Sahara States, Hyderabad V. ACIT, Hyderabad

ITA 1744/HYD/2008

• Counselvise Citation: 174422514 RSA 2008
• Duration Of Justice: 2 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 11-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T DIWAKAR PRASAD
• Assessee Lawyers: V SHIVA KUMAR; M BHASKAR
• Section: 27; 143(3); 80IB; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI AKBER BASHA, ACCOUNTANT MEMBER ITA. NO.1744/HYD/2008 ASSESSMENT YEAR 2004-05 SAHARA STATES, HYDERABAD. ( PAN AAAJS 2519 Q) VS ACIT, CIR - 5(1), HYDERABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : S/ SHRI V. SHIVA KUMAR & M. BHASKAR RESPONDENT BY : SHRI T. DIWAKAR PRASAD DATE OF HEARING: 8-9-2011 DATE OF PRONOUNCEMENT: 28-9-20 11 O R D E R PER AKBER BASHA, ACCOUNTANT MEMBER: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER PASSED BY THE CIT (A)-V, HYDERABAD, DATED 29-8-2008 AN D IT PERTAINS TO THE ASSESSMENT YEAR 2004-05. 2. THE ONLY EFFECTIVE GROUND RAISED IN THIS APPEAL IS WITH REGARD TO THE PENALTY LEVIED UNDER SECTION 271 (1)( C) OF TH E ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN AOP (JOINT VENTURE) ENGAGED IN THE BUSINESS OF DEVELOPMENT OF LA ND AND CONSTRUCTION OF HOUSES. IT HAS FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004-05 ON 4-8-2005 SHOWING INCOME OF RS.77,41,82 2/-. IN THE ITA 1744 OF 2008 S SAHARA STATES-HYDERABAD 2 PROFIT AND LOSS ACCOUNT FILED WITH THE RETURN, UNDER THE HEAD INCOME, THE ASSESSEE HAS SHOWN THE RECEIPTS FROM SALE OF RESIDENTIAL HOUSES AT RS.15,86,47,820/- AND RS.1,69,08,850/- FROM THE SALE O F SHOPS AND RECEIPTS OF RS.19,19,499/- TOWARDS OTHER INCOME, COMPRISI NG OF SALE OF BROCHURES, CANCELLATION CHARGES, TRANSFER FEE AND LATE IN TEREST ETC. AFTER CLAIMING DEDUCTION FOR AN AMOUNT OF RS.9,78,87,803/- T OWARDS EXPENDITURE ON DIFFERENT HEADS, IT WAS SHOWN NET PROF IT AT RS.6,22,53,679. AFTER CLAIMING EXEMPTION UNDER SECTIO N 80IB OF THE ACT, FOR AN AMOUNT OF RS.5,45,11,857/-, IT HAS SHOWN T HE TAXABLE INCOME AT RS.77,41,522/-. DURING THE ASSESSMENT PROCEEDINGS, FR OM ENQUIRIES CONDUCTED BY THE ASSESSING OFFICER, HE FOUND THAT DURING T HE PREVIOUS YEAR, THE ASSESSEE HAS SOLD A PLOT OF LAND TO M/S. KAVYA E DUCATIONAL SOCIETY FOR AN AMOUNT OF RS.56,82,794/- WHICH WAS REGIS TERED VIDE SALE DEED DATED 11-9-2003. HOWEVER, IN THE RETURN OF INCO ME FILED, THE ASSESSEE HAS NOT DISCLOSED ANY INCOME FROM THE SALE OF THE SAI D PLOT. ON QUERY RAISED BY THE ASSESSING OFFICER VIDE HIS LETTER D ATED 4-12-2006 ASKING THE ASSESSEE AS TO WHY THE PROFIT ON SUCH SALE SHOULD NOT BE BROUGHT TO TAX, THE ASSESSEE VIDE ITS LETTER DATED 7-12- 2006, HAS ADMITTED INCOME OF RS.11,16,431/- ON SALE OF THE SAID P LOT OF M/S KAVYA EDUCATIONAL SOCIETY FOR THIS ASSESSMENT YEAR. THEREAFTER , THE ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF TH E ACT ON 15- 12-2006, AFTER ADDING THE SAID AMOUNT OF RS.11,16,431 /- ADMITTED BY THE ASSESSEE TO ITS RETURNED INCOME. SINCE THE ASSESSEE HAS CON CEALED ITS INCOME IN THE RETURN FILED BY IT, THE ASSESSING OFFICE R HAS INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT W HILE COMPLETING THE ASSESSMENT. IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 271(1) OF THE ACT, THE ASSE SSEE VIDE ITS LETTER DATED 19-1-2007 HAS SUBMITTED THAT THERE WAS A N INADVERTENT ITA 1744 OF 2008 S SAHARA STATES-HYDERABAD 3 CLERICAL MISTAKE IN NOT DISCLOSING THE PROFIT ON SALE OF PLOT OF LAND. STATING THAT THE AMOUNT RECEIVED ON SALE OF PLOT WAS D ULY ACCOUNTED FOR BY IT AND WAS SHOWN UNDER THE HEAD ADVANCE FROM CUSTO MERS IN THE BALANCE SHEET, THE ASSESSEE CONTENDED THAT THERE WAS NO CONCE ALMENT WITHIN MEANING OF SECTION 271(1) OF THE ACT. THE A SSESSING OFFICER AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, LEVIED PE NALTY OF RS.3,08,929/- UNDER SECTION 271(1) ( C) OF THE ACT. AGG RIEVED AGAINST THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE WENT IN APP EAL BEFORE THE CIT (A). ON APPEAL, THE CIT (A) AFTER DISCUSSING THE ISSUE ELABORATELY IN HIS ORDER HELD THAT PENALTY PROCEEDING S UNDER SECTION 271(1)(C ) OF THE ACT WERE INITIATED CORRECTLY AND THAT THE ASSESSING OFFICER HAS RECORDED HIS SATISFACTION IN THE ASSESSMENT FOR I NITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C ) OF THE ACT . ACCORDINGLY, THE CIT (A) HELD THAT THERE IS NO MERIT IN THE GROUN D RAISED BY THE ASSESSEE AND THE SAME WAS REJECTED. AGAINST THE FINDINGS AN D THE DECISION OF THE CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HE CIT (A) IS NOT CORRECT IN CONFIRMING THE PENALTY AND THE AS SESSEES BUSINESS ACTIVITY IS CARRIED OUT AT HYDERABAD WHEREAS ACCOUNTS ARE MAINTAINED AT LUCKNOW. THE ASSESSEE HAD RECEIVED ADVANCES FROM THE PURCH ASER DURING THE PERIOD 2001 TO 2003 WHICH HAS BEEN FULLY A ND CORRECTLY RECORDED IN THE BOOKS. THE ASSESSEE HAS FURNISHED THE PAR TICULARS OF THESE ADVANCES ALONG WITH OTHER ADVANCES TOTALING IN ALL TO ABOUT RS.18.38 CRORES IN ITS BALANCE SHEET. IT FURNISHED THE F ULL DETAILS OF THESE ADVANCES ALONG WITH ADDRESSES OF THE CONCERNED PERSONS ON BEING ASKED FOR BY THE ASSESSING OFFICER DURING SCRUTINY PROCEEDIN GS. IF THE ASSESSEE WERE AWARE OF ANY DISCREPANCY, IT IS ONLY RATIONAL TO EXPECT ITA 1744 OF 2008 S SAHARA STATES-HYDERABAD 4 THAT THE ASSESSEE WOULD HAVE CORRECTED THE SAME INSTEAD OF ALLOWING THE ASSESSING OFFICER TO FIND OUT THE SAME. IT IS ALSO WORTHY OF NOTICE THAT THE ASSESSEE HAS BEEN DEVELOPING ABOUT 11.44 LAKHS SQ. FT. OF LAND AND RECEIVED ADVANCES OF MORE THAN RS.18 CRORES AS PART OF ITS BUSINESS ACTIVITY. THE ASSESSING OFFICER MADE ENQUIRIES IN RESPECT O F THESE ADVANCES AND EXCEPT THE SOLITARY TRANSACTION INVOLVING SAL E OF 4371 SQ. YARDS, NO DISCREPANCIES WERE DETECTED EVEN AFTER MAKING DIRECT ENQUIRIES UNDER SECTION 133(6) OF THE ACT. THE ASSESSEE I S DERIVING INCOME MOST PART OF WHICH IS ELIGIBLE FOR DEDUCTION UNDE R SECTION 80IB (10) OF THE ACT. IN FACT, BETWEEN THE ASSESSMENT YEARS 2003-04 TO 2007-08, THE ASSESSEE HAS CLAIMED DEDUCTION OF ABOUT RS.20 CRORES WHICH HAS BEEN FOUND ALLOWABLE ON THE FACTUAL PLANE. FOR THE YEAR UNDER CONSIDERATION, THE DEDUCTION CLAIMED UNDER SECTION 80IB (10) IS RS.5.45. CRORES. THE ASSESSING OFFICER NOT ONLY SCRUTINIZED BOOKS AND DOCUMENTS BUT ALSO CONDUCTED FIELD ENQUIRIES AND OBTAINED AND VERIFIED LAY-OUT PLANS, AND FLOOR PLANS OF THE RESIDENTIAL UNI TS. THE ASSESSEE DERIVED INCOME FROM SALE OF COMMERCIAL SHOPS AND THE ASSESSIN G OFFICER VERIFIED AND FOUND THAT THERE WAS NO INCORRECT CLAIM OF DEDUCTION IN RESPECT OF THE INCOME FROM COMMERCIAL UNITS AS WAS RECORDED IN THE ASSESSMENT ORDER. EVEN FIELD ENQUIRIES WERE CONDUCTED AN D BUILT UP AREAS OF RESIDENTIAL UNITS WERE GOT MEASURED AND FOUND TO BE WITHIN THE LIMITS FOR ELIGIBILITY AND COMPREHENSIVE DETAILS WERE ALSO RECORDED IN THE ASSESSMENT ORDER. THE ONLY ADDITION MADE BY THE ASSESSING OFFICER WAS THE PROFIT FROM THE SOLITARY TRANSACTION OF SALE OF A P LOT TO A SOCIETY. IT IS FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS NOT EVE N COMMENTED ABOUT THE EXPLANATION IN HIS ORDER AND HE DID NOT RE CORD HIS SATISFACTION ABOUT THE CORRECTNESS OR OTHERWISE AND REMAINED CONTENT T O ADD THE PROFIT WHICH WAS ALSO VOLUNTEERED BY THE ASSESSEE WHICH ACCEP TED THE ITA 1744 OF 2008 S SAHARA STATES-HYDERABAD 5 ADDITION AND PAID THE TAX LEVIED. ON THE FACTS FOUND , IT IS NOT POSSIBLE TO SUGGEST THAT THE ASSESSEE WAS IN THE PROCESS OF PERPETRATING A FRAUDULENT TRANSACTION. A PERUSAL OF THE ASSESSMENT ORDE R SHOWS THAT THE COST OF THE PLOT WAS WORKED OUT BY THE ASSESSEE BY ADD ING PROPORTIONATE DEVELOPMENT COSTS AND ALSO PROPORTIONATE COST OF COMMON FACILITIES TO THE BASIC COST. THIS WORKING HAS BEEN ACCEPTED BY THE ASSESSING OFFICER WITHOUT ANY MODIFICATION WHICH IS AN IN DICATOR OF THE CORRECTNESS OF THE ACCOUNTS MAINTAINED BY THE ASSESSEE. IT IS FURTHER SUBMITTED THAT THERE WAS NO WARRANT FOR THE ASSESSING OFF ICER TO LEVEL A CHARGE OF CONCEALMENT MUCH LESS LEVY A CONCEALMENT PENALTY. HE RELIED ON SEVERAL CASE-LAWS TO SUPPORT HIS VIEW. THE AUTHORIZ ED REPRESENTATIVE OF THE ASSESSEE FURTHER SUBMITTED THAT T HE FACTUAL BACKGROUND IN WHICH THE IMPUGNED PROFIT WAS OMITTED T O BE DECLARED AND HE HAS REJECTED THE EXPLANATION OFFERED BY THE ASSE SSEE FILED BY THE ASSESSEE AND HIS CONCLUSION THAT ONCE AN AUDIT OF THE ACCOUN TS WAS CONDUCTED, ALL THE SALE TRANSACTIONS WOULD HAVE BEEN VERI FIED AND THE ASSESSEE MUST HAVE BEEN AWARE OF THE SALE TRANSACTION FAIL ED TO APPRECIATE THE EXPLANATION OF THE ASSESSEE THAT AN INADV ERTENT OMISSION OF A CLERICAL NATURE WAS THE REASON FOR THE OMISSION. IT IS FURTHER CONTENDED THAT THE CONCLUSION THAT THE AFFIDAVITS FILED BEFORE THE CIT (A) WERE THE RESULT OF AN AFTERTHOUGHT IS EQUALLY ILL FOU NDED BECAUSE THE EXPLANATION OF THE ASSESSEE BEFORE THE ASSESSING OFFICER AND THE CIT (A) WAS SOUGHT TO BE SUBSTANTIATED BY FILING THE ATTACHMENT S RATHER THAN INVENTING A NEW REASONS. IT IS FURTHER SUBMITTED THAT THE CHARGE OF CONCEALMENT OF FURNISHING OF INACCURATE PARTICULARS WITH A VIEW TO CONCEAL INCOME COULD NOT BE LEVELED AGAINST THE ASSESSEE AN D PENALTY LEVIED MAY KINDLY BE CANCELLED. ITA 1744 OF 2008 S SAHARA STATES-HYDERABAD 6 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS, WHEN T HE ASSESSING OFFICER HAS ASKED THE ASSESSEE TO FURNISH THE DETAILS OF RECE IPTS SHOWN UNDER ADVANCES FROM VARIOUS PERSONS, IT IS OBVIOUS THAT TH E ASSESSEE HAS CERTIFIED THOSE DETAILS BEFORE FURNISHING THE REQUIR ED INFORMATION BEFORE THE ASSESSING OFFICER. STILL THEN, THE ASSESSEE DID NOT DISCLOSE/OFFER THE INCOME, WHICH IT HAS ALREADY EARNED F ROM SALE OF THE SAID PLOT MADE IN THE PREVIOUS YEAR. HOWEVER, AFTER CO NDUCTING ENQUIRIES, WHEN THE ASSESSEE WAS CONFRONTED BY THE ASSESSING OFFICER FOR NOT OFFERING THE INCOME IT HAS EARNED FROM SALE OF THE SAID PLOT, IT HAS NO OTHER ALTERNATIVE THAN TO OFFER OR DISCLOSE THE SAID AM OUNT OF RS.11,16,431/- TOWARDS PROFIT AND THUS INCOME EARNED O R SALE OF THE SAID PLOT MADE DURING THE PREVIOUS YEAR. IT IS FURTH ER SUBMITTED THAT THE SINCE THE ASSESSEE HAS OFFERED ADDITIONAL INCOME OF RS.11,1 6,431/- ONLY AFTER DETECTION OF CONCEALMENT BY THE ASSESSING OFFICER, RELYING ON THE RATIO OF ALLAHABAD HIGH COURT IN CIT VS. AJAY MILL ( 262 ITR 66) AND THE DECISION OF MADRAS HIGH COURT IN THE CASE OF RAVI AND CO . VS. ACIT (271 ITR 286). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEES BUSINESS ACTIVITY WAS CARRIED OUT AT HYDERABAD WHEREAS ACCOU NTS WERE MAINTAINED AT LUCKNOW. IT IS ALSO AN UNDISPUTED FACT THAT THE ASSESSEE HAS FURNISHED THE PARTICULARS OF ADVANCE UNDER DISPUTE A LONG WITH OTHER ADVANCES IN ITS BALANCE SHEET. IT APPEARS THAT THE ASSESSEE H AS OFFERED TO TAX THE INCOME ARISING FROM THE SALE OF LAND ON COM ING TO KNOW THAT THERE WAS A MISTAKE/OMISSION ON THE PART OF THE STAFF IN NOT DISCLOSING THE SALE TRANSACTION EARLIER. IN OUR CONSIDERED VIEW, SUCH INADVERTENT ITA 1744 OF 2008 S SAHARA STATES-HYDERABAD 7 MISTAKE DOES NOT TANTAMOUNT TO ANY MALAFIDE INTENT OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME WITHIN T HE MEANING OF SECTION 271 [1] [C] OF THE ACT. IF THE ASSESSEE WERE AWARE OF SUCH DISCREPANCY, IT IS ONLY RATIONAL TO EXPECT THAT THE ASSESSEE WOULD HAVE CORRECTED THE SAME INSTEAD OF ALLOWING THE ASSESSING OFFICE R TO FIND OUT THE SAME. THE ONLY ADDITION MADE BY THE ASSESSING OFFICER WAS THE PROFIT FROM THE SOLITARY TRANSACTION OF SALE OF A PLOT TO A SOCI ETY. ON THE FACTS FOUND, IT IS NOT POSSIBLE TO SUGGEST THAT THE ASSESSEE WAS IN THE PROCESS OF PERPETRATING A FRAUDULENT TRANSACTION. THEREFORE, THERE WAS NO WARRANT FOR THE ASSESSING OFFICER TO LEVEL A CHARGE OF CO NCEALMENT MUCH LESS LEVY A CONCEALMENT PENALTY. THEREFORE, THE LOWER AUTHORITIES ARE NOT JUSTIFIED IN LEVYING THE PENALTY UNDER SECTION 27 1 [1] [C] OF THE ACT. HENCE, WE ALLOW THE GROUND RAISED BY THE ASSESSEE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 28 -9- 2011. SD/- SD/- (G.C. GUPTA) (AKBER BASHA) VICE PRESIDENT. ACCOUNTANT MEMBER. DT/- 28-9-2011. COPY FORWARDED TO: 1. SAHARA MANZIL, OPP. SECRETARIAT, SAIFABAD, HYDERAB AD. 2. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-5(1), HYDE RABAD. 3. CIT (A)-V, HYDERABAD. 4. CIT, AP, HYDERABAD. 5. THE D.R., ITAT, HYDERABAD. JMR* ITA 1744 OF 2008 S SAHARA STATES-HYDERABAD 8