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TMI Blog2017 (9) TMI 1526X X X X Extracts X X X X X X X X Extracts X X X X ..... disprove the claim of the assessee by authorities below. The case of the assessee gets support from the decision of Hon’ble Supreme Court in the case of CIT v. Reliance Petroproducts Private Limited (2010 (3) TMI 80 - SUPREME COURT) as in the instant case of the assessee , the assessee made a claim of expenses which did not found favour with Revenue and merely because claim of expenses is not accepted by Revenue, the penalty u/s 271(1)(c) is not automatic. We hereby order deletion of penalty on this ground also , as levied by the AO and as confirmed by learned CIT(A). - Decided in favour of assessee. - I.T.A. No. 5730/Mum/2013 - - - Dated:- 25-9-2017 - Shri Saktijit Dey, Judicial Member And Shri Ramit Kochar, Accountant Member Assessee by : Shri. R. Prasad Rao Revenue by : Shri Rajat Mittal ORDER Per Ramit Kochar, Accountant Member This appeal, filed by the assessee, being ITA No. 5730/Mum/2013, is directed against the appellate order dated 28th August, 2013 passed by learned Commissioner of Income Tax (Appeals)- 3, Mumbai (hereinafter called the CIT(A) ) for assessment year 2000-01, appellate proceedings before learned CIT(A) has arisen from the penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said transaction as non genuine and loss on the purchase and sale of the said flat of ₹ 12,09,799/- was disallowed by the AO in quantum assessment proceedings. The additions so made by the AO in the assessment order was upheld by learned CIT(A) against quantum proceedings as in the opinion of learned CIT(A) the said loss cannot be allowed as business loss or speculation loss. The matter went to ITAT wherein the assessee filed appeal against quantum proceedings which appeal of the assessee also stood dismissed by ITAT so far this issue was concerned as the assessee withdrew this ground of appeal before the ITAT in ITA no. 8083/Mum/2004 vide orders dated 23-06-2005 ( reported in (2006) 99 ITD 1(Mum-trib.)) . In the penalty proceeding before the AO u/s. 271 (1)(c) , the assessee did not produce any further documentary evidences in support of his contentions before the AO and the AO held assessee liable for penalty u/s 271(1)(c) for furnishing of inaccurate particulars of income , vide penalty order dated 27-02-2006 passed by the AO u/s 271(1)(c) wherein penalty of ₹ 10,55,438/- was levied against the assessee u/s 271(1)(c) , which penalty was later confirmed by learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with learned CIT(A) against quantum assessment. Penalty proceedings were initiated by the AO u/s 271(1)(c). The AO observed that the assessee did not offer the said income in the return of income filed with the Revenue but furnished the details of this income during assessment proceedings after questionnaire was issued to the assessee by the AO. The AO observed that the assessee has claimed excess expenditure against the income offered subsequently and hence the assessee has furnished inaccurate particulars of income within meaning of Section 271(1)(c) of the 1961 Act. Thus , the AO levied the penalty under the provision of section 271(1)(c) of the Act, vide penalty order dated 27-02-2006 passed u/s 271(1)(c). During the course of appellate proceedings before learned CIT(A), the assessee submitted that against the additional revenue of ₹ 51,00,000/-, a sum of ₹ 42,56,828/- was on account of interest on loan and ₹ 10,00,000/- was on account of excess income offered for the film Arth , by Friends India, proprietary concern of the assessee . It was submitted that this claim of interest was made on loans which are reflected in the Balance Sheet which were duly re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nasmuch as, during the course of penalty proceedings, the assessee failed to give any explanation. Therefore, even on this addition, the penalty is upheld. 4. Aggrieved by the appellate order dated 28-08-2013 passed by learned CIT(A), the assessee filed an appeal before the tribunal. 5. The Ld. Counsel for the assessee submitted that the assessee was in business of finance and he died on 26-05-2008 as pauper. Our attention was drawn to para 4 of the penalty order passed by the AO and it was submitted that there was a loss on sale of flat to the tune of ₹ 12,07,799/- which was disallowed by the A.O which was later confirmed by the CIT(A). It was submitted that the assessee did not press this issue before ITAT and the tribunal was pleased to dismiss this ground of appeal in ITA no. 8083/Mum/2004 vide orders dated 23-06-2005 ( reported in (2006) 99 ITD 1(Mum-trib.)) . Our attention was also drawn to para 5 of the penalty order passed by the AO and it was submitted that the assessee offered income of ₹ 51,00,000/- during the assessment proceedings and against which there were also expenses of ₹ 52,56,828/- incurred by the assessee . The AO has disallowed expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook wherein CIT(A) appellate order dated 24-01-2003 for assessment year 1999-2000 is placed and it was contended by the assessee that the CIT(A) has allowed the said loss as speculative loss. Our attention was drawn to page no. 44 to 48/paper book where the bank statement is placed and various payments made to Mayberry Properties Private Limited are reflected. Our attention was also drawn to page no 28/paper book where in the schedule of the investment as on 31-03-2000 being part of audited account is placed and investment in flats as 31st March, 2000 of ₹ 63,09,800/- is reflected . The assessee also placed reliance on tribunal decision in ITA no. 1017/Mum/2013 dated 22/06/2016 in the case of Lenient Finvest Pvt. Ltd. v. ITO where in the penalty was deleted by the tribunal in the case where purchase and sale of share were held to be speculative loss instead of business loss as claimed by the tax-payer and penalty was held not exigible in that case. With regard to the second issue on which penalty was levied u/s 271(1)(c) it was submitted that the assessee has filed all loan confirmation and the assessee did not earlier claimed interest paid by it. The additional income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is produced along with agreement dated 30-04-1999 between Ormonde Developers Private Limited and Harish Luthria w.r.t. the purchase and sale of said flat. It was submitted that the AO was justified in making additions and also AO was justified in levying penalty u/s 271(1)(c) . It was admitted by Ld. DR that no notice u/s 133(6) or summons u/s 131 were issued by the AO to Mayberry Properties Pvt. Ltd.. With respect to the second issue it was submitted by learned D.R that no confirmations were filed by the assessee while only reconciliation statement were filed by the assessee which is being described as the confirmations by the assessee. He drew our attention to appellate order of learned CIT(A) at para 3.2 wherein categorically learned CIT(A) recorded that the assessee did not file any confirmations but merely filed reconciliation statements. It was submitted that no confirmations were filed during assessment as well penalty proceedings. The learned counsel for the assessee submitted in rejoinder that so far as first issue is concerned , the assessee only filed confirmation letter from Mayberry Properties Private Limited along with agreement of Harish Luthria with the Ormonde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 96,889/- which was claimed by the assessee in audited Profit and Loss Account towards sale of flat, which makes total loss to be ₹ 12,07,799/- on sale of said flat which was claimed as business loss. The assessee also claimed that the said flat booked was with M/s. Ormonde Developers Pvt. Ltd through Mayberry Properties Private Limited , which was ultimately sold by said Ormonde Developers Pvt. Ltd to Harish Luthria on 30-04-1999 vide registered agreement (pb/page 34-43) on the instructions of the assessee in order to reduce losses arising from investment in flat. The assessee has also produced his bank statements of proprietary concern Friends India (pb /page 44-48) to substantiate that various payments were made from time to time to Mayberry Properties Pvt. Ltd for booking in flats. The said amounts for purchase and sale of flat were shown in audited Profit and Loss account(page 23/pb). The investments made by the assessee in flats as at 31-03-2000 were reflected in audited accounts to be ₹ 63,09,800/- under schedule of investments as Investment in Flats A/c . The said loss claimed by the assessee were disallowed by the A.O. mainly on the grounds that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the above, we set aside the orders of the authorities below and delete the penalty imposed on the assessee. We have also observed that the assessee in the instant case has placed all the facts before the AO with respect to its claim of business loss from purchase and sale of flat which did not found favour with the AO and the claim of the assessee for business loss was disallowed by the AO mainly because the assessee name was not found mentioned in the registered agreement which was between Ormonde Developers Pvt. Ltd and Harish Luthria dated 30-04-1999 and the authorities below disbelieved the genuineness of the sale and purchase transaction of flat. The assessee has claimed that he was investor in the flat and once he realized that the real estate is going at losses , he instructed Mayberry Properties Private Limited to sell this flat and hence it is claimed that Ormonde Developers Pvt. Ltd sold the flat on 30-04-1999 at the instructions of the assessee to realize investment and hence it is not required that the name of the assessee did found mentioned in the registered agreements as it was directly transferred by developer namely Ormonde Developers Pvt. Ltd to Hari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Supreme Court in the case of CIT v. Reliance Petroproducts Private Limited (2010) 322 ITR 158(SC) also supports stand of the assessee that merely because claim of the assessee is disallowed by the AO in quantum assessment will not lead to levying of penalty automatically so far as penalty proceedings are concerned. We order accordingly. With respect to levy of penalty on second ground of additional income offered during assessment proceedings to the tune of ₹ 19,90,500/- , we are again of the considered view after going through the entire material on record that the assessee has during the course of assessment proceedings offered additional income of ₹ 51,00,000/- from film Fire which was not declared earlier while at the same time the assessee has not claim expenditure of ₹ 52,56,828/- which has been claimed during assessment proceedings . The assessee has claimed to have paid interest on loans to the tune of ₹ 42,56,828/-and ₹ 10,00,000/- was excess income offered for the film Earth . The AO disallowed certain interest expenses so claimed during assessment proceedings and net income to the tune of ₹ 19,90,500/- was added as an add ..... X X X X Extracts X X X X X X X X Extracts X X X X
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