Splendor Constructions Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 268/DEL/2010

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5656 (ITAT-DELHI)
• Duration Of Justice: 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2003-2004
• Appeal Filed On: 19-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS SHYMANA SEN
• Assessee Lawyers: M GIRI S
• Keywords: Capital asset; Question of law; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI BEFORE SHRI C.L.SETHI, JM AND SHRI R.C.SHARMA, AM ITA NO.268/DEL/2010 ASSESSMENT YEAR : 2003-04 M/S SPLENDOR CONSTRUCTIONS PVT.LTD., 414/1, DDA COMMERCIAL COMPLEX, DISTRICT CENTRE, JANAKPURI, NEW DELHI 110 058. PAN NO.AAACS2727H. VS. INCOME TAX OFFICER, WARD-9(2), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANOOP SHARMA AND SHRI M.GIRI, ADVOCATES. RESPONDENT BY : MRS.SHYMANA SEN, SR.DR. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) DATED 21.10.2009 IN THE MATTER OF DELETION OF PENALTY IMP OSED U/S 271(1)(C) OF THE IT ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT DURING THE YEAR, THE ASSESSEE COMPANY HAD DECL ARED LONG TERM CAPITAL GAIN ON SALE OF LAND OWNED BY IT. FROM THE DETAILS FURNISH ED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS DISCOVERED THAT THE COMPANY PURCHASED THIS LAND IN THE FINANCIAL YEAR 1998-99 AND SOME IM PROVEMENTS WERE MADE ON IT. IN THE BALANCE SHEETS FILED IN CONSECUTIVE YEARS TH E LAND WAS SHOWN AS STOCK IN TRADE AND ITS VALUE/COST AS ON 31.3.2002 WAS REFLE CTED AT RS.3,46,63,069/-. IN THE ITA-268/DEL/2010 2 BALANCE SHEET AS ON 31.3.2003 FILED WITH THE RETURN OF INCOME, NO STOCK-IN-TRADE WAS DECLARED. THE ASSESSEE COMPANY CLAIMED THAT DU RING THE FINANCIAL YEAR UNDER CONSIDERATION IT HAD CONVERTED ITS STOCK-IN-TRADE C OMPRISING OF THE IMPUGNED LAND INTO INVESTMENT AND SOLD THE SAME ON 12.12.2002 T O ANOTHER COMPANY I.E. M/S PREMIER TYRES LTD. FOR RS.6,00,00,000/-. THE DIFFE RENCE IN THE SALE CONSIDERATION AND THE COST OF PURCHASE WHICH CAME TO RS.2,53,36,9 31/- WAS DECLARED AS LONG TERM CAPITAL GAINS. THE INCOME FROM LONG TERM CAPI TAL GAIN WAS DECLARED AT RS.1,66,09,750/- AFTER CLAIMING BENEFIT OF INDEXED COST OF ACQUISITION. IN THE ASSESSMENT ORDER, THE PERIOD OF HOLDING THE ASSET W AS RECKONED FROM THE DATE WHEN IT WAS CONVERTED AS INVESTMENT FROM STOCK IN TRA DE AND SINCE IT WAS LESS THAN THREE YEARS, THE GAIN WAS TREATED AS SHORT TERM CAP ITAL GAIN AND TAXED AS SUCH. IN RESPECT OF THE ADDITION MADE, THE AO LEVIED PENALTY U/S 271(1)(C) AND THE SAME WAS CONFIRMED BY THE CIT(A). AGAINST THE ORDER OF CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. IT WAS CONTENDED BY THE LEARNED AR THAT WHETHER THE ASSET WAS A LONG TERM CAPITAL ASSET OR SHORT TERM CAPITAL ASSET WAS A DEB ATABLE ISSUE AND IN RESPECT OF THE ADDITION SO MADE, SUBSTANTIAL QUESTION OF LAW WAS A DMITTED BY THE HONBLE HIGH COURT. HE FURTHER CONTENDED THAT IN VIEW OF THE DEC ISION OF THE ITAT AHMEDABAD BENCH IN THE CASE OF ROOPAM MERCANTILE 91 ITD 273 FOR CONCEALMENT OF INCOME, WHERE A PLEA OR CLAIM WHICH IS HELD BY THE HIGH COURT TO HAVE GIVEN RISE TO A SUBSTANTIAL QUESTION OF LAW, CANNOT BE TREATED TO BE FRIVOLOUS OR MALA-FIDE AS TO ATTRACT LEVY OF PENALTY U/S 271(1)(C). IN VIEW OF THE ORDER OF THE HON'BLE DELHI HIGH COURT DATED 16.9.2009, WHEREIN SUBSTANTIAL QUE STION OF LAW HAD BEEN ADMITTED BY THE HONBLE HIGH COURT. APPLYING THE P ROPOSITION OF LAW LAID DOWN BY THE ITAT AHMEDABAD BENCH, HE CONTENDED THAT PENA LTY IS NOT LEVIABLE U/S 271(1)(C). 4. RESPECTFULLY FOLLOWING THE PROPOSITION OF LAW LA ID DOWN BY THE COORDINATE BENCH AS DISCUSSED HEREINABOVE, WHERE A PLEA OR CLA IM WHICH IS HELD BY THE HIGH ITA-268/DEL/2010 3 COURT TO HAVE GIVEN RISE TO A SUBSTANTIAL QUESTION OF LAW, CANNOT BE TREATED TO BE FRIVOLOUS OR MALA-FIDE SO AS TO ATTRACT LEVY OF PEN ALTY U/S 271(1)(C). ACCORDINGLY, WE HOLD THAT IT IS NOT A FIT CASE FOR LEVY OF PENAL TY. 5. THE SECOND ISSUE ON WHICH THE PENALTY PROCEEDING S WERE INITIATED IS THAT THE ASSESSEE HAD CLAIMED BROUGHT FORWARD LOSS AMOUNTING TO RS.1,27,457/- WHICH WAS THEN SET OFF AGAINST THE CURRENT YEARS INCOME. IT WAS DISCOVERED DURING THE ASSESSMENT PROCEEDINGS THAT THE SHARE HOLDING PATTE RN OF THE ASSESSEE COMPANY WAS CHANGED WHICH AFFECTED MORE THAN 51% OF SHARE H OLDINGS AND ACCORDINGLY BROUGHT FORWARD LOSSES COULD NOT HAVE BEEN CLAIMED BY THE ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO S HOW CAUSE WHY BROUGHT FORWARD LOSS SHOULD BE ALLOWED TO BE ADJUSTED AGAIN ST THE CURRENT YEARS INCOME. IN RESPONSE THE ASSESSEE ADMITTED ITS OMISSION AND WITHDREW THE CLAIM BY FILING A LETTER DATED 23.12.2005. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. AS TH ERE WAS INADVERTENT MISTAKE BY THE ASSESSEE WITH REGARD TO CHANGE IN SH AREHOLDING PATTERN, DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF BY FILING L ETTER DATED 23.12.2005, THE ASSESSEE HAS WITHDRAWN ITS CLAIM FOR SETTING OF BRO UGHT FORWARD LOSSES OF RS.1,27,457/-. THUS, NO PENALTY IS WARRANTED FOR S UCH ACCEPTANCE OF CLAIM ON ACCOUNT OF INADVERTENT MISTAKE, DURING THE COURSE O F ASSESSMENT AND OFFERING THE SAME FOR TAXATION. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 17 TH MARCH, 2010. SD/- SD/- (C.L.SETHI) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 17.03.2010. VK. ITA-268/DEL/2010 4 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR