UMESH H GANDHI, MUMBAI V. ASST CIT CEN CIR 29, MUMBAI

ITA 1751/MUM/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71660 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 05-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K MADHUK
• Assessee Lawyers: K SHIVARAM
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI , BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM I.T.A. NO. 1751/MUM/2013 ( / ASSESSMENT YEAR: 2005-06) UMESH H. GANDHI, 34, BALA SINOR CO-OP. HOUSING SOCIETY, S. V. ROAD, KANDIVLI (W), MUMBAI-400 067 VS. ASST. CIT, CENTRAL CIRCLE 29, ROOM NO.476, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400 020 ! ' ./PAN/GIR NO. AABPG 9305 P ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !#& / APPELLANT BY : SHRI K. SHIVARAM & SHRI AJAY SINGH $%!#'& / RESPONDENT BY : SHRI S. K. MADHUK ( )*'+, / DATE OF HEARING : 02.09.2013 -./'+, / DATE OF PRONOUNCEMENT : 21.11.2013 0 O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-40, MUMBAI (CIT(A) FOR SHORT ) DATED 23.01.2013, CONFIRMING THE LEVY OF PENALTY U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) BY THE ASSESSING OFFICER (A.O.) FOR THE ASSESSMENT YEA R (A.Y.) 2005-06 VIDE ORDER DATED 28.06.2012. 2 ITA NO. 1751/MUM/2013 (A.Y. 2005-06) UMESH H. GANDHI VS. ASST. CIT BACKGROUND FACTS OF THE CASE 2.1 SEARCH ACTION U/S. 132(1) OF THE ACT WAS CONDUC TED AT THE BUSINESS AND RESIDENT PREMISES OF ONE, SH. GURINDER SINGH BAWA, HIS FAMIL Y MEMBERS AND VARIOUS FAMILY CONCERNS, INCLUDING THE OFFICE PREMISES OF M/S. GUN JYOT PROPERTIES PVT. LTD. (GPPL) AND M/S. BAWA DEVELOPERS PVT. LTD., ON 05.01.2007. VARI OUS DOCUMENTS, INCLUDING AN AGREEMENT DATED 21.03.2003, PERTAINING TO A JOINT V ENTURE BETWEEN GPPL, GURUPRERNA ENTERPRISES (GPE), A PARTNERSHIP FIRM, AND THE ASSE SSEE WAS FOUND AND SEIZED DURING THE SEARCH. THE PARTIES WERE CO-DEVELOPERS IN A PROJECT BY THE NAME ELCO ARCADE/ELCO MALL AND RESIDENCY, SITUATE AT BANDRA, MUMBAI. THE ASSES SEE WAS, ACCORDINGLY, SUBJECT TO SURVEY U/S.133A AT HIS BUSINESS PREMISES AT BORIVALI (W), MUMBAI ON 05.01.2007 ITSELF, AND HIS STATEMENT U/S.131 RECORDED ON 13.02.2007. T HE ASSESSEE OFFERED AN INCOME OF RS.75 LACS, BEING CASH RECEIPTS ON THE SALE OF SHOP S IN THE PROJECT ELCO MALL AND RESIDENCY. PROCEEDINGS U/S.153C OF THE ACT WERE INI TIATED VIDE NOTICE DATED 31.01.2008 FOR A.YS. 2001-02 TO 2007-08. THE ASSESSEE RESPONDE D ON 20.02.2008 BY STATING THAT HIS RETURN OF INCOME FOR THE RELEVANT YEAR (A.Y. 2005-0 6), AS ORIGINALLY FILED ON 31.10.2005, I.E., AT AN INCOME OF RS.43,94,190/-, MAY BE TREATE D AS FILED IN RESPONSE TO THE NOTICE U/S.153C. ASSESSMENT U/S. 143(3) R/W S. 153C WAS CO MPLETED ON 31.12.2008 AT AN INCOME OF RS.946.44 LACS. THE PRINCIPAL ADDITION WAS FOR R S.8.50 CRORES, BEING THE AMOUNT OF REFUNDABLE DEPOSIT/ADVANCE GIVEN TO THE ASSESSEE VI DE AN AGREEMENT DATED 25.02.2003 FOR DEVELOPMENT OF THE ELCO PROJECT, AND WHICH STOOD AG REED TO BE RELINQUISHED BY THE PAYER (GPE) IN FAVOUR OF THE ASSESSEE VIDE A SUBSEQUENT A GREEMENT DATED 22.10.2004 IN EXCHANGE OF DEVELOPMENT RIGHTS OVER 19050 SQ. FT. O F THE MARKET SALEABLE AREA AND SOME CAR PARKING SPACE IN THE ELCO PROJECT IN ITS FAVOUR (GPE, THE SECOND CO-DEVELOPER). THE SAME STOOD CONFIRMED IN FIRST APPEAL. THE APPELLATE TRIBUNAL, IN FURTHER APPEAL (IN ITA NO.6487/MUM/2009 DATED 29.10.2010), WHILE CONFIRMIN G THE REVENUES STAND IN PRINCIPLE, RESTORED THE MATTER BACK TO THE FILE OF THE A.O. TO ENABLE A CORRECT ASSESSMENT OF INCOME ON THE SALE OF THE SAID DEVELOPMENT RIGHTS; THE ASSESSEE CONTENDING OF HAVING INCURRED EXPENDITURE TOWARD THE ACQUISITION AND MAT URITY OF THE SAID RIGHTS, I.E., TOWARD EARNING RS.850 LACS. THE SAID EXPENDITURE WAS DETER MINED AT RS.750.19 LACS, RESULTING IN 3 ITA NO. 1751/MUM/2013 (A.Y. 2005-06) UMESH H. GANDHI VS. ASST. CIT A NET INCOME OF RS.99.81 LACS. THIS WAS THE SOLE AD DITION TO THE RETURNED INCOME, WHICH STOOD THUS ASSESSED AT RS.1,43,75,290/- VIDE ORDER U/S.143(3) R/W SS. 153C & 254 DATED 27.12.2011. THE ASSESSMENT HAVING BEEN FINALIZED TH US, THE A.O. INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT VIDE NOTICE U /S. 274 DATED 27/12/2011 (PB PG. 5). 2.2 THE PENALTY UNDER THE SAID SECTION WAS LEVIED A T THE MINIMUM AMOUNT OF 100% OF THE TAX ON THE SOLE ADDITION, WHICH HAD SINCE BEEN ACCEPTED BY THE ASSESSEE. IN APPEAL, THE LD. CIT(A) CONFIRMED THE SAME, DRAWING ON THE FACTU AL FINDINGS WHICH FORMED THE BASIS OF THE ASSESSMENT; THE SAME BEING ONLY AS CONFIRMED BY AND IN TERMS OF THE FINDINGS BY THE TRIBUNAL, THE FINAL FACT FINDING BODY. NO EXPLA NATION HAD BEEN OFFERED BY THE ASSESSEE. HIS CONTENTION OF THE REVENUE HAVING FAILED TO APPR ECIATE THAT THE ASSESSEE WAS IN FACT FOLLOWING THE PROJECT COMPLETION METHOD, WAS ALSO F OUND INVALID BY HIM INASMUCH AS THE SAME HAD IN FACT BEEN ALREADY NEGATED BY THE FIRST APPELLATE AUTHORITY IN THE QUANTUM PROCEEDINGS, I.E., IN THE FIRST ROUND. THERE WAS NO QUESTION OF THE COMPLETION OF THE PROJECT, AS WHAT HAD BEEN SOLD BY THE ASSESSEE WERE ONLY THE DEVELOPMENT RIGHTS IN THE SALEABLE AREA. THE ASSESSEES CLAIM OF THE RECOGNIT ION OF INCOME ONLY ON THE CONSTRUCTION OF THE PROJECT THUS COULD NOT BE COUNTENANCED, WHAT BEING RELEVANT IS THE RECOGNITION OF THE INCOME FOLLOWING THE GENERAL PRINCIPLE OF ACCRU AL OF THE CORRESPONDING RIGHT TO RECEIVE, AS ENUMERATED IN ACCOUNTING STANDARD (AS)- 9. DUE CREDIT FOR EXPENSES INCURRED HAD ALREADY BEEN ALLOWED. THERE WAS FURTHER NO QUES TION OF THE DISCLOSURE BEING VOLUNTARY INASMUCH AS THE SAME WAS BASED ONLY ON TH E MATERIALS FOUND BY THE REVENUE DURING SEARCH AND SURVEY. EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT STOOD FAIRLY ATTRACTED. RELIANCE WAS PLACED BY HIM ON THE DECISI ONS IN THE CASE OF CIT VS. C. ANANTHAN CHETTIAR [2005] 273 ITR 401 (MAD); P.C. JOSEPH & BROS. VS. CIT [2000] 243 ITR 818 (KER); K. L. SWAMY VS. CIT [1999] 239 ITR 386 (KAR); BHAIRAV LAL VERMA VS. UNION OF INDIA [1998] 230 ITR 855 (ALL); AND BANARAS CHEMICAL FACTORY VS. CIT [1977] 108 ITR 96 (ALL). AGGRIEVED, THE ASSESSEE IS IN SECOND APPE AL. 4 ITA NO. 1751/MUM/2013 (A.Y. 2005-06) UMESH H. GANDHI VS. ASST. CIT 3. BEFORE US, LIKE CONTENTIONS STOOD RAISED BY EITH ER SIDE. WHILE THE LD. AUTHORIZED REPRESENTATIVE (AR) WOULD CONTEND OF THE INCOME HAV ING BEEN DETERMINED ON ESTIMATE BASIS, SO THAT NO PENALTY IS IMPOSABLE UNDER THE CI RCUMSTANCES, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELIED ON THE ORDERS OF THE AUT HORITIES BELOW, CLAIMING THEM TO BE ON PROPER APPRECIATION OF FACTS, APPLYING THE LAW IN T HE MATTER, SO THAT NO INTERFERENCE WAS CALLED FOR. THE ASSESSEE WOULD ALSO CONTEND OF THE PENALTY BEING TIME BARRED INASMUCH AS THE PENALTY ORDER STOOD PASSED ONLY ON 28.06.2012 E VEN AS THE ORDER BY THE FIRST APPELLATE AUTHORITY IN THE FIRST ROUND, DISMISSING THE ASSESS EES APPEAL, WAS PASSED ON 26.11.2009. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 4.1 OUR FIRST OBSERVATION IS THAT OF THE ASSESSEES CASE BEING SANS ANY EXPLANATION, I.E., ON THE MERITS OF THE CASE. THERE HAS BEEN NO RETURN ING BY THE ASSESSEE OF THE IMPUGNED INCOME, STATED TO HAVE BEEN SO TO BUY PEACE WITH TH E DEPARTMENT. THE INCOME STOOD NOT REVISED EVEN ON THE RELEVANT AGREEMENTS, I.E., DATE D 25.02.2003 AND 22.10.2004, HAVING BEEN DISCOVERED BY THE REVENUE IN THE SEARCH AND SU RVEY PROCEEDINGS; THE ASSESSEE, IN SECTION 153C PROCEEDINGS RETURNING THE INCOME AS OR IGINALLY RETURNED, I.E., AT RS.43.94 LACS, AND WHICH IS DE HORS THE INCOME ON THE RECEIPT OF RS.8.50 CRORES. RELIA NCE ON THE DECISION IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS (P.) LTD . [2010] 322 ITR 158 (SC), WHEREIN, RATHER, IT STANDS CLARIFIED BY THE APEX CO URT THAT IT ALL DEPENDS ON THE RETURN OF INCOME, IS THUS CLEARLY MISPLACED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4.2 OUR SECOND OBSERVATION IN THE MATTER IS THAT TH E ONLY INCOME ADDED IN ASSESSMENT IS QUA THE TRANSFER OF DEVELOPMENT RIGHTS IN THE ELCO PRO JECT (OVER 19050 SQ. FT.) TO GPE IN OCTOBER, 2004 FOR A CONSIDERATION OF RS.850 LACS, S O THAT THE SAME WAS NO LONGER LIABLE TO BE REFUNDED. THERE IS NO FURTHER OBLIGATION ON THE ASSESSEE, AND WHICH IN ANY CASE HAS BEEN FACTORED INTO BY ALLOWING DEDUCTION FOR ALL TH E EXPENSES IN RELATION THERETO, AS STOOD INCURRED UP TO THE RELEVANT DATE. BEFORE US THE ASSESSEE WOULD CONTEND THAT ONLY THE EXPENDITURE INCURRED UP TO A.Y. 2005-06 HAS BEEN TAKEN INTO ACCOUNT. THE SAME IS ONLY CONSISTENT AND IN AGREEMENT 5 ITA NO. 1751/MUM/2013 (A.Y. 2005-06) UMESH H. GANDHI VS. ASST. CIT WITH THE FACTS OF THE CASE INASMUCH AS THE ASSESSEE EXERCISED, VIDE AGREEMENT DATED 22.10.2004, THE OPTION TO NOT REFUND RS.8.50 CRORES ALREADY RECEIVED BY HIM, IN EXCHANGE OF CERTAIN MARKETABLE AREA, EVEN AS CONFIRMED BY GP E, THE SECOND CO-DEVELOPER OF THE ELCO PROJECT, VIDE ITS LETTER DATED 16.07.2009 (PB PGS.293-294). ACCORDINGLY, THE EXPENSES INCURRED BY THE ASSESSEE, AS A CO-DEVELOPE R, ONLY UP TO THE RELEVANT YEAR-END, I.E., THE PREVIOUS YEAR RELEVANT TO A.Y. 2005-06, W ERE REQUIRED TO BE TAKEN INTO ACCOUNT. THERE HAS THUS BEEN IN FACT OBSERVANCE OF THE PRINC IPLE OF MATCHING OF REVENUE AND EXPENDITURE, VIOLATION OF WHICH STANDS CLAIMED BY T HE ASSESSEE. THE ASSESSEE FURTHER CLAIMS TO HAVE INCURRED EXPEND ITURE ON THE ELCO PROJECT EVEN UP TO 31.03.2011, WHICH IN FACT IS NOT COMPLETE EVE N TILL THEN, WITH THE OCCUPANCY CERTIFICATE HAVING NOT BEEN RECEIVED EVEN BY THAT D ATE (PB PG. 349). WE ARE AGAIN UNABLE TO UNDERSTAND THE RELEVANCE OF THE SAME, I.E., THE EXPENDITURE INCURRED AFTER THE DATE OF AGREEMENT/TRANSFER. THE ASSESSEE STANDS ALLOWED A T OTAL AREA OF 56838 SQ. FT. IN THE SAID PROJECT, OF WHICH IT RELEASED A PART (19050 SQ. FT. ) IN FAVOUR OF THE SECOND CO-DEVELOPER FOR AN AGREED CONSIDERATION OF RS.850 LACS DURING THE R ELEVANT YEAR. THE REVENUE HAS NOT BROUGHT THE INCOME ON AN ONGOING PROJECT TO TAX, BU T ONLY THAT ARISING ON THE SALE OF THE DEVELOPMENT RIGHTS IN A LIMITED AREA, THE INCOME QUA WHICH STANDS WITHOUT DOUBT ACCRUED TO AS WELL AS RECEIVED, I.E., AS INCOME, BY THE ASS ESSEE DURING THE CURRENT YEAR. THE EXPENDITURE BEING REFERRED TO IS THAT ATTRIBUTABLE TO THE BALANCE AREA FALLING TO HIS SHARE OR REMAINING WITH HIM (REFER PB-II), CLEARLY INDICTING THE ASSESSEES STAND AND VINDICATING THAT OF THE REVENUE. RATHER, AS IT WOULD APPEAR TO US, THE EXPENDITURE UP TO THE RELEVANT YEAR HAS ALSO BEEN ALLOWED IN TOTO , AND NOT BY APPORTIONING IT OVER OR ATTRIBUTABLE T O THE RELEVANT AREA, I.E., 19050 SQ. FT. BE THAT AS IT MA Y, THERE IS NO OR POSSIBLY COULD NOT BE ANY DISPUTE WITH REGARD TO THE INCOME AS FINALLY ASSESS ED, BEING ONLY IN TERMS OF THE FACTS AND FIGURES AS FURNISHED BY THE ASSESSEE. IN FACT, THE REVENUE HAS ALSO NOT AT ALL CONSIDERED THE INCOME BY WAY OF CASH RECEIPTS FOR RS.75 LACS RECEIVED ON THE SALE OF SHO PS IN ELCO PROJECT, AS AFFIRMED BY THE ASSESSEE VIDE HIS DEPOSITION DATED 13.02.2007. THE ASSESSEE HAS CLEARLY FAILED TO RENDER ANY EXPLANATION, MUCH LESS SUBSTANTIATE THE SAME, A S WELL AS TO ESTABLISH HIS BONA FIDE S IN 6 ITA NO. 1751/MUM/2013 (A.Y. 2005-06) UMESH H. GANDHI VS. ASST. CIT THE MATTER, WITH THERE BEING NO MEETING OF THE REBU TTAL OF HIS FACTUAL CLAIMS BY THE LD. CIT(A), AS WELL AS OF THE LATTERS RELIANCE ON CASE LAW, WHICH WE FIND AS APPOSITE, IN THE PENALTY PROCEEDINGS. REFERENCE IN THIS CONTEXT MAY ALSO BE MADE TO PARA 6/PGS.5-9 OF THE IMPUGNED ORDER AS WELL AS PARA 2.2 OF THIS ORDER. 4.3 THOUGH THE ASSESSEE HAS, AS AFORE-NOTED, NOT EX PLAINED AS TO HOW THE CASE LAW RELIED UPON BY THE REVENUE, WHICH WE HAVE PERUSED, IS NOT APPLICABLE, AS CLAIMED BY HIM, HE PLACES RELIANCE (PER WRITTEN SUBMISSIONS) ON SOM E CASE LAW, VIZ. METAL ROLLING WORKS LTD. V. CIT [2011] 339 ITR 373 (BOM); CIT VS. DHARAMCHAND L. SHAH [1993] 204 ITR 462 (BOM); CIT VS. AT & T COMMUNICATION SERVICES INDIA (P.) LT D. [2012] 342 ITR 257 (DEL), NONE OF WHICH WERE THOUGH ADVERTED TO DURING HEARING. THE SAME ARE TOWARD THE FINDINGS IN THE QUANTUM PROCEEDINGS BEING NOT CONCL USIVE OF PENALTY; DEBATABLE ISSUES, AS WELL AS POSSIBILITY OF TWO POSSIBLE VIEWS, PRECLUDI NG PENALTY. WE ARE UNABLE TO SEE AS TO HOW THE SAME, WHICH REPRESENT PART OF THE WELL SETT LED PROPOSITIONS QUA THE LAW ON PENALTY, ARE APPLICABLE IN THE FACTS AND CIRCUMSTAN CES OF THE INSTANT CASE, FOR THE SAID CASE LAW TO BE OF RELEVANCE, I.E., ON FACTS. 4.4 THE ASSESSEES LEGAL PLEA, I.E., WITH REGARD TO THE IMPUGNED PENALTY BEING TIME BARRED WITH REFERENCE TO SECTION 275 OF THE ACT, RA ISED BEFORE US FOR THE FIRST TIME, IS ALSO SANS ANY MERIT. THE ASSESSMENT IN THE FIRST ROUND HAVIN G BEEN SET ASIDE BY THE TRIBUNAL, NO PENALTY PROCEEDINGS, EVEN WHERE INITIATED THEREAT, WOULD SURVIVE, AND WOULD STAND TO BE VACATED. THE ASSESSMENT TO BE RECKONED, SIMULTANEOU S WITH THE CONCLUSION OF WHICH THE PENALTY PROCEEDINGS STOOD INITIATED VIDE NOTICE U/S .274, IS THAT IN THE SECOND ROUND, COMPLETED VIDE ORDER U/S.143(3) R/W SS. 153C & 254 OF EVEN DATE (27/12/2011). THE ASSESSMENT ORDER UNDER REFERENCE BEING NOT SUBJECT TO EITHER APPEAL OR REVISION, THE RELEVANT PROVISION IS S. 275(1)(C), WHICH YIELDS TH E TIME LIMIT AT 30.06.2012 , WHILE THE PENALTY ORDER STANDS PASSED ON 28.06.2012. THE SAME IS, THEREFORE, WITHIN TIME. THE CASE LAW RELIED UPON IS THUS OF NO ASSISTANCE. 7 ITA NO. 1751/MUM/2013 (A.Y. 2005-06) UMESH H. GANDHI VS. ASST. CIT 5. IN VIEW OF THE FOREGOING, WE CONFIRM THE LEVY OF THE PENALTY, WHICH IS AT THE MINIMUM APPLICABLE RATE. WE DECIDE ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSE D. 1/+23451+' 1'+6 ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 21, 2013 SD/- SD/- (D. MANMOHAN) (SANJAY ARORA) / VICE PRESIDENT / ACCOUNTANT MEMBER ( 7* MUMBAI; 8 DATED : 21.11.2013 )3 ROSHANI , SR. PS ! ' #$%& ' &$ COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( 9+ : ; / THE CIT(A) 4. ( 9+ / CIT - CONCERNED 5. <)=>$3+3?4 ,?4/ ( 7* / DR, ITAT, MUMBAI 6. >5@* GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , ( 7* / ITAT, MUMBAI