TMI Blog2019 (10) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... tant Member For the Assessee : Shri Rajesh Jain, CA For the Revenue : Ms. Paramita M. Biswas, CIT(DR) ORDER PER ANADEE NATH MISSHRA, AM (A) This appeal by Revenue is filed against the order of Learned Commissioner of Income Tax (Appeals)-36, New Delhi, [ Ld. CIT(A) , for short] dated 26.09.2016 for Assessment Year 2011-12. The grounds of appeal are as under: 1. On the facts and under the circumstances of the case, the ld. CIT(A) has erred in deleting penalty imposed u/s 271(1)(c) of the Income Tax Act, 1961 on the addition confirmed by the ld. CIT(A) on account of the disallowance made by the Assessing Officer u/s 14A r.w.r. 8D. 2. In the facts and under the circumstances of the case, the ld. CIT(A) has erred in deleting the penalty levied on the addition made u/s 40(a)(ia) in the light of the judgements of the court referred and ignoring the notification No. 56/2012 Non Deduction of TDS on certain cases, issued by CBDT vide F.No. 275/53/2012-IT(b)/SO 3069(E), dated 31.12.2012. 3. The Appellant craves to be allowed to add any fre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note of judgments relied upon the AO and Ld. CIT (A). The relevant observation and the finding of the Tribunal in this regard reads as under:- 18. The main issue which arises for consideration is as to whether the land held by the assessee was being held as a capital asset or not. There is no dispute to the fact that this land was purchased in the year 2005-06. There also does not appear to be any dispute that no activity has been carried on, on this land or in relation to this land. The assessee has classified this land as a capital asset in its books of account and has also disclosed the same as capital asset in the annual accounts for the financial year 2005-06 i.e. A.Y. 2006-07. This classification as capital asset has continued in the subsequent years as well. There is no adverse material or finding in relation to this land being held as capital asset. The assessee has also not claimed any expenditure in relation to this land. On going through the profit and loss account for each year it is also evident that the assessee had a column of purchase land whereby it has shown 'nil' figure every year. Thus the assessee in the accounts for each of the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g anything contained in sub-section (I), the profits or gains arising from the transfer by way of conversion by the owner of a capital asset into, or its treatment by him as stock-in-trade of a business carried on by him shall be chargeable to income-tax as his income of the previous year in which such stock-in-trade is sold or otherwise transferred by him and, for the purposes of section '48, the fair market value of the asset on the date of such conversion or treatment shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. 21. As per the above provision of section 45(2) in the case of such conversion also the income till the date of conversion is computed on -the basis of fair market value as on the date of the transfer is to be assessed as capital gain and income arising over and above fair market value after such conversion is to be assessed as business income and that too in the year in which the ultimate sale takes place. Thus the agreement entered into with M/s Vatika about the other land will not change the transaction under consideration keeping in view the fact that the land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45.(1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H, be chargeable to income-tax under 'the head Capital gains , and shall be deemed to be the income of the previous year in which the transfer took place. 24. As per the above provision, gain arising from transfet of a capital asset is to be taxed under the head capital gain. Further section 2(14) defines 'capital asset' as under:- 2(14) capital asset means- (a) property of any kind held by an assessee, whether or not connected with his business or profession,' but does not include (i) any stock in trade, consumables, stores or raw materials held for the purposes of the business or profession. . 25. On going through the above definition it is quite clear that capital asset does not include any stock-in-trade, consumable stock or raw material held for the purpose of business or profession, In the present case, as is evident from the facts on record, this land was not held a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of stock in trade will be chargeable at the rate of 30 per cent as against 20 per cent chargeable on capital gain. The learned DR could not controvert the fact that in the preceding year such loss has been assessed as capital loss. 26. The law even permits person carrying on the business in particular nature or trade such person to make investment and hold similar type of asset as capital asset. In the case of CIT vs. Gopal Purohit 336 ITR 287 (Born) an issue has arisen whereby the assessee was trading in shares and was holding certain shares as .investment. The Hon ble Bombay Court has held-that The first set of transactions involved investment in shares. The second set of transactions involved dealing in shares for the purposes of business. The Tribunal has correctly applied the principle of law in accepting the position that it is open to an assessee to maintain two separate portfolios, one relating to investment in shares and another relating to business activities involving dealing in shares. The Tribunal held that the delivery based transactions in the present case, should be treated as those in the nature of investment transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be treated as capital assets and a trading portfolio comprising of stock-in-trade which are to be treated as trading assets. Shares in question were held by the assessee as investment. Therefore) sale thereof gave rise to capital gains and not business income 30. In the present case the appellant company has acquired the land in the year 2005-06 as a capital asset. It has accounted for the same as capital asset. It has continued to hold the same as a capital asset. It has not converted that capital asset. It has not converted that capital asset to stockin- trade. There are no multiple transactions.. It has declared the capital loss in the preceding year. Considering all these facts and taking into consideration all the above facts and circumstances we are of the view that the income arising from the sale of the land held as a capital asset is to be assessed as long term capital gain and the Assessing Officer and Learned CIT (Appeals) were not right in treating the income as business income. Accordingly the Assessing Officer is directed to assess the income as capital gain. Thus the appeal is allowed, 3l. In result, the appeal is allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as business income. 5. Having heard Mr. Dileep Shivpuri, learned Senior Standing Counsel for the Revenue and having examined the orders of the AO, CIT(A) and the impugned order of the ITAT, the Court is not persuaded to agree with the Revenue's submission that the impugned order of the ITAT is perverse. 6. In the facts and circumstances of the present case, no substantial question of law arises for consideration. The appeal is dismissed. 10. Thus, when same issue on similar set of facts and reasoning has been decided in favour of the assessee by the Tribunal which has also been upheld by the Hon ble Delhi High Court, then this issue becomes a binding judicial precedent and no contrary view can be taken in this year. Moreover when in all the years, the assessee has been showing the land which is in dispute as a part of fixed assets which stood accepted year after year as an investment / fixed assets, then sale of such land will only give rise to capital gain chargeable u/s 45(2). Thus, the order of the AO and Ld. CIT (A) in treating it as a business income is reversed and the assessee s claim for taxability of such gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT. On the other side, the learned Commissioner of Income Tax (Departmental Representative) [Ld. CIT(DR) , for short] appearing for Revenue relied on the order of the Assessing Officer. We are of the view that penalty U/s 271(1)(c) I.T. Act amounting to ₹ 16,47,08,371/- levied by AO, and already deleted by the Ld. CIT(A); has no legs to stand when the corresponding additions made by the AO have already been deleted by ITAT vide its aforesaid order dated 21.01.2019. When the quantum addition does not survive, the penalty levied U/s 271(1)(c) of I.T. Act on the corresponding quantum addition also cannot survive. We take support from judicial precedent in the case of K.C. Builders vs. ACIT 135 Taxman 461 (SC), in which the Hon ble Apex Court held that where the additions made in the Assessment Order, on the basis of which penalty for concealment was levied, are deleted, there remains no basis at all for levying the penalty for concealment, and therefore, in such a case, no such penalty can survive and the same is liable to be cancelled. In view of the foregoing, appeal filed by Revenue is hereby dismissed. (D) In the Result, appeal of Revenue is ..... 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