By Legal Cell
Laxmankumar R. Daga, Mumbai vs Ito 14(1)(1), Mumbai on 15 March, 2017
PER N.K. PRADHAN, AM This is an appeal filed by the assessee. The relevant assessment year is 2004-05. The appeal is directed against the order of the Commissioner (Appeals) – 25, Mumbai and arises out of order u/s 271(1)(c) of the Income Tax Act, 1961 (the ‘Act’)
The effective ground of appeal filed by the assessee reads as under:-
The Ld. CIT(A) erred in confirming the action of the A.O. in levying penalty of Rs. 4,80,725/- u/s 271(1)(c) of the Act on the allegation of filing inaccurate particulars of income by the Appellant with respect to the compensation received by the Appellant from the builder on account of breach of conditions and harassments.
In view of the order of the ITAT in the case of Kushal
- Bangia (supra), the taxability of compensation of Rs. 16,50,000/- received by the assessee as long term capital gain by the AO is a debatable issue. An analogy may be drawn here. Where the assessee, prior to commencement of its business had received interest, which was capitalised as part of pre-operative expenses, the assessment treating it as taxable income cannot by itself justify levy of penalty. It was so decided by the Hon’ble Delhi High Court in CIT vs Mushashi Autoparts India Pvt. Ltd. (2011) 330 ITR 545 (Del).
As mentioned earlier, the assessee has disclosed the receipt of Rs. 16,50,000/- in the balance sheet filed along with the return of income. It has been held by the Hon’ble Supreme Court in Reliance Petro Products (P) Ltd. (supra) that merely because the assessee had claimed expenditure, which claim was not accepted or was not acceptable to revenue, that by itself would not attract penalty u/s 271(1)(c) of the Act.
In view of the reasons given at para 7 to 7.2 here-in-above, the penalty of Rs. 4,80,725/- imposed by the A.O. u/s 271(1)(c) is deleted.
In the result, the appeal filed by the assessee is allowed.