SMT. SUSHILA SURESHBABU MALGE, MUMBAI V. ITO , WARD-23(3)(4), MUMBAI

ITA 1681/MUM/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 8877 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 20-07-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MAYUR R MAKADIA
• Keywords: Business income; Bonafide belief; Reasonable cause
• Section: 273B; 143(3); 271B; 44AB

Judgement Text

1 ITA 6978/Mum/2019 IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI Before Shri Vikas Awasthy (JM) & Shri Prashant Maharishi(AM) I.T.A. No.1681/Mum/2020 (Assessment year 2012-13) Smt. Sushila Sureshbabu Malge 206, Tulsi Shyam Building Teen Hath Naka, Thane(W)-400 604 PAN : AJTPM688A vs Income-tax Officer 7(3)(2) Mumbai (APPELLANT) (RESPONDENT) Appellant by Shri Mayur R Makadia Respondent by Shri Milind Chavan Date of hearing 20-12-2021 Date of pronouncement 23-12-2021 O R D E R Per Prashant Maharishi(AM) 1. This is the appeal filed by the assessee for assessment year 2012-13 against the order of the learned Commissioner of Income-tax (Appeals)-2, Thane dated 07/02/2020, wherein the penalty levied by the learned assessing officer under section 271B of the Act of Rs.1,50,000/- was confirmed. 2. Brief facts of the case shows that assessee is an individual engaged in the business of construction and maintaining the books of account following the project completion method. She filed her return of income on 28/03/2014 at a loss of Rs.1,43,705/-. During the course of assessment 2 ITA 6978/Mum/2019 proceedings, the learned assessing officer made a disallowance of Rs. 1 crore on estimate basis where assessee failed to prove the correctness of work-in-progress. He further disallowed a sum of Rs. 10,20,00,000/- being compensation paid to other party. Thus, the work-in-progress shown by the assessee of Rs. 14.99 crores was reduced to Rs. 3.79 crores. The assessment order was framed under section 143(3) of the Act on 31/03/2015 at the returned income / loss. 3. However, the learned assessing officer noted that the assessee is a developer and has incurred huge expenditure by way of compensation as well as receipt of advance for various projects and, therefore, looking at the total business receipt, the assessee should have got her accounts audited under section 44AB of the Income-tax Act, which is admittedly not done by the assessee; hence, he initiated penalty proceedings under section 271B of the Act. The learned assessing officer issued show cause notice to the asssessee on 31/03/2015. 4. Assessee submitted reply on 13/08/2015 stating that assessee did not have any sales during the year as she follows the project completion method and therefore, the project was not complete during the year, hence assessee was under a bonafide belief that no tax audit was required. Assessee also demonstrated that the expenditure incurred on the project are carried forward as work-in-progress. Therefore there is a bona fide belief that in absence of any turnover provisions of section 44AB for tax audit does not apply. Therefore, no penalty may be levied. 5. The learned assessing officer rejected the contentions of the assessee and noted that assessee has received advance against sales of Rs. 6.5 crores and 3 ITA 6978/Mum/2019 further executed a joint venture agreement receiving Rs. 14.79 crores from other co-developers. He, therefore, rejected the contentions of the assessee and imposed the penalty under section 271B of the Act of Rs. 1,50,000/- vide order dated 24/0-9/2015. 6. The assessee, aggrieved by the order of the learned assessing officer, preferred appeal before the learned Commissioner of Income-tax (Appeals), who confirmed the penalty. Therefore, the assessee is aggrieved and has preferred this appeal. 7. The learned authorised representative reiterated the submissions made before the lower authorities. He stated that the assessee is following project completion method and does not have any sales during the year. Therefore, there is no turnover or gross receipts and all the expenditure are shown as work-in-progress; therefore, assessee was under a bonafide belief that tax audit was not required to be carried out. He supported his statement showing the profit & loss account for the year ended on 31/03/2012, where there is no gross receipt or turnover is shown as it is Nil. . He further submitted that the co-ordinate bench in assessment year 2016-17 & 2017-18, where the penalty under section 271C was considered, held that the assessee was not liable for tax audit under section 44AB of the Act and, therefore, was not required to withhold any tax under the provisions of section 194H of the Act. He, therefore, submitted that the issue is now squarely covered in favour of the assessee by the decision of the co-ordinate bench in assessee’s own case on identical facts and circumstances. He therefore, submitted that penalty deserves to be deleted. 4 ITA 6978/Mum/2019 8. The learned departmental representative vehemently supported the orders of lower authorities and submitted that assessee has failed to get her accounts audited without any reasonable cause and, therefore, penalty under section 271B of the Act has rightly been levied. He further supported that argument by the decision of Bangalore Bench in Lalanath Reddy vs ACIT (2017) taxmann.com 343 (Bang) wherein the imposition of the penalty is justified. He, therefore, submitted that issue is squarely covered against the assessee. 9. We have carefully considered the rival contentions and perused the orders of the lower authorities. Admittedly, in this case, the assessee submitted that she is maintaining her books of account on project completion method. During the year project has not completed. The expenses on the project incurred by the assessee are shown as work-in-progress. The advances received for the sale of property from the customers is disclosed as advances and no sale has been made during the year. In view of the above facts, assessee pleaded that there is no gross receipt exceeding the prescribed limit for which tax audit under section 44AB of the Act is required to be done. The assessee also submitted that there is no sales made during the year. Therefore, assessee was under a bona fide belief that if there is no sales turnover or gross receipts in the profit & loss account, then it is not required to obtain tax audit report under section 44AB of the Act. During the year assessee has only received the advances against sale of property. Because of this, as there was no gross receipts or turnover in the books of the assessee for the year, she did not got her accounts audited under section 44AB of the Act and, therefore, exposed 5 ITA 6978/Mum/2019 herself to the provisions of penalty under section 271B of the Act. Undoubtedly, in assessee’s own case, on identical facts and circumstances, where assessee contested for deletion of the penalty under section 271C of the Act, the co-ordinate bench vide order dated 28/02/2019 has categorically held that assessee is not required to withhold any tax under section 194H of the Act as her accounts are not required to be audited under section 44AB of the Act for the reason that assessee is maintaining books of account on project completion method. However, the Bangalore Bench of ITAT, on similar facts and circumstances, has confirmed the penalty. Such decision has been relied upon by the learned departmental representative. We have carefully considered both the decisions. We do not find any discussion on the aspect of provisions of section 273B of the Act which provides that no penalty shall be imposed if the assessee proves that there was a reasonable cause for the failure to comply with the law. In the present case, we find that the profit & loss account of the assessee submitted before us does not have any gross receipts, turnover. The cost of the project is shown as work-in-progress. The assessee follows project completion method. Therefore, the claim of the assessee was that she was under a bonafide belief that provisions of section 44AB of the Act does not apply and hence, no audit under section 44AB of the Act was got done. We find that this is a reasonable cause which has resulted into failure of the assessee to comply with the law. In view of this, we find that penalty under section 271B of the Act cannot be levied for the reason that there was a failure on the part of the assessee to obtain tax audit report because of a bonafide belief that there is no turnover, gross receipts, etc. The revenue 6 ITA 6978/Mum/2019 could not show that the belief of the assessee was malafide. The judicial precedents cited by the learned departmental representative has given a reason that in case of project completion method, the assessing officer will not have any opportunity to verify the expenses incurred by the assessee during the tenure of the project. We find that in the present case, the assessee has shown the cost of the project as work-in-progress. Therefore, whenever the assessing officer would like to examine the income earned by the assessee, naturally, he will have to examine the composition of total work in progress also. He would be entitled to further considering the allowability or disallowability of expenses included in work in progress for the reason that the assessee would be claiming deduction of the same in the year in which project is complete. In view of this, we reverse the orders of the lower authorities and direct the learned assessing officer to delete the penalty of Rs.1,50,000/- levied under section 271B of the Act. 10. Accordingly, appeal of the assessee is allowed. Order pronounced on 23/12/2021. Sd/- sd/- (VIKAS AWASTHY) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dt : 23/12/2021 Pavanan 7 ITA 6978/Mum/2019 Copy to : 1. Appellant 2. Respondent 3. The CIT concerned 4. The CIT(A) By Order 5. The DR, ITAT, Mumbai 6. Guard File /True copy/ Asstt. Registrar, ITAT, Mumbai