K. ANAND CONSTRUCTION P.LTD, MUMBAI V. DCIT CIR 9(2), MUMBAI

ITA 1510/MUM/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4869 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 17-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS JYOTHILAKSHMI NAYAK
• Keywords: Proportionate interest; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H , BENCH MUMBAI BEFORE SHRI M. BALAGANESH , AM & SHRI RAM LAL NEGI , JM ITA NO. 1510 / MUM/20 1 6 ( ASSESSMENT YEAR : 2011 - 12 ) M/S. K. ANAND CONSTRUCTION PVT. LTD., 14/15, HIGHWAY COMMERCE CENTRE JUNCTION OF IV PATE L ROAD, GOREGAON (E) MUMBAI 400 063 VS. DY. COMMISSIONER OF INCOME TAX CIRCLE 9(2), MUMBAI PAN/GIR NO. AADCK4377N ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY SHRI RAKESH JOSHI REVENUE BY MRS. JYOTHI L A KSH MI NAYAK DATE OF HEARING 04 / 02 /201 9 DATE OF PRONOUNCEMENT 08 / 02 /201 9 / O R D E R PER M. BALAGANESH (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF CIT(A) - 20, MUMBAI DATED 30/09/2014 FOR A.Y.2011 - 12 IN THE MATTER OF IMPOSITION OF PENALTY U/S.271(1)(C) OF THE INCOME TAX ACT, 1961. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDING THE LEVY OF PENALTY U/S.271(1)(C) OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN CONSTRUCTION ACTIVITY AND HAD FILED ITS ORIGINAL RETURN ITA NO. 1510/MUM/2016 M/S. K. ANAND CONSTRUCTION PVT. LTD., 2 OF INCOME FOR A.Y.2011 - 12 ON 28/09/2011 DECLARING TOTAL INCOME OF RS.26,35,876/ - THE CASE WAS SELECTED FOR SCRUTINY BY ISSUANCE OF NOTICE U/S.143(2) OF THE ACT ON 29/08/2012. LATER, THE ASSESSEE FILED REVISED RETURN OF INCOME ON 28/09 /2012 DECLARING LOSS OF RS.73,54,154/ - . THE REASONS FOR REVISING THE RETURN OF INCOME WAS STATED AS UNDER: - THE ASSESSEE COMPANY HAS UNDERTAKEN A RE SIDENTIAL REDEVELOPMENT PROJECT. THE ASSESSEE HAS BEEN FOLLOWING PERCENTAGE COMPLETION METHOD FOR THE PURPOSE OF OFFERING INCOME IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX ACT AND HAD OFFERED INCOME OF RS.4,73,851/ - ON ESTIMATED BASIS FOR THE A.Y. 2010 - 11. FURTHER, THE ASSESSEE HAD SHOWN THE PROJECT AS COMPLETED IN THE A.Y.2011 - 12 AND HAD MADE A PROVISION FOR INCOME PENDING WORK OF RS.95,00,000/ - AS ON 31.03.2011 AND AFTER TAKING DEDUCTION OF ALL THE EXPENSES RELATED TO THE PROJECT IT HAD OFFERED DE DUCTION OF ALL THE EXPENSES RELATED TO THE PROJECT IT HAD OFFERED THE BALANCE PROFIT IN THE ORIGINAL RETURN OF INCOME FILED FOR THE A.Y.2011 - 12. SUBSEQUENTLY, THERE HAS BEEN AN EXPENSES OVER RUN IN THE PROJECT BY RS.1,00,00,000/ - OVER AND ABOVE THE ESTIMAT ED EXPENSES FOR PENDING WORK OF RS 95,00,000/ - PROVIDED AS ON 31.03.2011, AS A RESULT THE ASSESSEE HAS ALREADY INCURRED HUGE LOSS IN THE SAID PROJECT. ACCORDINGLY, THE ASSESSEE COMPANY HAS HEREIN NOW DECIDED TO REVISE THE RETURN OF INCOME FILED FOR THE A. Y.2011 - 12 AND CLAIM THE LOSSES AS AGAINST PROFIT OFFERED IN THE ORIGINAL RETURN FILED FOR THE SAID YEAR.' 4. THE LD. AO WHILE COMPLETING THE ASSESSMENT IGNORED THE REVISED RETURN FILED BY THE ASSESSEE AND PROCEEDED TO COMPLETE THE ASSESSMENT BY MAKING DISALLOWANCE OF PROPORTIONATE INTEREST EXPENDITURE TO THE TUNE OF RS.4,13,544/ - AND ADDED THE SAME TO THE ORIGINAL RETURN OF INCOME OF RS.26,35,876/ - AND ACCORDINGLY DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS.30,49,420/ - . IN OTHER WORDS , EVEN THOU GH THE ASSESSEE HAD MADE A FRESH CLAIM OF EXPENDITURE TO THE TUNE OF RS.1 CRORE IN THE REVISED RETURN FILED ON 28/09/2012, THE LD. AO ON MAKING VARIOUS ITA NO. 1510/MUM/2016 M/S. K. ANAND CONSTRUCTION PVT. LTD., 3 OBSERVATIONS WITH REGARD TO INELIGIBILITY OF THE ASSESSEE TO MAKE SUCH A FRESH CLAIM IN THE REVISED RETU RN, PROCEEDED TO IGNORE THE REVISED RETURN IN TOTO AND COMPLETED THE ASSESSMENT BASED ON THE ORIGINAL RETURN OF INCOME. THE LD. AO ON COMPLETION OF ASSESSMENT PROCEEDINGS INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT IN RESPECT OF THE FRESH CLAIM OF EXPENSES MADE IN THE REVISED RETURN BY THE ASSESSEE. THE ASSESSEE DID NOT PREFER ANY APPEAL AGAINST THE ASSESSMENT ORDER FRAMED U/S.143( 3 ) OF THE ACT ON 30/03/2014. THE ASSESSEE PLEADED THAT THESE EXPENSES TO THE TUNE OF RS.1 CRORE WHICH WERE TO BE INCU RRED FOR THE PROJECT FROM WHICH THE ENTIRE INCOME WAS DISCLOSED DURING THE YEAR UNDER CONSIDERATION AND ACCORDINGLY STATED THAT THE SAID CLAIM OF RS. 1 CRORE IS ALLOWABLE AS DEDUCTION BEFORE THE LD. AO BY WAY OF FRESH CLAIM IN THE REVISED RETURN OF INCOME. THE LD. AO MADE CERTAIN OBSERVATIONS THAT THE EXPENSES TOWARDS STEEL, PURCHASE OF ELECTRICAL ITEMS, PURCHASE OF MARBLE, TILES, CEMENT ETC., WHICH WERE NOT TO BE INCURRED FURTHER BY THE ASSESSEE SINCE ACCORDING TO THE ASSESSEE PROJECT HAS ALREADY BEEN COM PLETED AND INCOME DERIVED THEREON HAD BEEN DULY OFFERED TO TAX DURING THE YEAR UNDER CONSIDERATION. WITH THESE OBSERVATIONS, THE LD. AO DID NOT CONSIDER THE FRESH CLAIM OF EXPENSES OF RS.1 CRORE IN THE REVISED RETURN AND ACCORDINGLY IGNORED THE REVISED RET URN FILED BY THE ASSESSEE WHILE COMPLETING THE ASSESSMENT. FOR THIS SUM OF RS.1 CRORE, THE LD. AO LEVIED PENALTY U/S.271(1)(C) @100% OF TAX ON SUCH INCOME SOUGHT TO BE EVADED AND LEVIED PENALTY OF RS.33,21,750/ - . THE ACTION OF THE LD. AO WAS UPHELD BY THE LD. CIT(A). ITA NO. 1510/MUM/2016 M/S. K. ANAND CONSTRUCTION PVT. LTD., 4 5. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD RIVAL SUBMISSIONS. AT THE OUTSET, WE FIND THAT THIS PENALTY OF RS.33,21,750/ - REPRESENTS THE TAX ON INCOME SOUGHT TO BE EVADED TO THE TUNE OF RS.1 CRORE WHICH IN TURN REPRESENTS TH E FRESH CLAIM OF EXPENSES MADE BY THE ASSESSEE IN THE REVISED RETURN OF INCOME FILED ON 28/09/2012 IN RESPECT OF PROJECT COMPLETED DURING THE YEAR. IT IS NOT IN DISPUTE THAT THE CONSTRUCTION OF PROJECT OF THE ASSESSEE WAS COMPLETED DURING THE YEAR UNDER AP PEAL. THE ASSESSEE HAD CLAIMED THAT IN RESPECT OF THE SAID COMPLETED PROJECT, THERE WERE CERTAIN ADDITIONAL EXPENSES INCURRED BY IT FOR WHICH PAYMENTS WERE YET TO BE MADE AS ON 31/03/2011 AND THAT THE PRO VISION OF THE SAID EXPENDITURE HAD TO BE MADE ON A CC RUAL BASIS AND ACCORDINGLY ALLOWABLE AS DEDUCTION. THE ASSESSEE FURTHER CLAIMED THAT THIS CLAIM OF FURTHER EXPENSES TO THE TUNE OF RS.1 CRORE WAS ADMITTEDLY NOT PROVIDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSE E WHICH WERE DULY AUDITED BUT I T SURFACE D AFTER THE COMPLETION OF ACCOUNTS AND ACCORDINGLY THE ASSESSEE MADE FRESH CLAIM OF THE SAME IN THE REVISED RETURN OF INCOME. IT IS NOT IN DISPUTE THAT ASSESSEE HAD SUBMITTED THE ENTIRE DETAILS OF THE SAID EXPENSES ON VARIOUS ACCOUNTS TO THE TUNE OF RS.1 CRORE BE FORE THE LD. AO. THE CRUCIAL POINT THAT REQUIRES TO BE ADJUDICATED HEREIN IS THAT THE SAID CLAIM OF EXPENSES TO THE TUNE OF RS.1 CRORE WAS NEVER CLAIMED BY THE ASSESSEE IN THE ORIGINAL RETURN OF INCOME. IT IS PERTINENT TO NOTE THAT THE LD. AO HAD ADMITTEDL Y COMPLETED THE ASSESSMENT ONLY BASED ON THE ORIGINAL RETURN OF INCOME BY COMPLETELY ITA NO. 1510/MUM/2016 M/S. K. ANAND CONSTRUCTION PVT. LTD., 5 AVOIDING THE REVISED RETURN OF INCOME FILED ON 28/09/2012. HENCE, IT COULD BE SAFELY CONCLUDED THAT THERE WAS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICUL ARS OF INCOME BY THE ASSESSEE IN THE ORIGINAL RETURN OF INCOME FILED ON 28/09/2011. HENCE, THERE CANNOT BE ANY PENALTY U/S.271(1)(C) ON THIS ACCOUNT ITSELF. 7. EVEN ASSUMING THAT THE LD. AO HAD DISALLOWED THE CLAIM OF EXPENSES TO THE TUNE OF RS.1 CRORE WHI LE COMPLETING THE ASSESSMENT THOUGH NOT SPECIFICALLY MENTIONED T HEREIN IN THAT MANY WORDS IN THE COMPUTATION , STILL THE GENUIN I TY OF IN CURRENCE OF THE SAID EXPENDITURE WERE NOT DOUBTED BY THE REVENUE IN AS MUCH AS THE ENTIRE BILLS FOR THE SAME WERE DULY FI LED BY THE ASSESSEE BEFORE THE LD. AO. IT IS NOW WELL SETTLED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (P) LTD., REPORTED IN 322 ITR 158 THAT FOR MERE DISALLOWANCE OF EXPENSES IN AN ASSESSMENT WOULD NOT AUTOMATICALLY RESULT IN CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME WARRANTING LEVY OF PENALTY U/S.271(1)(C) OF THE ACT. HENCE, THE LEVY OF PENALTY U/S.271(1)(C) OF THE ACT DESERVES TO BE DELETED ON THIS COUNT ALSO. 8. IN VIEW OF THE AFORES AID FINDINGS, WE REFRAIN TO GIVE OUR OPINION ON THE ALTERNATIVE SUBMISSIONS MADE BY THE LD. AR THAT THE LD. AO HAD NOT SPECIFICALLY STRUCK OFF THE RELEVANT PORTION IN THE SHOW - CAUSE NOTICE ISSUED FOR INITIATING THE PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT AS IT WOULD ITA NO. 1510/MUM/2016 M/S. K. ANAND CONSTRUCTION PVT. LTD., 6 BE ACADEMIC IN NATURE AT THIS POINT OF TIME. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 08 / 02 /201 9 SD/ - ( RAM LAL NEGI ) SD/ - ( M. BALAGANESH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 08 / 02 /201 9 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//