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TMI Blog2018 (6) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances of the case and in law, ld the CIT(A), was justified in directing the A.O to delete the penalty u/s 271(1)(c) of the I.T. Act on account of incorrect deemed rental value offered by the assessee without paying heed to the decision of Hon'ble Supreme Court in the case of CIT Vs. Reliance Petroproducts P. Ltd 2010 322 ITR 158 SC wherein it has been clearly held that everything would depend upon the return filed by the assessee and when the particulars therein are found to be inaccurate the liability would arise. iii. Whether, on the facts and circumstances of the case and in law, ld the CIT(A), was justified in directing the A.O to delete the penalty u/s 271(1)(c) of the I.T Act on account of long term capital gain offered by the assessee on structured product assessee whereas the assessee had no objection to the products being treated as debentures and consequently levying tax @ 10% as per proviso to section 112 of the I.T. Act. iv. Whether, on the facts and circumstances of the case and in law, the direction of ld. the CIT(A) to the A.O to delete the penalty u/s 271(1)(c) of the IT Act on account of long term capital gain offered by the assessee on struc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, the notional income of the villa owned by the him at Dubai could not be brought to tax in India. It was submitted by the assessee that the word 'may be' used in the tax treaty was to be construed as per the interpretation accorded to the same by different courts. The assessee taking support of various judicial pronouncements submitted that Article 6(1) of the India-UAE tax treaty vested an exclusive taxing right with the state of source and the state of residence was not empowered to levy any tax, even if the state of source did not exercise its power to levy tax. It was further submitted by the assessee that the protocol of the India-UAE tax treaty provided that notwithstanding the provisions of Article 6 and Article 23, the residential property owned by a national of a contracting state and occupied for self-residence in the other contracting state shall be exempt in the other contracting state from the taxes covered by the agreement. The assessee in order to drive home his contention that the notional income of the villa owned by him at Dubai could not be brought within the sweep of taxes in India, submitted that just as an Indian national residing in UAE, but owning prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eliberations adopted the rateable value of the villa at Rs. 88,09,932/- on the basis of a valuation report of Hamptons International, dated 11.08.2011 that was furnished by the assessee before him, and after allowing 30% statutory deduction under Sec. 24(a) worked out the income of the assessee from house property at Rs. 61,66,952/-. The A.O observing that the assessee had already offered income from house property in respect of the aforementioned villa at Rs. 14,00,000/-, thus made an addition of Rs. 47,66,952/-[i.e. Rs. 61,66,952/-(-) Rs. 14,00,000/-] in the hands of the assessee. 5. The A.O further observed that the assessee had worked out the Long term capital gain (for short 'LTCG') on the sale of a structured product, viz. 0% debentures issued by Deutsche Investments India Pvt. Ltd. after claiming indexation and offered the same to tax at the rate of 20%. The A.O held a conviction that the LTCG on sale of structured product was to be taxed as per the proviso to Sec 112 of the Act and no benefit of indexation could be availed by the assessee. Considering that the maturity proceeds of the 0% debentures amounted to Rs. 2,24,60,000/- and the assessee had incurred a cost of Rs. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how cause' notice (for short 'SCN') issued under Sec. 274 r.w. Sec. 271 of the Act, dated 28.02.2013, called upon the assessee to explain as to why penalty may not be imposed on him under Sec. 271(1)(c) of the Act. The assessee in support of his claim that no penalty under Sec. 271(1)(c) was liable to be imposed in his hands, submitted as under:- (A) As regards house property income: (i) It was submitted by the assessee that the Signature Villa owned by him at Palm Jumeirah, Dubai was gifted to him by Nakheel P.J.S.C and the possession of the same was given to him on 8th June 2008. The assessee stated in his reply that he had on his own estimated the rateable value of villa at Rs. 20,00,000/- and offered an amount of Rs. 14,00,000/- towards notional income under the head house property. However, in the course of the assessment proceedings, based on the provisions of Article 6 of the India-UAE tax treaty and the protocol thereto, the assessing officer was requested not to tax the notional income of the villa owned by him at Dubai. The assessing officer however did not find favour with the claim of the assessee and after estimating the annual letting value of the property at Rs. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at he had on his own brought the fact of having received the Signature Villa at Dubai as a gift to the notice of the Income tax Department. It was further stated by the assessee that he had initially on his own offered the income of Rs. 14,00,000/- as the notional income of the property under consideration. However, based on the interpretation of the DTAA between India-UAE and considering the (i). Notification No. 90/2008 (i) [(S.O 2124)(E)] [(F.No. 500/82/2004-FTD-1)], dated 28.08.2008; and (ii) Notification No. 91/2008 [(S.O. 2123)E] [(F.No. 500/82/2004-FTD-I)], dated 28.08.2008, the assessee, on the basis of an advice given to him by his counsel, had arrived at a bonafide view that on the basis of the DTAA and the protocol between India- UAE, no notional income in respect of the villa owned by him at UAE was liable to be brought to tax in his hands in India. It was stated by the assessee that his bonafides could be gathered from the fact that even in the subsequent assessment years, the notional income of the villa was not offered for tax by him. It was claimed by assessee that as the Notifications Nos. 90 and 91, dated 28.08.2008 were subject to interpretation by various judici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the transactions which was taxed as per the interpretation of the assessing officer was very small in comparison to the total income of the assessee, therefore, the assessee had not carried the matter in further appeal. The assessee in the backdrop of his aforesaid submissions claimed that no penalty under Sec. 271(1)(c) was liable to be imposed in his hands on account of differential treatment given to the capital gain by the assessing officer, as against that offered by the assessee. The assessee submitted before the A.O that as his claim in respect of both of the aforesaid issues were backed by a bonafide belief and the disagreement of the assessing officer had emerged on account of interpretation of the provisions of the Act, the relevant DTAA and the protocol, therefore, no penalty under Sec. 271(1)(c) in respect of either of the two additions was called for in his hands. 9. The A.O after deliberating on the contentions advanced by the assessee was however not persuaded to be in agreement with the same. The A.O after considering the various judicial pronouncements rendered on the issue under consideration, as well as the relevant amendments made in the Income tax Act, 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d remained self occupied by the assessee, and was not a case that he had received an amount in excess of Rs. 20,00,000/- by renting the property under consideration. The CIT(A) was also not impressed by the reliance placed by the A.O on the valuation report for estimating the annual lettable value of the villa at a higher figure of Rs. 88,09,932/-, as the same was not only meant for other purposes, but also had been assailed by the assessee in appeal before the higher appellate authority. The CIT(A) observed that as per the provisions of DTAA between India and UAE the income from the property was liable to be taxed in UAE, therefore, if that be the case, at least on the basis of such plausible view itself the assessee could not be held liable for concealment of income or furnishing of inaccurate particulars of income. It was further observed by the CIT(A) that the annual lettable value of Rs. 20,00,000/- shown by the assessee in his return of income under Sec. 23(a) could not be termed as unreasonable or unfair at the time of filing of the return of income, for the reason that the report which formed the basis of addition made by the A.O was received much later and subsequent to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res of Deutsche Investments Pvt. Ltd., and thus deleted the penalty imposed by the A.O under Sec. 271(1)(c) in respect of addition of Rs. 20,60,000/- made towards long term capital gain. 12. The revenue being aggrieved with the order of the CIT(A) had carried the matter in appeal before us. The ld. Departmental Representative (for short 'D.R') at the very outset of the hearing of the appeal took us through the facts of the case. It was submitted by the ld. D.R that as the A.O while framing the assessment had adopted the annual lettable value of the Signature villa owned by the assessee at Dubai on the basis of the valuation report of Hamptons International, dated 11th August 2011, which was furnished by the assessee, therefore, the determination of the notional income of the villa was not based on any estimation, but rather, on a concrete basis. The ld. D.R in order to drive home his contention took us through Page 3 of the assessment order and submitted that the assessee himself had accepted the annual lettable value (for short 'ALV') of the villa as per the aforesaid valuation report at Rs. 88,09,932/-, which after the claim of deduction under Sec.24(a) was computed at Rs. 61,66 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hands of the assessee. The ld. A.R taking us through the copy of the 'Show cause' notice (for short 'SCN'), dated 28.02.2013 issued by the A.O (Page 52 of 'APB') submitted that a bare perusal of the same revealed that the A.O by failing to strike off the irrelevant default mentioned therein, had thus failed to put the assessee to notice as regards the default for which he was called upon to explain as to why penalty under Sec.271(1)(c) may not be imposed on him. On a query by the bench as regards the basis for raising of the said issue, it was submitted by the ld. A.R that though the assessee had neither filed a cross-appeal or a cross-objection in the present case, however, he was well within his right in raising the objection which did go to the very root of assumption of jurisdiction by the A.O for imposing penalty under Sec. 271(1)(c). The ld. D.R vehemently objected to the objection sought to be raised by the ld. A.R, for the reason that the revenue had not been put to notice as regards raising of any such objection by the assessee. It was the contention of the ld. D.R that neither of the party can be allowed to raise an issue, without putting the other party to notice. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. 6222 & 6223/Mum/2013; dated 02.09.2015). (xv) M/s Parinee Developers Pvt Ltd. Vs. ACIT, Central Circle 13, Mumbai (ITA No. 6772/Mum/2013; dated 11.09.2015). (xvi) Mrs. Indrani Sunil Pillai Vs. Asst. CIT, Circle 2(1), Mumbai (ITA No. 1339/Mum/2016; dated 19.01.2018). Per contra, the ld. D.R submitted that the contentions advanced by the ld. A.R as regards the validity of the penalty proceedings not being maintainable, thus may not be admitted. The ld. D.R submitted that though the assessee was at a liberty to raise an objection, but however, the same had to be strictly confined as per Rule 27 of the Appellate Tribunal Rules, 1963. It was submitted by the ld. D.R that raising of an objection for the very first time by the ld. A.R during the course of the hearing of the appeal, and that too orally, without putting the revenue to notice in advance, could not be admitted. The ld. D.R to support his aforesaid contentions relied on the following judicial pronouncements: (i) CIT, Central-II Vs. Divine Infracon Pvt. Ltd. (ITA No. 771/Mum/2014, dated 13.08.2018, (High Court of Delhi) (ii) CIT-4 Vs. Jamunadas Virji Shares and Stock Brokers Pvt. Ltd.(2013) 258 CTR 458 (Bom) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its of the case relied on the order passed by the CIT(A) and submitted that the latter after duly appreciating the facts of the case in the right perspective had rightly deleted the penalty imposed by the A.O. under Sec.271(1)(c) of the Act. The ld. A.R took us through the relevant observations of the CIT(A) at Page 7 - Para 8.3 - 8.4 of his order, in context of the penalty imposed in respect of addition of Rs. 47,66,952/- made by the A.O towards the deemed annual value of the Signature villa owned by the assessee at Dubai. It was submitted by the ld. A.R that a perusal of Article 6 of the India-UAE tax treaty dealing with the taxability of the income of a person from an immovable property situated in the other contracting state read alongwith the protocol on the one hand, and the Notifications No. 90 and 91, dated 28.08.2008 issued by the CBDT on the other hand, revealed that the issue as regards the taxability of the notional income of the villa owned by the assessee at Dubai, was not free from doubts and debates. The ld. A.R taking support of his aforesaid contention submitted that as the assessee had relied on one set of possible view as regards the taxability of the notional i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 2833/Mum/2015, dated 8.11.2017) while dealing with a similar issue emerging in context of India-Kenya DTAA, had observed that any notification or circular cannot alter the nature of income that had been specifically included in the DTAA's. It was submitted by the ld. A.R that the Tribunal had further observed that even an amendment in a section of the Act would not affect the provisions of the tax treaties, unless the same are ratified by both the signatories of the treaty. It was averred by the ld. A.R that the Tribunal in the aforementioned case, on the basis of its aforesaid observations had concluded that the house property income of the assessee before them was liable to be brought to tax as per Article 6 of the DTAA between India and Kenya and was not liable to be taxed in India. The ld. A.R taking us through the copy of the order of the Tribunal in the aforesaid case (Page 24 of APB), submitted that as there were conflicting views of two benches of the Tribunal on the issue under consideration, therefore, it could safely be concluded that the issue was not free from doubts and debate. The ld. A.R taking support of the aforesaid facts, submitted that in case of a debatabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of a bonafide mistake on the part of an assessee, relied on the following judicial pronouncement:- (i) Price Waterhouse Coopers P. Ltd. Vs. CIT (2012) 348 ITR 306 (SC) (ii) CIT Vs. Bennett Coleman & Co. Ltd. (2013) 259 CTR 383 (Bom) (iii) CIT Vs. Somany Evergree Knits Ltd. (2013) 352 ITR 592 (Bom). (iv) CIT Vs. Rose Lock Factory (1993) 204 ITR 753 (All) The ld. A.R taking support of the aforesaid judicial pronouncements, submitted that no penalty under Sec. 271(1)(c) in respect of the addition made in the hands of the assessee in respect of long term capital gain on sale of the structured product, viz. 0% debentures of Deutsche Investments Pvt. Ltd. was liable to be imposed. It was submitted by the ld. A.R that the CIT(A) after duly appreciating the facts of the case in the right perspective had correctly deleted the penalty imposed by the A.O under Sec. 271(1)(c) in respect of the issue under consideration. 16. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We shall first advert to the maintainability of the objection as regards the validity of assumption of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w advert to the judicial pronouncements which had been relied upon by the ld. A.R before us, to buttress his contention that it was not obligatory for the assessee to raise the objection in writing and the same without putting the revenue to notice in advance, could be orally raised in the course of the hearing of the appeal. The ld. A.R had relied on the following judicial pronouncements: (i). Hukumchand Mills Ltd. Vs. CIT (1966) 62 ITR 232 (SC) : We find that the Hon'ble Apex Court had in the aforesaid judgment deliberated on the powers of the Tribunal as contemplated in Sec.33(4) of the Income Tax, 1922 r.w. Rule 12 and Rule 27 of the Appellate Tribunal Rules, 1946. The Hon'ble Apex Court had observed that Rule 12 and Rule 27 which were merely procedural in character, did not in any way circumscribe or control the powers of the Tribunal under Sec. 33(4) of the Act. It was further observed by the Hon'ble Apex Court that the Tribunal had jurisdiction to permit a question to be raised for the first time in appeal. However, the Hon'ble Supreme Court while deliberating on the word "thereon" observed that the same restricted the jurisdiction of the Tribunal to the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to Rule 27 though support the decision assailed against not only on the grounds decided in his favour, but also on grounds decided against it, but however, the same cannot be extended to permit the respondent to expand the scope of an appeal and assail the decision on issues, which are not the subject matter of the appeal. It was observed by the Hon'ble High Court that it would not be open to a respondent to travel outside the scope of the subject matter of the appeal under the guise of invoking Rule 27. (ii) CIT-4 Vs. Jamunadas Virji Shares & Stock Brokers (P.) Ltd (2013) 258 ITR 458 (Bom): The facts involved in the case before the Hon'ble High Court were that the Commissioner of Income Tax (Appeals) had allowed the appeal of the assessee in part and deleted the disallowance made by the Assessing Officer to the extent of Rs. 13.73 lacs. However, the Commissioner of Income Tax (Appeals) confirmed the disallowance in regard to the balance representing an amount of Rs. 14.96 lacs. The assessee's appeal against the order of the Commissioner of Income Tax (Appeals), was withdrawn, perhaps because it was barred by limitation. It was in the backdrop of the aforesaid facts that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A). The Tribunal in the backdrop of its aforesaid deliberations declined to admit the application filed by the assessee under Rule 27, observing that as the initiation of the proceedings under Sec. 153C was not the subject matter of appeal before it, therefore, the assessee in the garb of Rule 27 could not have raised an objection as regards the same. (iv) CIT, Meerut Vs. Jindal Ployster Ltd. (2017) 397 ITR 282 (All) The Hon'ble High Court in the aforementioned case had held that a bare reading of Rule 27 manifests that the assessee without having filed any cross appeal or cross objection can support the impugned order on any grounds decided against him. The High Court observed that the respondent may support the order appealed against, on any of the grounds decided against him. It was discernible from a cursory reading of Rule 27, that the respondent can support the impugned order on any of the ground, which was decided against him. It was observed by the High Court that as the assessee in the case before them had taken a ground before Commissioner (Appeals), and though had not further challenged the findings of the CIT(A) on the said ground, then as per Rule 27 of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titled to raise a ground which will work adversely to the appellant. In fact, such a ground may be a totally new ground, if it is purely one of law, and does not necessitate the recording of any evidence, even though the nature of the objection may be such that it is not only a defence to appeal itself, but goes further and may affect the validity of the entire proceedings. But the entertainment of such a ground would be given effect to only for the purpose of sustaining the order in appeal and dismissing the appeal and cannot be made use of to distort or to set aside, the order in favour of the appellant. In the backdrop of the aforesaid observations, the High Court held that the said liberty to the respondent was reserved by Rule 27 of the 1946 rules. (vii) Self Knitting Work Vs. CIT, Ludhiana (2014) 227 taxman 253 (P & H):- The High Court upheld the observations of the Tribunal, which had held that a respondent under Rule 27 is empowered to support the order appealed against on any of the grounds decided against him. Rule 27 of the Appellate Tribunal Rules, 1963, lays down that where no appeal has been filed by a respondent, he may support the order appealed against i.e. the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserve that we are in agreement with the contention raised by the ld. A.R that as per Sec. 254(1) of the Act, the Tribunal while disposing of an appeal is vested with wide powers to pass such orders thereon, as it thinks fit, after giving both the parties to the appeal an opportunity of being heard. Rather, we are persuaded to be in agreement with the contention advanced by the ld. A.R that as held by the Hon'ble Apex Court in the aforementioned judgments, it is obligatory on the part of the Tribunal to discharge such powers as a statutory duty cast upon it. To the said extent we are persuaded to subscribe to the views of the ld. Authorized Representative. However, we are unable to subscribe to the claim of the ld. A.R that an objection could be allowed to be raised for the very first time before the Tribunal, without putting the other party to notice as regards the same. We are unable to comprehend that as to how an objection which was never raised before the lower authorities could be allowed to be raised orally during the course of the hearing of the appeal, because if that be so, it would seriously jeopardise and rather adversely affect the rights of the other party to defend s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ec. 33(4) of the Act. Still further, we find that the Hon'ble High Court of Bombay in the case of Commissioner of Income-tax, Bombay City-1 Vs. Gilbert & Barker Manufacturing Co., USA (1978) 111 ITR 529 (Bom) as had been relied upon by ld. A.R, had observed that the Tribunal has the discretion to allow any party to an appeal, may be the appellant or the respondent, to raise a new point or new contention, provided two conditions are satisfied:- (1). No new facts are required to be brought on record for disposing of such new point; and (2). An opportunity is given to the other side to meet the point. We may herein observe, that in the aforesaid judicial pronouncements relied upon by the ld. A.R, the Hon'ble Apex Court after deliberating on the scope of powers of the Tribunal under Sec. 33(4) of the Income-tax Act, 1922, had concluded that Rule 12 and Rule 27 of the Appellate Tribunal rules, 1946 were not exhaustive of the powers of the Appellate Tribunal, and the same being merely procedural in character, do not in any way circumscribe or control the power of the Tribunal under Sec. 33(4) of the Act. Now, this takes us to the powers which are vested with the Tribunal under Sec. 33(4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt of jurisdiction had observed that the Tribunal has the discretion to allow any party to an appeal, may be the appellant or the respondent, to raise a new point or new contention, provided two conditions are satisfied:- (1). No new facts are required to be brought on record for disposing of such new point; and (2). An opportunity is given to the other side to meet the point. Thus, a perusal of the aforesaid judgment reveals that the High Court had specifically stressed that before either of the party is allowed to raise a new point or new contention, the other side is afforded an opportunity to meet the point. We are of the considered view that in the backdrop of the aforesaid judgment of the Hon'ble High Court of Jurisdiction, allowing the assessee respondent to proceed with his objection which was for the very first time orally raised during the course of hearing of the appeal before us, undoubtedly would be nothing short of proceeding with the hearing of the appeal, without affording an opportunity of being heard to the appellant revenue in context of the issue under consideration. 20. We are further of the considered view that though the parties to the appeal before the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee to support the order of the Commissioner of Income Tax (Appeals) on any of the grounds decided against him. We find that the Hon'ble High Court of Bombay after referring to its earlier orders in the case of B.R. Bamasi v/s Commissioner of Income Tax, 1972 (83) ITR 223 (Bombay) and Commissioner of Income Tax v/s Hazarimal Nagji & Co. (1962) 46 ITR 1168 (Bombay), had dealt with the scope of powers vested with a respondent under Rule 27 of the Appellate Tribunal Rules, 1963. The High Court had observed that under Rule 27 the Respondent is permitted to support the order appealed against, though he may not have appealed against the order, on any of the grounds decided against him. Similar view, had also been taken by the High Court of Allahabad in the case of CIT, Meerut Vs. Jindal Ployster Ltd. (2017) 397 ITR 282 (All). The High Court in the aforementioned case had held that a bare reading of Rule 27 manifests that the assessee without having filed any cross-appeal or cross-objection can support the impugned order on any ground decided against him. The High Court observed that the respondent may support the order appealed against, on any of the grounds decided against him. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintainability of the penalty imposed under Sec. 271(1)(c), on merits. We find that our indulgence in the present appeal had been sought as regards the validity of the penalty imposed under Sec. 271(1)(c) by the A.O on two issues, viz. (i) addition of an amount of Rs. 47,66,952/- towards deemed rental value of the Signature Villa owned by the assessee at Dubai; and (ii) LTCG of Rs. 20,60,000/- assessed by the A.O under Sec 112 of the Act on sale of Structured product i.e. 0% debentures issued by Deutsche Investments India Pvt. Ltd. by the assessee. 23. We shall first take up the validity of penalty imposed by the A.O under Sec. 271(1)(c) in respect of the addition of an amount of Rs. 47,66,952/- made towards deemed rental value of the villa owned by the assessee at Dubai, which however was vacated by the CIT(A). As observed by us hereinabove, as claimed by the assessee, he was gifted a villa, viz. 'Signature Villa' (hereinafter referred to as 'Villa') at Palm Jumeirah, Dubai by Nakheel P.J.S.C. The possession of the villa is stated to have been given to the assessee on 8th June, 2008. The assessee initially in his return of income for the year under consideration, viz. A.Y 2010-11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee was of the view that the income from an immovable property could be taxed only in the state of source and that too, to the exclusion of the property used for self occupation. 24. We have perused the orders of the lower authorities and find that the claim of the assessee that the notional income of the villa at Dubai could not be brought to tax in India, was dislodged by the A.O for the reason that as per him the manner in which the term 'may be' was used in Paragraph 1 of Article 6 of the India-UAE Tax Treaty was clarified by the CBDT vide its Notifications, viz. (1) Notification No. 90/2008 (i) [(S.O 2124)(E)] [(F.No. 500/82/2004-FTD-1)], dated 28.08.2008; and (2) Notification No. 91/2008 [(S.O. 2123)E] [(F.No. 500/82/2004-FTD-I)], dated 28.08.2008. Thus, the A.O being of the view that as the assessee was a resident of India, therefore, the notional income of the villa owned by him at Dubai was liable to be assessed in his hands under Sec. 5(1) of the Act. 25. We have given a thoughtful consideration to the issue before us and are persuaded to be in agreement with the Ld. A.R. that no penalty under Sec. 271(1)(c) was liable to be imposed as regards the addition ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a similar issue emerging in context of India-Kenya DTAA and concluding that the income of the assessee was liable to be taxed under Article 6 of the India-Kenya tax treaty, had observed that any notification or circular cannot alter the nature of income that had been specifically included in the DTAA's, therefore, on the basis of conflicting views of two benches of the Tribunal on the issue under consideration, it could safely be concluded that as the issue under consideration was not free from doubts and debates, thus the assessee could not be subjected to levy of penalty under Sec. 271(1)(c) for adopting one of such view. We find that in a case where an addition/disallowance made by the A.O is not free from doubts and debates, no penalty can be imposed under Sec. 271(1)(c). Our aforesaid view stands fortified by the following judgments of the Hon'ble Apex Court and the Hon'ble High Court of Bombay: (i) CIT Vs. Reliance Petroproducts P. Ltd. (2010) 322 ITR 158 (SC) (ii) CIT Vs. Nayan Builders & Developers (2015) 231 Taxman 665 (Bom) (iii) CIT Vs. S.M. Construction (2015) 233 Taxman 263 (Bom) (iv) CIT Vs. Petals Engineers P. Ltd. (2014) 264 CTR 577 (Bom) (v) CIT Vs. Nalin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nonconvertible debentures, had worked out the LTCG arising therefrom after claiming indexation and offering the same for tax at the rate of 20%. However, the A.O observed that the LTCG on sale of a structured product was to be taxed as per the proviso to Sec 112 of the Act, and thus benefit of indexation could not be claimed while working out the LTCG. Considering that the maturity proceeds of the 0% debentures amounted to Rs. 2,24,60,000/- and the assessee had incurred a cost of Rs. 2,00,00,000/-, the A.O assessed an amount of Rs. 24,60,000/- as long term capital gain taxable @10%. We find that though the assessee did not assail the aforesaid addition in appeal, but however, disputed the action of the A.O in not allowing the deduction of cost of Rs. 4,00,000/-. The A.O by his order passed under Sec. 154, dated 16/08/2013 allowed the application filed by the assessee and revised the LTCG to an amount Rs. 20,60,000/-. 28. We find that the assessee though had in his return of income for the year under consideration furnished the complete particulars in respect of the transaction under consideration, but however, had inadvertently computed the LTCG after the indexing the cost of acq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified by the judgment of the Hon'ble Apex Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd (2010) 322 ITR 158 (SC). Alternatively, as in the case before us, it clearly emerges that the assessee had inadvertently erred in not computing the LTCG under Sec. 112 of the Act, therefore, even otherwise, as held by the Hon'ble Apex Court in the case of Price Waterhouse Coopers Pvt. Ltd. Vs. CIT (2012) 348 ITR 306 (SC), now when the assessee had not attempted to either conceal its income or furnish inaccurate particulars, no penalty would be warranted in his hands. We thus, in terms of our aforesaid observations conclude that no penalty under Sec. 271(1)(c) was liable to be imposed in respect of the LTCG of Rs. 20,60,000/- assessed by the A.O under Sec. 112 in the hands of the assessee. We thus uphold the order of the CIT(A) in context of the issue under consideration. The Grounds of appeal Nos. (iii) and (iv) raised by the revenue are dismissed.
29. The Grounds of appeal Nos (v) and (vi) being general are dismissed as not pressed.
30. The appeal of the revenue is dismissed in terms of our aforesaid observations.
Order pronounced in the open court on 21/05/2018. X X X X Extracts X X X X X X X X Extracts X X X X
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