907.ITXA.412.13.sxw IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 412 OF 2013 Commissioner of Income Tax 12 ..Appellant Vs. M/s S.M. Construction ..Respondent .... Mr. P.C. Chhotaray, Advocate for Appellant. Mr. K. Gopal a/w Mr. Jitendra Singh Advocates for Respondent. .... CORAM : M.S. SANKLECHA & G.S. KULKARNI, JJ. DATED : 03 MARCH 2015 P.C.: This appeal by Revenue under Section 260 of Income Tax Act, 1961 challenges order dated 22 July 2012 passed by Income Tax Appellate Tribunal (the 'Tribunal'). By impugned order, Tribunal dismissed revenue's appeal from order dated 20 June 2011 passed by Commissioner of Income Tax (Appeals) (the 'CIT (A)') deleting penalty of Rs.13.30 Lakhs imposed under Section 271(1)(c) of Act by Assessing Officer. 2. appellant revenue has formulated following questions of law for our consideration: (a) Whether on fact and circumstance of case, Tribunal is right in upholding decision of S.S.DESHPANDE 1 / 7 ::: Uploaded on - 07/03/2015 ::: Downloaded on - 10/04/2020 11:23:45 ::: 907.ITXA.412.13.sxw CIT(A) in deleting penalty u/s 271(1)(c) of Act of Rs.13,30,917/ irrespective of fact that assessee had claimed Receipt of Rs.1.11 crore as capital receipt in order to evade tax (b) Whether on fact and circumstance of case, Tribunal failed to appreciate that fact of case are squarely covered by facts of case of CIT Vs. Zoom Communication Pvt. Ltd. 327 ITR 510 3. respondent assessee had on 27 January 1995 entered into Development Agreement with owners of land at Pune by paying consideration of Rs.54 Lakhs. During previous year relevant to subject Assessment Year 2005 06 aforesaid agreement dated 27 July 1995 was canceled and owners of land paid petitioners sum of Rs.1.65 Crores (including amount of Rs.54 Lakhs originally paid by respondent assessee). respondent assessee was of view that amount of Rs.1.11 Crores (Rs.1.65 Crores less R. 54 Lakhs) was not income but capital receipt which is not chargeable to tax as capital gains. aforesaid view was reflected in notes forming part of Accounts as well as in covering letter dated 29 October 2005 accompanying its Return of Income. 4. Assessing Officer did not accept contention of respondent assessee and held that receipt to be taxable under S.S.DESHPANDE 2 / 7 ::: Uploaded on - 07/03/2015 ::: Downloaded on - 10/04/2020 11:23:45 ::: 907.ITXA.412.13.sxw head of Capital Gains and after allowing expenses brought to tax amount of Rs.69.92 Lakhs as Capital Gains. respondent assessee being aggrieved with order of Assessing Officer agitated matter before CIT (A) but without any success. Thereafter, respondent assessee accepted finality of order passed by Assessing Officer bringing to tax amount of Rs.69.92 Lakhs under head Capital Gains. 5. Thereafter, Assessing Officer initiated penalty proceedings under Section 271(1)(c) of Act against respondent assessee. Assessing Officer did not accept respondent assessee's contention that as complete disclosure of facts had been made and claim made is bonafide no penalty is imposable in view of decision of Apex Court in CIT Vs. Reliance Petroproducts Pvt. Ltd. reported in 322 ITR 158. Assessing Officer held that respondent assessee had filed inaccurate particulars and imposed penalty of Rs.13.13 Lakhs under Section 271(1)(c) of Act. 6. In appeal, CIT (A) rendered finding of fact that assessee has disclosed receipt of above amount of Rs.1.11 Crores and claim unsustainable in law will not amount to furnishing of inaccurate particulars. It further held that Assessing Officer had not given any finding that receipt of aforesaid amount was not S.S.DESHPANDE 3 / 7 ::: Uploaded on - 07/03/2015 ::: Downloaded on - 10/04/2020 11:23:45 ::: 907.ITXA.412.13.sxw intimated to Assessing Officer. CIT (A) was of view that decision of Apex Court in Reliance Petroproducts Pvt. Ltd. (supra) applied to present facts and deleted penalty. 7. On further appeal by Revenue, Tribunal, by impugned order upheld order of CIT (A). Tribunal in impugned order held that petitioner had disclosed that amount of Rs.1.11 Crores was received on account of project not being fructified, had credited same to partner's capital account and it was not being offered to tax as same was receipt on capital account outside scope of Section 45 of Act. Tribunal also noted that there was letter which accompanied return of income wherein all facts relating to aforesaid receipt was indicated including fact that amount of Rs.54 Lakhs originally paid to vendor under development agreement in 1995 and on cancellation of agreement, original vendor of land paid to respondent assessee amount of Rs.1.65 Crores including amount of Rs.45 Lakhs which was originally paid by assessee. Tribunal also records that Assessing Officer was well aware of this letter and Note to Account being part of balance sheet of assessee filed also disclosed above facts. On aforesaid facts, Tribunal has held that decision of Apex Court in Reliance Petroproducts Pvt. Ltd. (supra) would apply and rendered S.S.DESHPANDE 4 / 7 ::: Uploaded on - 07/03/2015 ::: Downloaded on - 10/04/2020 11:23:45 ::: 907.ITXA.412.13.sxw finding of fact that all facts had been disclosed by respondent assessee alongwith its return of income including its claim of not being chargeable to tax. This claim was not found to be not bonafide. Tribunal also held that reliance placed on decision of Delhi High Court in case of CIT Vs. Zoom Communication P. Ltd. reported in 327 ITR 510 by Revenue is inappropriate as in that case assessee had deliberately debited amount to Profit and Loss Account though not in accordance with law and conduct of petitioner in Zoom Communication was held to be not bonafide. Accordingly, order of CIT (A) was upheld. 8. revenue's grievance with impugned order is that it proceeds on fundamental error that there has been full and complete disclosure on part of respondent assessee. This is so as disclosure is only of Rs. 1.11 Crores and not of Rs.1.65 Crores which was amount received by respondent assessee on relinquishment of its rights to immovable property. It is also contended by revenue that decision of Delhi High Court in Zoom Communication P. Ltd. is applicable to present facts and appeal should be admitted. 9. We find that respondent assessee had originally paid amount of Rs.54 Lakhs as consideration for development agreement in 1995. In previous year relevant to assessment year, S.S.DESHPANDE 5 / 7 ::: Uploaded on - 07/03/2015 ::: Downloaded on - 10/04/2020 11:23:45 ::: 907.ITXA.412.13.sxw respondent assessee received from vendor amount of Rs.1.65 Crores which included amount of Rs.54 Lakhs which was originally paid in 1995 by assessee to vendor. Therefore, only amount of Rs.1.11 Crores which was received in excess of amount paid by respondent assessee to original vendor could be subject matter of taxation and we find that disclosure of Rs.1.11 Crores which was made by petitioners as part of its notes to accounts as well as letter dated 29 October 2005 alongwith its claim of not being taxable was filed along with Return of Income. Thus there has been complete disclosure of all facts as held by CIT(A) and Tribunal. Besides claim made by respondent assessee of not being taxable was not found to be not bonafide. As held by Supreme Court in Reliance Petroproducts Pvt. Ltd. (supra) making of incorrect claim would not tantamount to furnishing inaccurate particulars of income. In this case, assessee bonafide believed that difference of Rs.1.65 Crores and Rs.55 Lakhs is not chargeable to tax and had so stated before Assessing Officer. fact that explanation of assessee is not accepted in quantum proceedings would not ipso facto visit assessee with penalty in absence of claim being held to be not bonafide. decision of Delhi High Court in Zoom Communication P. Ltd. (supra) is not applicable in present facts for reason that in this S.S.DESHPANDE 6 / 7 ::: Uploaded on - 07/03/2015 ::: Downloaded on - 10/04/2020 11:23:45 ::: 907.ITXA.412.13.sxw case, stand taken by respondent could be said to be in defiance of law and thus not bonafide. In this case it is not case of revenue that claim made by petitioner was not on basis of bonafide view. We find that on appreciation of facts, two authorities have concurrently come to finding of fact that there was complete disclosure of facts and claim made though not found acceptable was bonafide to conclude that no penalty be visited on respondent assessee. In light of above finding of facts, we find that no substantial question of law arises for our consideration. 10. Accordingly, appeal dismissed. No order as to costs. [G.S. KULKARNI, J] [M.S. SANKLECHA, J.] S.S.DESHPANDE 7 / 7 ::: Uploaded on - 07/03/2015 ::: Downloaded on - 10/04/2020 11:23:45 ::: Commissioner of Income-tax-12 v. S.M. Construction