TaxTMI 
TaxTMI 
2017 (9) TMI 1526
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....07-07-2017 , read as under:- "1. The Hon'ble CIT(A)- 3, Mumbai, seriously erred in law and on the facts and in the circumstances of the case, in not appreciating the merits of the case and in not deleting the impugned Penalty u/s. 271 (1)(c), arising out of an impugned Order dated 27/2/2006 passed u/s 271(1)(c) of the Act, by ACIT , CC-13 (PREVIOUS JURISDICTION : I.T.O. WARD 11(1)(2) MUMBAI, LATEST REVISED JURISDICTION I.T.O. WARD 16(1)(2)). The entire impugned Penalty of Rs. 10,55,438/- be deleted." 3. During the course of assessment proceedings u/s. 143(3) read with 143 (2), the A.O observed from the Profit & Loss A/c that the assessee claimed loss on sale of flat of Rs. 12,07,799/. The cost of the flat was shown at Rs. 30,85,500/- and expenses relating to this flat of Rs. 96,889/- were also debited to Profit and Loss account. The assessee on credit side of the Profit & Loss account had shown sale of flat at Rs. 19,74,590/-. Thus, there was a loss of Rs. 12,07,799/-. In assessment proceedings , the assessee was asked to furnish details about this transaction of purchase and sale of flat. The assessee submitted copy of agreement made between M/s. Ormonde Developers Pvt. L....
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....ssessee also placed reliance on appellate order of learned CIT(A) for assessment year 1999-00 wherein a similar disallowance had been allowed and the resultant loss was held to be speculative loss by learned CIT(A) . The learned CIT(A) for the impugned assessment year under consideration on perusal of documents placed on record being letter from Mayberry Properties Pvt. Ltd.,Mumbai addressed to Friends India (proprietary concern of the assessee) wherein it is mentioned that the amount of Rs. 19,74,590/- was payable to the assessee for sale of flat of 1870 square feet rejected the contention of the assessee that it had purchased the property as the letter was held not to be evidence for transaction in the property. The assessee could not produce registered purchase deed and more so the said letter even did not contain the name of the assessee. The learned CIT(A) held that the assessee is liable to penalty u/s 271(1) for not only for concealment of particulars but also for furnishing of inaccurate particulars of income, within meaning of explanation 1 clause(B), to section 271(1)(c), which reads as under: "(B) such person offers an explanation which he is not able to substantiate ....
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....s. The learned CIT(A) rejected the contention of the assessee and confirmed the penalty levied by the AO vide appellate orders dated 28-08-2013, by holding as under:- "I have perused the facts in this matter. At the very outset, it needs to be pointed out that, the additional revenue of Rs. 51 lacs was disclosed by the appellant during the course of assessment proceedings; in response to a questionnaire issued by the A.O. Therefore, to that extent, the revenue disclosed by the appellant was not voluntary. Having disclosed the said receipt of Rs. 51 lacs. the appellant set off expenses of Rs. 52,56,828/-, against the said income, and claimed a resultant loss against the returned income. The AO was able to verify payment of interest to 3 parties, as against 9 parties, to whom interest was shown payable. Now, it is the appellant's contention that confirmation of the remaining parties was filed before the AO and therefore, it is not known why the AO did not allow the interest. In this regard, the Assessee has filed a copy of his reply dated 17.03.2003. On perusal of this reply, it is seen that, with regard to these parties, the assessee has filed only reconciliation statements. ....
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....Rs. 12,07,797/- on sale of flat. it was submitted that assessee had purchased and sold the flat on which there was a loss and document were produced from Mayberry Properties (P) Ltd. which is placed in paper book page no. 33 wherein complete details were given with regard to the sale and purchase of flat being second floor 3 bedroom apartment (No. A-3) in Mayfair Building in Bangalore wherein it is reflected that investment in 1870 sq flat was Rs. 30,85,500/- while net sale proceed is mentioned to be Rs. 19,74,590/- payable to Friends India and loss on this transactions for sale and purchase of flat is computed to be Rs. 11,10,910/- . It was submitted that assessee made an investment in flat through Mayberry Properties (P) Ltd. which was booked with M/s. Ormonde Developers Pvt. Ltd and was sold to Harish Luthria on 30-04-1999 . It was submitted that the assessee sold the flat at a price lower than acquisition cost to reduce losses wherein advances were recalled. It was submitted that the builder/developer sold the flat to Harish Luthria to realize the proceeds by selling the flat to be paid back to assessee. It was submitted that there was no need for entering the name of assessee ....
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....as allowed by Revenue.It was submitted that third party confirmation were filed for interest expenses claimed during assessment proceedings against additional income offered . It was submitted that portion of interest expenses were allowed while the balance interest expenses was disallowed. It was submitted that no notices 133(6) or summons u/s 131 were issued by the A.O . It was submitted that the AO has disallowed the expenses without confronting the assessee. It was submitted that income has been accepted but portion of expenses were disallowed without even confronting assessee. It was submitted that penalty is not exigible on the said disallowance. Our attention was drawn to tribunal order in ITA no. 7803/Mum/2011 for assessment year 2006-07 vide orders dated 29-08-2012 and submitted that these advances were written back by the legal heirs of the assessee which is recorded by the tribunal in para 6 and also write off of loans advanced by the assessee which were allowed by ITAT and it was accepted by ITAT that these were related to business of the assessee. It was submitted that revenue has accepted the credits(income) and brought the same to tax but the debit(expenses) were dis....
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....at loan confirmations were filed twice before the authorities below. 7. We have heard rival contentions and have perused the material on record including case laws cited before us. We have observed that assessee is engaged in the business of production , distributor and exporters of feature films. The assessee has a proprietary concern namely Friends India . We have observed that assessee claimed that he booked a flat through Mayberry Properties Pvt. Ltd with Ormonade Developer Pvt. Ltd. being second floor 3 bedroom apartment (No. A-3) in Mayfair Building in Bangalore wherein it is stated that investment in 1870 sq flat was Rs. 30,85,500/- and further expenses were incurred to the tune of Rs. 96,889/- towards sales of flat which are reflected in the audited Profit and Loss Account of the assessee (pb/page23), while net sale proceed of the flat is mentioned to be Rs. 19,74,590/- in the credit side of audited Profit and loss account (pb/page 23), which translated into loss of Rs. 12,07,799/- which was claimed by the assessee as business loss in his return of income filed with the Revenue. To substantiate the same, the assessee produced letter dated 27-03-2000 from Mayberry Propert....
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....d which was accordingly dismissed by ITAT in ITA No. 8083/Mum/2004 vide orders dated 23/06/2005. The said order of ITAT is placed in paper book at page 81 to 86 . Similar disallowance was made for the assessment year 1999-2000 which losses were allowed by the CIT(A) under similar circumstances to be as speculative losses . The said appellate orders are placed in file. The assessee has also relied upon the decision of the tribunal in the case of Lenient Finvest Pvt. Ltd. v ITO in ITA no. 1017/Mum/2013 dated 22/06/2016 where in the tribunal has deleted the penalty u/s 271(1)(c) where the business loss was assessed as speculative loss instead of returned as business loss, the operative portion of the order of the tribunal is reproduced here under: "We find from the above facts that the AO did not agree with the claim of the assessee that the loss claimed by the assessee as trading loss is actually speculation loss in view of application of Explanation to Section 73 of the Act and this loss of Rs. 50,12,977/- is allowed to be carried forward for set off of speculation profits in any subsequent year. We find that all the facts and figures are available on record and the disallowance ....
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....Limited which was again booked through Ormonde Developers Private Limited. The assessee has produced confirmatory letter from Mayberry Properties Private Limited supported by his bank statements to reflect payments made from time to time to Mayberry Properties Private Limited through banking channel. The initial onus that lay on the assessee to come out of clutches of penalty provisions u/s 271(1)(c) stood discharged as the assessee has come out with a bonafide explanations to support its claim and it was for the AO to have made enquiries to disprove the contentions of the assessee and to have proved that these whole transaction of sale and purchase of flat was sham , bogus and colorable device to defraud revenue and to evade taxes which unfortunately no enquiry was made by the AO and nothing incriminating is on record against the assessee. Merely because registered agreement for sale and purchase of flats are not entered in the name of the assessee in our considered view is not sufficient to saddle assesssee with liability to pay penalty u/s 271(1)(c) . The assessee has duly come out with a bonafide explanation to support the transactions for sale and purchase of flat which is sup....