M/s Gatikrushna Villa, Bhubaneswar V. ITO, Bhubaneswar

ITA 11/CTK/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6341 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-04-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 07-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: B K MAHAPATRA
• Section: 143(3); 12; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK . . , . . , BEFORE SHRI P.K.BANSAL , AM & SHRI D.T.GARASIA , JM ./ ITA NO S . 11 & 12 /CTK/201 3 ( / ASSESSMENT YEAR S :20 07 - 08 & 2008 - 09 ) M/S GATIKRUSHNA VILLA, PLOT NO. 19, GATI KRUSHNA VILLA COMPLEX, BASUA GHAI MOUZA, TANKAPANI ROAD, BHUBANESWAR - 751 018 VS. ITO WARD 1(1), BHUBANESWAR ./ ./ PAN/GIR NO. : A A G FG 8314 H ( / APPELLANT ) .. ( / RESPONDENT ) /ASSES SEE BY : SHRI B.K.MAHAPATRA /REVENUE BY : SHRI S.C.MOHANTY / DATE OF HEARING : 2 4 TH APRIL, 2014 / DATE OF PRONOUNCEMENT : 1 ST MAY , 2014 / O R D E R PER BENCH : BOTH T H ESE APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE RESPECTIVE ORDER S OF THE CIT(A) DATED 3 - 10 - 2012 , RESPECTIVELY AGAINST THE SUSTENANCE OF PENALTY IMPOSED BY THE AO U/S. 271(1)(C) . SINCE THE FACTS INVOLVED IN BOTH THE YEARS ARE COMMON, THEREFORE, BOTH THE LEARNED AR AND DR AGREED THAT BOTH THE APPEALS BE DECIDED ON THE BASIS OF FACTS RELATING TO THE ASSESSMENT YEAR 2007 - 08. 2 . BRIEF FACTS OF THE CASE ARE THAT FOR THE ASSESSMENT YEAR 2007 - 08 THE ASSESSEE SUBMITTED RETURN DISCLOSING NIL INCOME. ACCOUNTS OF THE 2 ITA NO S . 11 & 12 /201 3 ASSESSEE WERE DULY AUDITED. THE AO DURING THE COURSE OF THE ASSESSMENT, ASKED THE ASSESSEE AS TO WHY THE PERCENTAGE OF COMPLETION METHOD HAS NOT BEEN ADOPTED A S THE ASSESSEE WAS ENGAGED IN THE CONSTRUCTION BUSINESS AND IT WAS REQUIRED TO FOLLOW IN VIEW OF THE ACCOUNTING STANDARD 7 PRESCRIBED BY THE INSTITUTE OF CHARTERED ACCOUNTS OF INDIA. THE ASSESSEE AGITATED STATING THAT ASSESSEE HAS FOLLOWED THE SAME SYSTEM OF ACCOUNTING AS HAS BEEN CONSISTENTLY FOLLOWED BY HIM IN THE EARLIER YEAR. THE AO IN THE ABSENCE OF AS 7 NOT BEING FOLLOWED BY THE ASSESSEE REJECTED THE BOOKS OF ACCOUNT U/S.145(3) AND COMPUTED THE PROFIT FROM THE CONTRACTUAL INVESTMENT AT THE RATE 8% . TH E ASSESSEE PRAYED THE DEMAND AND HAS NOT FILED ANY APPEAL. THE AO ISSUED SHOW CAUSE NOTICE AND TOOK THE VIEW THAT ASSESSEE FOLLOWED THE METHOD OF ACCOUNTING (AS7) JUST TO AVOID THE PAYMENT OF THE TAX AND, THEREFORE, HE TOOK THE VIEW THAT THE ASSESSEE HAS FURNISHED THE INACCURATE PARTICULARS FOR ITS INCOME AND IMPOSED THE PENALTY @100% OF THE TAX SOUGHT TO BE EVADED AMOUNTING TO RS. 8,50,674/ - . 3 . WE HEARD RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONG WITH ORDERS OF THE TAX AUTHORITIES BELOW. W E NOTED THAT U/S. 145(2) , THE CENTRAL GOVERNMENT BY OFFICIAL GAZETTE H AS NOTIFIED ON L Y THE TWO ACCOUNTING STANDARD, NAMELY, AS NO.1 RELATING TO THE DISCLOSURE OF THE ACCOUNTING POLICES AND AS NO.2 RELATING TO DISCLOSURE OF THE PRIOR PERIOD AND MARGINAL ITEM S AND CHARGES IN THE ACCOUNTING POLICY ( NOTIFICATION NO. SO 69(E), DATED 25 - 1 - 1996.) . TH ESE ACCOUNTING 3 ITA NO S . 11 & 12 /201 3 STANDARDS WERE MANDATED TO BE FOLLOWED BY THE ASSESSEE. THE ACCOUNTING STANDARD NO. 7 ON THE BASIS OF WHICH THE ADDITION HAS BEEN MADE IN THE INCOME OF TH E ASSESSEE IS NOT NOTIFIED UNDER SECTION 145(2). THE AS 7 HAS BEEN PRESCRIBED BY HE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA AND IT IS MANDATORY TO BE FOLLOWED AS PER THE PROVISIONS OF SECTION 145(2). THUS, IN OUR OPINION, THERE WAS NO DEFAULT MADE BY T HE ASSESSEE AS PER THE PROVISIONS OF SECTION 145(2) AND, THEREFORE, THE PROVISION OF SECTION 143(3) COULD HAVE NOT BEEN APPLIED IN THE INSTANT CASE. BOTH THE ASSESSING OFFICER AS WELL AS CIT(A) COULD NOT APPRECIATE THE PROVISION OF SECTION 145. MERELY THE A SSESSEE DID NOT DISPUTE THE ADDITION WILL NOT MAKE THE ASSESSEE LIABLE FOR LEVY OF PENALTY U/S.271(1)(C) ON THE CHARGE THAT THE ASSESSEE HAS FILED THE INACCURATE PARTICULARS OF INCOME. IT IS NOT DISPUTED BY THE REVENUE THAT THE ASSESSEE HAS NOT MAINTAINED THE BOOKS O ACCOUNT IN ACCORDANCE WITH THE ACCOUNTING STANDARD 1 & 2 AS NOTIFIED BY THE GOVERNMENT OF INDIA. IN OUR OPINION, FOLLOWING THE ACCOUNTING STANDARD 7 IS NOT MAINTAINABLE. IT HAS NOT BEEN NOTIFIED AS PER THE PROVISION OF SECTION 145(2) . IN VIEW O F THIS FACT, WE DO NOT AGREE WITH THE DEPARTMENT THAT THE ASSESSEE HAS FILED INACCURATE PARTICULARS OF INCOME. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS CHANGED THE METHOD OF ACCOUNTING DURING THE YEAR AS HAS BEEN CONSIDERABLY FOLLOWED IN THE EARLIER YEAR. THE ONUS IS ON THE REVENUE FOR IMPOSING THE PENALTY U/S.271(1)(C) FOR FILING INACCURATE PARTICULARS TO PROVE THAT ASSESSEE HAS FILED INACCURATE PARTICULARS OF INCOME. EXPLANATION 1 TO SECTION 271(1)(C) , WHICH IS APPLICABLE ONLY IF THE CHARG E OF THE ASSESSEE IS CONCEALMENT OF THE PARTICULARS OF INCOME. IN VIEW OF THIS, WE ARE OF THE VIEW THAT IT IS NOT A FIT CASE TO LEVY PENALTY. WE ACCORDINGLY, SET ASIDE THE ORDER OF THE CI T(A) FOR BOTH THE YEARS AND DELETE THE PENALTY. 4 ITA NO S . 11 & 12 /201 3 4 . IN THE RESULT, B OTH APPEAL S FILED BY THE ASSESSEE ARE ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 1 ST MAY , 201 4 . 1 ST MAY ,2014 SD/ - SD/ - ( . . ) ( D.T.GARASIA ) ( . . ) ( P.K.BANSAL ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK ; DATED 010 /05 /2014 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT , CUTTACK 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) , BHUBANESWAR 4. / CIT , BHUBANESWAR 5. , , / DR, ITAT, CUTTACK 6. / GUARD FILE. //TRUE COPY//