Income-tax Officer, V. M/s. Chandrai Constructions, Pune

ITA 2199/PUN/2013

• Counselvise Citation: 219924514 RSA 2013
• Duration Of Justice: 1 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 20-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Bonafide belief; Wrong claim; Revised return; Reassessment proceedings
• Section: 133A; 80IB; 147; 148; 12; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO S. 2199 & 2200 / P N/ 20 1 3 ASSESSMENT YEAR S : 20 0 5 - 06 & 2006 - 07 INCOME TAX OFFIC ER, WARD 2(1), PUNE VS. M/S. CHANDRAI CONSTRUCTIONS, S. NO. 34/5, 1 TO 6, OPP. BHARATI VIDYAPEETH, DATTANAGAR, AMBEGAON, PUNE - 411046 (APPELLANT) (RESPONDENT) PAN NO. AADFC8509R APPELLANT BY: SHRI B.C. MALAKAR RESPONDENT BY: SHRI S.N. PURAN IK DATE OF HEARING : 29 - 10 - 2014 DATE OF PRONOUNCEMENT : 22 - 01 - 201 5 ORDER PER R.S . PADVEKAR , JM : - TH ESE TWO APPEALS ARE FILED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT(A) - I I , PUNE DATED 30 - 08 - 2013 FOR THE A.Y S . 20 0 5 - 06 AND 2006 - 07 , DELETING THE PENALTY LEVIED BY THE ASSESSING OFFICER U/S. 271(1)(C) OF THE INCOME - TAX ACT OF RS. 27,57,237/ - AND RS.11,24,724/ - FOR THE A.YS. 2005 - 06 AND 2006 - 07 RESPECTIVELY. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS WHICH ARE VERBATIM IN BOTH THE APPEALS: 1. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN DELETING THE PENALTY U/S 271(1)(C) WITHOUT EXAMINING THE FACTS & EVIDENCES AVAILABLE ON RECORDS AND BROUGHT OUT BY THE ASSESSING OFFICER IN THE PENALTY ORDER IN SUPPORT OF LEVY OF PENAL T Y U/S 271(1)(C) OF THE ACT. 2. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN DELETING THE PENALTY U/S 271(1)(C) WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD WITHDRAWN THE CLAIM OF DEDUCTION U/S.80IB(10) 2 ITA NO S. 2199 & 2200/PN/2013, M/S. CHANDRAI CONSTRUCTIONS, PUNE ONLY AFTER A SURVEY U/S.133A OF THE ACT ON 02.06.2008 WAS CARRIED OUT AND THERE WAS NO VOLUNTARY DISCLOSURE OF INCOME. 3. THE LEARNED CIT(A) ERRED IN DELETING THE PENALTY ON THE PREMISE THAT THE ASSESSEE HAD CORRECTLY FILED THE RETURN AND ALL THE MATERIAL FACTS WERE BROUGHT ON RECORD IGNORING T HE FACT THAT SUCH CLAIM WAS SUBJECT TO FULFILLMENT OF CONDITION LAID DOWN U/S.80IB(A)(I) THAT THE PROJECT SHOULD BE COMPLETED BEFORE 31.03.2008. 4. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN NOT APPRECIATING THE ADMITTED FACT THAT THE ASSESSEE HAD VIOLATED THE CONDITIONS STIPULATED U/S.80IB(10)(A)(I) OF THE ACT AND IT WAS WELL WITHIN THE KNOWLEDGE OF THE ASSESSEE THAT THE PROJECT WAS NOT COMPLETED BY 31.03.2008 AND THUS HAD CONCEALED THE INCOME BY FURNISHING INACCURATE PARTICULARS OF INCOME. 5. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN NOT CONSIDERING THE FACT THAT THE COMMERCIAL AREA CONSTRUCTED EXCEEDED THE LIMIT PROVIDED UNDER CLAUSE (D) OF SECTION 80IB(10), WHICH WAS WELL WITHIN THE KNOWLEDGE OF THE ASSESSEE AND HAD THUS CONCEALE D THE INCOME. 2. THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. THE ASSESSEE IS A FIRM AND ENGAGED IN THE CONSTRUCTION ACTIVITY AND THE ORIGINAL RETURN FOR A.Y. 2005 - 06 WAS FILED DECLARING NIL INCOME. THE ASSESSEES CASE FOR THE A.Y. 2005 - 06 WA S REOPENED BASED ON THE SURVEY ACTION U/S. 133A CARRIED OUT ON 02 - 06 - 2008 DURING THE ASSESSMENT PROCEEDINGS FOR A.Y. 2006 - 07. A NOTICE U/S. 148 WAS ISSUED ON 03 - 06 - 2008 IN RESPONSE TO WHICH THE ASSESSEE FIELD RETURN OF INCOME DECLARING TOTAL INCOME AT RS. 75,34,985/ - WITHDRAWING THE CLAIM OF DEDUCTION MADE IN ORIGINAL RETURN U/S. 80IB(10) OF THE ACT . H OWEVER, AS THE REVISED RETURN WAS BEYOND THE STATUTORY DATE THUS WAS TREATED NONEST BY THE ASSESSING OFFICER. ON VERIFICATION OF THE FORM NO. 10CCB THE ASSE SSING OFFICER NOTICED THAT THE AUDITORS HAD NOT OFFERED ANY REMARK AGAINST THE COLUMN FOR COMPLETION OF THE PROJECT AND AGAINST THE BUILT - UP AREA OF RESIDENTIAL UNITS HAD WRITTEN LESS THAN 1500 SQ. FT. THE ASSESSEE IN 3 ITA NO S. 2199 & 2200/PN/2013, M/S. CHANDRAI CONSTRUCTIONS, PUNE STATEMENT RECORDED UNDER OATH DURING I TS SURVEY ACTION U/S. 133A STATED THAT, SINCE THE COMMERCIAL BUILT - UP AREA WAS MORE AND THE PROJECT WAS NOT COMPLETED BY 31 - 03 - 2008, TO HAVE MENTAL PEACE & AVOID PENALTY AND FURTHER LITIGATIONS , WAS WILLING TO PAY TAXES ON THE INCOME FOR A.YS. 2005 - 06 AND 2006 - 07. BASED ON THIS STATEMENT AND THE OTHER RELEVANT FACTS BROUGHT ON RECORD , THE ASSESSING OFFICER HELD THE ASSESSEE'S CLAIM OF DEDUCTION WAS INADMISSIBLE & THE SAME WAS REJECTED AND PENALTY PROCEEDINGS WERE ALSO INITIATED FOR FURNISHING INACCURATE PAR TICULARS OF INCOME U/S. 271(1)(C) OF THE ACT . 2.1 DURING THE PENALTY PROCEEDINGS , THE EXPLANATIONS SUBMITTED BY THE ASSESSEE WERE TAKEN INTO CONSIDERATION BY THE ASSESSING OFFICER, HOWEVER, IN VIEW OF THE FACTUAL AND LEGAL POSITION HE CONCLUDED THAT THE A SSESSEE HAD FURNISHED INACCURATE PARTICULARS FOR CLAIMING DEDUCTION U/S. 80IB(10). THUS, IT IS SEEN THAT THE BASIC TWO ISSUES BASED ON WHICH THE CLAIM OF 80IB(10) DEDUCTION WAS WITHDRAWN W ERE (I) THE ASSESSEE FIRM HAD NOT COMPLETED THE PROJECT WITHIN THE STIPULATED TIME LIMIT I.E. BEFORE 31 - 03 - 2008 AND (II) THE COMMERCIAL AREA CONSTRUCTED IN THE HOUSING PROJECT BY THE ASSESSEE EXCEEDED THE LIMIT PROVIDED U/S. 80IB(10)(D). THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEE OUGHT TO HAVE INFORMED THE DEPART MENT AND WITHDRAWN THE CLAIM OF DEDUCTION U/S. 80IB(10) FOR THE RELEVANT YEARS BUT THE SAME WAS NOT DONE BY THE ASSESSEE AND IT WAS ONLY DURING THE SURVEY ACTION U/S 133A CARRIED OUT ON 02 - 06 - 2008. THE ASSESSEE CA ME FORWARD TO WITHDRAW CLAIM OF DEDUCTION WRONGLY MADE. 3. IN SUM AND SUBSTANCE , THE ASSESSING OFFICER WAS OF THE OPINION THAT IN THE ORIGINAL RETURN THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME FOR CLAIMING DEDUCTION U/S. 80IB(10) OF THE ACT WHICH WAS NOT OTHERWISE ELIGIBLE. T HE ASSESSEE CHALLENGED THE PENALTY ORDERS BEFORE THE LD. CIT(A) AND LD. CIT(A) DELETED THE PENALTY IN BOTH 4 ITA NO S. 2199 & 2200/PN/2013, M/S. CHANDRAI CONSTRUCTIONS, PUNE THE ASSESSMENT YEARS AND THE REASONS GIVEN BY THE LD. CIT(A) ARE AS UNDER: 3.5 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND PERUSED MA TERIAL ON RECORD. THE APPELLANT HAD FILED THE ORIGINAL RETURN OF INCOME FOR A . YRS. 2005 - 06 ON 31.10.2005 AND 2006 - 07 ON 31.10.2006, IN WHICH THE CLAIM OF DEDUCTION U/S 80IB(10) HAD BEEN MADE. HOWEVER, DURING THE SURVEY ACTION U/S 133A UNDERTAKEN ON 2 - 6 - 20 08 ONE OF THE PARTNERS OF THE APPELLANT FIRM ACCEPTED THAT THE PROJECT WAS NOT COMPLETED BEFORE THE STIPULATED DATE I.E. 31 - 3 - 2008 AND TO AVOID LITIGATION AGREED TO WITHDRAW THE DEDUCTION CLAIMED U/S 80IB(10) FOR BOTH ASSESSMENT YEARS. SUBSEQUENTLY THE APP ELLANT FILED THE REVISED RETURN, THOUGH NONEST, FOR THE SAME NOTICE U/S 148 HAS BEEN ISSUED AND THE INCOME RETURNED BY THE APPELLANT HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD THE REASONS FOR HIS OBSERVATION THAT THE APPELLANT HAD FURNISHED INACCURATE PARTICULARS AS NO DEFECT IN THIS REGARD HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE AFORESAID ASSESSMENT PROCEEDINGS. THE FACT ON RECORD INDICATE THAT THE APPELLANT COULD NOT HAVE ANTICIPATED DURING THE AFORESAID ASSESSMENT YEARS AS TO WHETHER THE PROJECT WOULD BE COMPLETED WITHIN THE TIME LIMIT I.E. 31 - 03 - 2008 AT THE TIME OF FILING OF THE RETURNS OF INCOME FOR THE TWO ASSESSMENT YEARS. THE FACT ON RECORD ALSO INDICATE THAT THE CIT(A) HAS CONFI RMED DISALLOWANCE ON TWO GROUNDS; THE HOUSING PROJECT HAS COMMERCIAL CONSTRUCTION MORE THAN THE LIMIT PRESCRIBED U/S 80IB(10)(D) AND THE SAID PROJECT HAD NOT RECEIVED THE OCCUPANCY CERTIFICATE AND HENCE THE PROJECT WAS HELD TO HAVE BEEN NOT COMPLETED BEFOR E 31 - 03 - 2008. IT IS NOTICED THAT THE ISSUE OF THE COMMERCIAL AREA MORE THAN THE PRESCRIBED LIMIT AS PER CLAUSE (D) OF SEC 80IB(10) IS CLEARLY COVERED BY THE HON. BOMBAY HIGH COURT IN THE CASE OF BRAMHA ASSOCIATES, 333 ITR 289 ACCORDING TO WHICH IF THE LOCA L AUTHORITY HAS SANCTIONED A PLAN AS 'RESIDENTIAL - CUM - COMMERCIAL, FULL DEDUCTION IS TO BE ALLOWED. SO FAR AS THE APPLICABILITY OF THE AFORESAID DECISION BEING NOT APPLICABLE TO 2005 - 06 AND LATER YEARS AFTER INSERTION OF CLAUSE (D) TO SEC 8018(10), THE PUN E ITAT IN CASE OF OPEL SHELTERS AND D S KULKARNI FOR A.Y. 2005 - 06 HAS HELD THAT IF THE HOUSING PROJECT IS SANCTIONED OR COMMENCED BEFORE 31 - 03 - 2005 I.E. INTRODUCTION OF CLAUSE (D), THE RESTRICTION OF COMMERCIAL CONSTRUCTION LIMIT WILL NOT BE APPLICABLE. TH E VIEW OF THE AFORESAID DECISION HAS ALSO BEEN FOUND TO BE TAKEN IN A NUMBER OF SUBSEQUENT CASES SUCH AS HIRANANDANI AKRUTI, 39 SOT 498 AND JAIN 5 ITA NO S. 2199 & 2200/PN/2013, M/S. CHANDRAI CONSTRUCTIONS, PUNE HOUSING CONSTRUCTION LTD CITED SUPRA. THUS THE FACT THAT EMERGES FROM THE ABOVE IS THAT THE ISSUE IS A DEBATABL E ONE ESPECIALLY TO THE APPLICABILITY OF THE AMENDMENT FOR THE PROJECT SANCTIONED PRIOR TO 01 - 03 - 2005. THE APPELLANT WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND RECOGNIZED THE REVENUE BASED ON PROJECT PERCENTAGE COMPLETION METHOD AND HAS ACCORDINGLY CREDITED ALL ITS RECEIPTS TO PROFIT & LOSS ACCOUNT FOR THE RELEVANT YEAR 3.6 IT IS SETTLED LAW THAT PENALTY UNDER S. 271(1)(C) IS A CIVIL LIABILITY AND THE REVENUE IS NOT REQUIRED TO PROVE WILLFUL CONCEALMENT. HOWEVER, EACH AND EVERY ADDITION MADE IN THE ASSESSMENT CANNOT AUTOMATICALLY LEAD TO LEVY OF PENALTY FOR CONCEALMENT OF INCOME. A CASE FOR IMPOSITION OF PENALTY HAS TO BE EXAMINED IN TERMS OF THE PROVISIONS OF EXPLN. 1 TO S. 271(1)(C). SECONDLY, IT IS ALSO A SETTLED LEGAL POSITION THAT PENALTY PROCEE DINGS ARE DIFFERENT FROM ASSESSMENT PROCEEDINGS. THE FINDING GIVEN IN THE ASSESSMENT THOUGH IS A GOOD EVIDENCE BUT THE SAME IS NOT CONCLUSIVE IN PENALTY PROCEEDINGS. IN ORDER TO APPLY THE PROVISIONS OF SECTION 271(1)(C), THERE HAS TO BE CONCEALMENT OF PART ICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. IN THE PRESENT CASE IT IS NOT THE CASE OF THE AO THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME. THE AO HAS IMPOSED PENAL TY ON THE GROUND THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME. RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE APEX COURT IN VARIOUS CASES INCLUDING DILIP N. SHROFF VS. JT. CIT (2007) 210 CTR (SC) 228 : (2007) 291 ITR 519 (SC) AND UN ION OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS (2008) 13 SSC 369 AND KEEPING IN VIEW THAT IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS NOT FILED COMPLETE PARTICULARS OF HIS INCOME OR IT IS NOT THE CASE OF BONAFIDE BELIEF OR THE EXPLANATION OFFE RED BY THE ASSESSEE WAS FOUND TO BE FALSE OR UNTRUE. MAKING A WRONG CLAIM IS NOT AT PAR WITH CONCEALMENT OR GIVING OF INACCURATE INFORMATION, WHICH MAY CALL FOR LEVY OF PENALTY UNDER S. 271(1)(C) OF THE ACT. THIS VIEW ALSO FINDS SUPPORT FROM THE DECISIONS IN CIT VS. SIDHARTHA ENTERPRISES (2010) 228 CTR (P&H) 579 : (2010) 322 ITR 80 (P&H) AND CIT VS. THE SHAHABAD CO - OP: SUGAR MILLS LTD. (2010) 322 ITR 73 (P&H). 3.7 IN ORDER TO APPLY THE PROVISIONS OF S. 271(1)(C), THERE HAS TO BE CONCEALMENT OF PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. IN THE PRESENT CASE IT IS NOT THE CASE OF THE AO THAT THE ASSESSEE HAS 6 ITA NO S. 2199 & 2200/PN/2013, M/S. CHANDRAI CONSTRUCTIONS, PUNE CONCEALED THE PARTICULARS OF HIS INCOME. THE AO HAS IMPOSED PENALTY ON T HE GROUND THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE HON'BLE APEX COURT IN CIT VS. CIT VS. RELIANCE PETROPRODUCTS (P) LTD. (2010) 230 CTR (SC) 320 HAS OBSERVED AS UNDER: '.....IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY U NLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY ANY STRETCH OF IMAGINATION, MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. IN CIT VS. ATUL MOHAN BINDAL (2009) 225 CT R (SC) 248, WHERE THIS COURT WAS CONSIDERING THE SAME PROVISION, THE COURT OBSERVED THAT THE AO HAS TO BE SATISFIED THAT A PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THIS COURT REFERRED TO ANOTHER DECISION OF THIS COURT IN UNION OF INDIA & ORS. VS. DHARAMENDRA TEXTILE PROCESSORS & ORS. (2008) 219 CTR (SC) 617, AS ALSO, THE DECISION IN UNION OF INDIA VS. RAJASTHAN SPINNING & WEAVING MILLS (2009) 224 CTR (SC). IN ITO VS PARIKH INVESTMENT & DEVELOPME NT P. LTD. (2011) 43 SOT 537 (MUM), THE ITAT MUMBAI AFTER CONSIDERING THE VARIOUS APEX COURT DECISIONS IN THIS REGARD HELD WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THE RE (S NO QUESTION OF INVITING THE PENALTY UNDER S. 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN C ANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS................. 3.7.1 THE FACTS BROUGHT ON RECORD DO INDICATE THAT THE APPELLANT HAD DISCLOSED THE ENTIRE FACTS WITH RESPECT TO THE CLAIM OF DEDUCTION U/S 80IB(10) IN THE RETURN OF INCOME FILED FOR THE YE ARS UNDER CONSIDERATION. THE APPELLANT HAS ALSO FURNISHED ALL DETAILS, PAPERS AND PARTICULARS WHICH WERE MATERIAL TO THE COMPUTATION OF INCOME. THUS THE APPELLANT HAS FULLY AND TRULY DISCLOSED ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT AND FOR DETERMI NING THE ELIGIBILITY OF THE CLAIM OF DEDUCTION U/S 80IB(10) DURING THOSE YEARS. IN ORDER TO LEVY PENALTY U/S 271(1)(C) THE ASSESSING OFFICER HAS TO PROVE THAT THE CASE IS DIRECTLY COVERED BY THE SAID SECTION THEREBY IT MEANS THAT THE ASSESSING OFFICER HAS TO PROVE THAT THERE IS CONCEALMENT OF INCOME OR THAT IN ASSESSEE HAS 7 ITA NO S. 2199 & 2200/PN/2013, M/S. CHANDRAI CONSTRUCTIONS, PUNE FURNISHED INACCURATE PARTICULARS OF INCOME. IF THE CASE IS NOT COVERED DIRECTLY BY THE SECTION THE DEEMING FICTION IN EXPLANATION 1 TO SEC 271(1)(C) SHALL COME INTO PLAY. THE AFORESAID EX PLANATION 2 IS APPLICABLE TO THE CONCEALMENT OF INCOME AS WELL AS THE FURNISHING OF INACCURATE PARTICULARS. THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. PENALTY CAN BE LEVIED ONLY IN THE EVENT THE FACTORS ENUMERATED IN CLAUSE (A) AND (B) OF EXPLANATION 1 AR E SATISFIED AND A FINDING IN THIS BEHALF IS ARRIVED AT BY THE ASSESSING OFFICER AND THE LEGAL FICTION CREATED THERE UNDER WOULD BE ATTRACTED. THE DISALLOWANCE OF CLAIM OF DEDUCTION DOES NOT IPSO FACTO LEAD TO THE CONCLUSION THAT THE PENALTY U/S 271(1)(C) I S ATTRACTED. IN THE PRESENT CASE, THE APPELLANT HAS DISCLOSED ALL THE MATERIAL FACTS RELEVANT FOR ITS ASSESSMENT. THE CASE INVOLVES A DEBATABLE ISSUE WITH REGARD TO DEDUCTION PROVIDED UNDER THE STATUTE BETWEEN THE APPELLANT & THE A.O. AND IS THUS, CLEARLY OUTSIDE THE SCOPE OF EXPLANATION TO S. 271(1) OF THE ACT AS THE ASSESSEE HAS MADE FULL DISCLOSURE OF ALL THE RELEVANT FACTS AND HAS ACTED IN BONAFIDE MANNER. THE APPELLANT HAS DISCLOSED ALL THE MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT AND THE ONLY QUEST ION IS WITH REGARD TO THE INTERPRETATION OF THE RELEVANT PROVISION OF LAW ALLOWING DEDUCTION TO THE ASSESSEE UPON FULFILLING CERTAIN CONDITIONS LAID DOWN IN THE RELEVANT PROVISION OF LAW. THERE IS NO MATERIAL TO SUGGEST THAT THE APPELLANT HAS NOT DISCLOSE D ANY RELEVANT PARTICULARS OR FACTS BEFORE THE AUTHORITIES AND HAS NOT ACTED BONA FIDE. IN THESE FACTS OF THE CASE, NO PENALTY CAN BE LEVIED UNDER S. 271(1) (C) OF THE I. T. ACT. THEREFORE, THE APPLICATION OF EXPLANATION 1 TO SECTION 271(1)(C) CANNOT COME INTO OPERATION AS TWO CONDITIONS ARE REQUIRED TO BE SATISFIED BEFORE APPLYING THE EXPLANATION NAMELY; A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER TO BE FALSE OR B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONAFIDE . IN THE INSTANT CASE THE APPELLANT HAS OFFERED A VALID EXPLANATION IN RESPECT OF THE CLAIM OF DEDUCTION. SIMILARLY, THE CLAIM HAS BEEN MA DE UNDER BONA FIDE IMPRESSION THAT THE APPELLANT IS ENTITLED TO DEDUCTION. THERE IS NOTHING ON THE RECORD TO SUGGEST THAT THE EXPLANATION OFFERED BY THE APPELLANT IS FALSE. SIMILARLY, THERE IS NO INDICATION AS WELL AS NOTHING IS ON THE RECORD THAT THE EXPL ANATION OFFERED BY THE APPELLANT 8 ITA NO S. 2199 & 2200/PN/2013, M/S. CHANDRAI CONSTRUCTIONS, PUNE FIRM IS NOT BONA FIDE. THE ENTIRE FACTS OF THE CASE HAS TO BE SEEN WHEN THE RETURNS OF INCOME FOR BOTH THE ASSESSMENT YEARS WERE FILED BY THE APPELLANT AND IT IS QUITE APPARENT THAT THE APPELLANT AT THAT POINT OF TIME I.E. 2005 AND 2006, COULD NOT HAVE FORESEEN OR CONTEMPLATED THAT THE PROJECT UNDERTAKEN WOULD NOT BE COMPLETED WITHIN THE STIPULATED TIME IN MARCH, 2008. THEREFORE, IT CANNOT BE SAID THAT THE APPELLANT HAS CONCEALED THE PARTICULARS OF INCOME BY FURNISHING THE I NACCURATE PARTICULARS. 3.7.2 IN THE CASE OF KANBAY SOFTWARE INDIA (P) LTD VS DCIT (2009) 122 TTJ (PUNE) 721, THE HONOURABLE PUNE BENCH HELD THAT BEFORE PENALTY IS IMPOSED THE AO HAS TO BE SATISFIED THAT THE ASSESSEE HAS CONCEALED INCOME, OR THAT THE ASSES SEE HAS FURNISHED INACCURATE PARTICULARS OR THAT THE CASE OF THE ASSESSEE IS COVERED BY DEEMING FICTION OF ONE OF THE EXPLANATIONS APPENDED TO S. 271 (1)(C). IT FURTHER HELD THAT CIVIL LIABILITY OF PENALTY UNDER S. 271(1)(C) CANNOT BE CONSTRUED TO MEAN TH AT A PENALTY IS AN AUTOMATIC CONSEQUENCE OF AN ADDITION BEING MADE TO THE INCOME OF THE ASSESSEE. THE ONLY IMPACT OF A LIABILITY BEING CIVIL LIABILITY IS THAT MENS REA OR THE INTENTIONS OF THE ASSESSEE NEED NOT BE PROVED A MERE CONTRAVENTION OF STATUTORY O BLIGATION IS ENOUGH TO TRIGGER THE PENALTY PROVISION, BUT THEN THERE HAS TO BE A CONTRAVENTION OF THE STATUTORY OBLIGATION FIRST WHETHER WILFUL OR NOT. THERE IS NO CAUSE AND EFFECT RELATIONSHIP BETWEEN PENALTY AND ADDITION PER SE. ALL THAT THE EXPLANATION 1 TO S. 271(1)(C) DOES IS TO SHIFT THE ONUS OF PROOF FROM AO TO THE ASSESSEE. INSTEAD OF AO BEING UNDER AN OBLIGATION TO ESTABLISH THE MALA FIDES OF THE ASSESSEE, THE ONUS IS NOW ON THE ASSESSEE TO ESTABLISH HIS INNOCENCE AND RIGHTEOUS CONDUCT. NO DOUBT AN ADDITION TO INCOME IS THE STARTING POINT OF THIS EXERCISE, BUT NOT ONLY THAT IN THE ASSESSMENT PROCEEDINGS ITSELF THE AO HAS TO BE SATISFIED THAT THE ADDITIONS ARE SUCH THAT PENALTY PROCEEDINGS UNDER S. 271(1)(C) ARE REQUIRED TO BE INITIATED BUT ALSO BEFO RE ANY PENALTY UNDER S. 271(1)(C) CAN BE IMPOSED, EACH SUCH CASE WILL HAVE TO BE EXAMINED IN THE LIGHT OF SCHEME OF THINGS ENVISAGED BY S. 271(1)(C) READ ALONG WITH EXPLANATIONS THERETO. FURTHER, RAISING A LEGAL CLAIM, EVEN IF IT IS ULTIMATELY FOUND TO BE LEGALLY UNACCEPTABLE, CANNOT AMOUNT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. DEEMING FICTION IN EXPLANATION 1 TO S. 271(1)(C) IS ALSO NOT ATTRACTED AS IT RELATES ONLY TO FACTUAL ASPECTS. ASSESSEE'S EXPLANATION REGARDING BONA FIDES OF THE CLAIM DO ES NOT SUFFER FROM ANY APPARENT CONSISTENCIES OR FACTUAL ERRORS AND IT IS QUITE IN TUNE WITH THE HUMAN PROBABILITIES CASE OF THE ASSESSEE IS NOT EVEN HIT BY THE MISCHIEF OF ANY OF THE THREE 9 ITA NO S. 2199 & 2200/PN/2013, M/S. CHANDRAI CONSTRUCTIONS, PUNE EVENTUALITIES ENVISAGED BY THE DEEMING FICTION UNDER EXPLN. 1 TO S . 271(1)(C) HENCE IT WAS NOT FIT CASE FOR IMPOSITION OF PENALTY . 3.7.3 COMING TO THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS LTD., (2010) 322 ITR 158 (S.C) IT WAS HELD AS UNDER: 'READING THE WORDS 'INACCURATE' AND 'PARTICULARS' IN CONJUNCTION, THEY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. IN THIS CASE, THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN W ERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. SUCH NOT BEING THE CASE, THERE WOULD BE NO QUESTION OF IN VITING THE PENALTY U/S. 271(1)(C). A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FUR NISHING INACCURATE P ARTICULARS REGARDING THE INCOME OF THE A SSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. THE ASSESSEE HAD FURNISHED ALL THE DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NO T FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PART.' THIS JUDGEMENT OF THE HON'BLE APEX COURT THEREFORE, EMPHASIZES THAT MERE MAKING OF A CLAIM OF DEDUCTION WHICH WAS NOT ALLOWABLE BY ITSELF WOULD NOT AMOUNT TO FURNISHIN G INACCURATE PARTICULARS OF INCOME. IN FACT, EVERY LEGAL DISALLOWANCE UNDER THE PROVISIONS OF THE ACT CANNOT LEAD TO THE CONCLUSION THAT THERE WAS FURNISHING OF INACCURATE PARTICULARS OF INCOME ON THE PART OF THE ASSESSEE. 3.7.4 THE APPELLANT HAS ALSO CIT ED THE DECISION IN THE CASE OF ROHAN ENGG. CONSTRUCTION, ITA NO. 867/PN/2011 FOR A.Y. 2006 - 04, ORDER DATED 19.10.2012 AND ALSO FILED A COPY OF THE SAME. THE PUNE ITAT CONFIRMED THE DECISION OF THE CIT (APPEALS) DECIDING IN FAVOUR OF THE ASSESSEE HAS REPROD UCED PARAS 14 AND 15 OF THE ORDER OF CIT (APPEALS) IN ITS ORDER IN PARA 5, WHICH IS REPRODUCED BELOW: '14. AS REGARDS THE MAXIMUM ALLOWABLE COMMERCIAL SPACE UNDER THE AMENDED LAW, THE ISSUE IS A HIGHLY CONTENTIOUS ONE ON WHICH JUDICIAL OPINION ITSELF WAS DIVIDED AT THE RELEVANT TIME, LEADING TO THE CONSTRUCTION OF SPECIAL BENCH OF THE HONOURABLE ITAT. FURTHER, NO FACTS HAVE BEEN BROUGHT TO LIGHT BY THE LEARNED AO WHICH ESTABLISH THAT ANY FACTS WERE CONCEALED OR INACCURATE 10 ITA NO S. 2199 & 2200/PN/2013, M/S. CHANDRAI CONSTRUCTIONS, PUNE PARTICULARS WERE FURNISHED. AT BES T, IT WAS A CASE OF INCORRECT READING OF THE LAW OR FAILURE TO APPLY THE SAME CORRECTLY WHICH, IN MY VIEW, CANNOT ATTRACT THE PROVISIONS OF SECTION 271(1)(C). AS ITAT PUNE HAS EXPLAINED IN KANDAY, THE SAID PROVISION IS ONLY ATTRACTED IN THE CASE OF CONCEAL MENT OF FACTS, OR FURNISHING OF INACCURATE FACTUAL PARTICULARS. INTERPRETATION OF LAW CANNOT BE A MATTER OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS. 15. THE ONLY OTHER REASON FOR DENIAL OF THE BENEFIT OF SECTION 80 - IB (10) IN THIS CASE WAS THE INABILITY TO OBTAIN COMPLETION CERTIFICATE BY THE APPOINTED DATE, I.E. 01/04/2008. NOTABLY, THE ASSESSMENT YEAR UNDER CONTENTION IS 006 - 07, FOR WHICH THE RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 31/10/2006. CLEARLY, AT THE TIME OF FILING RETURN IN 200 6, THE ASSESSEE COULD NOT HAVE KNOWN THAT IT WOULD FAIL TO OBTAIN COMPLETION CERTIFICATE IN RESPECT OF THE PROJECT BY 01/04/2008. THEREFORE, ON THIS COUNT ALSO, IT CANNOT BE SAID THAT THE ASSESSES HAD DELIBERATELY MADE A WRONGFUL CLAIM CONCEALING FACTS OF FURNISHING INACCURATE PARTICULARS OF FACTS. WHILE THE INABILITY TO OBTAIN THE SAID COMPLETION CERTIFICATE WAS SUFFICIENT GROUND FOR DENIAL OF EXEMPTION BY THE AO AT THE STAGE OF SCRUTINY ASSESSMENT, THE SAME WAS CLEARLY NOT SUFFICIENT GROUND FOR LEVY OF PE NALTY. PARA 6 OF THE ITAT ORDER IS REPRODUCED, WHERE IN ITAT HAS CONFIRMED THE DECISION OF CIT (A) WHICH IS IN FAVOUR OF THE ASSESSEE 6. WE FURTHER FIND THAT THE ASSESSEE HAS FURNISHED ALL THE PARTICULARS BEFORE THE A.O. AT THE TIME OF ASSESSMENT PROCEE DINGS ALONG WITH THE RETURN. WHEN IT WAS FOUND THAT SOME OF THE CONDITIONS FOR CLAIMING THE DEDUCTION U/S 80 IB(10) IN RESPECT OF THE HOUSING PROJECT 'ROHAN HEIGHTS' WERE NO T FULFILLED, THE ASSESSEE WITHDREW HIS CLAIM. WE FURTHER FIND THAT SO FAR AS DISALL OWANCE MADE U/S. 49(A)(IA) IS CONCERNED, I.E. FORWARDS NON DEDUCTION OF TDS, NOWHERE IT IS THE CASE OF THE A.O. THAT ANY BOGUS CLAIM IS MADE BY THE ASSESSEE. IN OUR OPINION, THE ASSESSEES CASE IS SQUARELY COVERED BY THE DECISION OF THE HONOURABLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD., 322 ITR 158 (SC). IN THE SAID CASE, THEIR LORDSHIPS HAVE HELD THAT MERELY BECAUSE CLAIM IS DISALLOWED WHICH IS OTHERWISE BONAFIDE, THE ASSESSEE CANNOT BE SUBJECTED TO PENAL CONSEQUENCES U/S. 271(1)(C) OF THE ACT. MOREOVER, THE LD. 11 ITA NO S. 2199 & 2200/PN/2013, M/S. CHANDRAI CONSTRUCTIONS, PUNE CIT(A) HAS CONSIDERED THE ISSUE IN DETAIL. WE FIND NO REASON TO TAKE DIFFERENT VIEW BUT CONFIRM THE ORDER OF CIT(A). 3.8 IN VIEW OF THE ABOVE, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE PENALTY U/S. 271( 1)(C) OF THE ACT, LEVIED FOR THE YEAR UNDER CONSIDERATION AND THE APPELLANT SUCCEEDS IN GROUNDS OF APPEAL NO. 1 TO 3. NOW, THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD . WE HAVE ALSO PERUSED THE PENALTY ORDERS PASSED BY THE ASSESSING OFFICER AS WELL AS THE ORDER OF THE LD. CIT(A) DELETING THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT. THERE IS NO DISPUTE ABOUT THE FACT THAT THE PROJECT IS CONCERNED , OTHERWISE THE ASSESS EE IS ELIGIBLE FOR CLAIMING THE DEDUCTION U/S. 80IB(10) OF THE ACT . I N THE CASE OF THE ASSESSEE , THE HOUSING PROJECT WAS APPROVED PRIOR TO 01 - 04 - 2004 . W HILE FILING THE ORIGINAL RETURN FOR THE A.Y. 2005 - 06 , T HE ASSESSEE ALSO ENCLOSED AUDITOR S CERTIFICATE S. THERE WAS A SURVEY ACTION ON 02 - 06 - 2008 U/S. 133A OF THE ACT BY THE ASSESSING OFFICER TO VERIFY THE HOUSING PROJECT. DURING THE COURSE OF SURVEY ACTION THE PARTNER S ACCEPTED THAT THE SAID HOUSING PROJECT WAS NOT COMPLETED BEFORE 31 - 03 - 2008 AND PARTNE R ALSO AGREED TO WITHDRAW THE DEDUCTION CLAIMED U/S. 80IB(10) FOR BOTH THE ASSESSMENT YEARS I.E. A.YS. 2005 - 06 AND 2006 - 07 AND THEY ACCORDINGLY FILED REVISED RETURN ON 30 - 06 - 2008 WITHOUT CLAIMING THE DEDUCTION. THE ASSESSING OFFICER ON THE BASIS OF REVISE D RETURN S FILED BY THE ASSESSEE INITIAT ED THE REASSESSMENT PROCEEDINGS U/S. 147 OF THE ACT FOR A.Y. 2005 - 06 AS TIME FOR ISSUING THE NOTICE U/S. 143(2) HAD EXPIRED. THE ASSESSING OFFICER INITIATED THE PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT. THERE WERE MAIN TWO REASONS (I) THE ASSESSEE AGREED FOR WITHDRAWING THE DEDUCTION WHICH WAS OTHERWISE CLAIMED U/S. 80IB(10)(I) OF THE ACT AS THE SAID PROJECT WAS NOT COMPLETED BEFORE 31 - 03 - 2008 THOUGH IT WAS APPROVED PRIOR TO 01 - 0 4 - 2004 AND (II) COMMERCIAL ARE A IN 12 ITA NO S. 2199 & 2200/PN/2013, M/S. CHANDRAI CONSTRUCTIONS, PUNE SAID PROJECT WAS EXCEEDING THE LIMIT PRESCRIBED IN SEC. 80IB(10) OF THE ACT. 5. THE CONTENTION OF THE ASSESSEE IS THAT THE ORIGINAL RETURNS FOR BOTH THE ASSESSMENT YEARS WERE SUBMITTED ON 31 - 10 - 2005 FOR THE A.Y. 2005 - 06 AND 31 - 10 - 2006 FOR THE A.Y. 20 06 - 07 RESPECTIVELY AND ON THOSE DATES IT WAS NOT WITHIN KNOWLEDGE OF THE ASSESSEE THAT THE HOUSING PROJECT WOULD NOT BE COMPLETED BEFORE 31 - 03 - 2008. IT WAS TRUE THAT THE ASSESSEE CAME FORWARD AND ADMITTED THAT THERE WAS A MISTAKE IN CLAIMING THE DEDUCTION U/S. 80IB(10) AND AT THE SAME TIME IN THE C OMPLEX TAX LAWS WHICH UNDERGO AMENDMENTS ON MANY TIMES , IT MAY BE DIFFICULT FOR THE ASSESSEE IN SUCH A SITUATION TO CONTEMPLATE WHETHER THE HOUSING PROJECT W OULD BE COMPLETED IN STIPULATED TIME OR NOT. AS RIGHTL Y ARGUED BY THE LD. AR FOR THE ASSESSEE , THE ISSUE OF 80IB (10) DEDUCTION IS A DEBATABLE ISSUE. IN RESPECT OF THE OBSERVATION OF THE ASSESSING OFFICER ON THE COMMERCIAL AREA BEING MORE THAN 5% , NOW THE SAID ISSUE IS IN FAVOUR OF THE ASSESSEE BY THE DECISIO N OF HON'BLE JURISDICTIONAL HIGH COURT IN BRAMHA ASSOCIATES, 333 ITR 289 . THE DEFINITION OF THE BUILT UP AREA IS BROUGHT ON THE STATUTE BOOK W.E.F. 01 - 04 - 2005 AS PER THE WELL SETTLED LAW , T HE SAID DEFINITION IS NOT RETROSPECTIVE AND IS NOT APPLICABLE TO T HE PROJECT APPROVED PRIOR TO 01 - 04 - 2005. THE LD. CIT(A) HAS RIGHTLY RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P) LTD. 322 ITR 158 ( SC). MERELY BECAUSE THE LEGAL CLAIM IS NOT ALLOWED THERE IS NO JUS TIFICATION TO LEVY THE PENALTY. WE FIND THAT IN THE PRESENT CASE , CONSIDERING THE NATURE OF THE CLAIM, THE ASSESSEE COULD HAVE DECLINED EVEN TO WITHDRAW THE CLAIM. IT IS TRUE THAT NOW THE SUPREME COURT HAS HELD IN THE CASE OF MAK DATA PVT. LTD. VS. CIT, 358 ITR 593 THAT OFFERING THE INCOME FOR BUYING THE PEACE WILL NOT ABSOLVE THE ASSESSE FROM THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT UNLESS THERE IS A PROPER JUSTIFICATION BUT SAID DECISION IS TO BE CONSIDERED IN THE BACK DROP OF THE FACTS IN THE EACH CASE . 13 ITA NO S. 2199 & 2200/PN/2013, M/S. CHANDRAI CONSTRUCTIONS, PUNE 6. SO FAR AS THE PRESENT ASSESSEE IS CONCERNED ADMITTEDLY EVEN THE CHARGE OF THE EXCESS COMMERCIAL AREA IS IN FAVOUR OF THE ASSESSEE BY THE PLETHORA OF DECISIONS OF THE ITAT, PUNE AND SO FAR AS THE ISSUE OF COMPLETION OF THE PROJECT IS CONCERNED AGAIN THERE CAN BE DEBATE ON ISSUE IF PROJECT IS APPROVED PRIOR TO 01 - 04 - 2004. AFTER GIVING OUR ANXIOUS CONSIDERATION ON THE FACTS OF THE CASE AND REASON S GIVEN BY THE LD. CIT(A) , WE ARE OF THE CONSIDERED OPINION THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LD. CIT(A) FOR BOTH THE ASSESSMENT YEARS. WE, ACCORDINGLY, CONFIRM THE ORDER OF THE LD. CIT(A) IN BOTH THE YEARS AND ACCORDINGLY, DISMISS ALL THE GROUNDS TAKEN BY THE REVENUE. 7. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED . PRONOUNCED IN THE OPEN COURT ON 22 - 01 - 20 1 5 SD/ - SD/ - ( R . K . PAN DA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE , DATED : 22 ND JANUARY, 2015 RK/PS COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - I I, PUNE 4 THE CIT - I I , PUNE 5 THE DR, ITAT, A BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR , INCOME TAX APPELLATE TRIBUNAL , PUNE