ITO 18(3)(1), MUMBAI V. ASHOK BHIMRAO MOKASHI, MUMBAI

ITA 7053/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3558 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 03-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A RAMACHANDRAN
• Assessee Lawyers: REEPAL TRALSHAWALA
• Keywords: Capital asset; Bonafide belief; Cost of acquisition; Fair market value; Wrong claim; Valuation report; Benefit of exemption; Surrender of tenancy right
• Section: 143(3); 54F; 54

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.7053 /MUM/2013 ( / ASSESSMENT YEAR : 2009-10) INCOME TAX OFFICER-18(3)(1), 207, PIRAMAL CHAMBERS, LALBAUG, MUMBAI 400 012. / V. SHRI ASHOK BHIMRAO MOKASHI, 12, HARGURU NIWAS, 45, TAIKALWADI, MANORAMA NAGARKAR ROAD, MAHIM, MUMBAI 400 016. ./ PAN : ADHPM6235P ( / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY : SHRI A. RAMACHANDRAN ASSESSEE BY : SHRI REEPAL TRALSHAWALA / DATE OF HEARING : 07-06-2016 / DATE OF PRONOUNCEMENT : 25-08-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE REVENUE, BEING ITA NO. 7 053/MUM/2013, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 26 TH SEPTEMBER, 2013 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 29, M UMBAI (HEREINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2009- 10, THE APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE PENALTY ORDER DATED 15 TH JUNE, 2012 PASSED BY THE LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 271(1)(C) OF THE INCOME TAX ACT,1961 (HEREINAFTER CALLED THE ACT). ITA 7053/MUM/2013 2 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE BEF ORE INCOME TAX APPELLATE TRIBUNAL, MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) IN THE MEMO OF APPEAL FILED WITH THE TRIBUNAL READ AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY U/S.271 (1 )(C) OF THE I.T. ACT, 1961 OF RS.42,29,880/- FOR AY.2009-10 WITHOUT APPRECIATIN G THE FACT THAT THE ASSESSEE CLAIMED THE COST OF ACQUISITION OF TENANTED P ROPERTY AT RS.26,06,640/-- I.E,. VALUE AS ON 01.04.1981 AND AR RIVED AT INDEXED COST OF RS.1,51,70,645/- THOUGH THE ASSESSEE HAD NOT P AID ANY CONSIDERATION FOR ACQUISITION OF THE TENANTED PROPER TY AND HENCE THE ASSESSEE WAS NOT ENTITLED FOR IT. THIS CLEARLY SHOWS THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD.CIT(A) ERRED IN DELETING THE PENALTY U/S.271 (1 ) (C) OF THE LT.ACT,1961 OF RS.42,29,880/- FOR AY.2009-10 WITHOUT APPRECIATIN G THE FACT THAT THE ASSESSEE HAD NOT DISCLOSED THE SALE TRANSACTION IN HIS RETURN OF INCOME, THEREFORE, THE CLAIM OF EXEMPTION DOES NOT ARISE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD.CIT(A) ERRED IN DELETING THE PENALTY U/S.271 (1 ) (C) OF THE LT.ACT,1961 OF RS.42,29,880/- FOR A Y.2009-10 WITHOUT APPRECIATIN G THE FACT THAT IF THE TRANSACTION OF THE ASSESSEE WAS NOT DETECTED BY TH E AIR ON THE BASIS OF WHICH THE CASE WAS SELECTED FOR SCRUTINY, T HE SUM OF RS.1,86,61 ,620/- WOULD HAVE ESCAPED ASSESSMENT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD.CIT(A) ERRED IN DELETING THE PENALTY U/S.271 (1)(C ) OF THE I.T.ACT,1961 OF RS.42,29,880/- FOR AY.2009-10 BY RELYING ON THE J UDGMENT OF CHANDRA PAL BAGGA VS. ITAT & ANR (261 ITR 67)(RAJ) AND CIT VS. SRI SARADHA TEXTILE PROCESSORS PVT. LTD.(286 ITR 499)(MA D) AS IN THESE CASE LAWS, THE TRANSACTION ON WHICH PENALTY WAS LEVIED WER E DISCLOSED BY THE ASSESSEE IN THEIR RETURN OF INCOMES WHEREAS IN THE I NSTANT CASE, THE TRANSACTION ON WHICH PENALTY WAS LEVIED WAS NOT DISCL OSED IN THE RETURN OF INCOME. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD.CIT(A) HAS ERRED DELETING THE PENALTY U/S.271 (1 )(C) OF THE I.T.ACT,1961 OF RS.42,29,8801- FOR AY.2009-10 WITHOUT APPRECIATING THE FACT THAT IN THE DECISION OF THE DELHI HIGH COURT VIDE ORDER DATED 10-08- 2013 IN THE CASE OF HCIL KALINDEE ARSSPL, IT HAS BEEN HELD THAT DUBIOUS AND FANCIFUL CLAIMS UNDER THE GARB OF INTER PRETATIONS, ARE A MERE PRETENSE AND NOT BONAFIDE. IT HAS ALSO BEEN HEL D THAT BONAFIDES HAVE TO BE SHOWN AND CANNOT BE ASSUMED AND MERELY BEC AUSE THE ASSESSEE COMPLIES WITH THE STATUTORY PROCEDURAL REQUIRE MENT OF FILING ITA 7053/MUM/2013 3 SUCH CLAIM CANNOT ABSOLVE THE ASSESSEE OF ITS LIABILIT Y IF THE ACT OF. ATTEMPT IN CLAIMING THE DEDUCTION WAS NOT BONAFIDE. FOR THESE AND OTHER REASONS IT IS SUBMITTED THAT THE ORD ER OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE AO BE RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL AND DOING ELECTRICAL CONTRACTOR WORKING FOR CPWD, FCI G OVT. OF INDIA, PROVIDING ELECTRICAL ANNUAL MAINTENANCE SERVICES & SUPPLY AND INSTALLATION OF ELECTRICAL WORK UNDER NAME & STYLE OF M/S ASHOK ELECTRICALS. T HE SOURCE OF INCOME DURING THE YEAR UNDER CONSIDERATION IS INCOME FROM BUSINESS, CAPITAL GAIN & INCOME FROM OTHER SOURCES. THE AIR INFORMATION IN THIS CASE WAS RECEIVED BY TH E AO IN RESPECT OF INVESTMENT MADE BY THE ASSESSEE IN PROPERTY AS WELL AS BONDS/MUTUAL FUNDS. THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE & PROO F OF THE SAID INVESTMENTS. THE ASSESSEE SUBMITTED THAT HE HAS RECEIVED CONSIDE RATION IN LIEU OF TRANSFER OF TENANCY RIGHTS AS PER CONSENT ORDER PASSED BY TH E SMALL CAUSE COURT, MISC. NOTICE NO. 40 OF 2008 BEARING NO. 1011/3068 O F 1988 DATED 16/4/2008 AMOUNTING TO RS. 2,66,00,000/- WHICH HAD BEEN INVES TED IN A HOUSE PROPERTY AT SHANTI DHARMA CO-OP. HOUSING SOCIETY, AT MOGUL L ANE, MAHIM, MUMBAI- 400 016 AND IN TWO GARAGES IN THE BUILDING 'B' BALG OVIND CO-OP. HSG. SOCIETY LTD., MANORAMA NAGARKAR MARG (SOUTH), TALKAWADI ROA D., MAHIM, MUMBAI AND ALSO THE ASSESSEE INVESTED IN MUTUAL FUND/BONDS . DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S. 143(3) READ WITH SECTIO N 143(2) OF THE ACT , THE A.O. OBSERVED THAT THE ASSESSEE HAS TAKEN COST OF A CQUISITION OF TENANCY RIGHTS AT RS.20,06,640/- I.E. VALUE AS ON 1ST APRIL , 1981 AND ARRIVED AT INDEXED COST THE ASSESSEE HAS CLAIMED EXEMPTION U/S 54F OF THE ACT IN RESPECT OF PURCHASE OF HOUSE PROPERTY I.E. FLAT AT SHANTI DHARMA CO-OP. HOUSING SOCIETY, AT MOGUL LANE, MAHIM, MUMBAI TOGET HER WITH TWO GARAGES IN ANOTHER BUILDING. THE ASSESSEE HAS ALSO CLAIMED COS T OF IMPROVEMENT AND ITA 7053/MUM/2013 4 LEGAL EXPENSES OF RS. 25,97,310/- IN RESPECT OF PRO PERTY PURCHASED AT SHANTI DHARMA CO-OPERATIVE HOUSING SOCIETY . IT WAS OBSER VED BY THE A.O. THAT SINCE THE CAPITAL GAIN IS ON ACCOUNT OF TRANSFER OF TENANCY RIGHT AND THE ASSESSEE HAS NOT PAID ANY CONSIDERATION FOR ACQUISI TION OF THE TENANCY RIGHTS , THE COST OF ACQUISITION WAS TAKEN AS NIL IN VIEW OF PROVISIONS OF SECTION 55(2)(A) OF THE ACT BY DENYING ASSESSEES CLAIM OF INDEXED COST OF ACQUISITION. THE ASSESSEE HAD ALSO CLAIMED EXEMPTION U/S 54F OF THE ACT FOR THE PURCHASE OF TWO GARAGES OUT OF THE ABOVE STATED COMPENSATION RECEIVED FROM TENANCY RIGHT. BUT AS PER THE AGREEMENT OF THE GARAGES, IT WAS OBSERVED BY THE AO THAT THE GARAGES ARE NOT SITUATED IN THE SAME BUILDING W HERE THE ASSESSEE HAS PURCHASED PROPERTY I.E. SHANTI DHARMA CO-OP. HOUSIN G SOCIETY. WHEN ASKED AS TO WHY THE PURCHASE PRICE OF THE GARAGE SHOULD N OT BE DISALLOWED SINCE IT IS NOT WITHIN THE PREMISES OF THE HOUSE PROPERTY PURCH ASED, THE ASSESSEE SUBMITTED THAT DURING THE YEAR ASSESSEE PURCHASED A RESIDENTIAL HOUSE AT SHANTI DHARMA CO-OPERATIVE HOUSING SOCIETY, BUT NO GARAGE WAS AVAILABLE FOR PARKING THE CAR AND HENCE HE PURCHASED A GARAGE IN THE SAME LOCALITY. THE AO ALLOWED COST OF ONE GARAGE WHILE REJECTING THE C OST OF SECOND GARAGE WHILE COMPUTING DEDUCTION U/S 54F OF THE ACT. SIMILARLY, WITH RESPECT TO THE COST OF IMPROVEMENT AND LEGAL EXPENSES OF RS. 25,97,310/- W .R.T. HOUSE PROPERTY PURCHASED AT SHANTI DHARMA CO-OP. HOUSING SOCIETY , NO SUPPORTING DOCUMENTARY EVIDENCES WERE FURNISHED BY THE ASSESSE E AND ACCORDINGLY THE SAME WERE DISALLOWED BY THE AO VIDE ASSESSMENT ORDE R DATED 30-12-2011 PASSED U/S 143(3) OF THE ACT . THE A.O. ALSO INITI ATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PART ICULARS OF INCOME.THE AO ISSUED NOTICES U/S 274 R.W.S. 271(1)(C) OF THE ACT. THE ASSESSEE IN PENALTY PROCEEDINGS REITERATED THE SUBMISSIONS WHAT WERE MADE DURING THE ASSESSMENT PROCEEDINGS AND SUBMITTE D THAT THE CLAIM OF THE ASSESSEE WAS BONAFIDE AND COMPLETE DETAILS OF THE T RANSACTION WERE SUBMITTED IN THE RETURN OF INCOME AS WELL IN THE ASSESSMENT P ROCEEDINGS . THE ASSESSEE ITA 7053/MUM/2013 5 SUBMITTED THAT THE ASSESSEE HAS RECEIVED A CONSIDER ATION OF RS.2,66,00,000/- IN LIEU OF TRANSFER OF TENANCY RIGHTS AS PER CONSEN T ORDER DATED 16/04/2008 PASSED BY THE SMALL CAUSE COURT. THE ASSESSEE SUBMI TTED THAT THE SINCE THE TENANCY RIGHTS WERE ACQUIRED PRIOR TO 1ST APRIL, 19 81 HENCE THE ASSESSEE SUBSTITUTED FMV OF THE ASSET AS ON 1ST APRIL, 1981 AND THE ASSESSEE CLAIMED THE INDEXED COST OF ACQUISITION, HOWEVER, THE CLAIM OF THE ASSESSEE WAS DISALLOWED BY THE AO AND COST OF ACQUISITION WAS DE EMED TO RS. NIL. THE ASSESSEE ALSO SUBMITTED THAT ASSESSEES CLAIM FOR C OST OF IMPROVEMENT AND LEGAL FEES AMOUNTING TO RS. 25,97,310/- WAS ALSO DI SALLOWED IN THE AO ORDER ON THE GROUND THAT THE SAME WERE INCURRED IN RESPEC T OF THE PROPERTY AND NOT FOR THE TENANCY RIGHTS. IT WAS ALSO SUBMITTED THAT THE ASSESSEE CLAIMED DEDUCTION U/S. 54F OF THE ACT IN RESPECT OF INVESTM ENT IN FLAT AT SHANTI DHARMA CO-OPERATIVE HOUSING SOCIETY INCLUDING COST OF TWO GARAGES WHICH WERE A PART OF THE SAID RESIDENTIAL HOUSE ALTHOUGH LOCATED AT DIFFERENT BUILDING AS GARAGES WERE NOT AVAILABLE IN THE SAME BUILDING. THE ASSESSEE SUBMITTED THAT DEDUCTION U/S. 54F OF THE ACT WAS DISALLOWED F OR THE SECOND GARAGE PREMISES. THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS FURNISHED FULL DETAILS OF THE TRANSACTIONS AND HAD ALSO FURNISHED THE DETA ILS DURING THE COURSE OF ASSESSMENT PROCEEDINGS . THE ASSESSEE SUBMITTED THA T THE CLAIM WAS BONAFIDE.IT WAS SUBMITTED THAT SECTION 55(2) GIVES AN OPTION TO THE ASSESSEE TO SUBSTITUTE THE FAIR MARKET VALUE OF THE ASSET AS ON 01-04-1981 AND DESPITE THE COST OF ACQUISITION OF TENANCY RIGHTS BEING NIL , THE ASSESSEE CANNOT BE PREVENTED FROM EXERCISING THE OPTION PROVIDED TO IT UNDER LAW AS THE TENANCY RIGHTS BECAME PROPERTY OF THE ASSESSEE PRIOR TO 01- 04-1981. IT WAS SUBMITTED THAT IT WAS A BONAFIDE CLAIM AND THAT THE RE WAS NO INTENTION TO DEFRAUD THE REVENUE. THE ASSESSEE SUBMITTED THAT HE HAD INCURRED AN EXPENDITURE OF RS. 25,97,310/- TOWARDS COST OF IMPR OVEMENT AND LEGAL FEES WHICH LED TO IMPROVEMENT IN THE CAPITAL ASSET WHICH LED TO INCREASE IN VALUE / PRICE OF THE TENANCY RIGHTS. THE ASSESSEE SUBMITTED THAT AS A RESULT OF THE ABOVE EXPENDITURE INCURRED BY THE ASSESSEE HAS LED TO THE REALISATION OF RS. ITA 7053/MUM/2013 6 2.66 CRORES FOR THE TENANCY RIGHTS.THUS, IT WAS SUB MITTED THE SAME IS COST OF IMPROVEMENT OF THE PROPERTY WHICH SHOULD BE ALLOWED . IT WAS SUBMITTED THAT THE CONSIDERATION OF RS. 2.66 CRORES IN LIEU OF THE TRANSFER OF TENANCY RIGHTS WAS AWARDED TO THE ASSESSEE AS PER THE CONSENT ORDE R PASSED BY THE SMALL CAUSE COURT, HENCE, LEGAL FEES INCURRED TOWARDS THE SAME IS DEDUCTIBLE U/S 48 OF THE ACT AS THE SAME IS INCURRED IN CONNECTION WITH THE TRANSFER OF THE TENANCY RIGHTS. THE ASSESSEE SUBMITTED THAT THE AS SESSEE ACQUIRED FLAT AT SHANTI DHARMA CO-OPERATIVE HSG. SOCIETY WHERE THERE WAS NO CAR PARKING FACILITY AVAILABLE, HENCE, THE ASSESSEE ACQUIRED GA RAGES IN THE RESIDENTIAL HOUSE IN THE NEARBY SOCIETY IN THE LOCALITY , IT WA S SUBMITTED THAT THE GARAGES OUGHT TO BE CONSIDERED AS PART OF A RESIDENTIAL HOU SE AND HENCE, IT IS ELIGIBLE FOR DEDUCTION U/S 54F OF THE ACT BEING A PART OF A RESIDENTIAL HOUSE. IT WAS SUBMITTED THAT MERELY BECAUSE THE ASSESSEES STAND WAS NOT ACCEPTED BY REVENUE AND THE DISALLOWANCE WAS MADE THEN IT DOES NOT MEAN THAT THE ASSESSEE HAD CONCEALED ANY PARTICULARS OF INCOME O R FURNISHED INACCURATE PARTICULARS OF INCOME. THE ASSESSEE HAD FURNISHED FULL DETAILS OF THE TRANSACTIONS DURING THE COURSE OF ASSESSMENT PROCEE DINGS, HENCE, NO PENALTY CAN BE LEVIED ON THE ASSESSEE. IT WAS SUBMITTED TH AT ALL THE FACTS REGARDING THE DEDUCTION/EXPENSES WERE MADE AVAILABLE IN THE R ETURN OF INCOME AS WELL DURING ASSESSMENT PROCEEDINGS , HENCE THE ASSESSEE HAS NOT FURNISHED ANY INACCURATE PARTICULARS OF INCOME AND HENCE THE LEVY OF PENALTY DOES NOT ARISE. THE ASSESSEE RELIED ON THE FOLLOWING CASE LAWS:- 1. CHANDRAPAL BAGGA V. ITAT (2003) 261 ITR 67 (RAJ.) 2. CIT V. HARSHVARDHAN CHEMICALS & MINERAL LTD., 259 I TR 212 (RAJ.) 3. CIT V. AJAIB SINGH & CO. (2001) 253 ITR 630 (P&H) 4. DCIT V. G.M. GUPTA (2003) SOT 230 (DEL) 5. VINOD KAPUR V. ITO (2003) 127 TAXMAN 53 6. CIT V. HONEYWELL DACE (INDIA) LTD. (2007) 292 ITR 1 69 (DEL) ITA 7053/MUM/2013 7 7. DILIP N SHROFF V. JCIT (2007) 291 ITR 519(SC) 8. T ASHOK PAI V. CIT (2007)292 ITR 11(SC) 9. CIT V. RELIANCE PETROPRODUCTS PRIVATE LIMITED (2010 ) 322 ITR 158(SC) 10. D M MANASAVI V. CIT (1973) 3 SCC 207(SC) 11. ANANTHARAM VEERASINGHAIAH V. CIT (1980) SUPP SCC 13 THE A.O. OBSERVED THAT THE ASSESSEE HAS FILED RETUR N OF INCOME LATE I.E. BEYOND THE PERIOD STIPULATED U/S. 139(1) OF THE ACT. THE A O OBSERVED THAT HAD THE AIR NOT DETECTED THE ASSESSEES TRANSACTION AND THE CAS E WOULD NOT HAVE BEEN SELECTED FOR SCRUTINY UNDER CASS, A SUM OF RS. 1,86 ,61,620/- WOULD HAVE ESCAPED ASSESSMENT. THE AO OBSERVED THAT THE ASSESS EE HAS NOT PAID ANY CONSIDERATION FOR ACQUIRING THE TENANTED PROPERTY A ND HENCE AS PER SECTION 55(2)(A) OF THE ACT, THE COST OF ACQUISITION OF THE TENANTED PROPERTY IS NIL. THE ASSESSEE HAS NOT PRODUCED ANY DOCUMENTARY EVIDENCE WITH RESPECT TO THE COST OF IMPROVEMENT IN RESPECT OF THE NEW PROPERTY PURCH ASED AND ALSO WITH RESPECT TO LEGAL FEES. HE OBSERVED THAT THE ASSESS EE HAS NOT FILED ANY QUANTUM APPEAL AGAINST THE ASSESSMENT ORDER U/S 143 (3) OF THE ACT. THE AO HELD THAT THE CASE LAWS RELIED UPON BY THE ASSESSEE ARE MATERIALLY SEPARATE AND DISTINGUISHABLE. THE AO HELD THAT THESE CASE LA WS ARE MERELY AN AFTERTHOUGHT TO ESCAPE THE LEVY OF PENALTY U/S. 271 (1)(C) OF THE ACT . THE ASSESSEEE DID NOT HAVE ANY FURTHER EVIDENCES TO SUP PORT HIS CLAIM TO SUPPORT HIS CLAIM OF INDEXATION AND LEGAL FEES. THE AO RELI ED UPON THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT V. SHR EE KRISHNA TRADING CO. 253 ITR 645 WHEREIN THE COURT HELD THAT THE BURDEN IS ON ASSESSEE TO ESTABLISH THAT HE HAS NOT CONCEALED THE PARTICULARS OF INCOME. THE A.O. HELD THAT THE ASSESSEE HAS DELIBERATELY FURNISHED INACCU RATE PARTICULARS OF HIS INCOME AND HENCE EXPLANATION 1 OF SECTION 271(1)(C) OF THE ACT IS CLEARLY APPLICABLE AND THE AO , THEREFORE, LEVIED PENALTY O F RS. 42,29,880/- BEING ITA 7053/MUM/2013 8 100% OF THE TAX SOUGHT TO BE EVADED U/S 271(1)(C) O F THE ACT, VIDE PENALTY ORDERS DATED 15-06-2012 PASSED U/S 271(1)(C) OF THE ACT. 4. AGGRIEVED BY THE PENALTY ORDER DATED 15-06-2012 PASSED BY THE A.O. U/S. 271(1)(C) OF THE ACT, THE ASSESSEE HAS FILED FIRST APPEAL BEFORE THE LD. CIT(A). 5. BEFORE THE LD. CIT(A) , THE ASSESSEE SUBMITTED T HAT THE ASSESSEE HAD DISCLOSED THE PARTICULARS REGARDING SALE OF TENANCY RIGHTS, COST OF ACQUISITION, COST OF IMPROVEMENT AND THE LEGAL FEES AND THE DEDU CTION CLAIMED U/S 54F OF THE ACT IN THE RETURN OF INCOME FILED WITH THE REVE NUE AS WELL DURING ASSESSMENT PROCEEDINGS THE ASSESSEE HAD CLAIMED TH E BENEFIT OF COST OF ACQUISITION OF THE TENANCY RIGHT FROM 1ST APRIL, 19 81 AND INDEXED COST OF ACQUISITION ON THE SALE OF THESE TENANCY RIGHTS, WH ICH WAS DENIED BY THE A.O. AND FURTHER THE EXEMPTION U/S 54F OF THE ACT WAS CL AIMED BY THE ASSESSEE IN THE RETURN OF INCOME WHICH WAS ALSO PARTLY DISALLOW ED BY THE A.O. THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS UNDER BONA FIDE BELIEF THAT THE ASSESSEE WAS LEGALLY ENTITLED FOR THE ABOVE BENEFIT S. THE A.O. DENIED THE ASSESSEES CLAIM OF COST OF ACQUISITION AND CLAIM O F INDEXATION AS WELL BENEFIT OF EXEMPTION U/S 54F OF THE ACT. COMPLETE DETAILS WERE FILED IN SUPPORT OF WORKING OF LTCG AND NO DISCREPANCY WAS FOUND BY THE AO .THE DOCUMENTARY EVIDENCES IN SUPPORT OF CLAIM OF LTCG ARE NOT FOUND TO BE FORGED,FALSE OR FABRICATED. ALL THE PARTICULARS IN SUPPORT OF WORKI NG OF LTCG WERE DULY FURNISHED . THE AO DISALLOWED FMV OF THE TENANCY RIGHTS ADOPTED AS ON 01- 4-1981 AS WELL INDEXATION THEREOF. THE A.O. ALL OWED EXEMPTION OF ONE GARAGE INSTEAD OF TWO GARAGES AND DID NOT ALLOW THE COST OF IMPROVEMENT INCLUDING THE LEGAL FEES. THE ASSESSEE SUBMITTED TH AT THE BONAFIDE OF THE ASSESSEE CANNOT BE DOUBTED AS THE RETURN OF INCOME BEING A TECHNICAL DOCUMENT WAS PREPARED BY A PROFESSIONAL CHARTERED A CCOUNTANT . THE RETURN OF INCOME WAS PREPARED UNDER EXPERT ADVICE AND GUID ANCE OF PROFESSIONAL CA AND BASED ON THE SAME CLAIMS WERE MADE IN THE RETUR N OF INCOME FILED WITH ITA 7053/MUM/2013 9 THE REVENUE WAS THE CONTENTION OF THE ASSESSEE BEFO RE THE LEARNED CIT(A). IT WAS SUBMITTED THAT MERELY BECAUSE LEGAL CLAIM OF TH E ASSESSEE WAS NOT ALLOWED IS NOT A GROUND FOR LEVYING PENALTY AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PRIVATE LIMITED V. CIT 322 ITR 158(SC). THE LD. CIT(A) ACCEPTED THE CONTENTIONS OF THE ASS ESSEE WHEREBY HE OBSERVED THAT THE ASSESSEE HAD DISCLOSED THE ENTIRE FACTS RE GARDING THE SALE OF THE TENANCY RIGHTS, RECEIPT OF RS. 2.66 CRORES AND THE CLAIM OF FMV AS ON 1ST APRIL, 1981, INDEXATION AND CLAIM OF EXEMPTION U/S 54F OF THE ACT IN THE RETURN OF INCOME FILED WITH THE REVENUE FOR THE YEA R UNDER CONSIDERATION. IT IS ANOTHER MATTER THAT THE CLAIM MADE BY THE ASSESSEE ON THE SALE PROCEEDS OF TENANCY RIGHTS , INDEXATION AND CLAIM OF EXEMPTION OF CAPITAL GAIN WAS NOT ALLOWABLE TO HIM. THE AO REJECTED THE WORKING OF LO NG TERM CAPITAL GAINS OF THE ASSESSEE DURING ASSESSMENT PROCEEDINGS ON THE GROUN D THAT THE ASSESSEE HAS NOT PAID ANY AMOUNT FOR ACQUIRING THE TENANCY RIGHT S OF THE PROPERTY IN QUESTION AND THEREFORE THE COST OF ACQUISITION OF T HE TENANCY RIGHTS IS TO BE TAKEN AT NIL AS PER PROVISIONS OF SECTION 55(2)(A) OF THE ACT. NO NEW FACTS HAD BEEN BROUGHT ON RECORD BY THE A.O. TO PROVE THA T THE ASSESSEE HAD CONCEALED ANY PARTICULARS OF INCOME. ALL THE FACTS ON THE BASIS OF WHICH ADDITIONS WERE MADE WERE AVAILABLE IN THE RETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION WHICH IS ON RECORD. THE LD. C IT(A) OBSERVED THAT THE RETURN OF INCOME WAS PREPARED UNDER THE ADVICE OF C HARTERED ACCOUNTANT WHO ADVISED HIM THAT SINCE THE TENANCY RIGHTS GOT CONVE RTED INTO OWNERSHIP RIGHTS BY WAY OF CONSENT TERMS, THE TRANSFER IN 2008 OF RI GHT, TITLE AND INTEREST WAS THAT OF OWNERSHIP RIGHTS AND NOT TENANCY RIGHTS AND EVEN THOUGH AS AT 1ST APRIL, 1981 THE ASSESSEE HAD ONLY TENANCY RIGHTS BU T SINCE THE SAME WAS CONVERTED INTO OWNERSHIP RIGHTS, THE OWNERSHIP RIGH T IN THE PROPERTY WOULD RELATE BACK TO THE ACQUISITION OF TENANCY RIGHTS. T HE ASSESSEE AS PER THE ADVICE OF THE CHARTERED ACCOUNTANT ON THIS COMPLICA TED AND TECHNICAL ISSUE, ITA 7053/MUM/2013 10 AGREED FOR COMPUTING THE CAPITAL GAINS ACCORDINGLY BY CONSIDERING THE FMV OF THE PROPERTY AS ON 1ST APRIL, 1981 AND INDEXING THE SAME UNDER MISTAKEN BELIEF AND THE WRONG ADVISE TO CLAIM THE DEDUCTION. THE LD. CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THE ISSUE OF TH E TAXATION OF CAPITAL GAINS ON THE SALE OF TENANCY RIGHTS BEING HIGHLY TECHNICA L ISSUE COULD NOT HAVE BEEN FINALIZED WITHOUT THE HELP AND ADVICE OF THE PROFES SIONAL CHARTERED ACCOUNTANT. WHEN THE A.O. POINTED OUT THE MISTAKE O F THE ASSESSEE IN COMPUTING THE CAPITAL GAINS, THE ASSESSEE CAME FORW ARD TO OFFER THE CAPITAL GAINS TO TAX AS PER THE WORKING OF THE A.O. DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE DID NOT CONTEST DECISION OF THE A.O AND PAID THE DUE TAXES THEREON WHICH PROVE THE BONA FIDE OF THE ASSESSEE. IT WAS OBSERVED BY THE LD CIT(A) THAT THE RETURN OF INCOME WAS FILE D BY THE ASSESSEE UNDER THE BONAFIDE BELIEF THAT THE ASSESSEE WAS ENTITLED FOR EXEMPTION U/S 54 AND THE INDEXATION AS PER ADVISE OF CHARTERED ACCOUNTANT. T HE LD. CIT(A) HELD THAT THERE APPEARS TO BE NO DELIBERATE ATTEMPT ON THE PA RT OF THE ASSESSEE TO FILE ANY INACCURATE PARTICULARS OF INCOME BY CLAIMING TH E DEDUCTION AND INDEXATION IN COMPUTING THE CAPITAL GAINS. THE ASSE SSEE MADE A LEGAL CLAIM OF DEDUCTION U/S 54F OF THE ACT AND INDEXATION BENEFIT IN THE RETURN OF INCOME FILED WITH THE REVENUE WHICH WAS NOT ACCEPTED BY TH E REVENUE AND MERELY MAKING A CLAIM WHICH DID NOT FOUND FAVOUR WITH THE REVENUE WILL NOT MAKE THE ASSESSEE EXIGIBLE FOR PENALTY U/S 271(1)(C) OF THE ACT. THE LEARNED CIT(A) HELD THAT THE CASE OF THE ASSESSEE IS ONE OF THE BO NAFIDE MISTAKES WHICH WAS DULY CORRECTED BY THE ASSESSEE IMMEDIATELY AFTER RE ALIZING THE MISTAKE, HENCE, PENALTY IS NOT EXIGIBLE . THE ASSESSEE CAME OUT WIT H BONAFIDE EXPLANATION AS TO THE DEFAULT COMMITTED BY THE ASSESSEE. ACCORDIN GLY THE LEARNED CIT(A) DELETED THE PENALTY VIDE APPELLATE ORDERS DATED 26- 09-2013. THE LD. CIT(A) RELIED ON THE FOLLOWING JUDICIAL DECISIONS:- 1. CHANDRA PAL BAGGA V. ITAT & ANR. (2003) 261 ITR 67 (RAJ.) ITA 7053/MUM/2013 11 2. CIT V. SRI SARADHA TEXTILE PROCESSORS (P) LTD. (200 6) 286 ITR 499(MAD.) 3. CIT V. RELIANCE PETROPRODUCTS (P) LTD. (2010) 230 C TR (SC) 320 4. ACIT V. MALU ELECTRODES (P) LTD. (2010) 127 TTJ (NA G) 599. 5. DILIP N. SHROFF V. JCIT & ANR. 291 ITR 519 (SC) 6. AGGRIEVED BY THE APPELLATE ORDER DATED 26-09-201 3 PASSED BY THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 7. THE LD. D.R. SUBMITTED THAT THE CONSIDERATION OF RS. 2.66 CRORES ON SURRENDER OF TENANCY RIGHTS WAS RECEIVED BY THE ASS ESSEE AS PER THE CONSENT ORDER PASSED BY THE HONBLE SMALL CAUSE COURT. NO C OST OF ACQUISITION WAS PAID FOR THE ACQUISITION OF THE TENANCY RIGHTS WHI CH WAS ACQUIRED BY THE FATHER OF THE ASSESSEE FROM HIS EMPLOYER. THE TENAN CY RIGHTS WERE GRANTED PRIOR TO 01-04-1981 TO FATHER OF THE ASSESSEE BY HI S EMPLOYERS. THE LD. D.R. SUBMITTED THAT THE TENANCY RIGHTS WERE ACQUIRED PRI OR TO 1ST APRIL, 1981 WITHOUT PAYING ANY CONSIDERATION AND THE ASSESSEE S UBSTITUTED FMV OF THE ASSET AS ON 1ST APRIL, 1981 ON A MISTAKEN BELIEF TH AT THE ASSESSEE IS ENTITLED FOR ADOPTING FMV AS ON 01-04-1981 AND TO APPLY INDE XATION DESPITE SPECIFIC PROVISION AS CONTAINED U/S 55(2)(A) OF THE ACT THAT COST OF ACQUISITION IN THESE CASE WILL BE TAKEN TO BE NIL. THE ASSESSEE CLAIMED THE INDEXED COST OF ACQUISITION , HOWEVER, THE CLAIM OF THE ASSESSEE WA S DISALLOWED AND COST OF ACQUISITION WAS TAKEN TO BE NIL IN THE QUANTUM PROC EEDINGS WHICH WAS ACCEPTED BY THE ASSESSEE IN QUANTUM PROCEEDINGS . T HE ASSESSEE HAS WRONGLY CLAIMED THE COST INCURRED FOR IMPROVEMENT IN RESPEC T OF THE PROPERTY AND ALSO LEGAL EXPENSES , WHILE NO EVIDENCE WERE PRODUCED. S IMILARLY, THE ASSESSEE HAS ALSO CLAIMED EXEMPTION U/S 54F OF THE ACT FOR THE P URCHASE OF TWO GARAGES ALTHOUGH IN SAME LOCALITY BUT LOCATED IN DIFFERENT BUILDING ON THE GROUND THAT THE GARAGES WERE NOT AVAILABLE IN THE BUILDING IN W HICH RESIDENTIAL FLAT WAS ACQUIRED , WHICH WERE ALTHOUGH ACQUIRED OUT OF TH E ABOVE STATED ITA 7053/MUM/2013 12 COMPENSATION RECEIVED FROM TENANCY RIGHT. BUT THE C LAIM OF THE ASSESSEE IS ALLOWED FOR ONLY ONE GARAGE IN QUANTUM PROCEEDINGS AND THE CLAIM WITH RESPECT TO SECOND GARAGE WAS DISALLOWED BY THE AO W HICH DECISION WAS ACCEPTED BY THE ASSESSEE AS NO APPEAL WAS FILED WIT H THE APPELLATE AUTHORITIES. THE ASSESSEE HAS ACCEPTED THE QUANTUM ADDITIONS AND PAID DUE TAXES AS NO APPEAL WAS FILED BY THE ASSESSEE AGAINST QUANTUM AD DITIONS IN THE ASSESSMENT FRAMED U/S. 143(3) OF THE ACT. THE LD. D R RELIED UPON THE DECISION OF CIT V. ZOOM COMMUNICATION PRIVATE LIMIT ED (2010) 327 ITR 510(DELHI) , UOI V. DHARMENDRA TEXTILES PROCESSOR ( 2008) 174 TAXMAN 571(SC) AND MAK DATA PRIVATE LIMITED V. CIT (2013) 358 ITR 593(SC). 8. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITIONS HAVE BEEN MADE BY THE A.O. WHICH HAS NOT BEEN CHALLENGED IN T HE QUANTUM ADDITION. THE ASSESSEE SUBMITTED THAT THE AO HAS ALLEGED THAT IT IS ONLY DUE TO AIR INFORMATION RECEIVED THAT THE ASSESSEE CASE WAS SEL ECTED FOR SCRUTINY AND IT CAME TO THE NOTICE OF THE REVENUE THAT THE ASSESSEE HAS CLAIMED FMV FOR THE TENANCY RIGHTS AND ITS INDEXATION WHICH IS OTHERWIS E NOT ALLOWABLE DUE TO SECTION 55(2)(A) OF THE ACT AS COST OF ACQUISITION OF TENANCY RIGHT IS NIL , WHILE THE FACT IS THAT THE DETAILS WERE SUBMITTED BY THE ASSESSEE WHILE FILING RETURN OF INCOME. HE RELIED UPON DECISION OF THE TRIBUNAL IN THE CASE OF ITO V. SMT CHANDRIKA B. SHAH IN ITA NO. 1790/MUM/2009 VIDE ORD ERS DATED 07-05- 2010. THE LD. COUNSEL SUBMITTED THAT THE ASSESSEES FATHER GOT THE TENANCY RIGHT MUCH EARLIER THAN THE YEAR 1981 FROM HIS EMPL OYER WHO IS OWNER OF THE SAID PREMISES , AND THE FATHER CONTINUED WITH THE OCCUPATION OF THE PREMISES EVEN AFTER LEAVING EMPLOYMENT AND LATER ON HE DIED . THE ASSESSEE GOT TENANCY RIGHTS AFTER THE DEATH OF HIS FATHER. THE ASSESSEE GOT AWARD UNDER THE DIRECTION OF THE SMALL CAUSE COURT IN CONSENT TERMS WHEREBY HE WAS ENTITLED FOR 1000 SQUARE FEET CONSTRUCTED AREA ( OUT OF WHIC H 200 SQUARE FEET BEING PAID AREA) ALONG WITH OPEN CAR PARKING FACILITY IN THE NEW BUILDING TO BE CONSTRUCTED ON THE SAME PLOT OF LAND IN LIEU OF THE PREMISES OCCUPIED BY HIM ITA 7053/MUM/2013 13 AS WELL ON PAYMENT OF RS 13 LACS FOR 200 SQUARE FEE T AREA IN THE YEAR 1996, HOWEVER THE EMPLOYER COULD NOT PROVIDE THE SAID NEW CONSTRUCTED AREA AND THEN IT WAS MUTUALLY AGREED THAT THE COMPENSATION OF RS.2.66 CRORES FOR SURRENDER OF THE TENANCY RIGHT SHALL BE GRANTED BY THE SAID EMPLOYER OF THE FATHER OF THE ASSESSEE WHO WAS OWNER OF THE PREMISE S TO THE ASSESSEE VIDE CONSENT TERM AGREED IN 2008, AND COST OF ACQUISITI ON WAS CLAIMED BEING FMV AS ON 01-04-1981 AND INDEXATION WAS APPLIED AS THE ASSESSEE WAS UNDER THE BONAFIDE BELIEF THAT THE CONSENT TERM APPROVED BY C OURT OF SMALL COURT IN 1996 WHEREBY THE ASSESSEE WOULD GET 1000 SQUARE FEE T AREA( 800 SQUARE FEET + PAID 200 SQUARE FEET) ON OWNERSHIP BASIS IN THE SAME PLOT OF LAND IN A NEWLY CONSTRUCTED BUILDING HAS LED TO CONVERSION OF TENANCY RIGHTS INTO OWNERSHIP RIGHTS WHICH SHALL DATE BACK TO THE GRANT OF TENANCY RIGHTS.THE CHARTERED ACCOUNTANT OF THE ASSESSEE GUIDED THE ASS ESSEE ON THE SAME AS THIS MATTER WHICH WAS HIGHLY COMPLEX , THE ASSESSEE RELIED UPON THE EXPERT GUIDANCE AND ADVISE OF CA. THE COPY OF CONSENT TERM S AWARD ARE FILED IN THE PAPER BOOK PAGE 17-28. IT WAS SUBMITTED THAT ALL T HE PARTICULARS WERE SUBMITTED WHILE FILING RETURN OF INCOME WITH THE RE VENUE AS WELL DURING ASSESSMENT PROCEEDINGS . THERE WAS NO ATTEMPT MADE TO CONCEAL THE INCOME AS ALL PARTICULARS WERE FILED. THE ASSESSEE INCURR ED COST TOWARDS IMPROVEMENT AND LEGAL CHARGES WHICH WAS WRONGLY DISALLOWED BY T HE A.O. . THE ASSESSEE HAS BEEN WRONGLY DENIED THE BENEFIT OF DEDUCTION U/ S. 54F OF THE ACT WITH RESPECT TO TWO GARAGES PURCHASED IN THE NEARBY BUIL DING IN THE SAME LOCALITY AS THE GARAGES IN THE SAME BUILDING WERE NOT AVAILA BLE. THE ASSESSEE WAS GRANTED DEDUCTION FOR ONE GARAGE WHILE FOR THE OTHE R GARAGE, THE DEDUCTION WAS DISALLOWED BY THE REVENUE. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE CASE LAWS RELIED ON BY BOTH THE PARTIES. WE HAVE OBSERVED THAT THE ASSESSEE HAS RECEIVED RS. 2. 66 CRORES ON THE SURRENDER OF TENANCY RIGHTS UNDER THE CONSENT TERMS AWARDED B Y THE HONBLE COURT. THE ITA 7053/MUM/2013 14 SAID TENANCY WAS GRANTED TO THE FATHER OF THE ASSES SEE BY HIS EMPLOYER PRIOR TO 01-04-1981. THE EMPLOYER OF THE FATHER OF THE AS SESSEE WAS OWNER OF THE SAID PREMISES . THERE WAS A LITIGATION BETWEEN THE ASSESSEES FATHER AND HIS EMPLOYER. THE FATHER OF THE ASSESSEE DIED AND CONS EQUENTLY THE ASSESSEE ACQUIRED THE TENANCY RIGHT AFTER DEATH OF HIS FATHE R. THERE WAS A COMPROMISE/CONSENT TERMS AGREED BETWEEN THE SAID OW NER(EMPLOYER OF FATHER) AND THE ASSESSEE , AND INITIALLY IN 1996 VIDE CONSE NT TERM AGREED BY BOTH THE PARTIES , THE ASSESSEE WAS ENTITLED FOR AN AREA OF 800 SQUARE FEET IN THE NEW BUILDING TO BE BUILT IN THE SAME PLOT OF LAND IN LI EU OF SURRENDER OF TENANCY RIGHTS, WHILE ADDITIONALLY 200 SQUARE FEET WAS TO BE GIVEN TO THE ASSESSEE ON PAYMENT OF RS. 13 LACS. THE ASSESSEE WOULD HAVE BEE N THE OWNER OF THE NEWLY ACQUIRED 1000 SQUARE FEET IN TERMS OF CONSENT TERMS AWARDED BY THE COURT. THE EMPLOYER COULD NOT PROVIDE NEWLY CONSTRUCTED AR EA OF 1000 SQUARE FEET BUILT UP IN THE SAME COMPLEX FOR 10 YEARS AND FRESH CONSENT TERM AS MUTUALLY AGREED WAS ENTERED INTO BY BOTH THE PARTIES WHICH W AS FILED WITH THE HONBLE COURT WHEREBY THE ASSESSEE IN PLACE OF EARLIER CONS ENT TERM WILL NOW RECEIVE AN AMOUNT OF RS. 2.66 CRORES FROM THE EMPLOYER OF HIS FATHER UNDER NEW CONSENT TERMS AWARDED BY THE COURT IN LIEU OF SURRE NDER OF TENANCY RIGHTS. THE CONSENT TERMS AWARDED BY THE HONBLE COURT OF S MALL CAUSE BOTH ORIGINAL AND REVISED ARE PLACED AT PAPER BOOK PAGE 17-28. T HE ASSESSEE HAD A BELIEF AND CAME OUT WITH AN EXPLANATION THAT SINCE 1996 TH E TENANCY RIGHTS WERE CONVERTED INTO OWNERSHIP RIGHTS SINCE THE ASSESSEE IS ENTITLED FOR 1000 SQUARE FEET OF THE CONSTRUCTED AREA IN NEWLY CONSTRUCTED B UILDING IN THE SAME PLOT OF LAND AND THE SAME SHALL DATE BACK TO THE PERIOD WHE N THE TENANCY RIGHTS WERE GRANTED TO THE FATHER OF THE ASSESSEE AND THE ASSESSEE CLAIMED FAIR MARKET VALUE OF TENANCY RIGHTS AS ON 01-04-1981 AN ALLOWABLE DEDUCTION WHILE COMPUTING LONG TERM CAPITAL GAINS ON SURRENDE R OF TENANCY RIGHTS, DESPITE THE SPECIFIC PROVISION AS CONTAINED U/S 55( 2)(A) OF THE ACT, WHEREBY THE COST OF ACQUISITION IN THE CASE OF TENANCY RIGHT SH ALL BE TAKEN TO BE NIL IN CASE NO COST IS PAID BY THE TAX-PAYER TO ACQUIRE THE TEN ANCY RIGHTS. THE ASSESSEE ITA 7053/MUM/2013 15 HAS ALSO PRODUCED VALUATION REPORT DATED 27-04-2009 VALUING TENANCY RIGHTS AS ON 01-04-1981 WHICH IS PLACED IN PAPER BOOK PAGE 14-16 AND THE SAME WAS STATED TO BE THE BASIS FOR MAKING CLAIM OF FMV AS ON 01-04-1981. IN OUR CONSIDERED VIEW, BASED ON THESE EXPLANATIONS SUBMIT TED BY THE ASSESSEE ALONG WITH DOCUMENTARY EVIDENCES IT COULD NOT BE SA ID THAT THESE EXPLANATIONS WERE NOT BONA FIDE EXPLANATIONS . THUS , IT COULD NOT BE SAID THAT THE ASSESSEE SET UP PATENTLY WRONG CLAIM WITH AN IN TENTION TO DEFRAUD REVENUE ALTHOUGH IT IS A DIFFERENT MATTER THE CLAIM AND THE EXPLANATIONS SUBMITTED BY THE ASSESSEE BEFORE REVENUE DID NOT FOUND FAVOUR WI TH THE REVENUE AND IN OUR CONSIDERED VIEW, THE EXPLANATIONS WHICH ARE NOT ACCEPTED BY THE REVENUE DOES NOT CEASES TO BE A BONA FIDE EXPLANATION MEREL Y ON THE GROUNDS THAT THE SAME WERE NOT ACCEPTED BY THE REVENUE. THE ASSESSEE ALSO ACQUIRED TWO GARAGES IN THE SAME LOCALITY ALTHOUGH IN DIFFERENT BUILDING THAN THE BUILDING WHERE THE RESI DENTIAL FLAT WAS ACQUIRED BY THE ASSESSEE AS IN THE BUILDING WHERE NEW RESIDENTI AL FLAT WAS LOCATED, GARAGES WERE NOT AVAILABLE . THIS WAS ALSO GOT VERI FIED BY THE REVENUE BY DEPUTING INSPECTOR TO VERIFY THE CONTENTIONS OF THE ASSESSEE DURING QUANTUM ASSESSMENT PROCEEDINGS WHICH WAS FOUND TO BE CORREC T BY THE REVENUE. THE ASSESSEE HAD SUBMITTED THAT GARAGES ARE PART AND PA RCEL OF RESIDENTIAL HOUSE KEEPING IN VIEW THE DEFINITION OF THE WORD HOUSE. HOWEVER, THE ASSESSEE WAS ALLOWED DEDUCTION U/S 54F OF THE ACT WITH RESPECT T O ONE GARAGE ONLY . AGAIN,WE ARE OF THE CONSIDERED VIEW, THAT THE EXPLA NATION OFFERED BY THE ASSESSEE IS BONA FIDE AS THE HOUSE DOES NOT MEAN FO UR WALLS AND THE AMENITIES LIKE GARDEN, GARAGE ETC ARE PART AND PARC EL OF THE RESIDENTIAL HOUSE IN MODERN TIMES. WE ALSO DID NOT FIND THAT THERE IS ANY RESTRICTION IMPOSED BY THE ACT ON HAVING ONLY ONE GARAGE WITH A RESIDENTIA L HOUSE. THE ASSESSEE WAS COMPELLED TO TAKE GARAGES IN NEARBY BUILDING IN THE SAME LOCALITY AS GARAGES IN THE SAME BUILDING IN WHICH RESIDENTIAL FLAT WAS ACQUIRED BY THE ASSESSEE WERE NOT AVAILABLE WHICH WAS VERIFIED BY THE REVENU E. IN ANY CASE , IT IS NOT ITA 7053/MUM/2013 16 THE CASE SET UP BY THE REVENUE THAT THE SECOND GARA GE WAS NEVER ACQUIRED BY THE ASSESSEE AND HE HAS SET UP A EX-FACIE BOGUS CLA IM, IN-FACT IT IS THE CLAIM SET UP BY THE ASSESSEE WHICH DID NOT FOUND FAVOUR W ITH THE REVENUE AND IN OUR CONSIDERED VIEW, THE ASSESSEE HAS A PRIMA FACIE GOOD ARGUABLE CASE ON MERITS ON THE INSTANT DISALLOWANCE MADE BY THE REVE NUE, IT IS DIFFERENT MATTER THAT THE ASSESSEE DID NOT CHALLENGE THE QUANTUM ASS ESSMENT FRAMED BY THE REVENUE. THUS, IN OUR CONSIDERED VIEW THE ASSESSEE CAME OUT WITH A BONA FIDE EXPLANATION WHICH DID NOT FOUND FAVOUR WITH THE REV ENUE AND THE ASSESSEE ON HIS PART ALSO CHOSE TO ACCEPT THE DISALLOWANCE AS W AS MADE IN QUANTUM ASSESSMENT AND DECIDED NOT TO AGITATE THE MATTER WI TH THE APPELLATE AUTHORITIES. SIMILARLY, THE BENEFIT OF COST OF IMPROVEMENTS IN T HE PROPERTY WHERE TENANCY RIGHTS WERE HELD BY THE ASSESSEE AND LEGAL EXPENSES PAID BY THE ASSESSEE WITH RESPECT TO THE TRANSFER OF THE TENANCY RIGHTS WERE DENIED TO THE ASSESSEE BY THE AO ALTHOUGH THE CLAIM WAS SET UP ON THE GROUNDS THAT THE IMPROVEMENT COST INCURRED BY THE ASSESSEE LED TO BETTER REALIZA TION OF COMPENSATION ON ACCOUNT OF SURRENDER OF TENANCY RIGHTS AS WELL LEGA L EXPENSES WERE INCURRED WHICH ARE INEXTRICABLY LINKED TO TRANSFER OF TENANC Y RIGHTS AS THE SAID MATTER WAS SUBJUDICE WITH THE HONBLE COURT OF SMALL CAUSE , WHICH IN OUR CONSIDERED VIEW IS A BONAFIDE EXPLANATION ALBEIT DID NOT FOUND FAVOUR WITH THE REVENUE AND THE ASSESSEE ON ITS PART CHOSE TO ACCEPT THE AS SESSMENT IN QUANTUM AND DECIDED NOT TO AGITATE THE MATTER WITH THE APPELLAT E AUTHORITIES. IN OUR CONSIDERED VIEW THE ASSESSEE HAS COME OUT WI TH BONA FIDE EXPLANATIONS TO SUPPORT AND SUBSTANTIATE HIS CLAIM AS FILED IN T HE RETURN OF INCOME ALBEIT THE SAME WERE NOT ACCEPTED BY REVENUE AS WE DISCUSS ED IN PRECEDING PARAS. EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT CLEAR LY MANDATES THAT THE PENALTY SHALL BE LEVIABLE WHEN THE TAX-PAYER WITH RESPECT T O HIS CLAIM IN COMPUTATION OF INCOME FAILS TO OFFER AN EXPLANATION OR OFFERS A N EXPLANATION WHICH IS FOUND ITA 7053/MUM/2013 17 TO BE FALSE OR AN EXPLANATION IS OFFERED WHICH THE TAX-PAYER IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE , THEN IN SUCH CASES PENALTY IS LEVIABLE U/S 271(1)(C) OF TH E ACT. IN THE INSTANT CASE ,WE ARE OF CONSIDERED VIEW THAT THE ASSESSEE HAS DISCHA RGED ITS BURDEN BY COMING OUT WITH AN EXPLANATION WHICH WAS A BONA FIDE EXPLA NATION. ON THE CLAIM BEING DISALLOWED IN QUANTUM ASSESSMENT PROCEEDINGS, THE ASSESSEE ACCEPTED THE SAME AND DEPOSITED THE DUE TAXES WITH THE REVEN UE AND DID NOT PERSUE FURTHER LITIGATION WITH THE APPELLATE AUTHORITIES . WE ARE OF CONSIDERED VIEW THAT THE RATIO OF LAW LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS P. LTD. (SUPRA) IS DIRECTLY APPLICABLE IN THIS CASE AS THE CLAIM HAS BEEN SET UP BY THE ASSESSEE WHICH DID NOT FOUND FAVOUR WITH THE REVENUE AS IT COULD NOT BE SAID THAT AN ATTEMPT HAS BEEN MADE TO DEFRAUD REVENUE OR TO SET UP AN EX FACIE ILLEGAL CLAIM AND IN-FACT IT CAN ONLY BE SAID THAT THE CLAIM WAS SET UP BY THE ASSESSEE IN THE RE TURN OF INCOME FILED WITH THE REVENUE AS DISCUSSED BY US EARLIER BUT THE SAME DID NOT FOUND FAVOUR WITH THE REVENUE, THE PENALTY LEVIED IN THE INSTANT CASE BY THE A.O. IN OUR CONSIDERED VIEW IS NOT EXIGIBLE UNDER SUCH CIRCUMST ANCES AS THE ASSESSEE HAS MADE A BONAFIDE CLAIM FOR WHICH EXPLANATIONS WERE D ULY SUBMITTED WHICH ARE FOUND NOT TO BE FALSE NEITHER IT WAS AN EX FACIE IL LEGAL CLAIM, ALBEIT THE SAME DID NOT FOUND FAVOUR WITH THE REVENUE. MERELY BECA USE THE CLAIM SET UP BY THE ASSESSEE WAS DISALLOWED BY THE REVENUE AS IN T HE PRESENT CASE, IN OUR CONSIDERED VIEW , THE ASSESSEE IS NOT LIABLE FOR PE NALTY U/S 271(1)(C) OF THE ACT KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE EXPLANATIONS WITH WHICH THE ASSESSEE CAME FORWARD TO SUPPORT HIS CLAIM. THE CASE LAWS RELIED UPON BY THE LD. DR ARE DISTINGUISHABLE AS IT IS NOT A CASE WHERE BOGUS CLAIM WAS SET UP AND THE ASSESSEE WAS CORNERED BY T HE REVENUE AND THEN ASSESSEE HAD TO SURRENDER THE AMOUNT TO BUY PEACE E TC. RATHER IT IS A CASE WHERE A CLAIM WAS SET UP BASED ON BONA FIDE BELIEF BASED ON EXPERT ADVISE WHICH CLAIM IS NEITHER PATENTLY WRONG NOR EX-FACIE ILLEGAL KEEPING IN VIEW FACTS AND CIRCUMSTANCES OF THE CASE , WHILE THE CLAIM SET UP BY THE ASSESSEE DID NOT ITA 7053/MUM/2013 18 FOUND FAVOUR WITH THE REVENUE WHICH THE ASSESSEE CH OSE TO ACCEPT AND NOT AGITATE WITH HIGHER APPELLATE AUTHORITIES . THE ASS ESSEE DID MAKE DISCLOSURES AND ALSO BACKED THE SAME WITH EXPLANATIONS DURING A SSESSMENT PROCEEDINGS WHICH DID NOT FOUND FAVOUR WITH REVENUE WHICH IN OU R CONSIDERED VIEW IS NOT SUFFICIENT ENOUGH TO SADDLE THE ASSESSEE WITH PENAL TY U/S 271(1)(C) OF THE ACT. WE DO NOT FIND ANY INFIRMITY IN THE WELL REASONED A PPELLATE ORDER DATED 26-09- 2013 PASSED BY THE LD. CIT(A) DELETING THE PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE ACT. KEEPING IN VIEW THE FACTS AN D CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE ASSES SEE AND ARE OF THE CONSIDERED VIEW THAT THE PENALTY IS NOT EXIGIBLE IN THE INSTANT CASE AND ACCORDINGLY THE PENALTY LEVIED BY THE A.O. IS HERE BY ORDERED TO BE DELETED AND THE WELL REASONED ORDER OF THE LD. CIT(A) IS UPHELD / SUSTAINED. WE ORDER ACCORDINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN ITA N0. 7053/MUM/2013 FOR THE ASSESSMENT YEAR 2009-10 IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH AUGUST , 2016. # $% &' 25-08-2016 ( ) SD/- SD/- (MAHAVIR SINGH) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 25-08-2016 [ ITA 7053/MUM/2013 19 .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI A BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI