INCOME TAX OFFICER 9(1)-2, MUMBAI V. M/S. BRAZ HOUSING PVT.LTD., MUMBAI

ITA 2751/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1533 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-05-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 29-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS; S S RANA L K AGRAWAL
• Keywords: Set aside
• Section: 271(1)(c); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, B, MUMBAI BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 2751/MUM/2009 (ASSESSMENT YEARS: 2004-05) INCOME TAX OFFICER WARD 9(1)( 2), ROOM NO.226, 2 ND FL., AAYAKAR BHAVAN, M K ROAD MUMBAI-400020 .APPELLANT V/S BRAZ HOUSING PVT.LTD., 302, PREMIER PARK, 2 ND DOMINIC COLONY, ORLEM, MALAD (W), PAN: AABCB1658C RESPONDENT APPELLANT BY : S/SHRI S S RANA, L K AGRAWAL AND PITAMBAR DAS RESPONDENT BY : NONE O R D E R PER VIJAY PAL RAO,JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 24.04.2009 OF CIT(A)-IX, MUMBAI ARISING FROM THE PENALTY ORDER PASSED UNDER SECTION 271(1)(C) OF THE ACT FOR THE ASSESSMENT YEAR 2004-05. 2 THE REVENUE HAS RAISED VARIOUS GROUNDS IN THIS AP PEAL, HOWEVER, THE ONLY ISSUE ARISES IN THIS APPEAL FO R OUR CONSIDERATION AND ADJUDICATION IS WHETHER IN THE FA CTS AND ITA NO. 2751/MUM/2009 (ASSESSMENT YEARS: 2004-05) 2 CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFI ED IN DELETING THE PENALTY OF RS.3,01,749/- LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 3. NOBODY HAS APPEARED ON BEHALF OF THE ASSESSEE WH EN THE APPEAL WAS CALLED FOR HEARING DESPITE THE NOTIC E OF HEARING THROUGH RPAD ISSUED TO THE ASSESSEE. THEREFORE, WE PROPOSE TO HEAR AND DISPOSE OFF THIS APPEAL EX-PARTE. 4. WE HAVE HEARD THE LEARNED DR AND CONSIDERED THE RELEVANT RECORDS. THE LEARNED DR HAS CONTENDED THA T WHEN THE PROJECT WAS SUBSTANTIALLY COMPLETED IN THE ASSE SSMENT YEAR 2001-02 ITSELF AND THE ASSESSEE HAS HANDED OVE R THE POSSESSION TO THE SOME OF THE BUYERS THEN WHILE OF FERING THE INCOME, THE ASSESSEE HAS STATED THAT THE SAID PROJE CT IS INCOMPLETE WITH AN INTENTION TO AVOID TAX LIABILITY AND THEREFORE THE ASSESSES HAS CONCEALED THE INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME. HE HAS RELIED UPO N THE PENALTY ORDER. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNED DR AND PERUSAL OF THE RELEVANT RECORDS, WE NOTE THAT THE AO MADE THE ADDITION BY ESTIMATING THE INCOME OF THE ASSESSEE A T THE RATE OF 8% OF THE TOTAL ADVANCES RECEIVED BY THE ASSESS EE IN BOOKING OF THE FLATS. WE NOTE THAT THE ASSESSEE IS FOLLOWING THE PERCENTAGE OF WORK COMPLETION METHOD SINCE THE ASSESSMENT YEAR 1996-97. THE ASSESSEE EXPLAINED THAT THE CONSTRUCTION OF TOP TWO FLOORS WERE INCOMPLETE BECA USE SOME ITA NO. 2751/MUM/2009 (ASSESSMENT YEARS: 2004-05) 3 OF THE FLATS WERE UNDER CONSTRUCTION AS THE FINISHI NG WORK WAS NOT COMPLETED. THEREFORE, THE POSSESSION WAS NOT HA NDED OVER TO THE BUYERS. THE ASSESSEE OFFERED THE COMPLETION OF PROJECT FOR THREE FLATS ON EACH FLOOR. THE 4 TH FLAT ON EACH FLOOR WAS NOT AVAILABLE DUE TO TDR RULES. THE ASSESSEE SHO WN THAT THE ADDITIONAL FOURTH FLAT ON EACH FLOOR WAS COMPLE TED IN THE YEAR 2005-06 RELEVANT TO THE ASSESSMENT YEAR 2006-0 7 WHEN THE ENTIRE PAYMENT OF THE SALE CONSIDERATION WAS RE CEIVED BY THE ASSESSEE. THEREFORE, THE METHOD ADOPTED BY THE ASSESSEE CONSISTENTLY, CANNOT BE FOUND FAULTY. THUS, IT I S EVIDENT THAT THE ASSESSEE HAS CLEARLY DISCLOSED THE PRIMARY AN D BASIC FACTS ABOUT THE COMPLETION OF PROJECT DURING THE YE AR AND TREATED THE REMAINING PARTS AS INCOMPLETE PROJECTS AS THE FINISHING WORK WERE NOT COMPLETED AND THE ASSESSEE DID NOT RECEIVE FULL CONSIDERATION OF THE FLATS AND THE POS SESSION THEREOF WAS ALSO NOT HANDED OVER TO THE BUYERS. T HE AO MADE THE ADDITION BY NOT ACCEPTING THE METHOD OF AC COUNTING ADOPTED BY THE ASSESSEE AND THEREBY REACHED TO THE CONCLUSION THAT THE ASSESSEE HAS NOT DISCLOSED THE FACT OF RECEIVING THE ADVANCE BOOKING OF FLATS AND INCOMPLE TE PORTION OF THE PROJECT. IN OUR VIEW, NON ACCEPTANCE OF METH OD OF ACCOUNTING CANNOT LEAD TO THE CONCLUSION THAT THE ASSESSEE HAS CONCEALED THE INCOME AND FURNISHED INACCURATE P ARTICULARS OF INCOME. IN THE RECENT DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V/S RELIANCE PETROPRODUCT S PVT.LTD ITA NO. 2751/MUM/2009 (ASSESSMENT YEARS: 2004-05) 4 REPORTED IN 322 ITR 158(SC) IN WHICH THE HONBLE SUPREME COURT HELD IN PARAGRAPHS 11 TO 14 AS UNDER : 11. WE HAVE ALREADY SEEN THE MEANING OF THE WORD PARTICULARS IN THE EARLIER PART OF THIS JUDG MENT. READING THE WORDS IN CONJUNCTION, THEY MUST MEANS THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TR UTH OR ERRONEOUS. WE MUST HASTEN TO ADD HERE THAT IN TH IS CASE, THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORR ECT OR ERRONEOUS OR FALSE, SUCH NOT BEING THE CASE, TH ERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C ) OF THE ACT. A MERE MAKING OF THE CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, W ILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF HE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. 12. IT WAS TRIED TO BE SUGGESTED THAT SECTION 14A OF THE ACT SPECIFICALLY EXCLUDED THE DEDUCTION IN RESPECT OF THE EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF T HE TOTAL INCOME UNDER THE ACT. IT WAS FURTHER POINTED OUT THAT THE DIVIDENDS FROM THE SHARES DID NOT FORM THE PART OF THE TOTAL INCOME. IT WAS, THEREFORE REITER ATED BEFORE US THAT THE ASSESSING OFFICER HAD CORRECTLY REACHED THE CONCLUSION THAT SINCE THE ASSESSEE HAD CLAIMED EXCESSIVE DEDUCTIONS KNOWING THAT THEY ARE INCORRECT, IT AMOUNTED TO CONCEALMENT OF INCOME. I T WAS TRIED TO BE ARGUED THAT THE FALSEHOOD IN ACCOUN TS CAN TAKE EITHER OF THE TWO FORMS ; (I) AN ITEM OF R ECEIPT MAY BE SUPPRESSED FRAUDULENTLY; (II) AN ITEM OF EXPENDITURE MAY BE FALSELY (OR IN AN EXAGGERATED AMOUNT ) CLAIMED AND BOTH TYPES ATTEMPT TO REDUCE THE TAXABLE INCOME AND, THEREFORE, BOTH TYPES AMOUN T TO CONCEALMENT OF PARTICULARS OF ONES INCOME AS WE LL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. WE DO NOT AGREE, AS THE ASSESSEE HAD FURNISHED ALL TH E DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN IS RETURN, WHICH DETAILS, IN THEMSELVES WE NOT FOUND T O BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMEN T OF INCOME ON ITS PARTS. IT WAS UP TO THE AUTHORITI ES TO ACCEPT ITS CLAIM IN THE RETURN OR NOT. MERELY BECA USE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE ITA NO. 2751/MUM/2009 (ASSESSMENT YEARS: 2004-05) 5 REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENALTY UNDER SECTION 271(1)( C ). IF W E ACCEPT THE CONTENTION OF THE REVENUE THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MAD IS NOT ACCEPTED BY THE AO FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY UNDER SECTION 271(1)( C ). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE. 13. IN THIS BEHALF THE OBSERVATIONS OF THIS COURT MADE IN SREE KRISHNA ELECTRICIANS V/S STATE OF TAMI L NADU (2009) 23 VST 249 AS REGARDS THE PENALTY ARE APPOSITE. IN THE AFOREMENTIONED DECISION WHICH PERTAINED TO THE PENALTY PROCEEDINGS UNDER THE TAM IL NADU GENERAL SALES TAX ACT, THE COURT HAD FOUND TH AT THE AUTHORITIES BELOW HAD FOUND THAT THERE WERE SOM E INCORRECT STATEMENTS MADE IN THE RETURN . HOWEVER, THE SAID TRANSACTIONS WERE REFLECTED IN THE ACCOUNT S OF THE ASSESSEE. THIS COURT, THEREFORE, OBSERVED (PAGE 251): SO FAR AS THE QUESTION OF PENALTY IS CONCERNED THE ITEMS WHICH WERE NOT INCLUDED IN THE TURNOVER WERE FOUND INCORPORATED IN THE APPELLANTS ACCOUNT BOOKS. WHERE CERTAIN ITEMS WHICH ARE NOT INCLUDED IN THE TURNOVER ARE DISCLOSED IN THE DEALERS OWN ACCOUNT BOOKS AND THE ASSESSING AUTHORITIES INCLUDES THESE ITEMS IN THE DEALERS TURNOVER DISALLOWING THE EXEMPTION, PENALTY CANNOT BE IMPOSED. THE PENALTY LEVIED STANDS SET ASIDE 14. THE SITUATION IN THE PRESENT CASE IS STILL BET TER AS NO FAULT HAS BEEN FOUND WITH THE PARTICULARS SUBMITTED BY THE ASSESSEE IN ITS RETURN. 6. FROM THE DECISION OF THE HONBLE SUPREME COURT ( SUPRA), IT IS CLEAR THAT WHEN THE INFORMATION AND DETAILS G IVEN BY THE ASSESSEE IS NOT FOUND TO BE INCORRECT OR INACCURATE , THE ASSESSEE CANNOT BE HELD OF GUILTY OF FURNISHING INA CCURATE PARTICULARS AND RESULTING LEVY OF PENALTY. RESPECT FULLY FOLLOWING THE DECISION OF THE DECISION OF THE SUPRE ME COURT ITA NO. 2751/MUM/2009 (ASSESSMENT YEARS: 2004-05) 6 (SUPRA), WE FIND THAT, IN THE FACTS AND CIRCUMSTAN CES OF THE PRESENT CASE, THE PENALTY IS NOT JUSTIFIED. WE FIN D NO ERROR OR ILLEGALITY IN THE ORDER OF THE CIT(A) IN DELETING THE PENALTY IMPOSED BY THE AO. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 4.6.2010 SD SD (P.M.JAGTAP) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMB ER MUMBAI, DATED 4 TH JUNE 2010 SRL:28510 COPY TO: 1. INCOME TAX OFFICER WARD 9(1)( 2), ROOM NO.226, 2 ND FL., AAYAKAR BHAVAN, M K ROAD MUMBAI-400020 2. BRAZ HOUSING PVT.LTD., 302, PREMIER PARK, 2 ND DOMINIC COLONY, ORLEM, MALAD (W), 3 CCIT CITY-V, MUMBAI. 4.CIT IX, MUMBAI 5 CIT(A)-VI, MUMBAI. 6. DR B BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI