M/s. Greenland Developers, Surat V. The Income tax Officer,Ward-3(3), Surat

ITA 2821/AHD/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67956 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 18-11-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 06-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Keywords: Revised return; Revenue expenditure; Ignorance of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMADABAD BEFORE SHRI N. S. SAINI , ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO. 2821/AHD/2010 ASSESSMENT YEAR :2006-2007 M/S. GREENLAND DEVELOPERS 4 TH FLOOR, SHARON PLAZA, PARLE POINT, SURAT. V/S . INCOME-TAX OFFICER, WARD.3(3), SURAT. PAN NO. A AGFG5384B (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI TUSHAR HEMANI, A.R. /BY RESPONDENT SHRI K. C. MATHEWS, SR. D.R. /DATE OF HEARING 18.11.2013 /DATE OF PRONOUNCEMENT 22.11.2013 O R D E R PER : SHRI N. S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-II, SURAT, DATED 11.08.2010. 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT T HE LD. CIT(A) ERRED IN CONFIRMING THE PENALTY OF RS.3,33,897/- LEVIED BY T HE A.O. U/S. 271(1)(C) OF THE INCOME TAX ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FIRM IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND CONTRACT WORK. THE AS SESSEE ENTERED INTO A LABOUR CONTRACT WITH M/S. GREENLAND CO-OPERATIVE HO USING SOCIETY LTD. TO CARRY OUT THE CONSTRUCTION WORK OF RS.2.5 CRORES WH ICH WAS TO BE COMPLETED WITHIN 24 MONTHS. THE CONSTRUCTION WORK WAS COMMEN CED IN MAY 2005. THE ITA NO. 2821/AHD/10 A.Y. 2006-07 PAGE 2 ASSESSEE FIRM SHOWED WORK-IN-PROGRESS OF RS.1,27,64 ,545/- BY ADOPTING THE PROJECT COMPLETION METHOD. ACCORDING TO THE A.O., IN THE CASE OF CONTRACTOR AS PER ACCOUNTING STANDARD AS-7 ISSUED BY THE INSTI TUTE OF CHARTERED ACCOUNTANTS OF INDIA THE CONTRACTOR SHOULD FOLLOW P ERCENTAGE COMPLETION METHOD WHICH IS APPLICABLE IN THE CASE OF ASSESSEE. IN REPLY OF THE SHOW CAUSE NOTICE ISSUED TO THE ASSESSEE, THE ASSESSEE F IRM SUBMITTED THAT IT WAS ENGAGED IN THE BUSINESS OF CONSTRUCTION ACTIVITY AN D ACCORDINGLY HAD OFFERED INCOME FROM CONTRACTUAL RECEIPTS IN THE A.Y. 2007-0 8 AND SUBMITTED THE AUDITED ANNUAL ACCOUNT FOR THE YEAR ENDED ON 31.03. 2007 ALONG WITH THE BOOKS OF ACCOUNTS BILLS, VOUCHERS ETC. DURING THE COURSE OF ASSESSMENT PROCEEDING FOR THE YEAR UNDER CONSIDERATION IN RESP ONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE A.O. AS TO WHY INCOME SHOULD N OT BE CONSIDERED ON PROPORTIONATE BASIS DURING A.Y. 2006-07, THE ASSESS EE IN ORDER TO AVOID PROTRACTED LITIGATION AND TO BUY PEACE OF MIND OFFE RED INCOME ON PROPORTIONATE BASIS. ACCORDINGLY, REVISED RETURN OF INCOME FOR A .Y. 07-08 WAS FILED REVISING THE ORIGINAL RETURN WHEREIN ASSESSEE HAD ALREADY OF FERED TOTAL INCOME AND PAID TOTAL TAX DURING A.Y. 07-08 ON PROJECT COMPLET ION METHOD. THIS RESULTED IN ASSESSING THE INCOME OF RS.11,12,990/- DURING TH E YEAR UNDER CONSIDERATION. 4. THEREAFTER, THE A.O. ISSUED NOTICE U/S. 271(1)(C ) OF THE ACT TO SHOW AS TO WHY PENALTY SHOULD NOT BE LEVIED FOR CONCEALMENT OF INCOME OF RS.11,12,990/-. THE ASSESSEE SUBMITTED THAT IT HAD NOT SHOWN ANY INCOME OUT OF ITS CONTRACTUAL RECEIPTS AS IT WAS FOLLOWING PROJECT COMPLETION METHOD ITA NO. 2821/AHD/10 A.Y. 2006-07 PAGE 3 AND HAD OFFERED INCOME OUT OF CONTRACTUAL RECEIPTS AS A WHOLE IN THE A.Y. 07- 08 AND THEREFORE, WAS NOT LIABLE FOR PENALTY PROCEE DING. 5. THE ASSESSING OFFICER DID NOT ACCEPT THE SAID EX PLANATION OF THE ASSESSEE AND HELD THAT THE ASSESSEE FAILED TO SHOW ITS TRUE INCOME IN ITS RETURN OF INCOME FILED FOR THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE WAS WELL ADVISED AND GUIDED BY THE TAX PROFESSIONALS AN D IGNORANCE OF LAW IS NOT ANY EXCUSE FOR NOT LEVYING OF PENALTY. ACCORDINGLY , HE LEVIED PENALTY RS.3,38,897/- BEING 100% OF THE AMOUNT OF TAX SOUGH T TO BE EVADED BY THE ASSESSEE. 6. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ACTION O F THE A.O. HE OBSERVED THAT THERE WAS NO FORCE IN THE PLEA OF THE ASSESSEE THAT IT HAD ADOPTED PROJECT COMPLETION METHOD AND PAID TAXES FULLY FOR THE A.Y. 07-08. HE OBSERVED THAT THE ASSESSEE WAS A LABOUR CONTRACTOR AND WAS BOUND TO FOLLOW PERCENTAGE WORK COMPLETION METHOD WHICH WAS SUPPORTED BY THE F ACT THAT THE AMOUNT OF CONTRACT WAS PRE-DECIDED AT THE BEGINNING AT RS.2.5 0 CRORE, THEREFORE, INCOME UNDER PERCENTAGE WORK COMPLETION METHOD WAS NOT DIF FICULT TO COMPUTE FROM THE CONTRACT WORK TO THE TUNE OF RS.1.27 CRORES COM PLETED AT THE END OF F.Y.2005-06 RELEVANT TO A.Y. 2006-07. THUS, THE AS SESSEE FAILED TO SHOW INCOME FROM CONTRACT WORK DONE IN A.Y. 06-07 AND AV OIDED AND EVADED TAX PAYMENT ON THE SAID INCOME. HE FURTHER OBSERVED TH AT THE JUDICIAL DECISIONS RELIED UPON BY THE ASSESSEE HAVE EITHER BEEN RENDER ED PRIOR TO THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF DHARMENDRA TEXTILE PROCESSORS 174 TAXMAN 571 VIDE ORDER DATED 29.09.2008, FACTS INVOLVED THEREIN ARE NOT ITA NO. 2821/AHD/10 A.Y. 2006-07 PAGE 4 COMPARABLE TO THE FACTS OF THE ASSESSEES CASE. I N CASE OF DHARMENDRA TEXTILE PROCESSORS (SUPRA), THE HONBLE SUPREME COURT LAID DOWN THE PR INCIPLE THAT WHERE CONCEALMENT HAD BEEN ESTABLISHED OR PROV ED, THERE IS NO REQUIREMENT OF ESTABLISHING MENS-REA OR MALAFIDE IN TENTION FOR LEVY OF PENALTY FOR CONCEALMENT OF INCOME, BECAUSE TAX EVASION IS A CIVIL LIABILITY AND THE RULES OF CRIMINAL PROCEDURE CANNOT BE MADE APPLICABLE TO IT. THE ABOVE PRINCIPLE HAS NOT BEEN OVERRULED IN THE SUBSEQUENT DECISION G IVEN BY THE SUPREME COURT IN CASE OF M/S. RAJASTHAN SPINNING MILLS LTD. IN CIVIL APPEAL NO. 3527 OF 2009. HE ALSO RELIED ON THE DECISION OF THE HONBLE KERLA HIGH COURT IN THE CASE OF CIT VS. SREENIVASA PAI 242 ITR 29, WHEREIN LEVY OF PENALTY WAS UPHELD IN THE CASE WHERE REVISED RETURN WAS FILED A FTER BOOKS WERE IMPOUNDED. HE ALSO RELIED ON THE DECISION OF HONB LE MADRAS HIGH COURT IN THE CASE OF H.V. VENUGOPAL CHETTIAR VS. CIT (MAD) 153 ITR 376 A ND DDIT VS. CHIRAG METAL ROLLING MILLS LTD. (MP) 305 ITR 29, WHERE IT WAS HELD THAT IN CASE OF ADMISSION OF ASSESSEE DURING ASSESSMENT PROCEEDI NGS REGARDING CONCEALMENT, NO INDEPENDENT ENQUIRY TO PROVE CONCEA LMENT WAS NECESSARY IN PENALTY PROCEEDINGS. 7. LD. A.R. OF THE ASSESSEE REITERATED THE SUBMISSI ONS MADE BEFORE THE LOWER AUTHORITIES. HE FURTHER RELIED ON THE DECISI ON OF HONBLE SUPREME COURT IN CASE OF RELIANCE PETROPRODUCTS PVT.LTD. ( 322 ITR 158 ) (SC), WHEREIN IT WAS HELD THAT IN ORDER TO EXPOSE THE ASSESSEE TO PENALT Y, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CAN NOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAI M TANTAMOUNT TO FURNISHING ITA NO. 2821/AHD/10 A.Y. 2006-07 PAGE 5 INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THA T EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF H IS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILI TY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NO T BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. HE FURTHER PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN CASE O F CIT VS. BILAHARI INVESTMENT PRIVATE LTD. (2008) 299 ITR 1(SC), WHEREIN IT WAS HELD THAT SINCE FROM THE VARIOUS STATEMENTS PRODUCED THE ENTIRE EXE RCISE ARISING OUT OF THE CHANGE OF METHOD FROM THE COMPLETED CONTRACT METHOD TO DEFERRED REVENUE EXPENDITURE WAS REVENUE NEUTRAL, THE COMPLETED CONT RACT METHOD WAS NOT REQUIRED TO BE SUBSTITUTED BY THE PERCENTAGE OF COM PLETION METHOD. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD . WE FIND THAT IN THE INSTANT CASE, PENALTY U/S. 271(1)(C) OF RS.3,33,897/- WAS L EVIED IN RESPECT OF INCOME OF RS.11,12,990/- WHICH ACCORDING TO THE A.O. WAS A SSESSABLE IN THE ASSESSMENT YEAR UNDER CONSIDERATION ON THE BASIS OF PERCENTAGE OF COMPLETION METHOD OF ACCOUNTING WHEREAS THE SAID AM OUNT WAS DISCLOSED BY THE ASSESSEE AS ITS INCOME OF THE A.Y. 07-08 ON THE BASIS OF PROJECT COMPLETION METHOD OF ACCOUNTING. THUS, WE FIND THA T IT IS A CASE WHERE THE AMOUNT WAS ALREADY DISCLOSED BY THE ASSESSEE AS ITS INCOME THOUGH OF A SUBSEQUENT YEAR ON THE BASIS OF A DIFFERENT SYSTEM OF ACCOUNTING FOLLOWED BY IT THAN THE SYSTEM OF ACCOUNTING FOR COMPUTING HIS INCOME ADOPTED BY THE ITA NO. 2821/AHD/10 A.Y. 2006-07 PAGE 6 A.O. WE FIND THAT IT IS NOT AT ALL A CASE OF CONCE ALMENT OF INCOME BY THE ASSESSEE. THEREFORE, IN OUR CONSIDERED VIEW, PENAL TY U/S.271(1)(C) IS NOT EXIGIBLE IN THE INSTANT CASE AND ACCORDINGLY, THE S AME IS DELETED IN ITS ENTIRETY. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLO WED. 9. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON FRIDAY THE 22 ND OF NOVEMBER, 2013, AT AHMADABAD. SD/- SD/- ( KUL BHARAT ) (N. S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , 12( ;