UHDE INDIA PVT. LTD., MUMBAI V. A.C.I.T. RG.10(3), MUMBAI

ITA 2641/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2458 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 24-08-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 19-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Question of law

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN,AM AND AMARJIT SINGH, J M ./I.T.A. NO.2641/MUM/2012 ( / ASSESSMENT YEAR: 2003-04) UHDE INDIA P VT. LIMITED, UDHE HOUSE,LBS MARG, VIKHROLI (W), MUMBAI-400083 / VS. ASSTT. COMMISSIONER OF INCOME TAX- RANG 10(3), MUMBAI. ( / APPELLANT) .. ( / RESPONDENT) ./ ./PAN. :AAACU1416H / APPELLANT BY S/SHRI FIROZE ANDHYARUJINA AND M N GOLVALA ! /RSPONDENT BY SHRI G M DAS ' # ! $% / DATE OF HEARING : 24.8.2015 &' ! $% /DATE OF PRONOUNCEMENT: 18.11.2015 / O R D E R PER AMARJIT SINGH , JM: THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGA INST ORDER DATED 27.1.2012, PASSED BY THE LD.CIT(A)-22,, MUMBAI, U NDER SECTION 271(1)( C ) OF THE INCOME TAX ACT, 1961 (THE ACT) FOR THE ASSESSME NT YEAR 2003-04 WHEREIN THE PENALTY WAS IMPOSED BY THE AO WHICH HAS BEEN ALSO UPHELD BY THE LD. CIT(A) BY ORDER UNDER APPEAL. 2. THE ASSESSEE HAS TAKEN SEVERAL GROUNDS IN ITS AP PEAL BUT THE MATTER OF CONTROVERSY BETWEEN THE PARTIES IS IN CONNECTION WI TH THE LEVY OF PENALTY U/S 271(1) (C) OF THE ACT. AMOUNTING TO RS.3,16,48,9 49/-. ITA NO.2641/MUM/2012 2 3. THE FACTS OF THE CASE ARE THAT THE DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE HAS C LAIMED EXPENSES ON ACCOUNT OF PROVISIONS MADE FOR CONTRACT TOTALLING TO RS.8,6 1,19,588/- THE SAID PROVISIONS PERTAIN TO 12 OF THE CONTRACTS UNDERTAKEN BY THE A SSESSEE WHICH WERE COMPLETED/INCOMPLETE. THE AO EXAMINED THE FACTS OF EACH AND EVERY CONTRACT AND THE NATURE OF THE PROVISIONS DURING THE COURSE OF ASSESSMENT IN ORDER TO VERIFY THE UNCERTAIN LIABILITIES UNDER EACH OF THE SAID PROVISION GIVING FINDING THAT THE SAID PROVISIONS ARE IN THE NATURE OF UNASCERTAI NED LIABILITIES AND ALSO THAT THEY ARE NOT CAPABLE OF BEING ESTIMATED WITH REASONABL E CERTAINTIES AND ACCORDINGLY DISALLOWED THE SAME. AFTER COMPLETION OF ASSESSME NT, PENALTY NOTICE WAS ISSUED AND IN PURSUANT TO PENALTY NOTICE SHRI LALIT HA VISHWANATHAN, MANAGER (TAXATION) APPEARED ON BEHALF OF THE ASSESSEE COMPA NY AND THE AO AFTER PROVIDING OPPORTUNITY OF BEING HEARD TO THE ASSESSE E PASSED ORDER DATED 28.3.2011 LEVYING PENALTY OF RS.3,16,48,949/-. SUBS EQUENTLY, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A), WHO CONFIRMED THE ACT ION OF AO BY HIS ORDER DATED 27.1.2012. AGGRIEVED BY THE ORDER OF LD.CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD. AR HAS ARGUED THAT THE NOTICE DATED 28.2 .2006 WAS SERVED TO THE ASSESSEE WITHOUT EXPLAINING ANY REASON FOR LEVY OF PENALTY U/S 271(1)( C ) DERIVED FROM THE CIRCUMSTANCES. THE LD. AR SUBMITTED THAT THE PENALTY ORDER PASSED BY THE AO AND CONFIRMED BY THE LD. CIT(A) IS WRONG AND AGAINST THE LAW AND FACTS AND IS LIABLE TO BE SET ASIDE. THE LD.AR SUBMITTED THAT THE ASSESSEE NOWHERE FURNISHED INACCURATE PARTICULARS OF INCOME AND CONC EALED HIS INCOME TO AVOID TAX LIABILITY DERIVED FROM THE SAID CIRCUMSTANCES. IT IS ALSO SPECIFICALLY SUBMITTED THAT ITA NO.2641/MUM/2012 3 IN VIEW OF THE ACCOUNTING STANDARD 7 REVISED-2002, THE ASSESSEE CAN CLAIM FUTURE LOSSES IN THE RELEVANT ASSESSMENT YEAR WHICH IS QUITE JUSTIFIABLE, HENCE, IN THE SAID CIRCUMSTANCES, THE REJECTION OF CLAIM BY THE AO IS NOT FALLING IN THE CATEGORY OF FURNISHING OF ACCURATE PARTICULARS OR CONCEALMENT OF PARTICULARS OF INCOME TO AVOID TAX LIABILITY, HENCE, IN THE SAID CIRCUMSTANCES, THE SAID PENALTY ORDER IS NOT JUSTIFIABLE IN THE EYES OF LAW SPECIF ICALLY IN THE CIRCUMSTANCES WHEN THE DEPARTMENT HAS ALLOWED THE SAID CLAIM IN THE EA RLIER ASSESSMENT YEARS I.E. AYS1999-2000 TO 2002-03. IT IS ALSO ARGUED THAT T HE ASSESSEE HAS FILED APPEAL BEFORE HONBLE BOMBAY HIGH COURT FOR THE ASSESSMENT YEAR 2003-04, WHEREIN THE SIMILAR POINT IS UNDER CONSIDERATION AND THE AP PEAL HAS BEEN ADMITTED ON 26.3.2013, THEREFORE, IN THE SAID CIRCUMSTANCES NO ACTION AGAINST THE ASSESSEE FOR LEVY OF PENALTY U/S 271(1)( C ) IS REQUIRED TO BE TAKEN. IN SUPPORT OF THIS CONTENTIONS THE LD. AR HAS PLACED RELIANCE ON THE FOLLOWING CASE LAW: A) CIT V/S NAYAN BUILDERS AND DEVELOPERS (368 IT R 722)(BOM); B) SCHRADER DUNCAN LTD V/S ADDL.CIT (2015)37 ITR ( TRIB)674(MUMBAI); C) M/S WESTIN HOSPITALITY SERVICES P.LTD. V/S DCIT IN ITA NO.1274&1275/M/2013 (AYS-2002-03 AND 2001-02) ORD ER DATED 27.8.2014; D) ADVAITA ESTATE DEVELOPMENT P LTD V/S ITO (2013) 27 ITR (TRIB) 112 (MUM); E) CIT VS. RELIANCE PETROPRODUCTS (SUPREME COURT). (2010)322 ITR 158 (SC). 5. ON THE OTHER HAND, THE LD. DR REFUTED THE SAID C ONTENTIONS AND ARGUED THAT THE ASSESSEE HAS MENTIONED IN HIS RETURN ABOUT FUTU RE LOSSES AND THERE WAS NO WORK DONE AND NO PROFIT WAS ASSESSED AND IT IS IMPO SSIBLE HOW THE ASSESSEE IS CLAIMING FUTURE LOSSES WITHOUT ANY BASIS HENCE THE AO HAS RIGHTLY IMPOSED THE PENALTY AND LD.CIT(A) HAS ALSO CONFIRMED THE SAID A CTION IN ACCORDANCE WITH LAW, THEREFORE, THE PRESENT CAPTION APPEAL FILED BY TH E ASSESSEE IS LIABLE TO BE DISMISSED. IT IS ALSO ARGUED BY THE LD. DR THAT T HE ORDER PASSED BY THE AO FOR ASSESSMENT YEAR 2003-04 HAS ALSO AFFIRMED BY THE LD .CIT(A) AND THE SAME HAS ITA NO.2641/MUM/2012 4 NOT BEEN SET ASIDE BY ANY HIGHER AUTHORITY UNDER LA W, THEREFORE, IN THE SAID CIRCUMSTANCES, THE PENALTY ORDER U/S 271(1)( C ) DA TED 28.3.2011 HAS RIGHTLY BEEN PASSED BY THE AO AND CONFIRMED BY THE LD.CIT(A ) BY HIS ORDER DATED 27.1.2012 AND THESE ORDERS ARE NOT LIABLE TO BE IN TERFERED WITH BY THIS TRIBUNAL AND, THE APPEAL OF THE ASSESSEE IS LIABLE TO BE DIS MISSED. 6. KEEPING IN VIEW THE ARGUMENTS ADVANCED BY THE PA RTIES AND ON CAREFUL PERUSAL OF THE RECORD BEFORE US IT IS REQUIRED TO BE SEEN BY THIS TRIBUNAL THAT WHETHER THE ASSESSEE CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME TO AVOID TAX LIABI LITY WHICH ATTRACT TO THE IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT OR NOT. WHILE PASSING THE ASSESSMENT ORDER BY THE AO FOR THE AY-2003-04, THE AO DISALLOWED THE CLAIM ON INCOMPLETE CONTRACTS AND ADDED THE AMOUNT OF RS .8,61,19,588/-. IN THE INSTANT CASE, IT IS TO BE SEEN AS TO WHETHER THE AS SESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED THE PARTICULARS OF INCOME TO AVOID TAX LIABILITY OR NOT. IN VIEW OF THE PROVISIONS OF AS-7, (REVISED-2002) IT CAME TO THE NOTICE THAT THE ASSESSEE CAN RECOGNIZE THE EXPE CTED LOSS. THE SAID MATTER IS HEREBY MENTIONED AT PAGE 118 OF THE PAPER BOOK (AS- 7), I.E. RECOGNITION OF EXPECTED LOSSES, WHEREIN IT IS STATED AT PARA 35 WHEN IT IS PROBABLE THAT TOTAL CONTRACT COSTS WILL EXCEED TOTAL CONTRACT REVENUE, THE EXPECTED LOSS SHOULD BE RECOGNIZED AS AN EXPENSES IMMEDIATELY AND UNDER PARA 36, IT IS MENTIONED THAT THE AMOUNT OF SUCH A LOSS IS DETERM INED IRRESPECTIVE OF : (A) WHETHER OR NOT WORK HAS COMMENCED ON THE CONTRA CT; B) THE STAGE OF COMPLETION OF CONTRACT ACTIVITY; OR ; C) THE AMOUNT OF PROFITS EXPECTED TO ARISE ON OTHER CONTRACTS WHICH ARE NOT TREATED AS A SINGLE CONSTRUCTION CONTRACT I N ACCORDANCE WITH PARAGRAPH 8 THE STAGE: ITA NO.2641/MUM/2012 5 . ON PERUSAL OF THE ASSESSMENT ORDER DATED 28.2.2006, APPARENTLY, THE ASSESSEE CLAIMED LOSSES WITH REGARD TO THE INCOMPLETE WORK WHICH HAS NOT BEEN ALLOWED BY THE AO AND THE SAID LOSSES HAVING BEEN ADDED TO THE INCOME OF THE ASSESSEE. IN OUR VIEW, IT IS NOT A CASE OF FURNISH ING IN ACCURATE PARTICULARS OF INCOME. MAKING INCORRECT CLAIM, IF ANY, DOES NOT A MOUNT TO CONCEALMENT OF PARTICULARS BECAUSE NO INFORMATION GIVEN BY THE ASS ESSEE IN ITS RETURN OF INCOME IS FOUND TO BE INCORRECT. IN THIS REGARD, WE DRAW THE SUPPORT FROM THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (SUPREME COURT). (2010)322 ITR 158 (SC). FURTHER IT IS ALSO NOTED THAT THE ASSESSMENT FOR THE ASSESSMENT YEAR 2003-0 4 IS IN APPEAL BEFORE THE HONBLE BOMBAY HIGH COURT IN ITA NO.477 OF 2012 V IDE WHICH THE SAID QUESTION OF LAW HAS ARISEN. IN EFFECT, WE ARE OF THE VIEW THAT THE AO WAS NOT JUSTIFIED IN LEVYING PENALTY ON THE AMOUNT DISALLOWED SINCE THE SAID CLAIM IS SUPPORTED BY ACCOUNTING STANDARD-7 ISSUED BY ICAI. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD.CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. PRONOUNCED ACCORDINGLY ON 18 TH NOV, 2015. &' ' ( )* +,- 18 TH NOV, 2015 ' ! 6# 7 SD/- SD/- (B.R. BASKARAN) (AMARJIT SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER ) ' 8# MUMBAI: 18 TH NOV, 2015. . . ./ SRL , SR. PS ITA NO.2641/MUM/2012 6 ! ' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ' 9$ ( ) / THE CIT(A)- CONCERNED 4. ' 9$ / CIT CONCERNED 5. :;6 $< , % < , ) ' 8# / DR, ITAT, MUMBAI CONCERNED 6. 6= # / GUARD FILE. ,> ' / BY ORDER, ? (ASSTT. REGISTRAR ) % < , ) ' 8# /ITAT, MUMBAI