DCIT CEN CIR 5(1), MUMBAI V. AKRUTI KAILASH CONSTRUCITON, MUMBAI

ITA 1978/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6277 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 02-04-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Initiation of penalty proceedings; Difference of opinion
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHR I MANOJ KUMAR AGGARWAL , ACCOUNTANT MEMBER ITA NO. 1978 / MUM . /201 8 ( ASSESSMENT YEAR : 20 12 13 ) DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 5 (1), MUMBAI . APPELLANT V/S AKRUTI KAILASH CONSTRUCTION 6 TH FLOOR, AKRUTI TRADE CENTRE ROAD NO.7, MAROL MIDC ANDHERI (E), MUMBAI 400 093 PAN AAEFA9859K . RESPONDENT ASSESSEE BY : SHRI PAVAN VED REVENUE BY : SHRI MANOJ KUMAR DATE OF HEARING 2 9 .0 8 .2019 DATE OF ORDER 11.10.2019 O R D E R PER SAKTIJIT DEY. J.M. AFORESAID APPEAL BY THE REVENUE IS AGAINST ORDER DATED 18 TH JANUARY 2018, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 53, MUMBAI, DELETING THE PENALTY IMPOSED OF ` 1,06,12,880, UNDER SECTION 271(1)(C) OF THE INCOME - TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 2012 13. 2 . BRIEF FACTS ARE, THE ASSESSEE , A PARTNERSHIP FIRM , IS ENGAGED IN THE BUSINESS OF PROPERTY DEVELOPMEN T. FOR THE ASSESSMENT YEAR UNDER 2 AKRUTI KAILASH CONSTRUCTION DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 31 ST JULY 2012, DECLARING LOSS OF ` 3,36,32,538. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER WHILE VERIFYING THE RETURN OF INCOME FILED BY THE ASSESSEE NOTICED THAT THE ASSESSEE HAS OFFERED INTEREST INCOME OF ` 70,492, UNDER THE HEAD INCOME FROM OTHER SOURCES. WHEREAS, IT HAS S HOWN LOSS OF ` 3,43,45,900, UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION. ON A PERUSAL OF THE PROFIT & LOSS ACCOUNT, HE NOTICED THAT THE LOSS SHOWN BY THE ASSESSEE IS MAINLY DUE TO VARIOUS EXPENSES , SUCH AS , ADMINISTRATIVE EXPENSES , EMPLOYEE COST ETC . DEBITED TO THE PROFIT & LOSS ACCOUNT. HE OBSERVED , AS PER SECTION 57 OF THE ACT, ONLY EXPENDITURE INCURRED FOR EARNING THE INCOME CAN BE ALLOWED. THUS, HE CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY THE EXPENDITURE DEBITED TO THE PROFIT & LOSS ACCOUNT SHOULD NOT BE DISALLOWED. THOUGH , THE ASSESSEE JUSTIFIED THE EXPENDITURE DEBITED TO THE PROFIT & LOSS ACCOUNT, HOWEVER, THE ASSESSING OFFICER DID NOT FIND MERIT IN THEM. HE OBSERVED , SINCE THE ASSESSEE HAS UNDERTAKEN A SINGLE DEVELOPMENT PROJECT DURING THE YEAR , THE EXPENDITURE INCURRED SHOULD HAVE BEEN CAPITALIZED AND TRANSFERRED TO WORK IN PROGRESS (WIP) ACCOUNT AND SHOULD NOT HAVE BEEN DEBITED TO THE PROFIT & LOSS ACCOUNT. ACCORDINGLY, HE DISALLOWED THE LOSS CLAIMED BY THE ASSESSEE WHICH RESULTED IN DETE RMINATION OF INCOME AT ` 5,70,840. AS IT APPEARS FROM THE FACTS ON RECORD, THE ASSESSEE DID NOT CONTEST THE AFORESAID DECISION OF THE ASSESSING OFFICER. THUS, ON THE BASIS OF DISALLOWANCE OF 3 AKRUTI KAILASH CONSTRUCTION LOSS CLAIMED BY THE ASSESSEE, THE ASSESSI NG OFFICER INITIATED PRO CEEDING FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ALLEGING FURNISHING OF INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME. THOUGH, THE ASSESSEE FILED ITS EXPLANATION OBJECTING TO THE INITIATION OF PENALTY PROCEEDINGS AND SUBMIT TED THAT NEITHER THERE IS CONCEALMENT OF INCOME N OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, HOWEVER, THE ASSESSING OFFICER REJECTING THE EXPLANATION OF THE ASSESSEE PROCEEDED TO IMPOSE PENALTY OF ` 1,06,12,880, UNDER SECTION 271(1)(C) OF THE ACT. T HE ASSESSEE CHALLENGED THE PENALTY IMPOSED BEFORE THE FIRST APPELLATE AUTHORITY. 3 . THE LEARNED COMMISSIONER (APPEALS) , AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIAL ON RECORD, OBSERVED THAT NONE OF THE EXPENDITURES C LAIMED BY THE ASSESSE E WERE FOUND TO BE BOGUS BY THE ASSESSING OFFICER. HE OBSERVED , THE FACT THAT THE ASSESSEE HAS UNDERTAKEN DEVELOPMENT OF THE PROJECT AND OTHER INCOME IN RESPECT OF THE SAME PROJECT ON SALE OF TDR AND FSI IN EARLIER YEARS HAS NOT BEEN D ISPUTED. HE FOUND THAT THE ASSESSEE HAD SUBSTANTIAL BORROWINGS WHICH HAVE BEEN UTILIZED IN DEVELOPMENT OF THE PROJECT. FURTHER, SALES MADE IN EARLIER YEARS HAVE NOT BEEN RECEIVED FULLY WHICH IS EVIDENT FROM THE LIST OF DEBTORS REFLECTED IN THE BALANCE SHEE T. WHEREAS, BORROWINGS OF EARLIER YEA R S HAVE NOT BEEN RE PAID FULLY. THE MAJOR EXPENDITURE IS ON ACCOUNT OF 4 AKRUTI KAILASH CONSTRUCTION INTEREST COST. HE OBSERVED , THE ONLY DISPUTE RAISED BY THE ASSESSING OFFICER IS , THE INTEREST COST AND ADMINISTRATIVE EXPENDITURE SHOULD HAVE BEEN C APITALIZED INSTEAD OF DEBITING TO THE PROFIT & LOSS ACCOUNT. THUS, HE OBSERVED , MERELY BECAUSE THE EXPENDITURE WAS REQUIRED TO BE CAPITALIZED WOULD NOT LEAD TO EITHER CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. FURTHER , HE OBSE RVED , TREATING THE EXPENDITURE AS WIP IS MERE DEFERRAL OF INCOME. FURTHER, THERE WAS NO TAXABLE INCOME AND TAX PAYABLE EVEN AFTER ASSESSMENT. THUS, THERE CANNOT BE A MOTIVE ON THE PART OF THE ASSESSEE TO EVADE TAX. THUS, IN THE AFORESAID PREMISES, LEARNED COMMISSIONER (APPEALS) DELETED THE PENALTY IMPOSED UNDER SECTION 271 (1)(C) OF THE ACT. 4 . THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , THE VERY FACT T HAT THE ASSESSEE DID NOT CONTEST THE DECISION OF THE ASSESSING OFFICER IN DIRECTING CAPITALIZATION OF THE EXPENDITURE PROVES THE FACT THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THEREFORE, IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS JUSTIFIED. 5 . PER CONTRA, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , IT IS ONLY A DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE ASSESSING OFFICER WITH REGARD TO THE NATURE OF EXPENDITURE , WHETHER REVENUE OR CAPITAL. HE SUBMITTED , THE ASSESSING OFFICER HAS NEITHER DISPUTED NOR DOUBTED THE GENUINENESS OF EXPENDITURE INCURRED BY THE A SSESSEE. HE 5 AKRUTI KAILASH CONSTRUCTION SUBMITTED , EVEN IF THE EXPENDITURE IS CAPITALIZED IT HAS TO BE ALLOWED IN THE SUBSEQUENT YEARS ON COMPLETION OF THE PROJECT AND RECOGNITION OF THE REVENUE FROM THE PROJECT. HE SUBMITTED , THE ASSESSEE HAS FURNISHED FULL PARTICULARS OF THE EXPEND ITURE INCURRED IN ITS FINANCIAL STATEMENTS. THEREFORE, IT IS NOT A CASE OF EITHER CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THUS, HE SUBMITTED , LEARNED COMMISSIONER (APPEALS) WAS JUSTIFIED IN DELETING THE PENALTY IMPOSED UNDE R SECTION 271(1)(C) OF THE ACT. 6 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. IT IS EVIDENT, THE ASSESSING OFFICER HAS NEITHER DOUBTED NOR DISPUTED THE GENUINENESS OF EXPENDITURE INCURRED BY THE ASSESSEE. IN ASSESSING OFFICERS OPINION, SINCE THE DEVELOPMENT OF PROJECT UNDERTAKEN B Y THE ASSESSEE IS IN PROGRESS , INSTEAD OF DEBITING THE EXPENDITURE TO THE PROFIT & LOSS ACCOUNT, THE ASSESSEE SHOULD HAVE CAPITALIZED IT BY TRANSFERRING TO WIP. THUS, THERE IS ONLY A DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND THE ASSESSING OFFICER WITH REGARD TO THE NATURE OF EXPENDITURE. IT IS ALSO A FACT ON RECORD THAT ALL THE NECESSARY INFO RMATION RELATIN G TO THE EXPENDITURE HAS BEEN FULLY DISCLOSED BY THE ASSESSEE IN THE FINANCIAL STATEMENT S. IN SUCH CIRCUMSTANCES, THE ASSESSEE CANNOT BE ACCUSED OF EITHER FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALING THE INCOME. AS RIGHTLY OBSERVED BY THE LEARNED COMMISSIONER (APPEALS), THERE IS NO DISPUTE 6 AKRUTI KAILASH CONSTRUCTION WITH REGARD TO THE DEVELOPMENT OF PROJECT BY THE ASSESSEE AND TREATING THE EXPENSES AS WORK IN PROGR ESS IS MERELY DEFERRAL OF EXPENSES. IN VIEW OF THE AFORESAID, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LEARNED COMMISSIONER (APPEALS) IN DELETING THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. GROUNDS RAISED ARE DISMISSED. 7 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN C OURT ON 11.10.2019 SD/ - MANOJ KUMAR AG GARWAL ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 11.10.2019 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI