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2019 (8) TMI 1817 - AT - Income TaxCapital gain computation - whether the cost of improvement borne by the previous owner in the case of acquisition of the property by one of the modes specified u/s.49 of the Act is allowable deduction for the purpose of calculating gains? - HELD THAT:- As relying on case of MANJULA J. SHAH [2011 (10) TMI 406 - BOMBAY HIGH COURT] we direct the Assessing Officer to allow the cost of improvement borne by the previous owner as inflated by indexation. Penalty proceedings u/s.271(1)(c) - assessee had failed to disclose the capital gains on sale of immovable property and also made a wrong claim u/s.35(1)(iii) - HELD THAT:- Admittedly, the penalty was levied in respect of addition made on account long term capital gains on sale of immovable property and the addition on account of alleged bogus claim u/s.35(1)(iii) of the Act. In respect of assessment of capital gains, the assessee has claimed exemption of capital gains u/s.54 of the Act, but the assessee had failed to produce evidences in respect of construction of a new house. In the circumstances, the Assessing Officer had made an addition of capital gains. Thus, the addition was made by the Assessing Officer for failure to prove the claim. Similarly the addition u/s.35(1)(iii) of the Act was made by the Assessing Officer only for assessee’s inability to produce necessary approval from CBDT. Therefore, it is settled proposition of law that mere inability to substantial claim does not entail levy of penalty u/s.271(1)(c) of the Act, reliance in this regard can be placed on the decision of Supreme Court in the case of C.I.T Vs. Reliance Petroproducts Pvt Ltd.[2010 (3) TMI 80 - SUPREME COURT] accordingly, we are of the considered opinion that it is not a fit case for levy of penalty. Assessee appeal allowed.
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