ACIT, CHENNAI V. M/s. Real Value Promoters P. Ltd., CHENNAI

ITA 1879/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61091 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 21-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANTHOSH KUMAR
• Keywords: Business income; Business expenditure; Bonafide belief
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NO. 1879/MDS/2011 [ASSESSMENT YEAR 2007-08] THE A.C.I.T COMPANY CIRCLE V(3) CHENNAI 600 034. (APPELLANT) VS. M/S REAL VALUE PROMOTERS P. LTD NO. 455, ANNA SALAI TEYNAMPET CHENNAI 600 018. PAN : AAMFS 5998 R (RESPONDENT) REVENUE BY : SHRI SANTHOSH KUMAR, JC IT ASSESSEE BY : NONE DATE OF HEARING : 15.05.2012 DATE OF PRONOUNCEMENT : 15.05.2012 O R D E R PER V. DURGA RAO, JM : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-V, CHENNAI DATED 23.09.2011 FOR THE ASSESSMENT YEAR 2007-08. 2 ITA NO. 1879/MDS/2011 2. FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS IN THE BUSINESS OF CONSTRUCTION OF BUILDINGS AND PROMOTION OF FLATS. THE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 13.11.2007 ADMITTING TOTAL INCOME OF RS. 10,80,89,5 00/-. THE ASSESSING OFFICER, PROCESSED THE RETURN FILED BY TH E ASSESSEE U/S 143(1) OF THE INCOME-TAX ACT, 1961 AND SUBSEQUENTLY AFTER FOLLOWING DUE PROCESS, COMPLETED ASSESSMENT U/S 143(3) OF THE I.T. ACT, 1961 BY ASSESSING THE INCOME OF THE ASSESSEE AT RS. 11,2 8,77,048/- ON THE GROUND THAT THE LAND DEVELOPMENT CHARGES ADDED U/S 40A(IA) OF THE ACT OF RS. 12,20,100/- AND AN AMOUNT OF RS. 35,67,4 48/- WAS ADDED UNDER THE HEAD BUSINESS. SUBSEQUENTLY, THE ASSES SING OFFICER ISSUED NOTICED U/S 271(1)(C) OF THE ACT BY REQUIRIN G THE ASSESSEE TO EXPLAIN AS TO WHY PENALTY SHOULD NOT BE IMPOSED. I N RESPONSE THERETO, THE ASSESSEE HAS EXPLAINED AS UNDER: THE COMPANYS ASSESSMENT WAS SELECTED FOR SCRUTINY U/S 143(2) AND ASSESSMENT WAS COMPLETED BY TREATING INC OME FROM LETTING OUT A PORTION OF COMPANYS PROPERTY AS HOUSE PROPERTY INCOME SEPARATELY AND NOT AS A BUSINESS IN COME AS IS BEING OFFERED BY THE COMPANY AND ALSO DISALLOWING E XPENSES 3 ITA NO. 1879/MDS/2011 U/S 40A(IA) OF THE ACT, PORTION OF LAND DEVELOPMENT EXPENSES, DUE TO OUR INABILITY TO PRODUCE DOCUMENTARY EVIDENC E AND NOT DEDUCTING TDS ON THE SAME. THE COMPANY HAS OFFERED THE INCOME FROM THE PROPERT Y A BUSINESS INCOME AS IT WAS ENGAGED IN FLAT PROMOTION DEVELOPING AND LETTING OF PROPERTY ON RENTALS. THE ASSESSING OFFICER HAD DIRECTED AND COMPLETED ASSESSMENT BY TR EATING THE INCOME FROM LETTING OF BUILDING ON RENTALS AS I NCOME. AS PER THE DECISION OF THE HON'BLE JURISDICTIONAL H IGH COURT IN CIT VS. CHENNAI PROPERTIES AND INVESTMENTS LTD [200 4] 136 TAXMANN 202 [MAD] IN RESPECT OF A COMPANY FORMED W ITH THE OBJECT OF DEALING IN PROPERTIES THE INCOME DERIVED FROM LETTING OUT OF BUILDINGS BELONGING TO IT IS ASSESSA BLE AS INCOME FROM HOUSE PROPERTY IN THE CASE OF SHAMBHU INVESTMENTS P. LTD VS. CIT [ 2003] 263 ITR SC, IT IS HELD THAT WHEREFROM AGREEMENT BETWEEN TWO PARTIES IT WAS CLEAR THAT PRIMARY OBJECT WAS TO LET OUT PORTION OF PROPERTY WITH ADDITIONAL RIGHT OF USING FURNITUR E AND FIXTURES AND OTHER COMMON FACILITIES INCOME DERIVED FROM THE SAME PROPERTY WAS INCOME FROM PROPERTY WHICH SHOULD BE ASSESSED AS SUCH. 4 ITA NO. 1879/MDS/2011 3. THE ASSESSING OFFICER, AFTER CONSIDERING THE EXP LANATION OF THE ASSESSEE, WAS OF THE OPINION THAT THE ASSESSEE DELI BERATELY OFFERED THE SAID INCOME UNDER THE HEAD BUSINESS INCOME IN STEAD OF OFFERING THE SAME AS FROM HOUSE PROPERTY AND HENC E HE LEVIED PENALTY U/S 271(1)(C) OF THE ACT. AGGRIEVED, THE A SSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). 4. BEFORE THE LD. CIT(A), IT WAS SUBMITTED BY THE L D. A.R. THAT IN SO FAR AS THE ADDITION IN RESPECT OF SECTION 40A(IA ) OF THE ACT IS CONCERNED, DETAILS WERE SUBMITTED BEFORE THE ASSES SING OFFICER IN THE ORIGINAL ASSESSMENT PROCEEDINGS. THERE IS NEITH ER ANY CONCEALMENT OF INCOME NOR FURNISHING OF ANY INACCUR ATE PARTICULARS OF INCOME U/S 271(1)(C) OF THE ACT. 5. THE LD. COMMISSIONER OF INCOME-TAX, AFTER CONSID ERING THE EXPLANATION OF THE ASSESSEE, DELETED THE ADDITION B Y OBSERVING THAT THE ASSESSING OFFICER HAS NOT DOUBTED THE GENUINENE SS OF THE PAYMENTS MADE AND EXPENSES CLAIMED OTHERWISE HAVE B EEN 5 ITA NO. 1879/MDS/2011 CONSIDERED AS ALLOWABLE BUT FOR VIOLATION OF PROVIS IONS OF SECTION 40A(IA) OF THE ACT. 6. IN SO FAR THE INCOME UNDER THE HEAD BUSINESS I S CONCERNED, IT WAS SUBMITTED BEFORE THE LD. COMMISSIONER OF INCOME -TAX THAT THE ASSESSEE BEING A BUILDER AND PROMOTER DEVELOPING PR OPERTY, FROM ONE PROPERTY WHICH IS IN DISPUTE REMAINED UNSOLD, H E EARNED INCOME BY LETTING IT OUT ON LEASE DURING THE YEAR UNDER CO NSIDERATION. THE SAME WAS CLAIMED AS BUSINESS EXPENDITURE. CONSIDERI NG THE ABOVE EXPLANATION OF THE ASSESSEE, THE LD. COMMISSIONER O F INCOME-TAX DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING THAT THE ASSESSEE HAS FILED ALL PARTICULARS OF INCO ME AND IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE EXPLANATION OFFERED BY THE ASSESSEE WAS FOUND TO BE FALSE OR UNTRUE AND DELETE D THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED, THE REVE NUE IS IN APPEAL BEFORE THE TRIBUNAL. 7. AT THE TIME OF HEARING, THE LD. D.R. STRONGLY SU PPORTED THE ORDER PASSED BY THE ASSESSING OFFICER. 6 ITA NO. 1879/MDS/2011 8. NONE APPEARED FOR AND ON BEHALF OF THE ASSESSEE AT THE TIME OF HEARING. SINCE THIS ISSUE CAN BE DECIDED IN THE ABSENCE OF THE ASSESSEE, WE ARE DECIDING THIS ISSUE AS UNDER. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE MATERIAL AVAIL ABLE ON RECORD. THE ASSESSING OFFICER IMPOSED PENALTY IN RESPECT OF NON-DEDUCTION OF TDS U/S 40A(IA) OF THE ACT. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE CONCEALED INCOME OR FURNI SHED ANY INACCURATE PARTICULARS OF INCOME. THIS ADDITION WAS MADE ON THE BASIS OF STATUTORY VIOLATION MADE BY THE ASSESSEE. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE PAYMENT WAS NOT G ENUINE OR EXPENDITURE INCURRED BY THE ASSESSEE IS DOUBTFUL. IT WAS SUBMITTED BEFORE THE LD. COMMISSIONER OF INCOME-TAX THAT THE TDS WAS NOT DEDUCTED UNDER THE BONAFIDE BELIEF THAT THE PAYMENT S WERE MADE TO TEMPORARY LABOURERS AND THE PAYMENT TO EACH INDI VIDUAL WAS LESS THAN RS. 50,000/- DURING THE PERIOD AND LESS THAN R S. 20,000/- ON EVERY PAYMENT. THE LD. COMMISSIONER OF INCOME-TAX DELETED THE 7 ITA NO. 1879/MDS/2011 PENALTY IMPOSED BY THE ASSESSING OFFICER. WE FIND NO INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX DEL ETING THE PENALTY IN SO FAR AS THIS COUNT IS CONCERNED. 10. IN SO FAR AS PENALTY IN RESPECT OF BUSINESS INC OME IS CONCERNED, THE ASSESSEE IS ALREADY IN THE BUSINESS OF CONSTRUCTION OF BUILDING AND PROMOTION OF FLATS. HE WAS UNABLE TO SELL ONE PROPERTY DURING THE YEARS UNDER CONSIDERATION IMMEDIATELY. THE SAME WAS GIVEN FOR LEASE. THE AMOUNT COLLECTED WAS SHOWN AS BUSINESS INCOME. IT WAS EXPLAINED BEFORE THE ASSESSING OFFI CER AS WELL AS THE LD. COMMISSIONER OF INCOME-TAX THAT HE WAS UNDER TH E BONAFIDE BELIEF THAT INCOME EARNED BY THE ASSESSEE IS BUSINE SS INCOME BECAUSE HE IS IN THE BUSINESS OF CONSTRUCTION OF BU ILDINGS AND PROMOTION OF FLATS. WE FIND FORCE IN THE EXPLANATI ON GIVEN BY THE ASSESSEE. THE HON'BLE SUPREME COURT IN THE CASE OF CITVS. RELIANCE PETRO PRODUCTS [P] LTD [2010] 322 ITR 158 [SC] HAS HELD AS UNDER: 8 ITA NO. 1879/MDS/2011 A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME- TAX ACT, 1961 SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INC OME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISH ED INACCURATE PARTICULARS OF INCOME. THE MEANING OF T HE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRA CE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GI VEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PART ICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISIONS, THE PENALTY PRO VISION CANNOT BE INVOKED. BU NO STRETCH OF IMAGINATION CA N MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING OF INAC CURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHI NG WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAU SE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH TH E PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS A RE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRA CT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCU RATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERR ONEOUS. WHERE THERE IS NO FINDING THAT NAY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE, THERE IS NO QUESTION OF INVITING THE PENA LTY U/S 9 ITA NO. 1879/MDS/2011 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT OF FURNISHIN G INACCURATE PARTICULARS. DECISION OF THE GUJARAT HIGH COURT AFFIRMED. IN VIEW OF THE ABOVE DECISION OF THE HON'BLE SUPREM E COURT AND FINDING NO INFIRMITY IN THE ORDER OF THE LD. COMMIS SIONER OF INCOME- TAX, THIS GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. THIS GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON WEDNESDAY, THE 15 TH OF MAY, 2012, AT CHENNAI. SD/- SD/- (O.K. NARAYANAN) (V. DURGA RAO) VICE PRESIDENT JUDICIAL MEMB ER CHENNAI, DATED THE 15 TH APRIL, 2012. 10 ITA NO. 1879/MDS/2011 VL/- COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A), CHENNAI (4) CIT, CHENNAI (5) D.R. (6) GUARD FILE