ACIT - 26(1), MUMBAI V. GRACE SHELTER, MUMBAI

ITA 2832/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1728 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 20-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R KAVITHA
• Assessee Lawyers: AMRIT PORWAL
• Section: 143(3)

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL G BENCH MUMB AI BEFORE SHRI SHAMIM YAHYA, JUDICIAL MEMBER AND SHRI PAWAN SINGH, ACCOUNTANT MEMBER ITA NO. 2832/MUM/2017 (ASSESSMENT YEAR 20 10-11 ) ACIT- 26(1) ROOM NO. 701, C- 11, 7 TH FLOOR, BKC, BANDRA (E), MUMBAI-400051. VS. GRACE SHELTER 64, DHEERAJ HERITAGE, 3 RD FLOOR, S V ROAD, OPP. MILAN SUBWAY, SANTACRUZ (E), MUMBAI. PAN: AAEFG4946M APPELLANT RESPONDE NT APPELLANT BY : R. KAVITHA (DR) RESPONDENT BY : SHRI AMRIT PORWAL (AR) DATE OF HEARING : 30.08.2018 DATE OF PRONOUNCEMEN T : 30.08.2018 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY REVENUE UNDER SECTION 253 OF INCOME- TAX ACT IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-38, MUMBAI DATED 30 .12.2016 FOR ASSESSMENT YEAR 2010-11. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE PENALTY OF RS.37,72,900/- LEV IED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 HOLDING THAT ONCE THERE IS CON TRACTUAL OBLIGATION ON THE ASSESSEE AND IN THE CONTEXT OF THE TERMS OF THE AGR EEMENT, IF THE PROVISION IS MADE THEN IT CANNOT BE SAID THAT THE CLAIM OF THE A SSESSEE IS NOT BONA FIDE. 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE PENALTY OF RS.37,72,900/- LEV IED U/S 271 (1)(C) OF THE INCOME TAX ACT, 1961 IGNORING THE FOLLOWING THE FAC TS: ITA NO. 2832/MUM/2017-GRACE SHELTER 2 A) THAT ALTHOUGH AS PER THE TERMS OF CONTRACT THE A SSESSEE WAS LIABLE TO CONSTRUCT RESIDENTIAL QUARTERS FOR THE MUNICIPAL CO RPORATION EMPLOYEES ETE. FREE OF COST SINCE 2004, THE PORTION OF LAND ON WHI CH THE QUARTERS WERE PROPOSED TO BE CONSTRUCTED WAS UNDER ENCROACHMENT A ND THE ASSESSEE HAD NOT RECEIVED POSSESSION OF THIS PART OF LAND IN THE PER IOD RELEVANT TO A.Y. 201 0-11 UNDER CONSIDERATION OR EVEN SUBSEQUENTLY. B) THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THA T IT HAD INDEED INCURRED ANY EXPENDITURE AGAINST THE 'PROVISION FOR EXPENSES' OF RS.1,22,10,000/- STATED TO BE PROVIDED TOWARDS CONSTRUCTION OF THE STAFF QUART ERS. C) THAT IT HAD BEEN CLEARLY EMERGED THAT NEITHER TH E TIME PERIOD OF INCURRING OF SUCH EXPENDITURE NOR THE QUANTUM OF EXPENDITURE, WH ICH WOULD BE DEPENDENT ON THE PERIOD IN WHICH THE CONSTRUCTION WOULD TAKE PLACE, IS ASCERTAINABLE AND THEREFORE SUCH PROVISION AS MADE BY THE ASSESSEE CA N ONLY BE TERMED AS 'VAGUE LIABILITY'. D) THAT A VAGUE LIABILITY WHOSE AMOUNT AND PERIOD O F INCURRENCE IS NOT ASCERTAINABLE AND WHICH IS CONTINGENT UPON THE OCCU RRENCE OF SOME EVENT IN FUTURE, CANNOT BE SAID TO BE AN EXPENSE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. E) THAT UNDER THE CIRCUMSTANCES, THE CLAIM OF DEDUC TION OF THE ASSESSEE ON THIS COUNT IS NOT ONLY ABSOLUTELY UNTENABLE BUT ALSO CAN NOT BE TERMED AS MADE IN GOOD FAITH AND HENCE PENALTY U/S 271 (1 )(C) OF THE IT ACT R.W. EXPLANATION 1 THERETO IS CLEARLY LEVIABLE ON THIS ISSUE.' 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE PENALTY LEVIED U/S 271 (1)(C) , RELYING ON THE SUPREME COURT'S JUDGEMENT IN THE CASE OF CIT VS. RELIANCE P ETRO PRODUCTS PVT. LTD. (322 ITR 158) (SC) WITHOUT APPRECIATING THAT THE PRINCIP LES LAID DOWN BY THE APEX COURT IN THE JUDGEMENT CITED SUPRA ARE NOT APPLICAB LE TO THE FACTS OF THE ASSESSEE'S CASE SINCE BESIDES BEING INCORRECT IN LA W, THE CLAIM OF DEDUCTION TOWARDS PROVISION OF EXPENSES MADE BY THE ASSESSEE IS ALSO NOT BONA FIDE' ITA NO. 2832/MUM/2017-GRACE SHELTER 3 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN RELYING ON THE JUDGMENT OF HON'BLE DELHI H IGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATIONS PVT. LTD. (327 ITR 510) (DE L) NOT APPRECIATING THAT THE RATIO LAID DOWN BY THE SAID JUDGMENT ACTUALLY E NDORSES THE STAND TAKEN BY THE DEPARTMENT' 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN IGNORING THE JUDGMENT OF THE HON'BLE SUPRE ME COURT IN THE CASE OF MAK DATA (P) LTD. VS CIT (2013) 358 ITR 593 (SC) WHEREI N IT WAS CATEGORICALLY HELD THAT IF ASSESSEE MAKES A CLAIM WHICH IS NOT ON LY INCORRECT IN LAW, BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND EXPLANATION FURNISHED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE BONAFIDE, EXPLANATION 1 TO SECTION 271 (1 )(C) WOULD COME INTO PLAY AND ASSESSEE WILL BE LIABLE TO PENAL TY. 6. 'THE APPELLANT PRAYS THAT THE ORDER OF THE CIT ( A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE A.O. BE RESTORED.' 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF DEVELOPER AND BUILDING CONSTRUCTION, FILED ITS RETU RN OF INCOME FOR ASSESSMENT YEAR 2010-11 ON 29.09.2010 DECLARING TOT AL TAXABLE INCOME OF RS. 39,65,132/-. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY. THE ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3) ON 31.12.2012. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDE R MADE THE ADDITION OF RS. 1,22,10,000/- ON ACCOUNT OF PROVISION OF EXPENS ES. ON APPEAL BEFORE THE LD. CIT(A), THE DISALLOWANCE WAS CONFIRMED. THE ADDITIONS WAR ALSO CONFIRMED BY THE TRIBUNAL. AFTER DISMISSAL OF APPE AL IN QUANTUM ASSESSMENT BY LD CIT(A), THE ASSESSING OFFICER ISSU ED SHOW-CAUSE NOTICE ITA NO. 2832/MUM/2017-GRACE SHELTER 4 DATED 16.01.2004 UNDER SECTION 274 R.W.S. 271(1)(C) OF THE ACT. THE ASSESSEE FILED ITS REPLY DATED 27.01.2014 AND CONTE NDED THAT THE ASSESSEE HAS FILED APPEAL BEFORE THE TRIBUNAL. THE ASSESSING OFFICER LEVIED THE PENALTY @ 100% OF THE AMOUNT OF TAX SOUGHT TO BE EV ADED. THE ASSESSING OFFICER WORKED OUT THE PENALTY AT RS. 37,72,900/- I N ITS ORDER DATED 27.03.2015 PASSED UNDER SECTION 271(1)(C) OF THE AC T. ON APPEAL BEFORE THE LD. CIT(A), THE PENALTY ORDER WAS SET-ASIDE. TH EREFORE, AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE ( DR) FOR THE REVENUE AND LD. AUTHORIZED REPRESENTATIVE (AR) OF THE ASSES SEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THOUGH THE REVENUE HA S RAISED AS MANY AS SIX GROUND OF APPEAL, HOWEVER, AS PER OUR CONSIDERED VI EW THE ONLY SUBSTANTIAL GROUND OF APPEAL IS IF THE ORDER PASSED BY LD CIT(A ) IN DELETING THE PENALTY LEVIED UNDER SECTION 271(1)( C) IS JUSTIFIED OR NOT . THE LD. DR FOR THE REVENUE RELIED UPON THE ORDER OF ASSESSING OFFICER. THE LD. DR FURTHER SUBMITS THAT THE ADDITION/DISALLOWANCE MADE BY ASSE SSING OFFICER WAS CONFIRMED BY THE LD. CIT(A). THE ASSESSEE FURNISHED INACCURATE PARTICULAR OF INCOME AND COMMITTED DEFAULT WITHIN THE MEANING OF EXPLANATION 1 OF SECTION 271(C). THE LD. DR PRAYED FOR REVERSING THE ORDER OF LD. CIT(A) AND RESTORED THE ORDER OF ASSESSING OFFICER. 4. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUBMI TS THAT THE ASSESSEE HAS NEITHER CONCEALED ANY INCOME NOR FURNISHED INACCURA TE PARTICULAR THEREOF. ITA NO. 2832/MUM/2017-GRACE SHELTER 5 THE LD. AR OF THE ASSESSEE SUBMITS THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF REHABILITATION PROJECT UNDER SLUM REHAB ILITATION SCHEME. THE ASSESSEE HAD TO CONSTRUCT THE MUNICIPAL STAFF QUART ER FREE OF COST AS WELL AS DEPOT, BEING ONE OF THE CONDITIONS IN THE PROJEC T APPROVED BY SLUM REHABILITATION AUTHORITY. THE ASSESSEE CALCULATED T HE TOTAL COST OF PROJECT AND MADE THE PROVISION OF RS. 1,22,10,000/- TOWARDS THE COST OF CONSTRUCTION OF MUNICIPAL STAFF QUARTER AND DEPOT A S WELL AS COMPOUND WALL AS THE LEGAL LIABILITY. THE ASSESSEE MADE PROV ISIONS WHICH WAS BASED ON SETTLED ACCOUNTING CONCEPT AND MATCHING PRINCIPL E. THEREFORE, THE ASSESSEE HAS NEITHER FURNISHED INACCURATE PARTICULA R NOR CONCEALED ANY INCOME. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT THE LD. CIT(A) AFTER APPRECIATING THE FACT DELETING THE PENALTY. T HE ASSESSEE FURNISHED ALL THE DETAILS; HOWEVER, THE ASSESSING OFFICER ADOPTED DIFFERENT VIEW AND DISALLOWED. NO PARTICULARS FURNISHED BY ASSESSEE WE RE DISCOVERED TO BE FALSE. NO PENALTY WAS LEVIABLE ON THE ASSESSEE ON T HE FACTS OF THE CASE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF BOTH THE PARTIES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESS ING OFFICER WHILE MAKING THE ASSESSMENT ORDER DISALLOWED THE COST OF THE PROVISION TOWARDS CONSTRUCTION OF MUNICIPAL STAFF QUARTER. THE ASSESS ING OFFICER LEVIED THE PENALTY @ 100% OF TAX SOUGHT TO BE EVADED. BEFORE T HE LD. CIT(A), THE ASSESSEE URGED THAT ASSESSEE IS FOLLOWING THE PERCE NTAGE COMPLETION METHOD FOR OFFERING THE INCOME FOR HIS PROJECT ACCO RDING TO WHICH INCOME ITA NO. 2832/MUM/2017-GRACE SHELTER 6 WAS OFFERED EVERY YEAR BUT BASIS OF PROGRESS OF WOR K VIS--VIS AGREEMENT FOR SALE EXECUTED IN RESPECTIVE YEARS. THE ASSESSEE ALSO EXPLAINED THAT WHILE CALCULATING THE COST OF PROJECT, THE ASSESSEE MADE PROVISION OF RS. 1.22 CRORE TOWARDS THE COST OF CONSTRUCTION OF MUNI CIPAL STAFF QUARTER AND ROAD DEPOT AS WELL AS COMPOUND WALL. 6. THE LD. CIT(A) OBSERVED THAT THE ASSESSEE IS UNDER LEGAL OBLIGATION TO CONSTRUCT MUNICIPAL STAFF QUARTER, ROAD DEPOT AND O THER WORK, SUCH OBLIGATION HAVE DIRECT PROXIMATE CONNECTION WITH TH E PROJECT AND OUTCOME OF THE PROJECT AND THAT SUCH OBLIGATION STILL SURVI VING AND NOT WAIVED BY THE AUTHORITIES. THE DELAY ON ACCOUNT OF CONSTRUCTI ON OF MUNICIPAL STAFF QUARTER OR ROAD WAS NOT ATTRIBUTABLE ON THE PART OF ASSESSEE AND WAS DUE TO DELAY ON THE PART OF MUNICIPAL CORPORATION OF GR EATER MUMBAI TO GET THE SLUM DWELL VACATED AND HAND OVER CLEAR POSSESSI ON TO THE ASSESSEE. THERE IS NO DISPUTE ABOUT THE BASIC FACTUAL ASPECT OF THE CLAIM MADE BY ASSESSEE EITHER BY ASSESSING OFFICER OR BY LD. CIT( A) OR BY THE TRIBUNAL. THE LD. CIT(A) WHILE RELYING UPON THE DECISION OF R ELIANCE PETRO PRODUCTS LTD. 322 ITR (SC); WHEREIN HONBLE SUPREME COURT H ELD THAT MERELY MAKING OF CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, B Y ITSELF WILL NOT AMOUNT TO FURNISH INACCURATE PARTICULARS REGARDING THE INC OME OF ASSESSEE. ON THE BASIS OF HIS OBSERVATION, THE LD. CIT(A) CONCLUDED THAT THERE IS NOT EVEN REMOTE SUGGESTION OF ANY FALSE PARTICULAR OR MATERI AL DETAILED FURNISHED BY THE ASSESSEE. THE CLAIM OF ASSESSEE WAS NOT ACCEPTE D WILL NOT COME ITSELF ITA NO. 2832/MUM/2017-GRACE SHELTER 7 TO INEVITABLE CONCLUSION THAT THE DETAILED SUPPLIED BY ASSESSEE WERE FALSE, INACCURATE OR SUFFERED FROM ANY CONCEALMENT AND DEL ETED THE PENALTY. 7. WE HAVE SEEN THAT THE ORDER PASSED BY LD CIT(A) IS BASED ON SOUND REASONING AND DOES NOT SUFFER FROM ANY LEGAL INFIRM ITY. THE LD. DR FOR THE REVENUE FAILED TO BRING ANY FACT TO OUR NOTICE AS T O HOW THE ORDER OF LD. CIT(A) IS SUFFERED FROM INFIRMITY OR ILLEGALITY. NO CONTRARY LAW IS BROUGHT TO OUR NOTICE. THEREFORE, WE DO NOT FIND ANY MERITS IN THE GROUNDS OF APPEAL RAISED BY REVENUE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COUR T ON 30/08/2018. SD/- SD/- SHAMIM YAHYA PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 30.08.2018 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI