Income-tax Officer, V. M/s. Talwalkar Bhalerao & Mate, Pune

ITA 1247/PUN/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2937 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-01-2016
• Assessment Year: 1990-1991
• Appeal Filed On: 09-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: HINTENDRA NINAWE
• Keywords: Income from undisclosed sources; Question of law
• Section: 27

Judgement Text

] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KSIQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . , , ' # BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1247/PN/2014 '% % / ASSESSMENT YEAR : 1990-91 ITO, WARD-3(1), PUNE . / APPELLANT V/S M/S. TALWALKAR BHALERAO & MATE, 17/7, SAI HOUSE, ERANDWANE, PUNE 411 004 . / RESPONDENT / ASSESSEE BY : SHRI NIKHIL PATHAK / RESPONDENT BY : SHRI HINTENDRA NINAWE / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE OR DER DATED 29-01-2014 OF THE CIT(A)-II, PUNE RELATING TO ASS ESSMENT YEAR 1990-91. 2. DELETION OF PENALTY OF RS.48,60,000/- BY THE CIT(A) LEVIED B Y THE AO U/S.271(1)(C) OF THE I.T. ACT IS THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL. / DATE OF HEARING :06.01.2016 / DATE OF PRONOUNCEMENT:13.01.2016 2 ITA NO.1247/2014 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS AS BUILDER AND PR OMOTER. THE ASSESSEE HAS FILED THE RETURN OF INCOME ON 30-11-19 90 DECLARING TOTAL LOSS OF RS.13,21,990/-. IN THIS CASE, A SEARCH ACTION U /S.132 OF THE I.T. ACT WAS CARRIED OUT AT THE BUSINESS PREMISES O F THE ASSESSEE ON 31-01-1990 DURING WHICH EVIDENCE OF RECEIPT OF ON-MON EY COLLECTED BY THE ASSESSEE WAS FOUND. IN THE STATEMENT RECORDED U/S.132(4) ONE OF THE PARTNERS SHRI P.S.TALWALKAR HAD DEC LARED AN AMOUNT OF RS.60 LAKHS AS UNDISCLOSED INCOME FOR THE A.Y. 199 0-91 ON ACCOUNT OF EXTRA MONEY RECEIVED WHICH WAS NOT DISCLO SED IN THE BOOKS OF ACCOUNT. HOWEVER, IN THE RETURN FILED THE ASSESS EE HAD NOT DISCLOSED SUCH ON-MONEY BUT SUCH AMOUNT WAS DECLARED IN THE A.Y. 1991-92 AND 1994-95. THE ASSESSEE IN HIS RETURN FOR A.Y . 1990-91 HAD GIVEN THE FOLLOWING NOTE : THE PARTNER HAS DECLARED A SUM OF RS.60 LAKHS (RUPEES SIXTY LAKHS) AS INCOME U/S.132(4) OF THE ACT AT THE TIME OF SEARCH AN D SEIZURE CONDUCTED BY THE DEPARTMENT ON 31.1.90. THE INCOME SO DECLARED WILL BE CONSIDERED IN THE INCOME TO BE COMPUTED FOR THE A .Y. 91-92 AS SOON AS THE INCOME IN THE CASE OF THE FIRM IS TO BE ASCERTAI NED IN THE COMPLETION OF THE PROJECT AND THE INCOME SO DECLARED U/S.132(4) PERTAINS TO THE SAID PROJECT. 4. THE AO COMPLETED THE ASSESSMENT U/S.143(3) ON 29-03- 1993 DETERMINING THE TOTAL INCOME AT RS.74,43,000/-. IN THE SAI D RETURN THE AO APART FROM MAKING OTHER ADDITIONS/DISALLOWANCES MAD E ADDITION OF RS.60 LAKHS BEING THE AMOUNT DECLARED U/S.132(4) WHICH WAS NOT OFFERED BY THE ASSESSEE FOR TAXATION. 5. THE ASSESSEE PREFERRED AN APPEAL AGAINST THIS ADDITION BUT WITHOUT ANY SUCCESS. THE ASSESSEE PREFERRED FURTHER A PPEAL BEFORE THE TRIBUNAL IN THE QUANTUM PROCEEDINGS AND THE TRIBUNAL ALSO DISMISSED THE APPEAL FILED BY THE ASSESSEE. SUBSEQUENTLY THE AO INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT AND LEV IED 3 ITA NO.1247/2014 PENALTY OF RS.48,60,000/- BEING THE PENALTY @ 150% OF THE T AX SOUGHT TO BE EVADED ON THE AMOUNT OF RS.60,00,000/-. TH E CIT(A) DELETED THE PENALTY. 6. THE REVENUE PREFERRED AN APPEAL AGAINST THE ORDER OF THE CIT(A) DELETING THE PENALTY AND THE TRIBUNAL VIDE ITA NO.259/PN/1998 ORDER DATED 17-02-2006 RESTORED THE IS SUE TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION AND PASSING A WELL REA SONED ANDSPEAKING ORDER BY APPRECIATING AND CONSIDERING ALL THE FACTS OF THE CASE BROUGHT ON RECORD IN CORRECT AND RIGHT PERSP ECTIVE. SUBSEQUENTLY, THE CIT(A) VIDE ORDER DATED 29-01-2014 DE LETED THE PENALTY LEVIED BY THE AO. WHILE DOING SO, HE NOTED THAT TH E ASSESSEE IN THE INSTANT CASE HAS FILED THE RETURN OF INCOME AND MAD E DISCLOSURE OF THE ON-MONEY RECEIVED IN THE STATEMENT OF ACCOUNT SUBMITTED WITH THE RETURN OF INCOME. THOUGH THE SAID REC EIPTS WERE ADDED TO THE TAXABLE INCOME IN SUBSEQUENT YEARS DUE TO ACCOUNTING SYSTEM FOLLOWED THE ASSESSEE HAD APPENDED A NOTE MENTIO NING THE AMOUNT RECEIVED AND THE MANNER IN WHICH THE SAME WOULD BE OFFERED TO TAX. IN OTHER WORDS, HE NOTED THAT THE ASSE SSEE HAD MADE DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR COMPUTATION OF TOTAL INCOME. RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. REPORTED IN 322 ITR 158 AND VARIOUS OTHER DECISIONS THE LD.CIT(A) HELD THAT TH E PENALTY LEVIED BY THE AO U/S.271(1)(C) CANNOT BE SUSTAINED. HE ACCO RDINGLY CANCELLED THE PENALTY LEVIED BY THE AO. 7. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 4 ITA NO.1247/2014 (1) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN DELETING THE PENALTY U/S 271 (1 )(C) WITHOUT EXAMINING THE FACTS & EVIDENCES AVAILABLE ON RECORD AND BROUGHT OUT BY THE ASSESSING O FFICER IN THE PENALTY ORDER IN SUPPORT OF LEVY OF PENALTY U/S 271 (1 )(C) OF THE ACT. (2) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) E RRED IN NOT APPRECIATING THAT THE ASSESSEE HAD CHANGED ITS METHOD OF ACCOUNTING FROM WIP TO PROJECT COMPLETION METHOD ONLY AFTER DETECTI ON BY SEARCH PARTY THAT ASSESSEE WAS COLLECTING ON-MONEY OVER & ABOVE THE AGREEM ENT AMOUNT, THEREBY WILFULLY EVADING TAX. (3) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) E RRED IN NOT CONSIDERING THAT EVEN AFTER OFFERING THE AMOUNT OF R S.60 LACS AS UNDISCLOSED INCOME DURING SEARCH ACTION, THE ASSESSEE HAD NOT OFFER ED THIS AMOUNT FOR TAXATION IN THE RETURN OF INCOME TAKING RECOURSE TO CHANGE IN THE METHOD OF ACCOUNTING AMOUNTS TO CONCEALING THE PARTICULARS OF I NCOME. (4) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY OR ALL THE GROUNDS OF APPEAL. 8. THE LD. COUNSEL FOR THE ASSESSEE HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT ON THE DATE OF SEARCH ON 31-01-1990 THE FINANCIAL YEAR ORDER WAS YET TO BE COMPLETED. REFERRIN G TO THE COPY OF THE REMAND REPORT OF THE AO, A COPY OF WHICH IS P LACED AT PAGES 101 TO 105 OF THE PAPER BOOK, THE LD. COUNSEL FOR TH E ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE EVIDENCE OF ON-M ONEY RECEIVED OF RS.43,02,900/- FOR DIFFERENT ASSESSMENT YEARS W HICH ARE AS UNDER : YEAR AMOUNT A.Y. 87 - 88 2,17,200/ - A.Y.88 - 89 26,41,400/ - A.Y.89 - 90 06,75,000/ - A.Y.90 - 91 07,69,300/ - TOTAL 43,02,900/ - 9. HE SUBMITTED THAT AS AGAINST THIS THE ASSESSEE HAD DECLARED RS.60 LAKHS AS ON-MONEY FOR THE A.Y. 90-91 IN HIS STATEMEN T RECORDED U/S.132(4). HE SUBMITTED THAT NO CASH WAS HOWE VER FOUND DURING THE COURSE OF SEARCH. THE ASSESSEE WHILE FILING THE RETURN FOR A.Y. 90-91 DID NOT DECLARE THE UNDISCLOSED INCOME AS STATE D IN THE STATEMENT RECORDED U/S.132(4). HOWEVER, THE ASSESSEE HA S OFFERED 5 ITA NO.1247/2014 THE SAME IN HIS RETURNS FILED FOR A.YRS. 91-92 AND 94-95 A ND THOSE RETURNS WERE FILED PRIOR TO THE COMPLETION OF THE ASSESSM ENT. HE SUBMITTED THAT THE AO IN THE ASSESSMENT COMPLETED HAS ADDED THE AMOUNT OF RS.60 LAKHS WHICH HAS BEEN CONFIRMED BY THE TRIB UNAL ALSO. THE AO, THEREAFTER LEVIED PENALTY @150% ON THE TAX SOUGHT TO BE EVADED WHICH WAS DELETED BY THE LD.CIT(A) VIDE ORDER DATED 16- 01-1998. HE SUBMITTED THAT THE TRIBUNAL VIDE ORDER DATE D 17-02- 2006 HAD SET ASIDE THE ORDER OF THE CIT(A) TO THE FILE OF THE CIT(A) AND THE LD.CIT(A) AGAIN DELETED THE PENALTY AFTER CONSIDERIN G THE TOTALITY OF THE FACTS OF THE CASE. 10. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD NOT HANDED OVER ANY OF THE FLATS IN A.Y. 90-91. HE HA D HANDED OVER PART OF THE FLATS IN A.Y. 91-92 AND THE REMAINING FLATS IN A.Y. 94-95. REFERRING TO THE COPY OF THE ASSESSMENT ORDER FOR 91-92, A COPY OF WHICH IS PLACED AT PAGES 96 TO 99 OF THE PAPER BOOK, HE SUBMITTED THAT THE AO IN THE SAID ORDER HAS CLEARLY MEN TIONED THAT THE ASSESSEE HAS DECLARED AN AMOUNT OF RS.34,55,600/- AS INCOME ON PROPORTIONATE BASIS OUT OF EXTRA UNACCOUNTED COLLECT ION OF RS.60 LAKHS FROM THE ROW HOUSE PURCHASERS. 11. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. KARDA CONSTRUCTIONS PVT. LTD. VIDE IT A NO.1960/2012 ORDER DATED 25-02-2013 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT ON-M ONEY CAN BE TAXED ONLY IN THE YEAR IN WHICH THE ASSESSEE HAS RE CORDED THE SALE OF FLATS. THEREFORE, THE SAME CAN BE TAXED ONLY WHE N THE FLATS WERE HANDED OVER, I.E. IN A.Y. 91-92 AND 94-95 AND CANNOT BE TAXED IN THE IMPUGNED YEAR. HE SUBMITTED THAT THE AO HAS INVO KED EXPLANATION 5 TO PROVISIONS OF SECTION 271(1)(C) OF THE ACT. T HE LD. 6 ITA NO.1247/2014 COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENC H TO THE PROVISIONS OF EXPLANATION 5 AS WELL AS EXPLANATION 5A TO SEC TION 271(1)(C) OF THE ACT AND SUBMITTED THAT EXPLANATION 5A WAS INSERTED BY THE FINANCE ACT, 2007 W.E.F. 01-06-2006 AND SPEAKS OF A NY INCOME BASED ON ANY ENTRY IN BOOKS OF ACCOUNTS OR OTHE R DOCUMENTS OR TRANSACTIONS AND THE ASSESSEE CLAIMED THAT SUCH ENT RY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS R EPRESENTS HIS INCOME, (WHOLLY OR IN PART) FOR ANY PREVIOUS YEAR. HOWEVER , AS PER EXPLANATION 5, WHEN DURING THE COURSE OF ANY SEARCH, THE ASSESSEE IS FOUND TO BE THE OWNER OF ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING FOUND FROM HIS PREMISES DURING THE SEARCH AND THE ASSESSEE HAS CLAIMED THAT SUCH ASSETS HAVE BE EN ACQUIRED BY HIM BY UTILIZING HIS INCOME ETC. THUS, THE INCOME WHICH W AS BASED ON ANY ENTRY IN ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS ETC. WERE NOT EARLIER IN THE EXPLANATION 5. T HEREFORE, NO PENALTY U/S. 271(1)(C) OF THE ACT CAN BE LEVIED BY INVOKIN G EXPLANATION 5 TO SECTION 271(1)(C) OF THE I.T. ACT, 1961. 12. SO FAR AS INVOKING OF EXPLANATION 1 TO PROVISIONS OF SEC TION 271(1)(C) OF THE ACT IS CONCERNED, HE SUBMITTED THAT THE A SSESSEE HAS ALREADY GIVEN A BONAFIDE REASON IN THE RETURN OF INCOME AS WELL AS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HE SUBMITT ED THAT ALTHOUGH THE QUANTUM ADDITION HAS BEEN CONFIRMED BY THE TRIBUNAL, HOWEVER, THE ASSESSEE CAN MAKE A NEW PLEA AT THE TIME OF PENALTY PROCEEDINGS WHICH ARE SEPARATE AND DISTINCT. SINCE THE H ONBLE BOMBAY HIGH COURT RECENTLY HAS HELD THAT ON-MONEY CAN BE TAXED ONLY IN THE YEAR WHEN THE SALE OF FLATS HAVE TAKEN PLACE , THEREFORE, IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT NO P ENALTY CAN BE LEVIED 271(1)(C) OF THE ACT. 7 ITA NO.1247/2014 13. IN HIS ALTERNATE CONTENTION HE SUBMITTED THAT SINCE THE EVIDENCE OF RECEIPT OF ON-MONEY RELATING TO THIS YEAR WAS ONLY RS.7,69,300/-, THEREFORE, AT THE MOST PENALTY CAN BE LEVIED ON RS.7,69,300/-. 14. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE AO. HE SUBMITTED THAT THE ASSESSEE WHILE FILING THE RETURN OF INCOME HAS CHANGED THE METHOD OF ACCOUNTING BY SHIFTING THE WORK-IN-PROGRESS METHOD TO PROJECT COMPLETION METHOD WHICH IS ONLY FOR DEFERRING OF THE TAX LIA BILITY. HE SUBMITTED THAT THE ASSESSEE IN HIS STATEMENT RECORDED U/S.132(4) HAD CATEGORICALLY STATED THAT THE UNDISCLOSED INCOME OF RS.60 LAKHS WILL BE OFFERED TO TAX IN THE A.Y. 90-91. THEREFORE, THE ASSE SSEE NOW CANNOT DEFER THE PAYMENT OF TAX ON THIS UNDISCLOSED INCOM E AND PAY THE SAME IN A.Y. 91-92 AND 94-95. 15. SO FAR AS DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF KARDA CONSTRUCTIONS PVT. LTD. (SUPRA) RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE IS CONCERNED HE SUBMITTED THAT THERE IS NO MENTION OF THE METHOD OF ACCOUNTING EMPLOYED BY THE ASSESSEE IN THE SAID DECISION. THEREFORE, THE PENALTY WAS RIGHTLY LEVIED BY THE AO IN A.Y. 90-91 AND THE CIT(A) WAS NOT JUSTIFIED IN CANCELLING THE PEN ALTY SO LEVIED. 16. THE LD. COUNSEL FOR THE ASSESSEE IN HIS REJOINDER SU BMITTED THAT CHANGE OF METHOD ONLY AFFECTS THE ACCOUNTED PROFIT AND NOT TO UNACCOUNTED INCOME. REFERRING TO PAGE 87 OF THE PAPER B OOK WHICH IS THE ASSESSMENT ORDER FOR A.Y. 90-91 THE LD. COUNSEL FO R THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO PARA 3 OF THE ASSESSMENT ORDER AND SUBMITTED THAT THE ASSESSEE HAS DECLARED LOSS 8 ITA NO.1247/2014 OF RS.13,21,990/-. THE AO COMPLETED THE ASSESSMENT BY DISREGARDING THE LOSS AND DETERMINED THE PROFIT AT RS.13,12 ,629/-. THE AO DETERMINED THE TOTAL INCOME AT RS.74,43,200/- WHICH INCLUDES THE UNDISCLOSED INCOME OF RS.60 LAKHS. HOWEVER, THE AO HAS LEVIED PENALTY ONLY ON RS.60 LAKLHS AND NOT LEVIED PENAL TY ON THE REMAINING INCOME WHICH HE HAD ADDED TO THE RETURNED LOS S. HE SUBMITTED THAT THE ASSESSEE HAD A RATIONALE IN OFFERING TH E UNDISCLOSED INCOME IN A.YRS. 91-92 AND 94-95. REFERRING T O THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RE LIANCE PETROPRODUCTS PVT. LTD. REPORTED IN 322 ITR 158 HE SUB MITTED THAT THE HONBLE SUPREME COURT IN THE SAID DECISION HAS HELD T HAT MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NO T AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING TH E INCOME OF THE ASSESSEE. THE SAID CLAIM MADE IN THE RETURN CANN OT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS. HE SUBMITTED THAT IN ANY WAY WHEN TWO VIEWS ARE POSSIBLE THE VIEW WHICH IS FAVOURAB LE TO THE ASSESSEE HAS TO ADOPTED. FOR THE ABOVE PROPOSITION HE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. V EGETABLE PRODUCTS REPORTED IN 88 ITR 192. 17. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BEFORE US. WE FIND IN THE INSTANT CASE A S EARCH TOOK PLACE IN THE CASE OF THE ASSESSEE ON 31-01-1990 DURING WHICH EVIDENCE OF RECEIPT OF ON-MONEY OF RS.43.02 LAKHS WAS FOUND, DETAILS OF WHICH ARE ALREADY GIVEN AT PARA 8 OF THIS ORDER. THE AS SESSEE IN HIS STATEMENT RECORDED U/S.132(4) OFFERED ADDITIONAL INCOME O F RS.60 LAKHS FOR THE A.Y. 90-91. HOWEVER, WHILE FILING THE RETUR N OF 9 ITA NO.1247/2014 INCOME, THE ASSESSEE DID NOT OFFER THE SAME TO TAX FOR TH E IMPUGNED ASSESSMENT YEAR BUT APPENDED A NOTE STATING THAT THE INCOME SO DECLARED WILL BE CONSIDERED IN THE INCOME TO BE COMPUTED FO R A.Y. 91-92 SINCE THE INCOME IN THE CASE OF THE FIRM IS TO BE AS CERTAINED AFTER THE COMPLETION OF THE PROJECT. WE FIND THE AO DID N OT ACCEPT THIS PROPOSITION OF THE ASSESSEE AND MADE ADDITION OF RS.60 LAKHS TO THE TOTAL INCOME OF THE ASSESSEE WHICH WAS UPHELD BY THE CIT(A) AS WELL AS BY THE TRIBUNAL. WE FIND THE AO THEREAFTER LEVIED PE NALTY ON THE ABOVE ADDITION OF RS.60 LAKHS WHICH WAS DELETED BY THE CIT(A) AND ON FURTHER APPEAL BY THE REVENUE THE TRIBUNAL VIDE O RDER DATED 17-02-2006 RESTORED THE MATTER TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION BY PASSING A SPEAKING ORDER. WE FIND THE CI T(A) AGAIN DELETED PENALTY FOR WHICH THE REVENUE IS IN APPEAL BEFORE US. 18. IT IS THE CASE OF THE REVENUE THAT THE ASSESSEE IN HIS STATEMENT RECORDED U/S.132(4) HAD ADMITTED ADDITIONAL INCOM E OF RS.60 LAKHS FOR THE IMPUGNED ASSESSMENT YEAR AND THEREFO RE THERE IS NO RATIONALE IN DEFERRING THE SAME TO A.YRS. 1991-92 AN D 1994-95. THE ASSESSEE WHICH WAS FOLLOWING WORK-IN-PROGRESS METHOD CANNOT SWITCH OVER TO PROJECT COMPLETION METHOD JUST TO DEFER THE TAX LIABILITY TO ESCAPE FROM THE PENALTY PROCEEDINGS. IT IS THE CASE OF THE ASSESSEE THAT ALTHOUGH QUANTUM ADDITION HAS BEEN SUSTA INED BY THE TRIBUNAL, HOWEVER, IN VIEW OF THE DECISION OF THE HONBLE BOM BAY HIGH COURT, ON-MONEY CAN BE BROUGHT TO TAX ONLY IN THE YEAR OF SALE OF FLATS. FURTHER, CHANGE OF METHOD ONLY AFFECTS THE ACCOU NTED PROFIT AND NOT TO UNDISCLOSED INCOME. IT IS ALSO THE CASE OF TH E ASSESSEE THAT EXPLANATION 5 IS NOT APPLICABLE TO THE ASSESSEE SINCE NO MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING WAS FOU ND FROM THE PREMISES OF THE ASSESSEE DURING THE SEARCH. IT IS A LSO THE 10 ITA NO.1247/2014 SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAS GIVEN A BONAFIDE REASON AND NOT DECLARED THE ADDITIONAL INC OME IN A.Y. 1990-91 AND DECLARED THE SAME IN SUBSEQUENT YEARS WHEN THE FLATS WERE SOLD. IT IS THE ALTERNATE CONTENTION OF THE AS SESSEE THAT SINCE EVIDENCE OF ON-MONEY RELATING TO THIS ASSESSMENT YE AR WAS ONLY RS.7,69,300/-, THEREFORE, PENALTY AT BEST CAN BE LEVIED ON THIS AMOUNT FOR THE IMPUGNED ASSESSMENT YEAR AND NOT ON RS.60 LAKHS. 19. WE FIND FORCE IN THE ARGUMENTS ADVANCED BY THE LD. C OUNSEL FOR THE ASSESSEE. ADMITTEDLY, EVIDENCE OF ON-MONEY WAS RECEIVED FOR SALE OF FLATS AMOUNTING TO RS.43,02,900/- FOR FOUR ASSESSMENT YEARS. HOWEVER, NO FLATS WERE SOLD DURING A.Y. 1990-91 AND A PAR T OF FLATS WERE SOLD IN A.Y. 1991-92 AND THE REMAINING FLATS SOLD IN A.Y. 1994- 95. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V S. KARDA CONSTRUCTIONS PVT. LTD. VIDE ITA NO.1960/2012 ORDER DAT ED 25-02- 2013 HAS HELD THAT ON-MONEY, WHICH WAS PART OF SALE CONS IDERATION OF FLATS, HAS TO BE TAXED IN THE YEAR IN WHICH THE ASSESSE E HAS RECORDED THE SALE OF FLATS. THE RELEVANT OBSERVATION OF T HE HONBLE HIGH COURT READS AS UNDER : P.C. : IN THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 2009-1 0 FOLLOWING QUESTION OF LAW HAS BEEN FRAMED FOR OUR CONSIDERATION. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE TRIBUNAL WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER OF RS.71,67,000/- BEING UNACCOUNTED CASH RECE IPTS FOUND DURING THE TIME OF SEARCH ACTION BY ACCEPTING THE EXPLANATI ON OF THE ASSSESSEE THAT THE UNACCOUNTED CASH RECEIPTS OF RS.71,67,000/- FOUND AT THE TIME OF SEARCH WERE BOOKING ADVANCES COLLECTED BY THE ASSESSEE FROM ITS CUSTOMERS AND WERE PART OF SALE CONSIDERATION DECLARED BY THE ASSESSEE AT THE TIME OF SALE OF FLATS AFTER THE DATE OF SEARCH? 2) THE TRIBUNAL BY THE IMPUGNED ORDER UPHELD THE FI NDING OF FACT RECORDED BY THE CIT(A) THAT RECEIPT OF RS.71,67,000/ - WAS PART OF THE SALE CONSIDERATION OF THE FLATS SOLD BY THE RESPONDENT A SSESSEE AND THE SAME HAS TO BE TAXED IN THE YEAR IN WHICH THE ASSESSEE HA S RECORDED THE SALE OF FLATS. THE OBJECTION OF THE REVENUE IS THAT A MOUNT OF RS.71,68,000/- FOUND IN CASH HAS TO BE TAXED IN THE YE AR IN WHICH CASH 11 ITA NO.1247/2014 WAS RECEIVED BY THE RESPONDENT ASSESSEE AND NOT IN THE YE AR THE SALE OF THE FLATS TOOK PLACE. THE TRIBUNAL RECORDS A FACT TH AT THERE IS NO DISPUTE THAT UNRECORDED ENTRIES OF CASH FOUND WITH THE RESPOND ENT ASSESSEE WERE IN RESPECT OF SALE OF FLATS AND FORMING PART OF C ONSIDERATION FOR SALE OF FLATS. FURTHER THE NAMES OF THE BUYERS OF THE FLAT S AND THE CASH RECEIPTS FROM THE BUYERS WERE ALSO FOUND DURING THE CO URSE OF THE SEARCH. IN THESE CIRCUMSTANCES, ON THE BASIS OF THE FIND ING OF FACT CASH RECEIPTS WERE UNDISPUTEDLY IN RESPECT OF SALE OF FLATS A ND THE SAME WERE OFFERED TO TAX IN THE YEAR IN WHICH FLATS WERE SOLD T HAT THE APPEAL OF THE REVENUE BEFORE THE TRIBUNAL WAS DISMISSED. 3. SINCE THE DECISION OF THE TRIBUNAL IS ESSENTIALLY BA SED ON A CONCURRENT FINDING OF FACT, WE SEE NO REASON TO ENTER TAIN THE PROPOSED QUESTION OF LAW. 4. ACCORDINGLY, THE APPEAL IS DISMISSED WITH NO ORDER A S TO COSTS. 20. FURTHER, IT IS ALSO A FACT THAT NO MONEY, BULLION, JEWELLER Y OR ANY OTHER VALUABLE ARTICLE WAS FOUND DURING THE COURSE OF SEARCH. NO CASH WAS ALSO FOUND DURING THE COURSE OF SEARCH, A S TATEMENT MADE BY THE LD. COUNSEL FOR THE ASSESSEE AT THE BAR AN D NOT CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE. T HEREFORE, EXPLANATION 5 CANNOT BE INVOKED IN THE INSTANT CASE. 21. WE FURTHER FIND THE ASSESSEE IN THE RETURN FILED FOR TH E IMPUGNED ASSESSMENT YEAR HAS APPENDED A NOTE JUSTIFYI NG NON- DISCLOSURE OF THE ADDITIONAL INCOME DURING THIS ASSESSMENT YEAR. IT IS ALSO A FACT THAT A PART OF THE UNDISCLOSED INCOME HAS B EEN OFFERED TO TAX IN A.Y. 1991-92 WHICH IS PRIOR TO THE COMPLETION OF THE ASSESSMENT. 22. THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) HAS HELD THAT A MERE MAK ING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT T O FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. THE SAID CLAIM MADE IN THE RETURN CANNOT AMOU NT TO FURNISHING OF INACCURATE PARTICULARS. THE RELEVANT OBSERVAT ION OF HONBLE SUPREME COURT AT PAGES 163 TO 166 READ AS UNDER : 12 ITA NO.1247/2014 A GLANCE AT THIS PROVISION WOULD SUGGEST THAT IN ORDER TO BE COVERED, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURA TE PARTICULARS OF HIS INCOME. PRESENT IS NOT THE CASE OF C ONCEALMENT OF THE INCOME. THAT IS NOT THE CASE OF THE REVENUE EITHER. H OWEVER, THE LEARNED COUNSEL FOR REVENUE SUGGESTED THAT BY MAKING I NCORRECT CLAIM FOR THE EXPENDITURE ON INTEREST, THE ASSESSEE HAS FURNISH ED INACCURATE PARTICULARS OF THE INCOME. AS PER LAW LEXICON, THE ME ANING OF THE WORD 'PARTICULAR' IS A DETAIL OR DETAILS (IN PLURAL SENSE); THE DETAILS OF A CLAIM, OR THE SEPARATE ITEMS OF AN ACCOUNT. THEREFORE, THE WORD 'PARTICULARS' USED IN THE SECTION 271(1)(C) WOULD EMBRACE THE MEAN ING OF THE DETAILS OF THE CLAIM MADE. IT IS AN ADMITTED POSITION IN THE PRESENT CASE THAT NO INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INCO RRECT OR INACCURATE. IT IS NOT AS IF ANY STATEMENT MADE OR ANY DETAIL SUPP LIED WAS FOUND TO BE FACTUALLY INCORRECT. HENCE, AT LEAST, PRIMA FACIE, T HE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. THE LEARNED COUNSEL ARGUED THAT 'SUBMITTING AN INCORRECT CLAIM IN LAW FO R THE EXPENDITURE ON INTEREST WOULD AMOUNT TO GIVING INACCURATE PARTICULA RS OF SUCH INCOME'. WE DO NOT THINK THAT SUCH CAN BE THE INTERPRETATION OF THE CONCERNED WORDS. THE WORDS ARE PLAIN AND SIMPLE. IN ORDER TO EXP OSE THE ASSESSEE TO THE PENALTY UNLESS THE CASE IS STRICTLY COVERED BY TH E PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY ANY STRETCH O F IMAGINATION, MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. IN COMMISSIONER OF INCOME TAX , DELHI VS. ATUL MOHAN BINDAL [2009(9) SCC 589], WHERE THIS COURT WAS CONSIDERING THE SAME PROVISION, THE COURT OBSERVED THAT THE ASSESSING OFFI CER HAS TO BE SATISFIED THAT A PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THIS C OURT REFERRED TO ANOTHER DECISION OF THIS COURT IN UNION OF INDIA VS. D HARAMENDRA TEXTILE PROCESSORS [2008(13) SCC 369], AS ALSO, THE DECISION IN U NION OF INDIA VS.RAJASTHAN SPG. & WVG. MILLS [2009(13) SCC 448] AND REITERATED IN PARA 13 THAT:- '13. IT GOES WITHOUT SAYING THAT FOR APPLICABILITY OF SECTION 271(1)(C), CONDITIONS STATED THEREIN MUST EXIST.' 8. THEREFORE, IT IS OBVIOUS THAT IT MUST BE SHOWN THAT THE CONDITIONS UNDER SECTION 271(1)(C) MUST EXIST BEFORE THE PENALTY IS IMPOSED. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BECAUSE THAT IS THE ONLY DOCUMENT, WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FO UND TO BE INACCURATE, THE LIABILITY WOULD ARISE. IN DILIP N. S HROFF VS. JOINT COMMISSIONER OF INCOME TAX, MUMBAI & ANR. [2007(6) SC C 329], THIS COURT EXPLAINED THE TERMS 'CONCEALMENT OF INCOME' AN D 'FURNISHING INACCURATE PARTICULARS'. THE COURT WENT ON TO HOLD T HEREIN THAT IN ORDER TO ATTRACT THE PENALTY UNDER SECTION 271(1)(C), MEN S REA WAS NECESSARY, AS ACCORDING TO THE COURT, THE WORD 'INACCURATE' SIGN IFIED A DELIBERATE ACT OR OMISSION ON BEHALF OF THE ASSESSEE. IT WENT ON TO HOLD THAT CLAUSE (III) OF SECTION 271(1) PROVIDED FOR A DISCRETIONARY JURISDICTION UPON THE ASSESSING AUTHORITY, INASMUCH AS THE AMOUNT OF PENALTY CO ULD NOT BE LESS THAN THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REA SON OF SUCH CONCEALMENT OF PARTICULARS OF INCOME, BUT IT MAY NOT EXCEED THREE TIMES THEREOF. IT WAS POINTED OUT THAT THE TERM 'INACCURAT E PARTICULARS' WAS NOT DEFINED ANYWHERE IN THE ACT AND, THEREFORE, IT WAS HELD THAT FURNISHING OF AN ASSESSMENT OF THE VALUE OF THE PROPERTY MAY NOT BY ITSELF BE FURNISHING INACCURATE PARTICULARS. IT WAS FUR THER HELD THAT THE 13 ITA NO.1247/2014 ASSESSEE MUST BE FOUND TO HAVE FAILED TO PROVE THAT HIS EXPLANATION IS NOT ONLY NOT BONA FIDE BUT ALL THE FACTS RELATING T O THE SAME AND MATERIAL TO THE COMPUTATION OF HIS INCOME WERE NOT DISCLOSED BY HIM. IT WAS THEN HELD THAT THE EXPLANATION MUST BE PRECEDED BY A FIN DING AS TO HOW AND IN WHAT MANNER, THE ASSESSEE HAD FURNISHED THE PARTICULA RS OF HIS INCOME. THE COURT ULTIMATELY WENT ON TO HOLD THAT T HE ELEMENT OF MENS REA WAS ESSENTIAL. IT WAS ONLY ON THE POINT OF MENS REA THAT THE JUDGMENT IN DILIP N. SHROFF VS. JOINT COMMISSIONER OF INCOME TAX, MUMBAI & ANR. WAS UPSET. IN UNION OF INDIA VS. DHARAME NDRA TEXTILE PROCESSORS (CITED SUPRA), AFTER QUOTING FROM SECTION 27 1 EXTENSIVELY AND ALSO CONSIDERING SECTION 271(1)(C), THE COURT CAM E TO THE CONCLUSION THAT SINCE SECTION 271(1)(C) INDICATED THE ELEMENT OF STRICT LIABILITY ON THE ASSESSEE FOR THE CONCEALMENT OR FOR GI VING INACCURATE PARTICULARS WHILE FILING RETURN, THERE WAS NO NECESSITY OF MENS REA. THE COURT WENT ON TO HOLD THAT THE OBJECTIVE BEHIND ENA CTMENT OF SECTION 271(1)(C) READ WITH EXPLANATIONS INDICATED WITH THE SAID SECTION WAS FOR PROVIDING REMEDY FOR LOSS OF REVENUE AND SUCH A PE NALTY WAS A CIVIL LIABILITY AND, THEREFORE, WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS WAS THE CASE IN THE MATTER OF PROSECUTION UNDER SECTION 276-C OF THE ACT. THE BASIC REASON WHY DECISION IN DILIP N. SHROFF VS. JOINT COMMISSIONER OF I NCOME TAX, MUMBAI & ANR. (CITED SUPRA) WAS OVERRULED BY THIS COUR T IN UNION OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS (CITED SUPRA) , WAS THAT ACCORDING TO THIS COURT THE EFFECT AND DIFFERENCE BE TWEEN SECTION 271(1)(C) AND SECTION 276-C OF THE ACT WAS LOST SIGHT OF IN CASE OF DILIP N. SHROFF VS. JOINT COMMISSIONER OF INCOME TAX, MUMBAI & ANR. (CITED SUPRA). HOWEVER, IT MUST BE POINTED OUT THAT IN UNION OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS (CITED SUPRA), NO FAULT WAS FOUND WITH THE REASONING IN THE DECISION IN DILIP N. SHROFF VS. J OINT COMMISSIONER OF INCOME TAX, MUMBAI & ANR. (CITED SUPRA), WHERE THE COURT EXPLAINED THE MEANING OF THE TERMS 'CONCEAL' AND INACCURATE'. IT WAS ONLY THE ULTIMATE INFERENCE IN DILIP N. SHROFF VS. JOINT COMM ISSIONER OF INCOME TAX, MUMBAI & ANR. (CITED SUPRA) TO THE EFFECT THAT MENS REA WAS AN ESSENTIAL INGREDIENT FOR THE PENALTY UNDER SECTION 27 1(1)(C) THAT THE DECISION IN DILIP N. SHROFF VS. JOINT COMMISSIONER OF I NCOME TAX, MUMBAI & ANR. (CITED SUPRA) WAS OVERRULED. 9. WE ARE NOT CONCERNED IN THE PRESENT CASE WITH THE MENS REA. HOWEVER, WE HAVE TO ONLY SEE AS TO WHETHER IN THIS CASE , AS A MATTER OF FACT, THE ASSESSEE HAS GIVEN INACCURATE PARTICULARS. IN W EBSTER'S DICTIONARY, THE WORD 'INACCURATE' HAS BEEN DEFINED A S:- 'NOT ACCURATE, NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS; AS AN INACCURATE STATEMENT, COPY OR TRANSCRIPT'. WE HAVE ALREADY SEEN THE MEANING OF THE WORD 'PARTIC ULARS' IN THE EARLIER PART OF THIS JUDGMENT. READING THE WORDS IN CONJUNCTION, THEY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN, WHICH AR E NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERR ONEOUS. WE MUST HASTEN TO ADD HERE THAT IN THIS CASE, THERE IS NO FINDI NG THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE I NCORRECT OR ERRONEOUS OR FALSE. SUCH NOT BEING THE CASE, THERE WOU LD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT T O THE INACCURATE PARTICULARS. 14 ITA NO.1247/2014 23. AS MENTIONED EARLIER, THE ASSESSEE, IN THE INSTANT CAS E, HAS OFFERED THE UNDISCLOSED INCOME OF RS.60 LAKHS IN A.Y. 1991-92 AND 1994-95 ON THE BASIS OF SALE OF FLATS DURING THOSE YEARS A ND THE ASSESSEE HAS GIVEN A NOTE IN THE RETURN FILED FOR THE IMP UGNED ASSESSMENT YEAR GIVING REASONS FOR NOT DECLARING THE SAM E IN THIS ASSESSMENT YEAR. IT IS NOW ACCEPTED BY THE HONBLE BO MBAY HIGH COURT IN THE CASE OF KARDA CONSTRUCTIONS PVT. LTD.(SUPRA ) THAT ON- MONEY HAS TO BE BROUGHT TO TAX ONLY IN THE YEAR OF SA LE OF FLATS. THEREFORE, MERELY BECAUSE ADDITION HAS BEEN SUSTAINED IN QUANTUM PROCEEDINGS, THE SAME CANNOT BE A GROUND FOR LEVY OF PE NALTY U/S.271(1)(C) OF THE I.T. ACT, 1961. THE ASSESSEE CAN ALWAY S MAKE NEW PLEA DURING PENALTY PROCEEDINGS. IT IS NOW THE SETTLE D PROPOSITION OF LAW THAT ASSESSMENT PROCEEDINGS AND QUANT UM PROCEEDINGS ARE SEPARATE AND DISTINCT. IN THIS VIEW OF TH E MATTER, WE ARE OF THE CONSIDERED OPINION THAT THIS IS NOT A FIT CASE FO R LEVY OF PENALTY U/S.271(1)(C) OF THE I.T. ACT. WE THEREFORE, UPHOLD TH E ORDER OF THE CIT(A). GROUNDS RAISED BY THE REVENUE ARE ACCORDIN GLY DISMISSED. 24. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13-01-2016. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER IQ.KS PUNE ; # DATED : 13 TH JANUARY 2016. LRH'K 15 ITA NO.1247/2014 ( )'+ , / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. CIT (A) - I I , PUNE 4. 5. 6. CIT-II, PUNE ' *, *, IQ.KS / DR, ITAT, B PUNE; / GUARD FILE. / BY ORDER , ' //TRUE COPY// / * / SR. PRIVATE SECRETARY *, IQ.KS / ITAT, PUNE