SAATHI BUILDERS P. LTD, MUMBAI V. ITO 9(3)(1), MUMBAI

ITA 1364/MUM/2012

• Counselvise Citation: 136419914 RSA 2012
• Duration Of Justice: 1 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 20-08-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 29-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: K SHIVARAM; PARAS S SAVLA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 1364/MUM/2012 ASSESSMENT YEAR: 2006-07 SAATHI BUILDERS PVT. LTD. 23, SANGEETA TAGORE ROAD, SANTACRUZ (WEST) MUMBAI- 400 054 PAN :AADCS 0341 J VS. ITO-9(3) (1) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. SHIVARAM & PARAS S. SAVLA RESPONDENT BY : SHRI SHISHIR SRIVASTAVA DATE OF HEARING : 20.08.2013 DATE OF PRONOUNCEMENT : 23.10.2013 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD.CIT(A) -20, MUMBAI CONFIRMING THE PENALTY OF RS. 10,93,500/- LEVIED BY THE AO U/S 271(1)(C) OF THE INCOME TAX ACT. 2. BRIEFLY STATED, THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS AS BUILDERS AND DEVELOPERS, IN THE YEAR 1995, HAD ENTERED INTO AN MOU WITH MR. CREADO & OTHERS, THE ASSIGNORS, FOR THE ACQUISITION OF THEIR RIGHT, TITLE INTEREST ETC. BEING SHARE IN THE PROPERTY SITUATED AT JUHU BEARING SURV EY NO. 39, HISSA NO. 3, NEW CTS NO. 511B & 511C. AS PER THE MOU, THERE WERE ENCUMBR ANCES IN THE SAID PROPERTY AND ALSO MULTIPLE LITIGATIONS BY VARIOUS PARTIES WH ICH WERE PENDING. IN THE MEANTIME, THE ASSESSEE ENTERED INTO A PARTNERSHIP IN THE NAME AND STYLE OF M/S. SAMARTH SIDDIVINAYAK DEVELOPERS VIDE PARTNERSHIP DATED 06.0 6.2005. SUBSEQUENTLY, ALL THE ITA NO. 1364/MUM/2012 SAATHI BUILDERS PVT. LTD. ASSESSMENT YEAR : 2006-07 2 LITIGANTS ENTERED INTO A CONSENT TERM VIDE ORDER DA TED 11.07.05 PASSED BY THE HONBLE BOMBAY HIGH COURT IN OOCJ SUIT NO. 2270 OF 1992 AND ACCORDINGLY, THE DISPUTE WAS SETTLED. IN ALL, THERE ARE 10 DEFENDANT S WHO ARE PARTY TO THE CONSENT TERM (THE SAID PARTNERSHIP FIRM AS DEFENDANT NO.10) AND IN VIEW OF THE CONSENT TERM, THE ASSESSEE HAD TRANSFERRED THE CONSTRUCTION PROJECT (WIP) FOR A CONSIDERATION I.E. RS.3,11,12,500/- AS CAPITAL CONT RIBUTION VIDE THE SAID PARTNERSHIP DEED. THE ASSESSEES SHARE OF PROFIT IN THE SAID PA RTNERSHIP FIRM WAS 38%. HOWEVER, ON PERUSAL OF THE P&L ACCOUNT, THE AO NOTED THAT TH E ASSESSEE HAD CREDITED ONLY AN AMOUNT OF RS.48.72 LAKHS AS CONSIDERATION TOWARDS T RANSFER OF PROJECT. IN THE COMPUTATION OF TOTAL INCOME, THE SAME WAS CONSIDERE D UNDER THE HEAD CAPITAL GAIN AND ACCORDINGLY THE ASSESSEE CLAIMED LONG TERM CAPI TAL LOSS OF RS.1,92,40,449/-. IN THE ASSESSMENT FRAMED U/S 143(3), THE AO DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS.48,72,230/- AFTER DEDUCTING THE COST OF SALE OF RS.2,62,40,269/-FROM THE SALE CONSIDERATION OF RS.3,11,12,500/-. ACCORDI NG TO THE AO, THE ASSESSEE HAD TREATED THE IMPUGNED PROPERTY IN QUESTION NOT AS AN INVESTMENT, BUT THE SAME WAS HELD AS STOCK-IN-TRADE SINCE THE PROPERTY WAS MADE A PART OF THE PROJECT BEING DEVELOPED BY THE ASSESSEE. RELYING ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SHRI HARBANS SINGH VS. CI T, REPORTED IN 132 ITR 77 AND THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF G. VENKATASWAMI NAIDU AND COMPANY VS. CIT REPORTED IN 35 ITR 594 AND IN THE C ASE OF RAJA J. RAMESHWAR RAO V. CIT REPORTED IN [1961] 42 ITR 179 (SC), HE TREAT ED THE ENTIRE SALE CONSIDERATION AS BUSINESS RECEIPT. CONSEQUENTLY, IN THE PENALTY P ROCEEDINGS, AS THE ASSESSEE COMPANY HAD FURNISHED INACCURATE PARTICULARS OF INC OME TO THE EXTENT OF RS.48,72,230/- LEADING TO CONCEALMENT OF INCOME, TH E AO LEVIED A PENALTY OF RS.10,93,500/- U/S 271(1)(C) BEING 100% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE. ON APPEAL, THE LD.CIT(A) CONFIRMED THE AC TION OF THE AO. AGGRIEVED BY THE IMPUGNED ORDER, THE ASSESSEE IS IN APPEAL BEFOR E US. 3. BEFORE US, THE LD.AR HAS REITERATED THE SAME SUB MISSION THAT HAS BEEN PLACED BEFORE THE LD.CIT(A) AND CONTENDED THAT THE LEVY OF PENALTY CONFIRMED BY THE LD.CIT(A) OUGHT TO BE DELETED. ON THE OTHER HAND, T HE LD.DR HAS STATED THAT THE INTENTION OF THE ASSESSEE IS BUSINESS AND IF ENCUMB RANCES WOULD HAVE BEEN CLEARED, ITA NO. 1364/MUM/2012 SAATHI BUILDERS PVT. LTD. ASSESSMENT YEAR : 2006-07 3 IT WOULD HAVE CONTINUED THE BUSINESS. THE HOLDING P ERIOD FOR CLEARANCES OF THE ENCUMBRANCES CANNOT CHANGE THE INTENTION OF THE ASS ESSEE. IN VIEW OF THE FACT THAT THE ASSESSEE HAS FURNISHED WRONG PARTICULARS LEADIN G TO THE CONCEALMENT OF INCOME, THE LD.CIT(A) HAS CORRECTLY UPHELD THE LEVY OF PENA LTY. 4. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. IT IS ALSO NOTED THAT IN THE QUANTUM PROCEEDINGS, THE ITAT IN ITA NO. 3240/MUM/2009 HAS CONFIRMED THE ORDERS OF THE AO & LD.CIT(A) TREATING THE ENTIRE CONSIDERATION AS BUSINESS RECEIPTS AND THERE IS NO APPEAL BEFORE THE HIGH COURT. IT IS PERTINENT TO MENTION THAT IN THE CASE OF CIT VS. SPLENDER CONSTR UCTION, THE DELHI HIGH COURT HAS HELD THAT DESPITE DISCLOSURE OF CONVERSION OF STOCK INTO INVESTMENT AND THE SAME IS ACCEPTED BY THE AO, THE CLAIM OF THE ASSESSEE THAT THE GAINS IS LONG TERM CAPITAL GAIN ATTRACTS THE PENALTY U/S 271(1)(C) OF THE INCO ME TAX ACT. IN THE INSTANT CASE, THE ASSESSEE HAS TREATED THE IMPUGNED PROPERTY IN Q UESTION NOT AS AN INVESTMENT, BUT THE SAME HAS BEEN HELD AS STOCK-IN-TRADE SINCE THE PROPERTY WAS MADE A PART OF THE PROJECT BEING DEVELOPED BY THE ASSESSEE. DESPIT E THE FACTS THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS AS BUILDERS AND DEVELOPERS, THE INTENTION IS TO KEEP THE PROPERTY AS A STOCK IN TRADE AND THE SUBSEQUENT TRA NSFER OF THE SAID PROPERTY TO THE TRANSFEREE WHO IS ALSO ENGAGED IN THE SIMILAR BUSIN ESS INDICATE THAT THE ASSESSEES ACT IS A DIRECT ATTEMPT TO REDUCE A PORTION OF INCO ME FROM THE KNOWLEDGE OF THE INCOME TAX AUTHORITIES BY FURNISHING WRONG PARTICUL ARS OF INCOME. IN VIEW OF THE AFOREMENTIONED DISCUSSION, WE UPHOLD THE ORDER OF T HE LD.CIT(A) CONFIRMING THE PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE ACT. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF OCTOBER, 2013. SD/- SD/- (P.M. JAGTAP) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 23.10.2013. *SRIVASTAVA ITA NO. 1364/MUM/2012 SAATHI BUILDERS PVT. LTD. ASSESSMENT YEAR : 2006-07 4 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR E BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.