)(c) of Rs 5,00,000/-.

2. On the facts and in the circumstances of the case and in law, the Learned CIT(A)-33 erred in stating that assess had claimed cost of improvement knowing the fact that no such expenses were incurred and erred in ignoring the fact that the documents pertaining to cost of improvements were pertaining to year 1997-98 which was Id years back & hence was not available with assessee & the view of the assessee is supported by Rule 6F of the Income Tax Act,1961.

3. On the facts and in the circumstances of the case and in law, the Learned CIT(A)-33 erred in ignoring the fact there was no concealment of particulars of income or inaccurate particulars of income were furnished as all the details related to cost of improvements were duly reflected in annual accounts and IT return of all years and was duly scrutinized by department in various years.

2. The brief fact of the case are that the assessee filed return of income on 31.07.2009 declaring total income for Rs. 2,53,754/-. The return of income was selected for scrutiny and the Assessing Officer (AO) made the addition of Rs. 2,60,210/- of expenses of Rs. 10,967/- on account of Long Term Capital Gain (LTCG).

3. The AO further observed that actual cost of property was Rs. 26,38,350/- whereas the assessee has claimed that Rs. 33,35,500/- inclusive of cost of improvement. The cost of improvement of Rs. 7,47,150/- was disallowed by the AO on the pretext that no documentary evidence presented, hence the cost of flat was taken of Rs. 26,38,350/- and index cost of acquisition was taken at Rs. 46,39,032/- as against Rs. 58,64,837/- claimed by assessee, thus the AO determined the LTCG of Rs. 10,967/- and further observed that since the assessee had Long Term Capital Loss (LTCL) relevant to AY- 2002-03 amounting to Rs. 66,904/-, the same was set of balance LTCL of Rs. 55,937/- was allowed to be carried for future set of and levied penalty of Rs. 5,00,000/- for incorrect claim of cost of improvement including index cost of improvement.

4. The assessee filed appeal before the CIT(A) and the CIT(A) uphold the penalty holding that assessee is guilty of furnishing the incorrect particulars of his income in term of section 271(1)(c) of the Act,on the pretext that assessee has failed to produce bank transaction showing the payment made by the assessee on the cost of improvement and that the assessee could not justify the cost of improvement by way of documentary evidence.

5. We have heard the ld. AR of the assessee and Departmental Representative (DR) for revenue and perused the material available on record.

6. The ld. Authorised Representative (AR) of the assessee has argued that the assessee has neither concealed nor submitted any incorrect particular.

7. Ld. AR of the assessee has drawn our attention to page no. 106 of the paper book filed before us which is the detailed of assets of assessee as on 31.03.2002, wherein the value of property at Ghatkopar has been shown of Rs. 33,35,500/-, again for the detail of fixed assets as on 31.03.2004, the same has been shown and again for the capital account for the year ended on 31.03.2006 the property at Ghatkopar is shown.

8. In the AY-2006-07, the assessee has shown two houses in respect of which deemed income was offered by the assessee was accepted. The ld. AR of the assessee further drawn our attention to page no. 75 of paper book which is copy of agreement for sale in respect of property ,wherein the sale consideration of the property is shown as Rs. 46,50,000/- and the same was received as per the detailed mentioned at page no. 79 of the paper book and as per clause 4 of the agreement, which clearly stipulate that the transferor (assessee) shall deliver the vacant and peaceful possession of the flat along with the “permanent fixtures and fittings” on completion of the sale i.e. on receipt of full consideration. The clause of the agreement to sale clearly stipulate about the permanent fixtures and fittings in the flat which were obviously made by the assessee for which the assessee has offered income in respect of AY 2006-07 which was duly accepted by the AO, copy of the assessment order for AY 2006-07 is placed on record, thus the cost of improvement claimed by assessee which was disallowed by the AO cannot be basis for making opinion about furnishing incorrect particular.

9. In CIT Vs Reliance Petroproducts Pvt. Ltd. reported viz. 322 ITR 158 the Hon’ble Apex Court has held that “In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination in making incorrect treatment of furnishing incorrect particular. There can be no dispute that everything would depend upon the return filed by assessee, i.e. before only document where assessee can furnish this particular of his income where property are found to be inaccurate, the liability would arise to attract penalty, the details supplied in the return must not be accurate, not exact or correct not in accordance to the truth or erroneous. Mere making the claim which is sustainable in law, by itself, will not amount to furnish inaccurate particular regarding the income of the assessee. 10. The assessee has shown from his paper book placed before us that the assessee was showing the property in his books of account/assets consistently and has offered income from the property which has been accepted by the revenue. 11. In these circumstances, we hold that there was no concealment or inaccurate particulars furnished by the assessee to the AO while filing the return of income for the relevant assessment year, and the order of AO for levying the penalty is illegal and not in accordance with law as laid down by Hon’ble Apex Court and Reliance Petroproducts Pvt. Ltd., hence the levy of penalty levied by the AO and subsequently confirmed by the CIT(A) is deleted. 12. In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on this 23rd December 2015.