2014 (7) TMI 82 - AT - Income Tax

Disallowance of LTCG - claim of long term capital loss - genuineness of transactions - Establishment of source of amount received only sale agreement was produced - no sale deed was executed - Held that - CIT(A) was rightly of the view that the assessee failed to establish the genuineness and capacity of the said amount received from one Sh. Rana Iqbal Singh Jolly. Sh. Rana Iqbal Singh jolly has not been produced though his presence was specifically required and the books of accounts from which the said amount of Rs. 2.4 crores was deposited in his bank account have also not been produced - Merely mentioning a PAN No. does not establish the genuineness and capacity of Sh. Rana Iqbal Singh Jolly, when a specific enquiry is being made by the Department - the assessee has evaded giving any evidence regarding the source of the said amount which was routed through Sh. Rana Iqbal Singh Jolly - The transaction becomes completely doubtful and improbable in view of the facts that no documents pertaining to possession being given or taken has been submitted, besides this the said transaction has been claimed to be not executed, inasmuch as it is claimed that the said amount was paid back to Sh. Rana Iqbal Singh Jolly in the next AY and the repossession of the land was taken (no documentary evidence to support the said claim) and subsequently the land was sold to M/s Patel Estate (P) Ltd. thus, the addition made by the CIT(A) is to be upheld and the property was sold in the next AY stands demonstrated by the Registration of the transaction Decided against Assessee. Levy of Penalty Held that - The amount has been shown as an income in 2007-08 A.Y. and only in the appellate proceedings due to the same having been considered as income in 2006-07 A.Y. the same has been deleted - neither the assessee filed any inaccurate particulars nor has any income been concealed - The finding arrived at is fact specific - Following CIT vs Reliance Petro Product 2010 (3) TMI 80 - SUPREME COURT - penalty on the addition sustained is not maintainable - the penal action was not warranted either on the grounds of concealment nor on the grounds of filing the inaccurate particulars - The record shows that full facts and necessary disclosures were made by the assessee and for whatever reasons the property was not Registered in Mr. Rana Iqbal Singh Jolly s name suspicions cannot be resorted to conclude that the filing of particulars were inaccurate or there was any concealment onus is on the Revenue to show which fact or particular was concealed or inaccurately filed - At best the assessee can be faulted for basing its claim on the belief that it was a case of part performance as the Registration of the sale had not taken place - The wrong claim in the peculiar facts it is seen is neither a fraudulent claim nor it is a false claim - the assessee has consistently argued its income over the years consistently remains at a loss figure as such neither can there be any motive or purpose - The wrong claim made on facts is a bonafide claim which though on facts cannot be accepted in the quantum proceedings Decided in favour of Assessee.

Summary

Issues Involved:
1. Disallowance of long-term capital loss of Rs. 36,18,407.
2. Addition of Rs. 8,68,81,641 as income due to reimbursement of expenses.
3. Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961.

Detailed Analysis:

1. Disallowance of Long-Term Capital Loss:
The assessee claimed a long-term capital loss of Rs. 36,18,407 on the sale of land. The Assessing Officer (AO) disallowed this claim, questioning the genuineness of the transaction and the evidence provided. The AO noted that the agreement to sell was not registered and appeared self-serving. The AO also found that the property was not handed over to the buyer, and the transaction was later canceled with the property sold to another buyer at the same price. The CIT(A) upheld the AO's decision, emphasizing the lack of documentary evidence and the improbability of the transaction. The Tribunal agreed with the lower authorities, noting the peculiar facts and the subsequent sale of the property, and upheld the addition.

2. Addition of Rs. 8,68,81,641 as Income:
The assessee received a reimbursement of Rs. 8,68,81,641 from its parent company for expenses incurred in the previous financial year. The assessee disclosed this amount in a letter to the AO and included it in the revised computation of income. The AO added this amount to the income of the assessee for the year under assessment, stating that the revised computation was filed after the due date. However, the Tribunal found that the addition was based on the assessee's voluntary disclosure and not on any discovery by the AO. The Tribunal held that there was no concealment or filing of inaccurate particulars by the assessee and quashed the penalty related to this addition.

3. Imposition of Penalty under Section 271(1)(c):
The AO imposed a penalty under Section 271(1)(c) for furnishing inaccurate particulars of income and concealing income. The penalty was based on the disallowance of the long-term capital loss and the addition of the reimbursement amount. The CIT(A) upheld the penalty, stating that the assessee furnished inaccurate particulars by claiming the long-term capital loss and failing to establish the source of the reimbursement amount. However, the Tribunal quashed the penalty, noting that the assessee made full disclosures and the claim for long-term capital loss was based on a bona fide belief. The Tribunal emphasized that the wrong claim was not fraudulent or false and that the assessee's consistent losses over the years indicated no motive to evade taxes.

Conclusion:
The Tribunal dismissed the appeal regarding the disallowance of the long-term capital loss but allowed the appeal against the penalty, quashing the penalty order on both counts. The Tribunal found that the assessee made full disclosures and acted in good faith, and there was no concealment or filing of inaccurate particulars warranting penal action.