M/s. Canara Housing Development Company, Bangalore V. Deputy Commissioner Of Income Tax, Central Circle- 2(2), Bangalore

CO 60/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3252 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 14 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-03-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 23-12-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R PREMI J T ITA T BENGA LURU
• Assessee Lawyers: R RAMAKRISHNA
• Keywords: Tax effect; Revised return; Reassessment proceedings; Set aside
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI PRADIP KUMAR KEDIA , ACCOUNTANT MEMBER IT A NO. 12 64/BANG/2019 ASSESSMENT YEAR: 2007 - 08 THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(2), BENGALURU. VS. M/S. CANARA HOUSING DEVELOPMENT COMPANY, 10/1, LAKSHMINARAYANA COMPLEX, PALACE ROAD, BENGALURU 560 052. PAN: AACFC 2037 M APPELLANT RESPONDENT ITA NO.1324/BANG/2019 & CO 60/BANG/2019 [IN ITA NO.1264/ BANG /2019] ASSESSMENT YEAR: 2007 - 08 M/S. CANARA HOUSING DEVELOPMENT COMPANY, BENGALURU 560 052. PAN: AACFC 2037M VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(2), BENGALURU. APPELLANT / CROSS OBJECTOR RESPONDENT REVENUE BY : SMT. R. PREMI, JT.CIT(DR)( ITAT), BENGALURU. A SSESSEE BY : SHRI R. RAMAKRISHNA, CA DATE OF HEARING : 02 .0 3 .2020 DATE OF PRONOUNCEMENT : 06. 0 3 .2020 ITA NO.1264 & 1324/BANG/2019 & CO 60/BANG/2019 PAGE 2 OF 8 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT ITA NO.1264/BANG/2019 IS AN APPEAL BY THE REVENUE WHILE ITA NO.1324/BANG/2019 IS AN APPEAL BY THE ASSESSEE. BO TH THESE APPEALS ARE DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS)-11, BANGALORE DATED 22.3.2019. THE ASSESSEE HAS ALSO FILED CROSS OBJEC TION IN CO NO. 60/BANG/2019 IN REVENUES APPEAL AND THE SAID CO IS PURELY SUPPORTIVE OF THE ORDER OF THE CIT(A) IN RELATION TO THE GRIEVANC E OF THE REVENUE IN ITS APPEAL. THE APPEALS AND CO RELATE TO ASSESSMENT YEA R 2007-08. 2. THE APPEALS ARISE OUT OF ORDER IMPOSING PENALTY ON THE ASSESSEE U/S.271(1)( C) OF THE INCOME TAX ACT, 1961 (ACT). THE ASSESSEE IS REAL ESTATE AND PROPERTY DEVELOPER. THE ASSESSEE FILED RETURN OF INCOME FOR AY 2007-08 ON 31.10.2007 DECLARING NIL INCOME AFTER SE TTING OFF BUSINESS LOSS. THE ASSESSEE FILED REVISED RETURN OF INCOME ON 29.3 .2009 IN WHICH HE DECLARED INCOME OF RS.1,23,57,550/- WITH REFERENCE TO INCOME FROM SALE OF PROPERTY AT A PLACE CALLED CHIKKAJALA, HEREINAFTER REFERRED TO AS CHIKKAJALA PROPERTY. THE RETURN SO FILED WAS WITHIN THE TIME LIMIT PERMITTED FOR FILING REVISED RETURN OF INCOME U/S.139(5) OF THE ACT. LA TER ON AN ORDER U/S.154 OF THE ACT WAS PASSED DATED 17.3.2010 WHEREBY THE BUSI NESS LOSS SET OFF IN THE RETURN OF INCOME WAS DISALLOWED AND TOTAL INCOM E WAS QUANTIFIED AT RS.18,00,36,023/-. 3. SUBSEQUENTLY THE ASSESSMENT FOR AY 2007-08 WAS R EOPENED BY ISSUE OF A NOTICE U/S.148 OF THE ACT DATED 26.8.200 9 AND THE REASONS FOR INITIATING REASSESSMENT PROCEEDINGS WERE ON THE BAS IS THAT IN A SEARCH CONDUCTED IN THE CASE OF ONE SRINVIVASA RAJU AND OT HERS IT CAME TO LIGHT THAT THE ASSESSEE SOLD CHIKKAJALA PROPERTY FOR A CO NSIDERATION OF RS.1,23,57,550/- ON 27.7.2006 AND THE SAME WAS NOT DISCLOSED TO THE ITA NO.1264 & 1324/BANG/2019 & CO 60/BANG/2019 PAGE 3 OF 8 DEPARTMENT AND HENCE PROCEEDINGS WERE BEING INITIAT ED U/S.147 OF THE ACT FOR BRINGING TO TAX INCOME THAT ESCAPED ASSESSMENT. 4. IN THE ASSESSMENT CONCLUDED PURSUANT TO THE NOTI CE ISSUED U/S.148 OF THE ACT, THE AO IN HIS ORDER OF ASSESSMENT U/S.1 47 READ WITH SECTION 143(3) OF THE ACT BROUGHT TO TAX A SUM OF RS.2,04,0 0,000/- (COMPRISING OF BOGUS AND NON-EXISTING LIABILITY OF RS.2,02,00,000 FROM M/S.SHERIFF CONSTRUCTION AND AN AMOUNT OF RS.2,00,000 FROM M/S. SHERIFF CENTRE. ANOTHER ADDITION THAT WAS MADE BY THE AO WAS OF AN ADDITION OF RS.22,50,000/- WHICH WAS SHOWN AS OUTSTANDING LIABI LITY PAYABLE TO ONE M/S.JYOTHI NARAINDAS. THE SUM WAS SHOWN AS ADVANCE FOR SALE OF PROPERTY AT BRINDAVAN APARTMENTS, HOSUR ROAD, BANGA LORE, BUT THE PROPERTY WAS ALREADY SOLD TO M/S.JYOTHI NARAINDAS A ND THEREFORE THE SUM OUGHT TO HAVE BEEN SHOWN AS SALES AND SINCE THE SAM E WAS NOT DECLARED AS PART OF THE SALE, THE AO BROUGHT TO TAX THE SUM OF RS.22,50,000/- AND DID NOT ALLOW THE BENEFIT OF DEDUCTION ON ACCOUNT OF CO ST BECAUSE NO COST WAS RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE AO IN THE COMPUTATION OF TOTAL INCOME COMMENCED THE COMPUTATI ON OF TOTAL INCOME WITH THE TOTAL INCOME DETERMINED IN THE ORDER DATED 17.3.2010 U/S.154 OF THE ACT OF A SUM OF RS.18,00,36,023/-. HE DID NOT CONSIDER THE REVISED RETURN OF INCOME FILED BY THE ASSESSEE ON 29.3.200 9 IN WHICH HE DECLARED INCOME OF RS.1,23,57,550/- WITH REFERENCE TO INCOME FROM SALE OF CHIKKAJALA PROPERTY. 5. IN THE APPELLATE PROCEEDINGS THE CIT(A) IN EXERC ISE OF HIS POWERS OF ENHANCEMENT ADDED A SUM OF RS.1,23,57,550/- BEING I NCOME FROM SALE OF CHIKKAJALA PROPERTY. 6. IN RESPECT OF THE AFORESAID THREE ADDITIONS, THE AO INITIATED PENALTY PROCEEDINGS U/S.271(1)(C ) OF THE ACT AND IMPOSED P ENALTY ON THE ASSESSEE. THE CIT(A) CANCELLED THE PENALTY IMPOSED IN RESPECT OF THE ITA NO.1264 & 1324/BANG/2019 & CO 60/BANG/2019 PAGE 4 OF 8 ADDITION ON ACCOUNT OF NON-EXISTING LIABILITY OF RS .2,04,00,000/- BECAUSE HE FOUND THAT THE SAID ADDITION WAS DELETED BY THE ITA T IN THE APPEAL FILED AGAINST THE ORDER OF THE CIT(A) IN THE QUANTUM PROC EEDINGS IN ITA NO.1381/BANG/2013 DATED 7.6.2017. AGAINST THAT PAR T OF THE CIT(A) THE REVENUE HAS FILED ITA NO. 1264/BANG/2019. THE GROU ND RAISED BY THE REVENUE IS THAT THE ORDER OF THE ITAT DELETING THE ADDITION OF RS.2,04,00,000 HAS NOT BEEN ACCEPTED BY THE DEPARTM ENT AND AN APPEAL HAS BEEN FILED BEFORE THE HONBLE KARNATAKA HIGH CO URT. THE LEARNED COUNSEL FOR THE ASSESSEE HOWEVER BROUGHT TO OUR NOT ICE THAT THE APPEAL OF THE REVENUE SO FILED IN ITA NO.873/2017 HAS BEEN WI THDRAWN BY THE REVENUE BECAUSE OF TAX EFFECT BEING LESS THAN THE L IMITS LAID DOWN BY CBDT CIRCULAR NO.17 OF 2019 DATED 8.8.2019 FOR FILING AP PEALS TO HIGH COURT. IN VIEW OF THE ABOVE, THE REVENUES APPEAL AGAINST THE ORDER OF THE CIT(A) CANCELLING THE ORDER IMPOSING PENALTY IN SO FAR AS IT RELATES TO ADDITION OF RS.2,04,00,000 WHICH WAS DELETED BY THE TRIBUNAL HA S TO BE CONFIRMED AND THE REVENUES APPEAL IS DISMISSED AS THE VERY BASIS OF ADDITION FOR WHICH PENALTY WAS IMPOSED NO LONGER SURVIVES. CONSEQUENT LY, THE CO NO.60/BANG/2019 FILED BY THE REVENUE IN THE APPEAL BY THE REVENUE WHICH IS SUPPORTIVE OF THE ORDER OF THE CIT(A) IN SO FAR AS THE ADDITION OF RS.2,04,00,000 IS CONCERNED, IS ALSO DISMISSED. 7. AS FAR AS THE APPEAL OF THE ASSESSEE IS CONCERNE D, THE SAME IS IN RELATION TO THE ACTION OF THE CIT(A) IN CONFIRMING THE ORDER OF THE AO IMPOSING PENALTY ON THE ASSESSEE U/S.271(1)( C) OF THE ACT IN SO FAR AS IT RELATES TO ADDITION ON ACCOUNT OF INCOME FROM CHIKK AJALA PROPERTY AND ADDITION ON ACCOUNT OF UNDISCLOSED INCOME FROM SALE OF PROPERTY TO M/S.JYOTHI NARAINDAS. AS FAR AS INCOME FROM SALE OF CHIKKAJALA PROPERTY IS CONCERNED, THE ASSESSEE DISCLOSED THE INCOME PRI OR TO ISSUE OF NOTICE U/S.148 OF THE ACT ON 26.8.2009 IN A REVISED RETURN OF INCOME FILED U/S.139(5) OF THE ACT ON 29.3.2009. THE SALE OF TH E CHIKKAJALA PROPERTY ITA NO.1264 & 1324/BANG/2019 & CO 60/BANG/2019 PAGE 5 OF 8 WAS ON 27.7.2006 I.E., IN THE PREVIOUS YEAR RELEVAN T TO AY 2007-08. THE REASON FOR NON-DISCLOSURE OF INCOME FROM SALE OF CH IKKAJALA PROPERTY IN THE ORIGINAL RETURN OF INCOME FILED ON 31.10.2007 WAS E XPLAINED BY THE ASSESSEE IN A LETTER DATED 30.3.2009 FILED BEFORE T HE AO AS FOLLOWS:- THE ASSESSEE FILED ITS ORIGINAL RETURN OF INCOME O N 31ST OCTOBER 2007 VIDE ACK.NO.7535901311007 REPORTING NIL INCOME . ON THE SCRUTINY OF THE RETURNS AND THE FINANCIAL STATEMENT S AND COMPARING THE SAME WITH THE RETURNS FILED OF M/S.SIDDIVINAYAK A PROPERTY DEVELOPERS, ONE OF OUR GROUP FIRMS, IT CAME TO LIGH T THAT CERTAIN AMOUNTS RECEIVED ON BEHALF OF THE SAID FIRM WERE CR EDITED IN THE ACCOUNTS OF THE PERSONS FROM WHOM THEY WERE RECEIVE D INSTEAD OF THE ACCOUNT OF M/S.SIDDIVINAYAKA PROPERTY DEVELOPER S AND SIMILARLY, THE AMOUNT INVESTED ON BEHALF OF M/S.SID DIVINAYAKA PROPERTY DEVELOPERS WAS DEBITED AND SHOWN AS AN ASS ET INSTEAD OF DEBITING IT TO THE SAID FIRM OR THE PARTNERS OF THE SAID FIRM VIZ., SRI P.DAYANANDA PAI AND SRI P.SATISH PAI. THIS AROS E CONSEQUENT TO THE FACT, THE ACCOUNTS OF THE SAID FIRM OF M/S.S IDDIVINAYAKA PROPERTY DEVELOPERS WERE NOT FINALISED ON ACCOUNT O F A NEBULAS SITUATION CREATED BY THE LAND AGENT BY NAME SRI BYR E GOWDA, WHO HAS NOT RENDERED THE ACCOUNTS AND WAS AVOIDING THE SETTLEMENT OF ACCOUNT FOR ONE REASON OR OTHER. IN THAT PROCESS, C ERTAIN INCOME RELATING TO ANOTHER ONE PROPERTY AT CHIKKAJALA BELO NGING TO THE ASSESSEE FIRM, WHICH WAS SOLD WAS NOT CONSIDERED FO R INCOME IN AS MUCH AS, IT WAS TIED UP ON ACCOUNT OF CONFUSION WITH THE PROPERTIES AT UTTANAHALLI. A PROPERTY AT CHIKKAJALA WAS SOLD UNDER THE DOCUMENT DATED 27/07/2006 FOR A SUM OF RS.1,28, 70,000/-. THE COST OF THE PROPERTY IS RS. 5,12,450/-. THEREFO RE, THE INCOME ON THE SALE OF THIS PROPERTY AMOUNTS TO RS. 1,23,57 ,550 AND THIS WAS OMITTED TO BE OFFERED TO TAX IN THE HANDS OF TH E ASSESSEE FIRM FOR THIS ASSESSMENT YEAR. INSTEAD OF OFFERING IN TH E HANDS OF THE ASSESSEE FIRM, IT CAME TO BE OFFERED IN THE HANDS O F M/S.SIDDIVINAYAKA PROPERTY DEVELOPERS ERRONEOUSLY. SIMILARLY IN RESPECT OF UTTHANAHALLI PROPERTY TO THE EXTENT OF 7 ACRES 21GUNTAS ACCOUNTED IN 'MISCELLANEOUS PROPERTY' IS NOW IDENTI FIED AND COST OF RS.1,22,85,000 IS TRANSFERRED TO SIDDIVINAYAKA P ROPERTY DEVELOPERS. THE ERROR IS REGRETTED. AFTER NOTICING THIS MISTAKE, WHICH AROSE CONSEQUENT TO THE CONFUSION, THE SAME I S EXCLUDED IN THE REVISED RETURN FILED IN THE HANDS OF M/S.SIDDIV INAYAKA ITA NO.1264 & 1324/BANG/2019 & CO 60/BANG/2019 PAGE 6 OF 8 PROPERTY DEVELOPERS AND THE SAME IS OFFERED TO TAX IN THE HANDS OF THE ASSESSEE FIRM, WHERE IT IS RIGHTLY ASSESSABL E. ACCORDINGLY, THIS REVISED RETURN. IT IS FILED THROUGH E-FILE MOD E AND A COPY OF THE ACKNOWLEDGEMENT IS ATTACHED TO THIS LETTER. 8. THE AO IMPOSED PENALTY ON THE ASSESSEE HOLDING T HAT THE ASSESSEE DID NOT DISCLOSE INCOME FROM SALE OF CHIKKAJALA PRO PERTY IN THE RETURN OF INCOME AND THE CIT(A) CONFIRMED THE ORDER OF THE AO . THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS THAT THERE WAS NO CONCEALMENT OF INCOME BECAUSE THE INCOME HAD BEEN DECLARED MUCH PRIOR TO ANY DETECTION BY THE AO AND THE PROCEEDINGS U/S.148 WER E INITIATED ONLY BASED ON THE REVISED RETURN FILED BY THE ASSESSEE AND HEN CE THERE IS NO CONCEALMENT OF PARTICULARS OF INCOME AS IS THE CASE SOUGHT TO BE MADE OUT BY THE REVENUE. THE LEARNED DR RELIED ON THE ORDER OF THE REVENUE AUTHORITIES. 9. WE ARE OF THE VIEW THAT THERE HAS BEEN A DISCLOS URE OF INCOME FROM SALE OF CHIKKAJALA PROPERTY IN A REVISED RETURN OF INCOME FILED ON 29.3.2009 MUCH PRIOR TO THE INITIATION OF PROCEEDINGS U/S.148 OF THE ACT BY ISSUE OF NOTICE ON 26.8.2009. EVEN IN THE RETURN FILED IN R ESPONSE TO THE NOTICE U/S.148 OF THE ACT, WHICH IS THE SAME AS THE REVISE D RETURN FILED ON 29.3.2009, INCOME FROM SALE OF CHIKKAJALA PROPERTY WAS DISCLOSED. THE AO STARTED COMPUTATION OF TOTAL INCOME IN THE ORDER U/ S.148 OF THE ACT NOT ON THE BASIS OF THE ORIGINAL RETURN FILED BY THE ASSES SEE ON 31.10.2007 OR THE REVISED RETURN FILED ON 29.3.2009 BUT ON THE BASIS OF HIS COMPUTATION OF TOTAL INCOME U/S.154 OF THE ACT DATED 17.3.2010. HENCE H E OMITTED TO TAKE COGNIZANCE OF THE REVISED RETURN OF INCOME. THE CI T(A) AT THE INSTANCE OF THE AO IN THE APPELLATE PROCEEDINGS BROUGHT THIS SU M TO TAX AND DID NOT INITIATE ANY PENALTY PROCEEDINGS ON THIS ADDITION B UT MERELY OBSERVED THAT THE ADDITION WILL BE TAKEN INTO CONSIDERATION WHILE FINALIZING PENAL PROCEEDINGS U/S.271(1)(C) OF THE ACT. IT IS DOUBTF UL WHETHER SUCH ITA NO.1264 & 1324/BANG/2019 & CO 60/BANG/2019 PAGE 7 OF 8 OBSERVATION WOULD AMOUNT TO INITIATING PENALTY PROC EEDINGS U/S.271(1)(C ) OF THE ACT. IT CAN ALSO BE SAID THAT THERE IS NO RECO RDING OF SATISFACTION FOR INITIATING PENALTY PROCEEDINGS FOR IMPOSITION OF PE NALTY ESPECIALLY WHEN THERE HAS BEEN A DISCLOSURE OF INCOME BY THE ASSESS EE IN THE RETURN OF INCOME FILED PRIOR TO INITIATING PROCEEDINGS U/S.14 8 OF THE ACT. THEREFORE IMPOSITION OF PENALTY ON THE SAID ADDITION (WHICH C ANNOT BE SAID TO BE ADDITION AT ALL) CANNOT BE SUSTAINED AND THE SAME I S DIRECTED TO BE DELETED. 10. AS FAR AS IMPOSITION OF PENALTY ON THE ADDITION OF RS.22,50,000 BEING SALE TRANSACTION NOT DISCLOSED ON SALE OF THE BRIND AVAN FLAT TO M/S.JYOTHI NARAINDAS IS CONCERNED, THE EXPLANATION OF THE ASSE SSEE WAS THAT THE SAID SUM WAS OFFERED TO TAX IN AY 2009-10 AS THE SALE TO OK PLACE ON 31.3.2007. IT WAS ALSO SUBMITTED THAT WHEN THE AO CONFRONTED T HE ASSESSEE ON THE ASPECT OF SALE, THE ASSESSEE AGREED FOR THE ADDITIO N AND DID NOT RAISE ANY ISSUE EXCEPT POINTING OUT THAT THE INCOME HAS BEEN SHOWN IN AY 2009-10. WE ARE OF THE VIEW THAT THE PENALTY IMPOSED ON THIS ADDITION SHOULD BE DELETED BUT SUBJECT TO VERIFICATION BY THE AO AS TO WHETHER THIS SUM OF OFFERED TO TAX IN AY 2009-10. THUS THE PENALTY LEV IED IN RESPECT OF THIS ADDITION IS SET ASIDE TO THE AO. 11. IN THE RESULT, WHILE APPEAL BY THE REVENUE AND THE CO BY THE ASSESSEE IS DISMISSED, THE APPEAL BY THE ASSESSEE I S PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 6 TH DAY OF MARCH, 2020. SD/- SD/- ( PRADI P KUMAR KEDIA ) ( N V VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 6 TH MARCH, 2020. / DESAI S MURTHY / ITA NO.1264 & 1324/BANG/2019 & CO 60/BANG/2019 PAGE 8 OF 8 COPY TO: 1. REVENUE 2. ASSESSEE 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FIL E BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.