Appeal details
Counselvise Citation
160624514 RSA 2012
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 3 month(s) 29 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
25-11-2013
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Assessment Year
2008-2009
Appeal Filed On
26-07-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE: SHRI G. S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO S . 1605 & 1606 /PN/20 12 ASSESSMENT YEAR S : 2007 - 08 & 2008 - 09 INCOME TAX OFFI CER, CENTRAL - 2, NASHIK VS. M/S. VIJAY BUILDERS, SANCHETI HEIGHTS, OPP. TELEPHONE EXCHANGE, CANADA CORNER, NASHIK (APPELLANT) (RESPONDENT) PAN NO. AAFFV4466Q APPELLANT BY: SHRI P.L. PATHADE RESPONDENT BY: SHRI NIKHIL PATHAK DATE OF HEARING : 29 - 10 - 2013 DATE OF PRONOUNCEMENT : 25 - 11 - 2013 ORDER P ER R.S. PADVEKAR , JM : - THESE APPEALS ARE FILED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT(A) - I, NASHI K DATED 24 - 05 - 2012 FOR THE A.YS. 200 7 - 08 AND 2008 - 09. THE ASSESSING OFFICER HA S LEVIED THE PENALTY U/S. 271(1)(C) OF RS.3,36,406/ - FOR THE A.Y. 2007 - 08 AND RS.8,91,532/ - FOR THE A.Y. 2008 - 09 WHICH HAS BEEN DELETED BY THE LD. CIT(A). THE REVENUE HAS TAKEN THE MULTIPLE GROUNDS BUT THE ISSUE FOR CONSIDERATION BEFORE US IS WHETHER LD. CIT(A) JUSTIFIED IN DELETING THE PENALTIES LEVIED BY THE ASSESSING OFFICER IN BOTH THE ASSESSMENT YEARS. 2. THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. THE ASSESSEE IS A PARTNERSHIP FIRM WHICH IS ENGAGED IN THE BUSINESS OF BUILDERS AND DEVELOP ERS. THERE WAS A SEARCH AND SEIZURE ACTION U/S. 132(2) OF THE INCOME - TAX ACT IN THE CASES OF KARDA AND LALWANI GROUP ON 30 - 01 - 2009 IN WHICH THE ASSESSEE FIRM WAS ALSO COVERED. THE ASSESSEE FILED THE RETURN OF INCOME IN RESPONSE TO NOTICES ISSUED U/S. 153 A FOR THE YEARS UNDER APPEAL. THE ASSESSING OFFICER MADE THE FOLLOWING ADDITIONS: 2 ITA NOS. 1605 & 1606/PN/2012, M/S. VIJAY BUILDERS, NASHIK A.Y. AMOUNT 2007 - 08 RS.9,99,449/ - 2008 - 09 RS.25,40,343/ - 3. THE ASSESSING OFFICER ALSO LEVIED THE PENALTY ON THE SAID ADDITIONS. DURING THE COURSE OF SEAR CH ACTION , IT WAS NOTICED THAT THE ASSESSEE HAS RECEIVED THE ON - MONEY FROM VARIOUS CUSTOMERS AND THE ASSESSEE HAS SHOWN THE SAID AMOUNT RECEIVED IN CASH AS ADVANCES RECEIVED IN THE BALANCE SHEETS FI LED WITH THE RETURN S OF INCOME IN RESPONSE TO NOTICES U/S. 153A OF THE ACT. THE ASSESSEE CLAIMED THAT AS PER THE METHOD OF ACCOUNTING AND REVENUE RECOGNITION , THE SAID ADVANCES CANNOT BE TREATED AS INCOME OF THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE AND HELD THAT THE S AID ON - MONEY RECEIPT WAS NOT RECORDED IN THE BOOKS OF ACCOUNT PRIOR TO SEARCH ACTION AND HENCE, METHOD OF ACCOUNTING IS NOT APPLICABLE TO THE SAID AMOUNT OF ON - MONEY. THE ASSESSING OFFICER HELD THAT THE AMOUNT OF ON - MONEY IS TAXABLE IN THE YEAR OF RECEIPT AND ACCORDINGLY COMPLETED THE ASSESSMENTS. THE ASSESSEE CHALLENGED THE PENALTY LEVIED BY THE ASSESSING OFFICER BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A) THE ASSESSEE PLEADED THAT IT HAS RECEIVED ADVANCES IN RESPECT OF AREA OF FLAT TO BE RECEIVED IN F UTURE AND TO BE SOLD IN FUTURE TO THE CUSTOMERS . W HEN THE AGREEMENT FOR SALE OF FLAT WAS ENTERED INTO WITH SMT. SUMAN PATIL FOR RS.13,55,250/ - AND WHEN THE CONSIDERATION IN RESPECT OF SAID FLAT HAS BEEN RECEIVED, THE SAID FLAT WAS NOT CONSTRUCTED AND HEN CE, THE CONSTRUCTED AREA WHICH WAS TO BE RECEIVED FROM KARDA CONSTRUCTION WAS NOT RECEIVED AND THE POSSESSION OF THE SAID FLAT C OULD NOT BE GIVEN TO SMT. SUMAN PATIL. 4. IT WAS PLEADED THAT THE INCOME ON ACCOUNT OF EITHER DEVELOPMENT AGREEMENT IN RESPEC T OF LAND AND ALSO IN RESPECT OF SALE OF FLAT HAS NOT BEEN ACCRUED TO THE ASSESSEE AS PER METHOD OF R EVENUE RECOGNITION 3 ITA NOS. 1605 & 1606/PN/2012, M/S. VIJAY BUILDERS, NASHIK FOLLOWED. THE ASSESSEE CONTENDED THAT THE INCOME IS TO BE RECOGNIZED ON ACTUAL COMPLETION OF FLAT AND POSSESSION OF THE SAME TO THE CUS TOMER. IT WAS CONTENDED THAT THE S AID METHOD OF THE R EVENUE /INCOME RECOGNITION HAS BEEN FOLLOWED IN RESPECT OF THE AREA OF THE FLATS OF 15629 SQ. FT. RECEIVED AS PER WRITTEN AGREEMENT WITH M/S. BHAKTI BUILDERS AND IN RESPECT OF ADDITIONAL AREA OF FLATS RE CEIVED AS PER SUBSEQUENT ORAL AGREEMENT WITH SHRI NARESH KARDA OF BHAKTI BUILDERS. THE ASSESSING OFFICER HAS ACCEPTED THE SAID METHOD OF THE R EVENUE RECOGNITION IN RESPECT OF THE AREA OF 15629 SQ. FT. THE ASSESSEE ALSO PLEADED THAT THE ON - MONEY RECEIPT I S IN RESPECT OF SAID TRANSACTION ONLY. THE ASSESSEE ACCORDINGLY SHOWED THE SAID AMOUNTS AS ADVANCES IN THE BALANCE SHEET AND DECIDED TO RECOGNIZE THE R EVENUE /INCOME IN RESPECT OF SAME IN THE YEAR OF COMPLETION/POSSESSION OF CONSTRUCTED PREMISES BUT AS THE ASSESSING OFFICER HAS INSISTED TO BRING TO TAX AMOUNT ON RECEIPT BASIS , T HE SAME HAS BEEN OFFERED TO TAX BY THE ASSESSEE AT RS.18,70,000/ - IN THE A.Y. 2008 - 09 AND RS.3 ,55,250/ - I N THE A.Y. 2009 - 10. THE LD. CIT(A) WAS CONVINCED WITH THE EXPLANATION OF THE ASSESSEE THAT EVEN IF THE ASSESSING OFFICER HAS ASSESSED THE SAID AMOUNT ON RECEIPT BASIS THAT DOES NOT MEAN THAT THERE WAS ACCRUAL OF THE INCOME OF THE ASSESSEE AS PER THE METHOD OF ACCOUNTING REGULARLY FOLLOWED. THE LD. CIT(A) DELETED THE PENALTIES . THE OPERATIVE PART OF THE FINDINGS OF THE LD. CIT(A) IS AS UNDER: 5.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER, THE PENALTY ORDER, THE RIVAL CONTENTIONS AND THE POSITION OF LAW ON THE SUBJECT. THE A.O. HAS TAXED ON - MONEY RECE IVED AS ADVANCE FOR BOOKING OF FLATS/SHOPS IN THE YEAR OF RECEIPT AND HAS ALSO IMPOSED PENALTY U/S. 271(L)(C) ON THE SAID ADDITION. IN THIS REGARD THE APPELLANT HAS POINTED OUT THAT THE AMOUNT OF CONSIDERATION RECORDED IN THE AGREEMENT AND THE AMOUNT OF CO NSIDERATION RECEIVED AS ADVANCE IN CASH_OVER AND ABOVE THE CONSIDERATION MENTIONED IN THE AGREEMENTS, ARE IN RESPECT OF THE SAME FLATS AND BOTH THE AMOUNTS ARE TOWARDS SALE CONSIDERATION OF THE FLATS. THE AMOUNT RECEIVED AS SALE CONSIDERATION CANNOT BE TAX ED AS INCOME THAT TOO, MUCH BEFORE THE CONSTRUCTION OF THE FLATS. THE SAID AMOUNT IS TO BE CONSIDERED AS SALE CONSIDERATION AT THE TIME OF RECOGNIZING REVENUE ON SALE /POSSESSION OF FLATS TO 4 ITA NOS. 1605 & 1606/PN/2012, M/S. VIJAY BUILDERS, NASHIK CUSTOMERS AS PER THE METHOD OF REVENUE RECOGNITION FOLLOWED BY TH E APPELLANT. THIS CONTENTION OF THE APPELLANT, IS SUPPORTED BY PLETHORA OF DECISIONS INCLUDING THE FOLLOWING DECISIONS RELIED ON BY THE APPELLANT. I) GOLANI BROTHERS VS. ACIT, 75 ITD 1 (PUNE). II) DHANVARSHA BUILDERS (P) LTD. VS. DC1T 102 ITD 375 (PUNE). I II) M/S. RANADE DIGHE & ASSOCIATES VS. ITO, ITA NO.466/PN/2010, A.Y. 1999 - 2000 DATED 26/8/2011. IV) PRADIP ASHOK RAHEJA VS. ACIT, ITA NOS. 327 & 316/PN/2004 DATED 31/12/2009. V) SHRI D.J. HANSWANI, ITA NO. 894/PN/97 AND 453/PN/ 98 DATED 29/6/2005. VI) M/S. TEJAS CONSTRUCTIONS, ITA NOS. 935 TO 938/PN/2009 FOR A. YRS. 2002 - 03 TO 2004 - 05 AND 1265 TO 1271/PN/2009 FOR A. YRS. 1999 - 2000 TO 2005 - 06. IN THE CASE OF TEJAS CONSTRUCTION REFERRED TO ABOVE, THE ASSESSEE HAS RECEIVED ON - MONE Y AND HAS CLAIMED THAT AS PER HIS METHOD OF RECOGNIZING REVENUE IN THE YEAR OF SALE/POSSESSION TO CUSTOMERS, THE INCOME RELATED TO ON - MONEY RECEIPT IS TAXABLE IN THE YEAR OF REVENUE RECOGNITION AND NOT IN THE YEAR OF RECEIPT. THE A.O. HAS TAXED THE AMOUNT OF ON - MONEY IN THE YEAR OF RECEIPT ITSELF CONTENDING THAT THERE IS NO ESTABLISHED LAW FOR GIVING THE ABOVE TREATMENT TO ON - MONEY AS CHOSEN BY THE ASSESSEE. THE ID. CIT(A) FOLLOWING THE DECISIONS OF IT AT, PUNE BENCH IN THE CASES OF GOLANI BROTHERS AND VARS HA DEVELOPERS HAS ACCEPTED THE CONTENTION OF THE APPELLANT. THE HON'BLE IT AT HAS ALSO CONFIRMED THE DECISION OF CIT(A), NASHIK VIDE PARA 13 OF THE APPELLATE ORDER. IN VIEW OF THE ABOVE FACTS AND DISCUSSION AND RESPECTFULLY FOLLOWING THE RATIO LAID DOWN B Y THE ABOVE MENTIONED DECISIONS RELIED ON BY THE APPELLANT, I AM OF THE CONSIDERED VIEW THAT THE A.O. IS NOT JUSTIFIED IN IMPOSING PENALTY U/S. 271(L)(C) IN RESPECT OF ON - MONEY RECEIVED IN THE YEAR OF RECEIPT OF THE ON - MONEY AS THE SAME CANNOT BE THE INCOM E OF THE APPELLANT OF THE SAID YEARS. IT IS ALSO SETTLED LAW THAT EVERY ADDITION TO INCOME RETURNED DOES NOT RESULT INTO LEVY OF PENALTY U/S. 271(L)(C) OF THE ACT. IT IS ALSO SETTLED LAW THAT WHERE ADDITION ITSELF IS NOT JUSTIFIED OR IS DOUBTFUL, PENALTY U /S 271(L)(C) IS NOT LEVIABLE. THE A.O. IS, THEREFORE, DIRECTED TO CANCEL THE PENALTY ORDERS OF RS. 3,36,406/ - AND RS.8,91,532/ - IMPOSED U/S. 271(L)(C) IN A. YRS. 2007 - 08 AND 2008 - 09 RESPECTIVELY. NOW THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. IN THIS CASE, IT IS NOT IN DISPUTE THAT THE ASSESSE OFFERED THE ON - MONEY THOUGH IT WAS SHOWN AS ADVANCES FROM THE CUSTOMERS AS AN INCOME DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT IS NOT I N DISPUTE 5 ITA NOS. 1605 & 1606/PN/2012, M/S. VIJAY BUILDERS, NASHIK THAT THE ON - MONEY RECEIPT IS A PART OF THE SALE CONSIDERATION BUT AS THE CONCERNED FLATS WERE NOT COMPLETED AND NO POSSESSION WAS GIVEN HENCE, THE AMOUNTS WERE SHOWN AS ADVANCES IN THE BALANCE SHEET. IT IS NOT DISPUTED BEFORE US BY THE REVENUE T HAT AS PER THE METHOD OF ACCOUNTING THE ASSESSEE WAS RECOGNIZING THE R EVENUE /INCOME AFTER GIVING THE POSSESSION OF THE FLATS/ROW HOUSES TO THE CUSTOMERS. IN THE CASE OF JAINARAYAN BABULAL VS. CIT, 170 ITR 399 (BOM) , THE HON'BLE HIGH COURT HAS HELD THAT TH E FINDING IN THE ASSESSMENT PROCEEDING IS RELEVANT BUT NOT A CONCLUSIVE. 6. WE CONCUR WITH THE FINDING OF THE LD. CIT(A) THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN IMPOSING THE PENALTY U/S. 271(1)(C) IN RESPECT OF THE ON - MONEY RECEIVED IN THE YEAR OF RECEIPT AS THE SAID MONEY CANNOT BE TREATED AS AN INCOME OF THE ASSESSEE EVEN THOUGH SAME IS BROUGHT TO TAX . WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). ACCORDINGLY, SAME ARE CONFIRMED IN BOTH THE ASSESSMENT YEARS. 7. IN THE RESU LT, THE REVENUES APPEALS ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 25 - 11 - 2013 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 25 TH NOVEMBER, 20 1 3 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - I, NASHIK 4 THE CIT - I, NASHIK 5 THE DR, ITAT, A BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE
