TMI Blog2016 (10) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 27-04-2009 valuing tenancy rights as on 01-04-1981 which is placed in paper book page 14-16 and the same was stated to be the basis for making claim of FMV as on 01-04-1981. In our considered view, based on these explanations submitted by the assessee along with documentary evidences it could not be said that these explanations were not bona fide explanations . Thus, it could not be said that the assessee set up patently wrong claim with an intention to defraud revenue although it is a different matter the claim and the explanations submitted by the assessee before Revenue did not found favour with the Revenue and in our considered view, the explanations which are not accepted by the Revenue does not ceases to be a bona fide explanation merely on the grounds that the same were not accepted by the Revenue. The assessee has acquired two garages in the same locality although in different building than the building where the residential flat was acquired by the assessee as in the building where new residential flat was located, garages were not available . This was also got verified by the Revenue by deputing inspector to verify the contentions of the assessee during quantum asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment in quantum and decided not to agitate the matter with the appellate authorities. Thus it is not a case where bogus claim was set up and the assessee was cornered by the Revenue and then assessee had to surrender the amount to buy peace etc. rather it is a case where a claim was set up based on bona fide belief based on expert advise which claim is neither patently wrong nor ex-facie illegal keeping in view facts and circumstances of the case , while the claim set up by the assessee did not found favour with the Revenue which the assessee chose to accept and not agitate with higher appellate authorities . The assessee did make disclosures and also backed the same with explanations during assessment proceedings which did not found favour with Revenue which in our considered view is not sufficient enough to saddle the assessee with penalty u/s 271(1)(c) of the Act. We do not find any infirmity in the well reasoned appellate order dated 26-09- 2013 passed by the ld. CIT(A) deleting the penalty levied by the AO u/s 271(1)(c) of the Act. Keeping in view the facts and circumstances of the case, we do not find any merit in the appeal of the assessee and are of the considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 620/- would have escaped assessment. 4. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in deleting the penalty u/s.271 (1)(c) of the I.T.Act,1961 of ₹ 42,29,880/- for AY.2009-10 by relying on the judgment of Chandra Pal Bagga Vs. ITAT ANR (261 ITR 67)(Raj) and CIT Vs. Sri Saradha Textile Processors Pvt. Ltd.(286 ITR 499)(Mad) as in these case laws, the transaction on which penalty was levied were disclosed by the assessee in their return of incomes whereas in the instant case, the transaction on which penalty was levied was not disclosed in the return of income. 5. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred deleting the penalty u/s.271 (1 )(c) of the I.T.Act,1961 of ₹ 42,29,8801- for AY.2009-10 without appreciating the fact that in the decision of the Delhi High Court vide order dated 10-08- 2013 in the case of HCIL Kalindee ARSSPL, it has been held that dubious and fanciful claims under the garb of interpretations, are a mere pretense and not bonafide. It has also been held that Bonafides have to be shown and cannot be assumed and merely because the assessee complies with the statutory procedural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2)(a) of the Act by denying assessee s claim of indexed cost of acquisition. The assessee had also claimed exemption u/s 54F of the Act for the purchase of two garages out of the above stated compensation received from tenancy right. But as per the agreement of the garages, it was observed by the AO that the garages are not situated in the same building where the assessee has purchased property i.e. Shanti Dharma Co-op. Housing Society. When asked as to why the purchase price of the garage should not be disallowed since it is not within the premises of the house property purchased, the assessee submitted that during the year assessee purchased a residential house at Shanti Dharma Co-operative Housing Society, but no garage was available for parking the car and hence he purchased a garage in the same locality. The AO allowed cost of one garage while rejecting the cost of second garage while computing deduction u/s 54F of the Act. Similarly, with respect to the cost of improvement and legal expenses of ₹ 25,97,310/- w.r.t. house property purchased at Shanti Dharma Co-op. Housing Society , no supporting documentary evidences were furnished by the assessee and accordingly the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a bonafide claim and that there was no intention to defraud the revenue. The assessee submitted that he had incurred an expenditure of ₹ 25,97,310/- towards cost of improvement and legal fees which led to improvement in the capital asset which led to increase in value / price of the tenancy rights. The assessee submitted that as a result of the above expenditure incurred by the assessee has led to the realisation of ₹ 2.66 crores for the tenancy rights.Thus, it was submitted the same is cost of improvement of the property which should be allowed. It was submitted that the consideration of ₹ 2.66 crores in lieu of the transfer of tenancy rights was awarded to the assessee as per the Consent order passed by the Small Cause Court, hence, legal fees incurred towards the same is deductible u/s 48 of the Act as the same is incurred in connection with the transfer of the tenancy rights. The assessee submitted that the assessee acquired flat at Shanti Dharma Co-operative Hsg. Society where there was no car parking facility available, hence, the assessee acquired garages in the residential house in the nearby society in the locality , it was submitted that the garages oug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinguishable. The AO held that these case laws are merely an afterthought to escape the levy of penalty u/s. 271(1)(c) of the Act . The assesseee did not have any further evidences to support his claim to support his claim of indexation and legal fees. The AO relied upon the decision of Hon ble Kerala High Court in the case of CIT v. Shree Krishna Trading Co. 253 ITR 645 wherein the court held that the burden is on assessee to establish that he has not concealed the particulars of income. The A.O. held that the assessee has deliberately furnished inaccurate particulars of his income and hence explanation 1 of Section 271(1)(c) of the Act is clearly applicable and the AO , therefore, levied penalty of ₹ 42,29,880/- being 100% of the tax sought to be evaded u/s 271(1)(c) of the Act, vide penalty orders dated 15-06-2012 passed u/s 271(1)(c) of the Act. 4. Aggrieved by the penalty order dated 15-06-2012 passed by the A.O. u/s. 271(1)(c) of the Act, the assessee has filed first appeal before the ld. CIT(A). 5. Before the ld. CIT(A) , the assessee submitted that the assessee had disclosed the particulars regarding sale of tenancy rights, cost of acquisition, cost of improveme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of exemption of capital gain was not allowable to him. The AO rejected the working of long term capital gains of the assessee during assessment proceedings on the ground that the assessee has not paid any amount for acquiring the tenancy rights of the property in question and therefore the cost of acquisition of the tenancy rights is to be taken at Nil as per provisions of Section 55(2)(a) of the Act. No new facts had been brought on record by the A.O. to prove that the assessee had concealed any particulars of income. All the facts on the basis of which additions were made were available in the return of income filed for the year under consideration which is on record. The ld. CIT(A) observed that the return of income was prepared under the advice of Chartered Accountant who advised him that since the tenancy rights got converted into ownership rights by way of consent terms, the transfer in 2008 of right, title and interest was that of ownership rights and not tenancy rights and even though as at 1st April, 1981 the assessee had only tenancy rights but since the same was converted into ownership rights, the ownership right in the property would relate back to the acquisition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shroff v. JCIT Anr. 291 ITR 519 (SC) 6. Aggrieved by the appellate order dated 26-09-2013 passed by the ld. CIT(A), the Revenue is in appeal before the Tribunal. 7. The ld. D.R. submitted that the consideration of ₹ 2.66 crores on surrender of tenancy rights was received by the assessee as per the Consent order passed by the Hon ble Small Cause Court. No cost of acquisition was paid for the acquisition of the tenancy rights which was acquired by the father of the assessee from his employer. The tenancy rights were granted prior to 01-04-1981 to father of the assessee by his employers. The ld. D.R. submitted that the tenancy rights were acquired prior to 1st April, 1981 without paying any consideration and the assessee substituted FMV of the asset as on 1st April, 1981 on a mistaken belief that the assessee is entitled for adopting FMV as on 01-04-1981 and to apply indexation despite specific provision as contained u/s 55(2)(a) of the Act that cost of acquisition in these case will be taken to be NIL. The assessee claimed the indexed cost of acquisition , however, the claim of the assessee was disallowed and cost of acquisition was taken to be Nil in the quantum proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e small Cause Court in consent terms whereby he was entitled for 1000 square feet constructed area ( out of which 200 square feet being paid area) along with open car parking facility in the new building to be constructed on the same plot of land in lieu of the premises occupied by him as well on payment of ₹ 13 lacs for 200 square feet area in the year 1996, however the employer could not provide the said new constructed area and then it was mutually agreed that the compensation of ₹ 2.66 crores for surrender of the tenancy right shall be granted by the said employer of the father of the assessee who was owner of the premises to the assessee vide consent term agreed in 2008, and cost of acquisition was claimed being FMV as on 01-04-1981 and indexation was applied as the assessee was under the bonafide belief that the consent term approved by Court of Small Court in 1996 whereby the assessee would get 1000 square feet area( 800 square feet + paid 200 square feet) on ownership basis in the same plot of land in a newly constructed building has led to conversion of tenancy rights into ownership rights which shall date back to the grant of tenancy rights.The Chartered Accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consent term will now receive an amount of ₹ 2.66 crores from the employer of his father under new consent terms awarded by the Court in lieu of surrender of tenancy rights. The consent terms awarded by the Hon ble Court of small cause both original and revised are placed at paper book page 17-28. The assessee had a belief and came out with an explanation that since 1996 the tenancy rights were converted into ownership rights since the assessee is entitled for 1000 square feet of the constructed area in newly constructed building in the same plot of land and the same shall date back to the period when the tenancy rights were granted to the father of the assessee and the assessee claimed fair market value of tenancy rights as on 01-04-1981 an allowable deduction while computing long term capital gains on surrender of tenancy rights, despite the specific provision as contained u/s 55(2)(a) of the Act, whereby the cost of acquisition in the case of tenancy right shall be taken to be Nil in case no cost is paid by the tax-payer to acquire the tenancy rights. The assessee has also produced valuation report dated 27-04-2009 valuing tenancy rights as on 01-04-1981 which is placed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferent matter that the assessee did not challenge the quantum assessment framed by the Revenue. Thus, in our considered view the assessee came out with a bona fide explanation which did not found favour with the Revenue and the assessee on his part also chose to accept the disallowance as was made in quantum assessment and decided not to agitate the matter with the appellate authorities. Similarly, the benefit of cost of improvements in the property where tenancy rights were held by the assessee and legal expenses paid by the assessee with respect to the transfer of the tenancy rights were denied to the assessee by the AO although the claim was set up on the grounds that the improvement cost incurred by the assessee led to better realization of compensation on account of surrender of tenancy rights as well legal expenses were incurred which are inextricably linked to transfer of tenancy rights as the said matter was subjudice with the Hon ble Court of small cause, which in our considered view is a bonafide explanation albeit did not found favour with the Revenue and the assessee on its part chose to accept the assessment in quantum and decided not to agitate the matter with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogus claim was set up and the assessee was cornered by the Revenue and then assessee had to surrender the amount to buy peace etc. rather it is a case where a claim was set up based on bona fide belief based on expert advise which claim is neither patently wrong nor ex-facie illegal keeping in view facts and circumstances of the case , while the claim set up by the assessee did not found favour with the Revenue which the assessee chose to accept and not agitate with higher appellate authorities . The assessee did make disclosures and also backed the same with explanations during assessment proceedings which did not found favour with Revenue which in our considered view is not sufficient enough to saddle the assessee with penalty u/s 271(1)(c) of the Act. We do not find any infirmity in the well reasoned appellate order dated 26-09- 2013 passed by the ld. CIT(A) deleting the penalty levied by the AO u/s 271(1)(c) of the Act. Keeping in view the facts and circumstances of the case, we do not find any merit in the appeal of the assessee and are of the considered view that the penalty is not exigible in the instant case and accordingly the penalty levied by the A.O. is hereby ordered t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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