Shri Divyesh J.Patel, Surat V. The ACIT.,Circle-3, Surat

ITA 2142/AHD/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9356 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2004-2005
• Appeal Filed On: 22-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAILAJA RAI
• Keywords: Business expenditure

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH, JM AND D.C.AGRAWAL, AM SHRI DIVYESH J. PATEL, 35, KHADKI STREET, NR. BANK OF INDIA, ADAJANGAM, SURAT. VS. ASSTT. CIT,, CIRCLE-3, SURAT. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- NONE RESPONDENT BY:- SMT. SHAILAJA RAI, DR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS:- (1) THAT ON THE FACTS AND CIRCUMSTANCE OF THE CASE, THE LD. CIT(A) HAS ERRED IN SUSTAINING THE IMPOSITION OF PENALTY O F RS.52,656/- U/S 271(1)(C) OF THE ACT. (2) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN SUSTAINING THE PENALTY WITHOUT JUSTIFY ING THE BASIC REQUIREMENT OF THE PROVISIONS OF LAW AS TO EITHER CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. (3) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN SUSTAINING THE PENALTY WITHOUT APPRECI ATING THE TRUE AND CORRECT FACTS OF THE CASE. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS LEVY O F PENALTY UNDER SECTION 271(1)(C)FOR A SUM OF RS.52,656/-. THE FACT S OF THE CASE ARE THAT ASSESSEE IS A BUILDER AND THE PROPRIETOR OF M/S BHA KTI CORPORATION. DURING ITA NO.2142/AHD/2010 ASST. YEAR :2004-05 ITA NO.2141/AHD/2010 ASST. YEAR 2004-05 2 THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT ASSESSEE HAS CLAIMED DEDUCTION OF RS.1,74,250/- UNDER THE HEAD EXTRA COVERAGE PREMIUM EXPENSES. WHEN ASKED TO SUBMIT THE EVIDENC E, THE ASSESSEE PRODUCED THE COPY OF RECEIPT ISSUED BY THE SURAT MU NICIPAL CORPORATION (SMC IN SHORT), WHICH SHOWED PAYMENT OF RS.3,48,500 /- MADE BY THE FATHER OF THE ASSESSEE SHRI JASHVANTBHAI G. PATEL. IT WAS ACCOUNTED FOR IN THE BOOKS OF HUF THAT PAYMENT WAS MADE IN THE PREVI OUS YEAR RELEVANT TO ASST. YEAR 2003-04. THIS SUM WAS TRANSFERRED IN EQU AL PROPORTION IN THE ACCOUNT OF ASSESSEE AND HIS BROTHER SHRI DIVYESH J. PATEL. THE EXPLANATION OF THE ASSESSEE WAS THAT PROJECT WAS COMPLETED THIS YEAR AND, THEREFORE, THE PAYMENT MADE TO SMC WAS FINALLY DEBITED IN THE PROJECT THIS YEAR. FURTHER THE PAYMENT WAS ALREADY ACCOUNTED FOR IN TH E BOOKS OF HUF AND, THEREFORE, THERE WAS NO CONCEALMENT. THE AO, HOWEVE R, DID NOT AGREE AND HELD THAT ONCE EXPENDITURE IS ALREADY ACCOUNTED FOR IN THE BOOKS OF HUF AND THERE IS NO REASON TO TRANSFER THE SAME IN THE BOOKS OF THE ASSESSEE. HE ACCORDINGLY MADE THE ADDITION. IN PENALTY PROCEE DINGS THE ASSESSEE FURNISHED SAME EXPLANATION THAT PROJECT WAS COMPLET ED THIS YEAR AND, THEREFORE, EXPENDITURE PERTAINING TO THE PROJECT WA S DEBITED IN THE ACCOUNT OF THIS YEAR. THE ASSESSEE HAD IN FACT FURNISHED FO LLOWING EXPLANATION:- I HAVE NOT FURNISHED ANY INACCURATE PARTICULARS OF INCOME. AS I HAVE STARTED CONSTRUCTION PROJECT IN THE NAME OF BHAKTI CORPORATION. THE LAND BELONGS TO SHRI JASWANTLAL GIRDHARLAL PATEL (HUF). DURING THE YEAR UNDER CONSIDERATION, THERE WAS SURVEY ACTION TOOK P LACE ON 16/10/2003 AND AFTER VERIFYING THE MATERIAL AVAILABLE ON THAT DAY, THE SURVEY PARTY INSISTED TO DISCLOSE CERTAIN AMOUNT AND AFTER CONSI DERING THE ALL FACTS AGREED FOR TOTAL DISCLOSE OF OUR GROUP OF RS.75,00, 000/- E.G. (1) DIVYESH J. PATEL (INDIVIDUAL) RS.30,00,000/- (2) MUKESH J. PATEL (INDIVIDUAL) RS.30,01,840/- (3) JASHWANTBHAI G. PATEL (HUF) RS.14,98,960/- ITA NO.2141/AHD/2010 ASST. YEAR 2004-05 3 I HAVE STARTED THE CONSTRUCTION WORK IN FY 2002-03 E.G. IN ASST. YEAR 2003-04 ON LAND BELONGS TO JASHWANTBHAI G. PATEL (H UF) AND THE CORPORATION CHARGED IMPACT FEES FOR SOME EXTRA WORK S. AS THE CORPORATION CHARGE THIS AMOUNT FROM THE LAND OWNER, BECAUSE PLAN PUT FOR APPROVAL WAS IN THE NAME OF LAND OWNER, ACCORDI NGLY JASHWANT G. PATEL (HUF) WHO IS THE LAND OWNER, PAID THE SAID FE ES TO CORPORATION. THE ACTUAL FEES TO BE PAID BY ME AND MY BROTHER WHO HAVE ALSO STARTED CONSTRUCTION PROJECT IN THE SAID LAND. IN NEXT YEAR E.G. IN ASST. YEAR 2004- 05 PROJECT WAS COMPLETED. THE LAND OWNER DEMANDED I MPACT FEES PAID BY HIM FOR THE SAID PROJECT. I HAVE PAID 50% I.E. RS.1 ,.74,250/- AND REMAINING 50% WAS PAID BY MY BROTHER MUKESH J. PATE L TO THE HUF AND CLAIMED AS BUSINESS EXPENSE. BECAUSE UNLESS AND UNT IL THE IMPACT FEES ARE NOT PAID, THE CORPORATION DOES NOT ISSUE THE COMPLE TION CERTIFICATE. HOWEVER, THE ASSESSING OFFICER DID NOT CONSIDER THE EXPLANATION OFFERED BY ME AND DISALLOWED THE SAID EXPENSES. HERE I HAVE NOT FURNISHED ANY INACCURATE PARTICULARS OF INCOME. ONLY AS PER THE O PINION OF ASSESSING OFFICER, SAID EXPENSES IS NOT ALLOWABLE AS BUSINESS EXPENDITURE AND DISALLOWED THE SAME.. THE AO, HOWEVER, DID NOT AGREE ON THE GROUND THAT P AYMENT WAS NOT MADE BY THE ASSESSEE BUT BY HUF OF JASHWANTBHAI G. PATEL. SECONDLY IT PERTAINED TO EARLIER YEAR AND NOT TO THE CURRENT YE AR. HE ACCORDINGLY LEVIED THE PENALTY OF RS.52,656/- 100% OF THE TAX SOUGHT T O BE EVADED. 3. THE LD. CIT(A) CONFIRMED THE PENALTY FOR THE SAM E REASONS AS STATED BY THE AO. IN THIS REGARD THE LD. CIT(A) HAS HELD AS UNDER :- 6.1 FROM THE ABOVE IT MAY BE CLEARLY SEEN THAT THE LIABILITY TO PAY EXTRA COVERAGE PREMIUM EXPENSES HAD ARISEN IN THE HANDS OF THE ASSESSEES FATHER HUF WHICH OWNED THE LAND ON WHICH THE ASSESSEE CONSTRUCTED A BUILDING. THIS LIABILITY HAD ARISEN I N THE IMMEDIATELY PRECEDING YEAR AND HAD BEEN DULY DISCHARGED BY THE HUF. THE DUES WERE RECOVERED BY THE SMC. HOWEVER, THE HUF SOUGHT TO RE COVER THE SAME DUES IN EQUAL PROPORTION FROM THE ASSESSEE AND HIS BROTHER WHO WERE THE BUILDERS, EVEN THOUGH THERE WAS NO AGREEMENT FOR TH IS PURPOSE, NOR WERE THE ASSESSEE AND HIS BROTHER AS THE BUILDERS REQUIR ED TO PAY SUCH CHARGES. THEREFORE, IT WAS NOT A LIABILITY WHICH COULD HAVE ARISEN IN THE HANDS OF THE ASSESSEE. THE CLAIM MADE BY THE ASSESSEE WAS TH E RESULT OF AN INTERNAL ITA NO.2141/AHD/2010 ASST. YEAR 2004-05 4 ARRANGEMENT FOR WHICH THERE WAS NO LEGAL SANCTION. IT WAS THUS CLEARLY ESTABLISHED THAT SUCH A CLAIM WAS NOT BONA FIDE AND HENCE, FALSE. THIS IS THE CLEAR FINDING GIVEN BY THE AO IN THE PENALTY OR DER. CONSEQUENTLY, THE PROVISIONS OF SECTION 271(10(C) R.W. THE EXPLANATIO N-1 BELOW THE SAID SECTION WERE CLEARLY ATTRACTED AND WERE RIGHTLY INV OKVED AND APPLIED BY THE AO. THE PENALTY OF RS.52,656/- LEVIED BY THE AO UNDER THE SAID SECTION IS CONFIRMED. 4. WE HAVE HEARD THE LD. DR AND GONE THROUGH MATERI AL ON RECORD. IN OUR VIEW THERE IS NO CASE FOR LEVY OF PENALTY. THE REASONS ARE THAT THE PROJECT FOR WHICH PAYMENT WAS MADE TO SMC BELONGED TO THE ASSESSEE. IT WAS ADMITTEDLY COMPLETED DURING THIS YEAR. SECONDLY , PAYMENT IS NOT UNDISCLOSED BUT WAS DEBITED IN THE BOOKS OF THE HUF AND LATER TRANSFERRED TO THE ASSESSEE. THEREFORE, THERE IS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE CASE OF THE REVENUE WILL ALSO NOT FALL IN THE EXPLANATION BECAUSE ASSES SEE HAS CLEARLY SPELT OUT ALL THE FACTS RELATING TO THE TRANSACTION. THE EXPL ANATION IS APPARENTLY BONA FIDE AND THERE IS NOTHING ON RECORD TO SHOW ASSESSE E HAS NOT SUBSTANTIATED HIS EXPLANATION. FOR THE PURPOSE OF ADDITION THE FI NDING OF AO IS SUFFICIENT BUT THEY ARE NOT ENOUGH FOR LEVY OF PENA LTY AS THE INGREDIENTS LAID UNDER SECTION 271(1)(C) HAVE TO SATISFIED. FUR THER THE EXPLANATION OF THE ASSESSEE THAT DEVELOPMENT EXPENSES HAVE TO BE B ORNE BY THE ASSESSEE HIMSELF CANNOT BE TERMED AS INCORRECT OR NOT BONA F IDE. THERE WAS ALSO NO REASON THAT EXPENSES DID NOT PERTAIN TO THE BUSINES S OF THE ASSESSEE. IT WAS CLAIMED BY THE ASSESSEE AS ACCORDING TO HIM IT BECA ME DUE ONLY THIS YEAR THOUGH THE AO DID NOT AGREE WITH THIS VIEW. BUT THE RE IS APPARENTLY A BONA FIDE BELIEF THAT ASSESSEE COULD CLAIM THIS EXP ENSE WHEN PROJECT IS COMPLETED. IN VIEW OF THIS WE HOLD THAT THERE IS NO CASE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C). WE CANCEL THE PENA LTY. ITA NO.2141/AHD/2010 ASST. YEAR 2004-05 5 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 30.11.10. SD/- SD/- (MAHAVIR SINGH) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT ME MBER AHMEDABAD, DATED : 30.11.10. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 19/10/2010. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 22/11/2010 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S . 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..