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2016 (6) TMI 1112 - AT - Income TaxLevy of penalty u/s.271(1)(c) - Held that - As the quantum appeal is still pending before the Commissioner of Income-tax(Appeals), the levy of penalty is also remitted back to the file of the Commissioner of Incometax( Appeals) for adjudicating the same after deciding the quantum addition before him. Entitlement to exemption u/s 54 - Held that - We hold that in the present case, the assessee inherited the property on 21.5.2002. The said property was purchased by the assessee s mother on 12.4.1960. After the death of the assessee s mother, the property was inherited to the assessee along with other co-owners. Accordingly, the cost of indexation to be applied as on 1.4.1981, after fixing the value of the asset as on 1.4.1981 and it cannot be said that the assessee acquired property under dispute on 21.5.2002 on the death of the assessee s mother so as to compute the capital gains. In other words, capital gains has to be assessed as long term capital gains by fixing the cost of asset as on 1.4.1981 and thereafter applying the cost of inflation index in terms of sec.49(1)(iii)(a) of the Act. Same view was taken in the case of CIT vs. Manjula J. Shah (2011 (10) TMI 406 - BOMBAY HIGH COURT ). Consequently, the assessee is entitled to exemption u/s.54 of the Act. Accordingly, this appeal of the assessee is allowed.
Issues Involved:
1. Confirmation of levy of penalty under Section 271(1)(c) of the Income Tax Act. 2. Validity of the order passed under Section 263 of the Income Tax Act. 3. Determination of cost of inflation index for inherited property for computing capital gains. Issue-wise Detailed Analysis: 1. Confirmation of Levy of Penalty under Section 271(1)(c): The assessee filed a return of income for the assessment year 2009-10, admitting a total income of ?8,13,460/-. The case was selected for scrutiny, and the Assessing Officer (AO) determined the total income to be ?4,96,41,505/-, initiating penalty proceedings for evading tax by furnishing inaccurate particulars and concealing income. The Commissioner of Income-tax (Appeals) confirmed the AO's order. However, the Tribunal noted that the quantum appeal was still pending before the Commissioner of Income-tax (Appeals) and remitted the penalty issue back to the Commissioner for adjudication after deciding on the quantum addition. The appeal was allowed for statistical purposes. 2. Validity of the Order Passed under Section 263: The Commissioner of Income-tax (CIT) took up the matter under Section 263, arguing that the assessee wrongly adopted the financial year 1981-82 for the cost of inflation index. Instead, the CIT contended that the correct financial year should be 2002-03, as the property was inherited on 21.5.2002. The assessee appealed against this order, but there was a delay of 299 days in filing the appeal. The Tribunal considered whether the delay was reasonable. Despite the assessee's explanation involving misplacement of appeal papers by a CA's office staff, the Tribunal found the reasons unsubstantiated and not supported by positive evidence. Consequently, the appeal was not admitted and dismissed due to the inordinate delay. 3. Determination of Cost of Inflation Index for Inherited Property: The assessee challenged the order determining the cost of inflation index for inherited property. The property was inherited on 21.5.2002 from the assessee's mother, who originally acquired it on 12.4.1960. The CIT(A) argued that the cost of inflation index should be from the financial year 2002-03. However, the Tribunal referred to Section 49(1)(iii)(a) and various case laws, concluding that the cost of acquisition should be the cost for which the previous owner acquired the property, with the cost of inflation index applied from the financial year 1981-82. The Tribunal held that the capital gains should be assessed as long-term capital gains by fixing the cost of the asset as on 1.4.1981 and applying the cost of inflation index accordingly. The appeal was allowed, granting the assessee exemption under Section 54 of the Act. Conclusion: - ITA No. 407/Mds/2015: Allowed for statistical purposes. - ITA No. 408/Mds/2015: Dismissed due to inordinate delay. - ITA No. 582/Mds/2016: Allowed, determining the cost of inflation index from 1.4.1981 and granting exemption under Section 54. Order Pronounced on 6th June 2016 at Chennai.
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