MSK Constructions P Ltd., CHENNAI V. DCIT, CHENNAI

ITA 111/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4383 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 20-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R CLEMENT RAMESH KUMAR
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

, .. , IN THE INCOME TAX APPELLATE TRIBUNAL , SMC B BENCH, CHENNAI . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.111/MDS/2016 ( / ASSESSMENT YEAR: 2011-12) M/S. MSK CONSTRUCTIONS P LTD., D4, GOLDEN GATE NEW, 33, HABIBULLAH ROAD, T.NAGAR, CHENNAI 600 017. VS THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE IV(3), CHENNAI. PAN: AAACM2608R ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI A.S. SRIRAMAN, ADVOCATE /RESPONDENT BY : SHRI R. CLEMENT RAMESH KUMAR, ADDL. CIT /DATE OF HEARING : 07.06.2017 !' /DATE OF PRONOUNCEMENT : 09.06.2017 / O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-8, CHENNAI DATED 11.12.2015 IN ITA NO.100/2014-15 FOR THE ASSE SSMENT YEAR 2011-12 PASSED U/S.250(6) R.W.S.271(1)(C) OF THE AC T. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN ITS A PPEAL, HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE LEVY OF PENALTY OF RS.4,31,783/- BY THE LD.AO U/S.271(1)(C) OF THE ACT WITHOUT ASSIGNING PROPER R EASONS AND JUSTIFICATION. 2 ITA NO.111/MDS/2016 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF POWER GENERATION THROUGH WINDMILL, FILED ITS RETURN OF IN COME FOR THE ASSESSMENT YEAR 2011-12 ON 14.09.2011 ADMITTING TOT AL INCOME OF RS.7,88,240/-. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 21.02.2014, WHEREIN THE LD. AO DISALLOWED RS.13, 97,357/- U/S.37 OF THE ACT BEING THE EXPENDITURE CLAIMED TOW ARDS BALANCE STAMP CHARGES WITH RESPECT TO THE PURCHASE OF LAND. THE ASSESSEE HAD PAID THE AMOUNT OF RS.13,97,357/- BEIN G THE DISPUTED STAMP DUTY IN ORDER TO RELEASE THE PURCHAS E DEED AS THE SAME HAD TO BE SOLD. THE ASSESSEE TREATED IT AS RE VENUE EXPENDITURE. HOWEVER, THE LD.AO OPINED THAT THE EX PENDITURE INCURRED TOWARDS STAMP DUTY FOR PURCHASE OF IMMOVAB LE PROPERTY VIZ., LAND, WHICH WAS THE FIXED ASSETS / INVESTMENT OF THE COMPANY AND NOT STOCK-IN-TRADE, CANNOT BE ALLOWED AS REVENU E EXPENDITURE AS IT WAS TO BE TREATED AS CAPITAL EXPENDITURE SINC E THE EXPENDITURE IS ATTRIBUTABLE FOR PURCHASE OF FIXED A SSETS / INVESTMENT. BECAUSE THE CLASSIFICATION OF EXPENDIT URE WAS PATENTLY WRONG, THE LD.AO OPINED THAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF ITS INCOME AS WELL AS FURNISHED 3 ITA NO.111/MDS/2016 INACCURATE PARTICULARS OF SUCH INCOME AND THEREFORE LEVIED PENALTY OF RS.4,31,783/- BY INVOKING THE PROVISIONS OF SECT ION 271(1)(C) OF THE ACT. 5. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ORDER OF THE LD.AO BY OBSERVING AS UNDER: I HAVE CONSIDERED THE OBSERVATIONS OF THE ASSESSIN G OFFICER AND THE SUBMISSIONS OF THE APPELLANT. AS OBSERVED BY THE APEX COURT IN THE CASE OF CIT VS. ANWAR ALI (76 ITR 696) (SC), IT CANNOT BE SAID THAT THE FINDING GIVEN IN THE ASSESS MENT PROCEEDINGS FOR DETERMINING OR COMPUTING THE TAX IS CONCLUSIVE FOR LEVY OF PENALTY. HOWEVER IT SHOULD BE CONSIDER ED TO BE GOOD EVIDENCE. BEFORE PENALTY CAN BE IMPOSED THE ENTIRE TY OF CIRCUMSTANCES MUST REASONABLY POINT TO THE CONCLUSI ON THAT THE DISPUTED AMOUNT REPRESENTED INCOME AND THE ASSESSEE HAS CONSCIOUSLY CONCEALED THE PARTICULARS OF HIS INCOME OR HAS DELIBERATELY FURNISHED INACCURATE PARTICULARS. THE APPELLANT, IN THE RETURN OF INCOME, CLAIMED A SUM OF RS.13,97,357 /- AS EXPENDITURE IN THE P & L ACCOUNT TOWARDS DISPUTED S TAMP DUTY OF PROPERTIES UNDER THE HEAD STAMP DUTY AND LAND S OLD. AS RIGHTLY POINTED OUT BY THE ASSESSING OFFICER, IT IS A DEFINITE FACT THAT THE APPELLANT IS WELL AWARE THAT THE EXPENDITU RE WAS INCURRED IN RELATION TO FIXED ASSETS AND WAS NOT AN ALLOWABLE EXPENDITURE UNDER THE HEAD INCOME FROM BUSINESS A S PER THE PROVISIONS OF THE INCOME TAX ACT. THE APPELLANT, H AVING KNOWN THE FACTS AND LAW, BY CLAIMING THESE EXPENSES AS BU SINESS EXPENDITURE, FURNISHED INACCURATE PARTICULARS IN TH E RETURN OF INCOME. THE ASSESSING OFFICER HAS RIGHTLY LEVIED T HE PENALTY AND THE SAME IS CONFIRMED. THE APPELLANT FAILS ON THIS GROUND. 4 ITA NO.111/MDS/2016 6. BEFORE US THE LD.AR ARGUED STATING THAT THE ASSE SSEE HAD NOT CONCEALED THE INCOME BECAUSE IT HAD EXPLICITLY DISCLOSED ALL THE PARTICULARS IN THE P&L ACCOUNT. HE FURTHER ARG UED STATING THAT THE ISSUE IS DEBATABLE AND THEREFORE IT IS NOT A FI T CASE FOR LEVY OF PENALTY THOUGH THE ADDITION IS SUSTAINED. THE LD.DR ON THE OTHER HAND VEHEMENTLY ARGUED IN SUPPORT OF THE ORDERS OF THE REVENUE AUTHORITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIAL ON RECORD. FROM THE FACTS OF THE CASE , IT IS APPARENT THAT THE ASSESSEE WHICH IS A PRIVATE LIMITED COMPAN Y HAS COMMITTED A MISTAKE WHICH IS VERY OBVIOUS. THE STA MP DUTY PAID BY THE ASSESSEE COMPANY IS DIRECTLY ATTRIBUTABLE TO WARDS PURCHASE OF LAND. THEREFORE, THE EXPENDITURE INCUR RED BY THE ASSESSEE HAS TO BE CLASSIFIED IN THE MANNER THE ASS ET IS CLASSIFIED. THE ASSESSEE COMPANYS BOOKS OF ACCOUN T ARE ALSO AUDITED BY CHARTERED ACCOUNTANT. IN THIS CIRCUMSTA NCES, WE CAN ONLY INFER THAT THERE WAS AN ATTEMPT BY THE ASSESSE E TO WRONGLY CLAIM THE CAPITAL EXPENDITURE OF RS.13,97,357/- AS REVENUE EXPENDITURE AS POINTED OUT BY THE REVENUE AUTHORITI ES. THERE IS NO DOUBT THAT, BUT FOR THE SCRUTINY ASSESSMENT, THE INCOME WOULD HAVE ESCAPED TAX. THEREFORE, I DO NOT FIND IT NECE SSARY TO 5 ITA NO.111/MDS/2016 INTERFERE WITH THE ORDER OF THE REVENUE AUTHORITIES WITH RESPECT TO LEVY OF PENALTY. HOWEVER I FIND THAT THE REVENUE AU THORITIES HAS WRONGLY COMPUTED THE LEVY OF PENALTY IE., TAX SOUG HT TO BE EVADED BY THE ASSESSEE, BECAUSE THE ASSESSEE HAD S OLD THE LAND SUBSEQUENTLY AND DECLARED CAPITAL GAINS. HENCE TAX SOUGHT TO BE EVADED BY THE ASSESSEE WILL BE THE DIFFERENCE BETWEEN OF THE RATE OF TAX APPLICABLE TO CAPITAL GAINS AND BUS INESS PROFIT ON RS.1397357/-. THEREFORE WE HEREBY DIRECT THE LD.A. O TO LOOK INTO THESE ASPECTS AND ACCORDINGLY REWORK THE LEVY OF PE NALTY AS PER THE PROVISIONS OF THE ACT AND THEREBY RECTIFY THE M ISTAKE IF ANY. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED AS INDICATED HEREIN ABOVE. ORDER PRONOUNCED IN THE COURT ON THE 09 TH JUNE, 2017. SD/- ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER #$ /CHENNAI, %& /DATED 09 TH JUNE, 2017 JR & () *) /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. - ( )/CIT(A) 4. - /CIT 5. )./ 0 /DR 6. /1 /GF