Mr. Harmail Singh, New Delhi V. ITO, New Delhi

ITA 1719/DEL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6382 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 03-06-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 12-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TARUN SEEM
• Assessee Lawyers: RAJESH ARORA
• Keywords: Business expenditure; Difference of opinion; Revised return
• Section: 133A

Judgement Text

ITA NO. 1719/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 1719/DEL/2012 A.Y. : 2003 - 04 MR. HARMAIL SINGH, D-68, PARYAVARAN COMPLEX, IGNOU ROAD, NEW DELHI (PAN: AQIPS9848L) VS. INCOME TAX OFFICER, WARD 24(3), NEW DELHI (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. RAJESH ARORA, CA DEPARTMENT BY : SH. TARUN SEEM, DR ORDER ORDER ORDER ORDER PER PER PER PER U.B.S. BEDI U.B.S. BEDI U.B.S. BEDI U.B.S. BEDI : : : : J JJ JM MM M THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS-XI), NEW DE LHI DATED 2.2.2012 PERTAINING TO ASSESSMENT YEAR 2003-04, WH EREBY THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE PENALTY I MPOSED BY THE AO U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 HAS BEEN CHALLENGED. 1.1 THE ORIGINAL GROUNDS OF APPEAL CHALLENGE WAS WI TH REGARD TO IMPOSING OF PENALTY BY THE LD. CIT(A) WHEREAS IN REVISED GROUND THE CHALLENGE IS WITH REFERENCE TO SUSTAINING OF PE NALTY BY THE LD. CIT(A), WHICH HAS BEEN ALLOWED. SO OBJECTION OF THE DEPARTMENT IN THIS REGARD GETS OVERRULED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN CONSTRUCTION ACTIVITIES AND FILED RETURN FOR THE RELEVANT ASSESSMENT YEAR ON 16.10.2003 DECLARING AN INCOME OF RS. 75,98 0/-. A SURVEY U/S. 133A OF THE ACT WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ITA NO. 1719/DEL/2012 2 ON 25.11.2003 AND CASE WAS SELECTED FOR SCRUTINY. WHEN NOTICE U/S. 143(2) OF THE ACT WAS ISSUED, THE ASSESSEE FILED I TS REVISED RETURN DECLARING TOTAL INCOME OF RS. 1,79,090/- WHICH WAS ASSESSED AT RS. 11,40,200/- AS AGAINST REVISED INCOME OF RS. 1,79,0 90/- AFTER MAKING ADDITION OF RS. 9,16,000/-. THIS ASSESSED INCOME A LSO INCLUDES DISALLOWANCE OF CERTAIN BUSINESS EXPENSES CLAIMED I N THE PROFIT AND LOSS ACCOUNT THE DETAILED OF WHICH ARE AS UNDER:- SALARY : RS. 54,000 CONVEYANCE & TELEPHONE : RS. 55,800/- RENOVATION AND REPAIR OF FLATS ON : RS. 48,500/- ACCOUNT OF DEMOLITION BY MCD. TOTAL TOTAL TOTAL TOTAL : RS. 1,58,300/ : RS. 1,58,300/ : RS. 1,58,300/ : RS. 1,58,300/- -- - 2.1 AGGRIEVED BY THIS ORDER OF THE ASSESSING OFFICE R, ASSESSEE CHALLENGED SUCH DISALLOWANCES BY PREFERRING AN APPE AL BUT LD. CIT(A) CONFIRMED SUCH ADDITION AS MADE BY THE ASSES SING OFFICER AND FURTHER ASSESSEE PREFERRED APPEAL BEFORE ITAT. HOWE VER, IN THE MEANTIME, ASSESSING OFFICER COMPLETED THE ALREADY I NITIATED PROCEEDINGS U/S. 271(1)(C) AND IMPOSED PENALTY @100 % OF THE TAX SOUGHT TO BE EVADED. THE ASSESSEE CHALLENGED SUCH A CTION BEFORE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 2.2 STILL AGGRIEVED, ASSESSEE HAS PREFERRED FURTHER APPEAL AND WHILE REITERATING THE SUBMISSIONS AS MADE BEFORE LO WER AUTHORITIES, IT WAS STRONGLY PLEADED THAT THERE WAS NO OCCASION FOR THE ASSESSING OFFICER TO LEVY SUCH PENALTY AND LD. CIT( A) WAS ALSO UNJUSTIFIED IN CONFIRMING THE SAME, WHEN ALL NECESS ARY PROOFS AND DOCUMENTS WERE FURNISHED TO ESTABLISH THAT NO MALAF IDE WAS INVOLVED IN THIS CASE AS THE FLAT WAS SOLD FOR RS. 4,95,000/- AND BALANCE AMOUNT SPENT ON RENOVATION OF THE PROPERTY AND IF FOR SOME ITA NO. 1719/DEL/2012 3 REASON, ADDITION HAS BEEN MADE, IT CANNOT BE SOLE C RITERIA FOR IMPOSITION OF THE PENALTY. LD. AR FURTHER SUBMITTED AS UNDER:- 1. THE AO LEVIED PENALTY U/S. 271(1)(C) OF RS. 3,02,749/- ON THE INCOME OF RS. 9,61,110/- ALLEGEDL Y SOUGHT TO BE EVADED ALLEGING THAT THE ASSESSEE HAS NOT GIVEN ANY EXPLANATION OR DOCUMENTARY EVIDENCE FOR THE NET PROFIT SHOWN DURING THE YEAR AND THAT T HE ASSESSEE WAS NOT REFLECTING THE FULL SALE CONSIDERATION RECEIVED BY HIM. THAT THE ASSESSEE HAD DELIBERATELY AND INTENTIONALLY OMITTED THE FAC TS IN ORDER TO HIDE THE ACTUAL SALE VALUE OF FLATS IN QUESTION AND HIDE THE FACTS WITH REGARD TO COST OF CONSTRUCTION INVOLVED. HOWEVER, IT IS NEITHER A CASE OF FAILURE OF ASSESSEE TO SUBMIT THE EXPLANATION NOR IT IS A CASE WHERE THE EXPLANATION SUBMITTED WAS NOT BONAFIDE. THE DISPUTE IS NOT ON THE DECLARATION OF RECEIPTS A ND EXPENSES. IT IS ON ACCOUNT OF DIFFERENCE OF OPINION WITH REGARD TO ALLOCATION OF COST OF CONSTRUCTION. PROFIT FROM SALE OF FLAT AT A-104, PARYAVARAN COMPLEX OF RS. 9,90,081/- (PENALTY IMPOSED ON RS. 9,61,110) 1.1 THE ASSESSEE, AN ILLITERATE SMALL TIME WORKER F ILED HIS RETURN WITHOUT A SUPPORTING P&L ACCOUNT. SURVEY U/S 133A WAS CONDUCTED AND THE ASSESSEE REVISED THE RETURN OF A TOTAL INCOME OF RS.1,79,086/ - AL ONG WITH THE RECEIPTS AND EXPENSES IN THE P&L ACCOUNT IN RESPONSE TO LETTER DATED 27.1.2005. THAT THE ASSESSEE DECLARED IN THE SAID P&L ACCOUNT, RECEIPT ITA NO. 1719/DEL/2012 4 OF RS. 14,50,000/- FOR THE PROPERLY IN QUESTION AND THE SE IS NOT DISPUTED BY THE LD. A.O IN CALCULATIN G THE ALLEGED PROFITS OF RS. 9,90,081/-. HENCE, THE ALLEGATION THAT THE ASSESSEE WAS NOT REFLECTING FUL L SALE CONSIDERATION IS NOT WARRANTED AND COMPLETELY UNJUSTIFIED. 1.2 THAT THE FIRST FLOOR OF FLAT AT A - 104, PARYAV ARAN COMPLEX, WAS SOLD TO THE BUYERS, MRS. JANKI RAWAT AND MR. GOPAL SINGH RAWAT, FOR SALE CONSIDERATION OF RS. 4,95,000/-, AND FURTHER A AMOUNT OF RS. 9,55,000/- WAS RECEIVED BY THE ASSESSEE FROM THEM FOR THE PURPOSE OF RENOVATION. THAT THE SAME IS REFLECTED AS RS. 14,50,000/- (RS. 4,95,000 + RS. 9,55,000) IN THE P&L A/C FILED BEFORE THE AO. HENCEFORTH, THERE WAS NO OMISSION OF FACTS AS TO TH E VALUE OF FLAT AS ALLEGED BY THE AO. 1.3 THAT THE TOTAL COST (EXCLUDING COMMISSION) OF T HE FLAT AT A - 104, PARYAVARAN COMPLEX COMES TO RS. 16,23,677/- AS PER THE IMPOUNDED MATERIAL. THE ASSESSEE ALLOCATED RS. 12,61,554/- TOWARDS THE COST OF FIRST FLOOR AT A -104, PARYAVARAN COMPLEX SINCE RENOVATION WAS DONE ON THE SAID FLOOR UPON BUYERS' INSTRUCTION AND THE AREA OF THE FLOOR WAS LARGER TH AN OTHER FLOORS. THE AO COMPUTED THE COST OF CONSTRUCTION OF THE 1ST FLOOR BY ALLOCATING THE COS T EQUALLY TO ALL THE FLOORS WHEREAS THE ASSESSEE ALLOCATED THE SAME ACCORDING TO THE AREA OF FLOORS AND TAKING THE EFFECT OF RENOVATION INTO ACCOUNT. THUS, THE DIFFERENCE IN COST OF CONSTRUCTION IS ACCOUNT OF DIFFERENCE IN OPINION BETWEEN THE ITA NO. 1719/DEL/2012 5 ASSESSEE AND THE A.O. THE ALLOCATION OF COST MADE BY THE ASSESSEE WAS INDEED A BONAFIDE ONE. 1.4 THAT THE AO HAS ALLOCATED THE COST OF CONSTRUCT ION EQUALLY AMONG GROUND FLOOR, FIRST FLOOR, SECOND FLOOR AND THIRD FLOOR. THE A.O HAS ERRED ON THE FAC T THAT THE GROUND FLOOR WAS ALREADY EXISTING AND IN POSSESSION OF THE ASSESSEE. IT WAS THUS NOT SUBJECT TO ANY CONSTRUCTION. THE DOCUMENTS IN SUPPORT THEREOF IN THE FORM OF TELEPHONE BILLS WERE PLACED ON RECORD BEFORE THE A.O. THE ALLOCATION OF COST OF CONSTRUCTION MADE BY THE A.O WAS THUS MADE ON PRESUMPTION AND SURMISES. 1.5 THAT THE DOCUMENTARY EVIDENCE THAT BUYER HAD PA ID RS.4,95,000/- AS SALES CONSIDERATION AND THEREAFTE R, RS. 9,55,000/- FOR THE PURPOSE OF RENOVATION OF THE FLAT WERE PLACED ON RECORD. THE CONFIRMATION OF BUYER WAS ALSO PLACED BEFORE THE CIT(A) DURING THE QUANTUM PROCEEDINGS. U/R 46A. THAT, THE GLARING FACT WAS NEVER CONFIRMED OR REBUTTED BY THE DEPARTMENT. THE ADDITION WAS CONFIRMED WITHOUT ANY REBUTTAL BY THE DEPARTMENT, AND WITHOUT PROVING AS TO HOW THE SUBMISSION OF THE ASSESSEE WAS ERRONEOUS. 1.6 THAT SINCE THE LOAN AMOUNT OF RS. 9,55,000/- WA S SANCTIONED ON 27.02.2003 AS EVIDENT FROM THE GIC OFFER LETTER AND DISBURSEMENT LETTER AND RECEIVED AFTER THE DATE OF SALE OF THE FIRST FLOOR I.E. 03.12.2003 THERE WAS NO QUESTION OF PASSING ANY 'ON MONEY' AS ALLEGED IN THE QUANTUM PROCEEDINGS. ITA NO. 1719/DEL/2012 6 THAT SUCH AN ALLEGATION WAS ONLY ON PRESUMPTIVE BASIS AND CANNOT DEFY THE FACTS ON RECORD THAT THE FLAT HAD BEEN SOLD MUCH EARLIER THAN DATE WHEN AMOUNT OF RS. 9,55,000/- WAS RECEIVED. 1.7 THAT SINCE THE PROPERTY AT A -104, PARYAVARAN COMPLEX WAS BUILT IN DIFFERENT SEGMENTS OVER THE PERIOD OF TIME, TO ASSESSEE ALSO HAD OPTION TO CALCULATE THE PROFITS USING 'COMPLETION METHOD.' THE ADDITION IN QUESTION WAS CONFIRMED FOLLOWING THE METHOD ON YEARLY BASIS. FOLLOWING COMPLETION METHOD, THE PROFIT PER FLAT COMES OUT TO RS.1,73,341, WHEREAS THE ASSESSEE HAS DECLARED A PROFIT OF RS. 1,88,446/-. 1.8 THAT THE ASSESSEE SUBSTANTIATED THREE ALTERNATE CALCULATIONS TO SHOW THAT NO INCOME BEYOND THE STATED INCOME WAS EARNED DURING THE YEAR UNDER CONSIDERATION. 1.9 THAT THE REVENUE DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE BUT BROUGHT NOTHING ON RECORD TO PROVE THAT THE EXPLANATION WAS FALSE OR INCORRECT. 1.10 THAT FOR LEVY OF PENALTY, TOTALITY OF CIRCUMST ANCE AND FACTS NEEDS TO BE CONSIDERED. NEITHER HAS THE TOTAL COST INCURRED NOR THE TOTAL AMOUNT RECEIVED BY THE ASSESSEE BEEN DISPUTED. THE DIFFERENCE IS MERELY ON ACCOUNT OF DIFFERENCE OF OPINION WITH REGARD TO ALLOCATION OF COST. 1.11 THAT MERELY BECAUSE THE ASSESSEE'S EXPLANATION WAS NOT AGREED WITH FOR THE PURPOSE OF MAKING ITA NO. 1719/DEL/2012 7 ADDITIONS, THE SAME DOES NOT AUTOMATICALLY ATTRACT PENALTY THEREUPON. 1.12 VARIOUS JUDICIAL PRONOUNCEMENTS HAVE CLARIFIED WHEN THE ASSESSEE'S EXPLANATION IS NOT FANTASTIC OR FANCIFUL, BUT THE SAME HAS NOT BEEN ACCEPTED DURING THE QUANTUM PROCEEDINGS, IT CANNOT BE HELD THAT PENALTY IS ATTRACTED ON THE SAME. 1.13 EXPLANATION OF THE ASSESSEE FOR THE PURPOSE OF AVOIDANCE OF PENALTY MUST BE AN ACCEPTABLE EXPLANATION; IT SHOULD NOT BE FANTASTIC OR FANCIFUL ONE. ONCE THE INITIAL BURDEN IS DISCHARGED, THE ASSESSEE WOULD BE OUT OF THE MISCHIEF UNLESS FURTHE R EVIDENCE IS ADDUCED. CIT V. MUSSADILAL RAM BHAROSE, (1987) 60 CTR (SC) RELIED ON. 1.14 IF AN ASSESSEE OFFERS AN EXPLANATION, WHICH IS NOT FOUND TO BE FALSE, HE CAN SAVE HIMSELF . FROM PENALTY EVEN IF HE WERE NOT ABLE TO SUBSTANTIATE HI S CASE AS LONG AS THE EXPLANATION OF THE ASSESSEE IS BONAFIDE AND AS LONG AS HE PLACES ALL THE RELEVANT FACTS MATERIAL TO COMPUTATION OF HIS TOTAL INCOME IRRESPECTIVE OF THE FACT THAT THE SAME EXPLANATION WAS NOT ACCEPTED FOR THE PURPOSE OF ASSESSMENT. ACIT VS. MALHOTRA MUKESH SATPAL (2008) 113 TTI 401 (HON'BLE ITAT, PUNE BENCH) 1.15 THE EXPLANATION OF THE ASSESSEE HAS NOWHERE BE EN ALLEGED TO BE FALSE OR SHORT. NEITHER IS IT ALLEGED TO BE NOT BONAFIDE. THEREFORE, PENALTY OUGHT NOT TO BE LEVIED ON THE ASSESSEE, EVEN IF THE ADDITIONS HAVE BEEN CONFIRMED IN QUANTUM PROCEEDINGS. THUS, THE ITA NO. 1719/DEL/2012 8 PENALTY LEVIED ON TH E SAME IS UNJUSTIFIED, AND SHOULD BE DELETED. 3. LD. DR IN HIS WRITTEN SUBMISSIONS FIRSTLY CHAL LENGED THE WORDING OF THE GROUND RAISED WHICH HAS SINCE BEEN REVISED BY THE ASSESSEE AND THE SAME HAS BEEN ACCEPTED BY THE B ENCH AS MENTIONED IN PARA 1.1 OF THIS ORDER WHILE OVERRULIN G THE OBJECTION OF THE DEPARTMENT. 4. NOW COMING TO THE MERITS OF THE CASE, LD. DR WHI LE REPRODUCING THE CONCLUSIONS OF THE ORDER OF THE ITA T AND THE QUANTUM APPEAL HAS FURTHER SUBMITTED THAT THE SITUA TION WITH REFERENCE TO ADDUCING THE EVIDENCE TO DISPEL THE CO NCLUSION OF THE CONTUMACIOUS CONDUCT ON THE PART OF THE ASSESSEE A S REMAINED UNCHANGED DURING THE PENALTY PROCEEDINGS. LD. CIT( A) HAS CONFIRMED THE PENALTY AND SINCE ASSESSEE HAS FAILED TO PRESENT ANY EVIDENCE WHY PENALTY FOR CONCEALMENT OF INCOME LEVI ED BY THE AO AND THE CONFIRMED BY THE CIT(A) SHOULD BE DELETED. IT WAS PLEADED FOR CONFIRMATION OF THE IMPUGNED ORDER. 5. WE HAVE HEARD BOTH THE SIDES AND CONSIDERED THE MATERIAL ON RECORD AND WE FIND THAT IN VIEW OF THE FACTS AND CI RCUMSTANCES OF THE CASE AND MATERIAL ON RECORD, ASSESSEE IS FOUND T O HAVE MADE OUT THE CASE IN LIGHT OF THE DECISIONS RELIED UPON AND INCORPORATED IN THE SNAP-SHOT OF THE ARGUMENTS FILED BY THE AR OF THE ASSESSEE AND MENTIONED IN PARA 2.2 OF OUR ORDER. CONSIDERING TH E PLEA RAISED IN LIGHT OF THE CASE LAWS RELIED UPON AND DISCUSSED, W E ARE OF THE VIEW ITA NO. 1719/DEL/2012 9 THAT THIS CASE IS NOT FIT FOR IMPOSITION OF PENALTY AS NONE OF THE INGREDIENTS INCORPORATED IN THE RELEVANT PROVISIONS HAVE BEEN FULFILLED BY THE AO BEFORE ARRIVING AT THE CONCLUS ION TO IMPOSE THE PENALTY. THEREFORE, ACCEPTING THE APPEAL OF THE AS SESSEE WE DIRECT TO DELETE THE PENALTY IMPOSED BY THE AO AND CONFIRM ED BY THE LD. CIT(A). 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/7/2014. SD/- SD/- [ [[ [SHAMIM YAHYA SHAMIM YAHYA SHAMIM YAHYA SHAMIM YAHYA] ]] ] [ [[ [U.B.S. BEDI U.B.S. BEDI U.B.S. BEDI U.B.S. BEDI] ]] ] ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER DATE 16/7/2014 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES