M/S RITE DEVELOPERS, Mumbai V. ITO , Mumbai

ITA 2386/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 8433 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 15-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY PRATAP SINGH
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI , ! BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER . 2386 / / 2019 (%. .2013-14 ) ITA NO. 2386/MUM/2019 (A.Y.2013-14) M/S. RITE DEVELOPERS, 310, VEENA CHAMBERS, FORT, MUMBAI 400 023. PAN:AAJFR3140H / VS. : / APPELLANT INCOME TAX OFFICER 17(3)(2) ROOM NO.114, AAYKAR BHAVAN, M.K.ROAD, MUMBAI 400 020 : / RESPONDENT ASSESSEE BY : SHRI SATISH MODY REVENUE BY : SHRI AJAY PRATAP SINGH / DATE OF HEARING : 13/10/2020 / DATE OF PRONOUNCEMENT : 08/01/2021 / ORDER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-28, MUMBAI ( IN SHORT THE CIT (A)) DATED 22/03/2019 FOR THE ASSESSMENT YEAR 2013-14. 2. SHRI SATISH MODY, APPEARING ON BEHALF OF THE ASS ESSEE SUBMITTED THAT THE ASSESSEE IS A BUILDER AND DEVELOPER. THE ASSES SEE IS FOLLOWING PROJECT COMPLETION METHOD FOR RECOGNITION OF PROFIT. THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR FILED RETURN OF INCOME ON 30/09/ 2013 DECLARING NIL INCOME. 2 ITA NO. 2386/MUM/2019 (A.Y.2013-14) DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR U NDER APPEAL THE ASSESSEE HAD PAID REGULARISATION CHARGES AMOUNTING TO RS.19, 51,365/- TO BMC IN RESPECT OF PROJECT UNDER CONSTRUCTION AT ANDHERI. T HE SAID AMOUNT WAS DEBITED TO THE P&L ACCOUNT FOR THE FINANCIAL YEAR 2 012-13. THE PROJECT IN RESPECT OF WHICH REGULARISATION CHARGES WERE PAID W AS COMPLETED IN THE FINANCIAL YEAR 2016-17. IN THE YEAR OF COMPLETION, THE ASSESSEE SUO-MOTU REDUCED THE AMOUNT PAID TO BMC. THUS, THE AFORES AID CHARGES PAID TO BMC WERE NEVER CLAIMED AS EXPENDITURE BY THE ASSESSEE. THE ASSESSMENT FOR ASSESSMENT YEAR 2013-14 WAS REOPENED TO DISALLOW TH E ALLEGED PENALTY AND FINE PAID TO BMC. THE ASSESSEE EXPLAINED THE ENTIR E FACTUAL POSITION TO THE ASSESSING OFFICER , HOWEVER, THE ASSESSING OFFICER MADE ADDITION OF THE AFORESAID PENALTY AMOUNT. AGGRIEVED BY THE ASSESSM ENT ORDER DATED 17/03/2016 PASSED UNDER SECTION 143(3) R.W.S 147 OF THE ACT, THE CIT(A) WITHOUT APPRECIATING THE FACTS REJECTED ASSESSEES CONTENTION AND UPHELD THE ASSESSMENT ORDER, HENCE, THE PRESENT APPEAL BY THE ASSESSEE. 3. PER CONTRA, SHRI AJAY PRATAP SINGH REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER. THE LD.DEP ARTMENTAL REPRESENTATIVE SUBMITTED THAT THE PENALTY/FINE PAID TO BMC IS NOT ALLOWABLE IN THE SCHEME OF SECTION 37(1) OF THE ACT. THE SUB MISSIONS MADE BY THE ASSESSEE WAS CONSIDERED BY THE LOWER AUTHORITIES AN D WERE REJECTED BY PASSING A REASONED ORDER. THE ASSESSEE HAS REITERATED TH E SAME CONTENTIONS BEFORE THE TRIBUNAL. 4. BOTH SIDES HEARD, ORDERS OF AUTHORITIES BELOW EX AMINED. THE SOLITARY ISSUE RAISED BY THE ASSESSEE IN APPEAL IS AGAINST D ISALLOWANCE OF FINE/PENALTY OF RS.19,51,365/- PAID BY THE ASSESSEE TO BMC. THE CO NTENTION OF THE ASSESSEE IS THAT THE ASSESSEE IS FOLLOWING PROJECT COMPLETION M ETHOD. THE PROJECT IN 3 ITA NO. 2386/MUM/2019 (A.Y.2013-14) RESPECT OF WHICH PENALTY WAS PAID TO BMC WAS COMPLE TED IN FINANCIAL YEAR 2016-17. THE ASSESSEE WHILE FILING RETURN OF INCOM E FOR THE RELEVANT ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2017-18 HAS RE DUCED THE AMOUNT OF PENALTY/REGULATION CHARGES AMOUNTING TO RS.19.51 LA CS PAID TO BMC. THE FACT THAT THE ASSESSEE IS FOLLOWING PROJECT COMPLETION M ETHOD TO RECOGNISE PROFITS HAS NOT BEEN DISPUTED BY THE REVENUE. THE ONLY ISS UE IS, WHETHER THE ASSESSEE IN RETURN OF INCOME FOR THE YEAR IN WHIC H INCOME FROM PROJECT HAS BEEN DECLARED HAS REDUCED THE AMOUNT OF RS.19.51 L ACS PAID AS PENALTY/FINE TO BMC?. WE OBSERVE FROM THE IMPUGNED ORDER (PARA-6) T HAT THE CIT(A) HAD SOUGHT REMAND REPORT FROM THE ASSESSING OFFICER ON THIS ISSUE. THE ASSESSING OFFICER IN HIS REMAND REPORT HAS MENTIONED THAT THE ASSESSEE IN ITS REVISED COMPUTATION FOR ASSESSMENT YEAR 2017-18 HAS REDUCED PENALTY/FINE TO THE TUNE OF RS.19.51 LACS. THE CIT(A) HAS NOT GRANTED RELIEF TO THE ASSESSEE MERELY FOR THE REASON THAT IN THE TAX AUDIT REPORT FOR AS SESSMENT YEAR 2017-18, THE AUDITOR HAS NOT REPORTED ANY AMOUNT OF RS.19,51,365 /- PAID BY WAY OF PENALTIES/FINES. THUS, IN VIEW OF THE ADMITTED FACT THAT THE ASSESSEE HAS REDUCED THE AMOUNT OF PENALTY/REGULARISATION CHARGE S IN THE COMPUTATION OF INCOME WHILE FILING OF RETURN OF INCOME IN THE YE AR IT HAS OFFERED THE PROFITS FROM THE PROJECT, NO DISALLOWANCE IN RESPECT OF AFO RESAID PENALTY/REGULARISATION CHARGES IS WARRANTED IN THE IMPUGNED ASSESSMENT YEAR. I FIND MERIT IN THE CONTENTIONS RAISED BY THE ASSE SSEE. ACCORDINGLY, THE APPEAL OF ASSESSEE IS ALLOWED. 4 ITA NO. 2386/MUM/2019 (A.Y.2013-14) 5. IN THE RESULT, APPEAL BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 8TH DAY OF JANUARY, 2021. SD/- (VIKAS AWASTHY) / JUDICIAL MEMBER / MUMBAI, (%/ DATED: 8/01/2021 VM , SR. PS(O/S) COPY OF THE ORDER FORWARDED TO : 1. ) / THE APPELLANT , 2. *+ / THE RESPONDENT. 3. ,+ ( )/ THE CIT(A)- 4. ,+ CIT 5. -.*+% , . . . , / DR, ITAT, MUMBAI 6. ./012 / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI