M/s. Soham Builders, Ahmedabad V. The ACIT.,Cent.Circle-2(2), Ahmedabad

ITA 1467/AHD/2011

• Counselvise Citation: 146720514 RSA 2011
• Duration Of Justice: 4 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 24-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH SR D R

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI S. S. GODARA, JUDICIAL MEMBER ./ ././ ./ ITA NO. 1467/AHD/2011 / ASSESSMENT YEAR: 2007-08 SOHAM BUILDERS, 404/E, SAHJANAND SHOPPING CENTRE, OPP. SWAMINARAYAN TEMPLE, SHAHIBAUG, AHMEDABAD PAN : AAWFS 6518 D V/S. ACIT, CENTRAL CIRCLE 2(2), AHMEDABAD / // / (APPELLANT) !' !' !' !' / // / (RESPONDENT) ASSESSEE(S) BY : SHRI GAURAV NAHTA, AR REVENUE BY : SHRI DINESH SINGH, SR. DR. #$ % &'(/ // / DATE OF HEARING : 12/06/2015 )* % &'( / // / DATE OF PRONOUNCEMENT: 19/06/2015 +, +, +, +,/ // / O R D E R PER G.D. AGRAWAL, VICE PRESIDENT: THIS IS AN APPEAL FILED BY THE ASSESSEE AND IS DIRE CTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX(APPEALS )-III, AHMEDABAD DATED 01.04.2011, PERTAINING TO ASSESSMENT YEAR 200 7-08. 2. THE ONLY GROUND RAISED IN THIS APPEAL BY THE ASS ESSEE IS AGAINST THE LEVY OF PENALTY OF RS. 16,34,840/- U/S 271(1)(C) OF THE INCOME-TAX ACT. 3. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY THE LD. COUNSEL THAT THE ASSESSEE DERIVES INCOME FROM CONSTRUCTION OF BUNGALOWS AND SALES THEREOF. THAT APART FROM THE STANDARD WORK AND FIT TINGS IN THE BUNGALOWS, IF SOME BUYERS REQUIRE ANY SPECIFIC WORK TO BE PERFORM ED OR ANY SPECIFIC FITTINGS TO BE PROVIDED, THEN THE ASSESSEE CHARGED SEPARATELY WHICH WAS OVER ITA NO.1467/AHD /2011 SOHAM BUILDERS VS ACIT FOR AY 2007-08 2 AND ABOVE THE SALE PRICE OF THE BUNGALOWS. THAT DU RING THE ACCOUNTING YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION, TH E TOTAL COLLECTION FROM THE ADDITIONAL WORK PERFORMED BY THE ASSESSEE WAS R S.2,78,96,582/-. THAT IN THE RETURN FILED, THE ASSESSEE HAS DISCLOSED ADD ITIONAL INCOME OF RS.30,00,000/- ON THE RECEIPT FROM EXTRA WORK AMOUN TING TO RS.2,78,96,582/-. THE NET PROFIT ESTIMATED BY THE ASSESSEE ON THE ABO VE RECEIPT WAS 10.75%. THE ASSESSING OFFICER WAS OF THE OPINION THAT IN PE RFORMING THE EXTRA WORK NO EXPENDITURE WAS INCURRED; THEREFORE, HE WAS OF T HE OPINION THAT ENTIRE RECEIPT OF RS.2,78,96,582/- IS TO BE ASSESSED. SIN CE THE ASSESSEE HAD ALREADY OFFERED INCOME OF RS.30,00,000/-, HE MADE THE ADDIT ION OF RS.2,48,96,582/-. ON APPEAL BY THE ASSESSEE, THE CIT(A) ESTIMATED THE PROFIT FROM THE EXTRA WORK DONE @ 25% OF THE RECEIPT WHICH WAS WORKED OUT TO RS.78,56,911/-. AFTER REDUCING RS.30,00,000/- ALREADY OFFERED BY TH E ASSESSEE, HE SUSTAINED THE ADDITION AT RS.48,56,911/-. THE ASSESSEE ACCEP TED THE ORDER OF THE CIT(A) WHILE THE REVENUE FILED THE APPEAL BEFORE TH E ITAT. THE ITAT UPHELD THE ORDER OF THE CIT(A). THAT THE ASSESSING OFFICER LEVIED PENALTY U/S 271(1)(C) IN RESPECT OF THE ADDITION OF RS.48,5 6,911/-. IT IS SUBMITTED BY THE LD. COUNSEL THAT THE ONLY DISPUTE IS WHETHER TH E INCOME FROM THE EXTRA WORK PERFORMED BY THE ASSESSEE SHOULD BE AT 25% OF THE RECEIPT OR AT 10.75% OF THE RECEIPT. THAT MERELY BECAUSE HIGHER PERCENTA GE OF THE INCOME IS ESTIMATED THAN WHAT IS OFFERED BY THE ASSESSEE WILL NOT AMOUNT TO CONCEALMENT OF INCOME SO AS TO LIABLE BY THE ASSESS EE FOR PENALTY U/S 271(1)(C). IN THIS REGARD, HE RELIED UPON THE DECI SION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. WHITELENE CHEMICA LS, (2014) 360 ITR 385 (GUJ.). HE ALSO SUBMITTED THAT THE EXTRA WORK IS D ONE BY THE ASSESSEE ONLY AS A SERVICE PROVIDED TO THE CUSTOMERS WHO HAVE PURCHA SED BUNGALOW FROM THE ASSESSEE. THEREFORE, WHILE PROVIDING SUCH SERVI CES, THERE IS NO PROFIT MOTIVE AND MANY A TIME MANY BUILDERS PROVIDE SUCH S ERVICES AT COST. THE ITA NO.1467/AHD /2011 SOHAM BUILDERS VS ACIT FOR AY 2007-08 3 ASSESSEE HAS ALREADY DISCLOSED THE PROFIT OF 10.75% ON THE RECEIPT FROM SUCH EXTRA SERVICES WHICH WAS QUITE FAIR AND REASONABLE. THAT MERELY BECAUSE A HIGHER PERCENTAGE OF INCOME IS ESTIMATED, THE ASSES SEE SHOULD NOT BE PENALIZED FOR CONCEALMENT OF INCOME. 4. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHE R HAND, RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. KALINDI RAIL NIMAN ENGG. LTD. VIDE ITA NO.244/2013, DECISION DAT ED 15.04.2014. 5. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THE UNDISPU TED FACTS ARE THAT THE ASSESSEE OFFERED THE INCOME @ 10.75% ON THE RECEIPT FROM EXTRA WORK PERFORMED BY THE ASSESSEE IN RESPECT OF BUNGALOWS S OLD BY IT. THE CIT(A) ESTIMATED THE INCOME @ 25% OF THE RECEIPT WHICH IS UPHELD BY THE ITAT. THE ASSESSING OFFICER HAS LEVIED THE PENALTY IN RES PECT OF ADDITION ULTIMATELY SUSTAINED AFTER THE ORDER OF THE ITAT. N OW THE QUESTION IS WHETHER THE ASSESSEE CAN BE SAID TO BE LIABLE FOR P ENALTY U/S 271(1)(C) MERELY BECAUSE THE INCOME HAS BEEN ESTIMATED AT A HIGHER P ERCENTAGE THAN WHAT IS DISCLOSED BY THE ASSESSEE. 6. WE FIND THAT THIS ISSUE IS CONSIDERED BY THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF WHITELENE CHEMICALS (SUPR A), WHEREIN THE HONBLE HIGH COURT HAS OBSERVED AS UNDER: 2. ISSUE PERTAINS TO PENALTY IMPOSED BY THE ASSES SING OFFICER AND CONFIRMED BY CIT(APPEALS) UNDER SECTION 271((1)(C) OF THE INCOME TAX ACT,1961 FOR THE ASSESSMENT YEAR 2001-2002. SUCH PE NALTY IN FURTHER APPEAL CAME TO BE DELETED BY THE TRIBUNAL. PRIMARILY, PENA LTY WAS IMPOSED ON TWO COUNTS. FIRSTLY, THAT ADDITIONS WERE MADE IN THE IN COME OF THE ASSESSEE AFTER REJECTION OF BOOK RESULTS ON THE BASIS OF FAIR GROS S PROFIT RATE. SECOND LIMB OF THE PENALTY WAS THAT ASSESSEE HAD RETAINED 3% OF TH E SALES TAX WITH IT. ITA NO.1467/AHD /2011 SOHAM BUILDERS VS ACIT FOR AY 2007-08 4 3. WITH RESPECT TO FIRST ASPECT OF THE PENALTY, T HE TRIBUNAL OBSERVED THAT NO PENALTY CAN BE IMPOSED MERELY BECAUSE ACCOUNT BOOKS OF ASSESSEE WERE REJECTED AND THAT PROFIT WAS ESTIMATED ON THE BASIS OF FAIR GROSS PROFIT RATIO. WITH RESPECT TO RETENTION OF THE PORTION OF THE SAL ES TAX, THE TRIBUNAL STATED THAT NO EVIDENCE WAS BROUGHT BY THE REVENUE TO SUGG EST THAT ASSESSEE HAD RETAINED A PORTION OF SALES TAX WITH IT. ASSESSEE F ILED ITS EXPLANATION WHICH COULD NOT BE TERMED AS NOT BONA FIDE. IN ABSENCE OF ANY CORROBORATIVE EVIDENCE TO PROVE THE CHARGE THAT THE PORTION OF SA LES TAX BILL WAS RETAINED BY THE ASSESSEE, PENALTY COULD NOT BE IMPOSED. FROM TH E ABOVE DISCUSSION, IT CAN BE SEEN THAT THE OPINION OF THE TRIBUNAL WITH RESPE CT TO DELETION OF PENALTY IS BASED ON APPRECIATION OF EVIDENCE ON RECORD. WITH R ESPECT TO ADDITIONS MADE AFTER REJECTION OF BOOK RESULT AND ON THE BASIS OF FAIR GROSS PROFIT RATIO, THE TRIBUNAL FOUND NO ADDITIONAL MATERIAL TO SUSTAIN TH E PENALTY. WITH RESPECT TO SO-CALLED RETENTION OF THE SALES TAX, THE TRIBUNAL FOUND THAT THE REVENUE COULD NOT ESTABLISH SUCH CHARGE. EXPLANATION OFFERE D BY THE ASSESSEE COULD NOT BE TERMED AS NOT BONA FIDE. WE DO NOT SEE ANY QUEST ION OF LAW ARISING. TAX APPEAL IS THEREFORE, DISMISSED. 7. THE RATIO OF ABOVE DECISION WOULD BE DIRECTLY AP PLICABLE TO THE FACTS OF THE ASSESSEES CASE. IN THE ABOVE CASE ALSO THE AS SESSING OFFICER HAS ESTIMATED THE INCOME AFTER REJECTION OF THE BOOKS O F ACCOUNTS BY ESTIMATING THE HIGHER GROSS PROFIT RATIO. IN THIS CASE ALSO F INALLY THE INCOME IS ASSESSED BY ESTIMATING THE HIGHER NET PROFIT RATIO. NO ADDIT IONAL MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE THAT ACTUAL INCOME OF THE ASSESSEE WAS 25% AND NOT 10.75%. THE ASSESSEE HAS GIVEN THE EXP LANATION THAT THE EXTRA WORK IS DONE BY THE BUILDER AS SERVICE TO THE BUYER OF THE BUNGALOWS. THE EXTRA WORK IS NOT DONE WITH THE PROFIT MOTIVE AND U SUALLY, IT IS DONE EITHER ON NO PROFIT OR NO LOSS BASIS OR ON NEGLIGIBLE PROF IT. THE ASSESSEE HAS ALREADY DISCLOSED REASONABLE PROFIT WHICH IS 10.75%. THE E XPLANATION OF THE ASSESSEE IS PLAUSIBLE AND REASONABLE. CONSIDERING THE FACTS OF THE CASE, IN OUR OPINION, THE DECISION OF HONBLE JURISDICTIONAL HIG H COURT WOULD BE SQUARELY APPLICABLE. THE LD. DEPARTMENTAL REPRESENTATIVE HAS RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF KALINDI RAIL NIMAN ENGG. LTD. (SUPRA) IN SUPPORT OF REVENUE. HOWEVER, THE DECISION OF HONBLE GUJARAT HIGH COURT WOULD BE BINDING UPON ALL LOWER AUTHORITIES, INCLUDING ITA NO.1467/AHD /2011 SOHAM BUILDERS VS ACIT FOR AY 2007-08 5 THE TRIBUNAL, WORKING WITHIN THE STATE OF GUJARAT. IN VIEW OF ABOVE, WE ARE BOUND BY THE DECISION OF HONBLE GUJARAT HIGH COURT AND WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF HONBLE JURI SDICTIONAL HIGH COURT IN THE CASE OF WHITELENE CHEMICALS (SUPRA), HOLD THAT THE LEVY OF PENALTY U/S 271(1)(C) WAS NOT JUSTIFIED AND THE SAME IS CANCELL ED. 8. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 19 TH JUNE, 2015 AT AHMEDABAD. SD/- SD/- (S. S. GODARA) JUDICIAL MEMBER (G.D. AGRAWAL) VICE-PRESIDENT AHMEDABAD; DATED 19/06/2015 BIJU T., PS +, % !&- .+-& +, % !&- .+-& +, % !&- .+-& +, % !&- .+-&/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. & #/ / CONCERNED CIT 4. #/ ( ) / THE CIT(A) 5. -23 !& , , / DR, ITAT, AHMEDABAD 6. 34 5$ / GUARD FILE . +,# +,# +,# +,# / BY ORDER, TRUE COPY 6 66 6/ // / 7 7 7 7 ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD