2018 (6) TMI 54 - AT - Income Tax

Assessee wins appeal, Revenue's dismissed. Penalty under sec 271(1)(c) deleted. Tribunal accepts expenditure as cost of improvement.

ACIT, Circle-52 (1), New Delhi Versus Eagle Theatres And Vice-Versa

ACIT, Circle-52 (1), New Delhi Versus Eagle Theatres And Vice-Versa - TMI Issues:1. Disallowance of revenue deduction for retrenchment compensation.2. Imposition of penalty under section 271(1)(c) for computation of capital gain.Analysis:1. The case involved two properties owned by the assessee, one of which was sold during the assessment year. The assessee claimed a revenue deduction of Rs. 66.88 lac as retrenchment compensation, which the AO did not allow. The Tribunal, in the second round of proceedings, accepted the alternate plea of the assessee for allowing the expenditure as a cost of improvement under section 48 of the Income-tax Act, 1961. The Tribunal found that the genuineness of the payment was not disputed, and hence, the penalty was deleted by the ld. CIT(A) in this regard.2. In the computation of capital gain, the assessee attributed Rs. 1 lac towards the constructed portion of the building sold, while the AO estimated the sale consideration at Rs. 32.70 lac. The Tribunal reduced the estimate to Rs. 16.35 lac. The penalty under section 271(1)(c) was imposed and confirmed based on this estimation. However, it was observed that the penalty was solely based on an estimate, as no separate sale consideration for the super structure was assigned in the sale deed. Citing legal precedents, it was noted that penalties cannot be imposed when income is determined on an estimate basis. Therefore, the Tribunal ordered to delete the penalty imposed in this regard.In conclusion, the appeal of the assessee was allowed, and that of the Revenue was dismissed, with the penalty being deleted based on the above analysis.