TaxTMI 
TaxTMI 
2008 (2) TMI 450
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....iture of Rs. 2,12,18,084/- on construction. This entire property i.e. land as well as building constructed thereon was sold by the assessee during the previous year relevant to the assessment year under consideration i.e. AY 2003-04 for a total consideration of Rs. 1,25,00,000/- vide sale deed dated 10.3.2003. The assessee company thus incurred a loss of Rs. 2,49,63,084/-[Rs. 1,25,00,000 - (Rs. 1,62,00,000 + Rs. 2,12,18,084 + Rs. 45,000)] as a result of the said transaction which was claimed by it as a business loss in the return of income filed for the year under consideration wherein total loss was declared at Rs. 2,51,33,234/- including mainly the said loss of Rs. 2,49,63,084/- incurred on sale of land & building. During the course of assessment proceedings, the claim of the assessee company for the said loss was examined by the AO. During the course of such examination, he found that the land and building sold by the assessee had been shown in the balance sheet under the head 'fixed assets' and not as 'stock-in-trade'. According to him, there was no evidence available on record to show that the assessee company had carried out any business activity of real estat....
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....come returned by the assessee as well as the income finally assessed by the AO being negative i.e. loss, the imposition of penalty was not justified. 4. The above submissions made on behalf of the assessee company were not found acceptable by the AO and rejecting the same, he proceeded to impose a penalty of Rs. 90 lakhs Under Section 271(1)(c) holding that the assessee company had furnished inaccurate particulars of its income. 5. The aforesaid penalty imposed by the AO Under Section 271(1)(c) was challenged by the assessee company in an appeal filed before the learned CIT(A) and the following submissions were made on its behalf before the learned CIT(A): 1. The cost of construction incurred by the assessee during the Assessment Year 1998-1999 to 2002-2003 amounting to Rs. 2,12,18,088/- has been estimated by the Assessing Officer at Rs. 6265852/-. There by reducing the cost of construction by Rs. 1,47,52,538/-. 2. The value of the land has been estimated at Rs. 1.81 Crores as against the purchased cost of Rs. 1.62 Crores. 3. Since it is a business assets as such no reference can be made Under Section 55A (reference Under Section 55A can be made only for ascertaining the FM....
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....s mentioned by the learned CIT(A) on page 5 & 6 of his impugned order. 7. After considering the submissions made on behalf of the assessee company in the light of material available on record as well as the case laws cited in support, the learned CIT(A) disposed of the assessee's appeal by deciding the issue as under: Rival contentions have carefully been considered. After considering the rival submissions I have come to the conclusion that as far as the issue of the recording of the satisfaction note by the Assessing Officer for initiation penalty proceedings is concerned, the contention of the ld.A.R. of the appellant stand rejected. The Assessing Officer has in unambiguous terms recorded his satisfaction for initiation penalty proceedings for furnishing inaccurate particulars of income with regard to treatment of the asset under construction and also with regard to the sale considerations. Accordingly, reliance placed by the ld.A.R. of the appellant in the decision of Hon'ble Delhi High Court in the case of Super Metal Re-Rollers (P) Ltd. and M/s Ram Commercial Enterprises Ltd. are not applicable to the facts of the appellant's case. As far as the another contenti....
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....building as the sale consideration of the building. The Assessing Officer had also given the indexation at the cost of land and added the cost of construction with the indexed cost of land. It has resulted into the cost of asset at Rs. 3,08,57,983/-. The long term capita! loss worked out at Rs. 64,41,983/- as per the figures given by the District Valuation Officer against the long term capital loss of Rs. 2,49,63,084/- returned by the assessee in its return of income. However, the ld.A.R. of the appellant has vehemently argued and submitted that even if the findings of the Assessing Officer in treating the whole of the transaction as a capital gain transaction and adopting the figures as per the Valuation Officer are accepted, the long term capital loss should have been worked out by giving the indexation loss at the cost of construction also in various years which were duly disclosed in its return of income and accepted by the Department. As per the working of the appellant, the long term capital loss work out at Rs. 2,53,84,357/- if the indexation is given on the cost of construction disclosed in its return of income. According to the appellant, the Assessing Officer can adopt fa....
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....onstruction as disclosed by the assessee and the cost of construction as estimated by the Departmental Valuer in the said transaction is not sufficient to take view that there is an involved concealment of income so as to attract Section 271(1)(c) of the Income-tax Act, 1961. Reliance is placed on the decisions of CWT v. Viswanath SLP (Civil) No. 15761-15762 of (1998) 209 ITR 89 and TPK Ramalingham v. CIT (1995) 211 ITR 520. Considering the entirety of all the facts and circumstances, I have come to the conclusion that since assessed loss is based on the estimate made by the Departmental Valuer irrespective of whether the said transaction is treated as a capital gain transaction or business transaction but same estimate can not be sufficient for levying the concealment penalty under Section 271(1)(c). Therefore, I direct the Assessing Officer to delete the penalty of Rs. 90,00,000/- imposed by him under Section 271(1)(c) of the Income-tax Act, 1961. 8. The learned CIT(A) thus found no merits in the preliminary objection raised by the assessee challenging the validity of initiation of penalty proceedings on the ground of lack of satisfaction observing that the requisite satisfactio....
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....hich was not justified. 10. The learned Counsel for the assessee, on the other hand, submitted that since it was a loss case and the assessee company had discontinued its business of real estate, no appeal was filed by it against the assessment made by the AO. He contended that such non-filing of appeal, however, cannot be held against the assessee in the penalty proceedings as the penalty proceedings are distinct and separate from the assessment proceedings. He submitted that even if the claim made by the assessee for business loss was not found acceptable by the AO, there was nothing brought on record either during the course of assessment proceedings or even during the course of penalty proceedings to establish that the claim so made was false. Referring to the submissions made on behalf of the assessee during the course of assessment proceedings as reproduced by the AO on page 2 of the assessment order, he pointed out that the cost incurred by the assessee on the construction of building over the years was shown as work-in-progress in the relevant balance sheets. He contended that the inference drawn by the AO that there was no evidence brought on record by the assessee to sho....
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....e said property was shown under the head "fixed assets". He, however, ignored/overlooked the fact that the assessee company was admittedly incorporated with the main object of carrying on real estate business and as pointed out by the learned Counsel for the assessee from the submissions made before the AO as reproduced on page 2 of the assessment order, the said property including construction thereon was shown as "work-in-progress" by the assessee company in its balance sheet relevant to AY 1998-99 to 2002-03. The action of the AO to treat the profit/loss arising from sale of the said property as capital gain as against business income as claimed by the assessee, in our opinion, was thus not well-founded and even though the said action of the AO was not challenged by the assessee in the quantum proceedings due to the fact that the income finally assessed was loss as explained by the learned Counsel for the assessee, this by itself cannot be sufficient to draw any adverse inference against the assessee during the course of penalty proceedings which are distinct and separate from the assessment proceedings. Moreover, a mere change of head of income by the AO in the assessment canno....
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....62,65,852/- relying on the DVO's report. As pointed out on behalf of the assessee company before the authorities below as well as before us, the said construction was carried out by it during a period of five years relevant to AY 1998-99 to 2002-03 and the cost incurred thereon was duly recorded in the books of account regularly maintained. No defect whatsoever was, however, pointed out by the AO in the books of account maintained by the assessee for the said years or even for the year under consideration and as rightly held by the learned CIT(A) in his impugned order, in the absence of any such defect pointed out by the AO or any material brought on record by him to prove that the cost of construction shown in the books of account had been inflated by the assessee, the addition made by substituting the cost of construction as recorded in the books of account with the valuation made by the DVO in his report itself was not justified, much less the imposition of penalty in respect of such addition. Even the benefit of indexation in respect of cost of construction admittedly incurred by the assessee in the earlier years was not allowed by the AO while computing the income from cap....