ITO 1(1)(1), V. M/S. ANANDSHREE LEASING & CONSTRUCTIONS PVT.LTD., MUMBAI

ITA 2938/MUM/2008

• Counselvise Citation: 293819914 RSA 2008
• Duration Of Justice: 3 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 03-04-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 30-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY
• Assessee Lawyers: G P MEHTA

Judgement Text

ITA NO.2938 OF 2008 ANANDSHREE LEASING & CON.PVT LTD MUMBAI PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL 'H' BENCH, MUMBAI BEFORE SHRI D.K.AGARWAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.2938/MUM/2008 (ASSESSMENT YEAR: 2002-03) INCOME TAX OFFICER 1(1)(1) VS ANANDSHREE LEASING & CONS. ROOM NO.534, PVT. LTD. C/O GP MEHTA & CO AAYAKAR BHAVAN 807, TULSIAN CHAMBERS, MUMBAI 400 020 NARIMAN POINT MUMBAI 400 001 PAN AAACA 3544 Q (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI AJAY, DR ASSESSEE BY: SHRI G.P. MEHTA DATE OF HEARING: 3/4/2012 DATE OF PRONOUNCEMENT:20/4/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS AN APPEAL BY REVENUE AGAINST THE ORDERS OF THE CIT(A)-I, MUMBAI CANCELLING LEVY OF PENALTY OF ` .1,74,46,520/-. 2. BRIEFLY STATED THE ASSESSEE DEBITED A SUM OF ` .4,88,69,896/- IN ITS PROFIT & LOSS A/C UNDER THE HEAD LOSS ON CL OSURE OF ANDHERI PROJECT. THE ASSESSEE IS A LAND DEVELOPER. IT HAD ENTERED INTO AN AGREEMENT WITH THE LAND OWNER TO ACQUIRE AND DEVELO P A PLOT OF LAND IN ANDHERI. IT HAD TAKEN A LOAN FROM GLOBAL TRUST B ANK AND PAID THE LANDLORD. THE PROJECT STARTED IN 1999-2000 AND INTEREST ON THE LOAN ACCOUNT AND OTHER EXPENSES ARE ADDED TO THE PR OJECT COST. IN A.Y 2002-03 THE ASSESSEE REALIZED THAT THE CONCERNE D PLOT OF LAND CAN ONLY BE DEVELOPED BY MIDC AND NOT BY ANY PRIVAT E BUILDER. THE ITA NO.2938 OF 2008 ANANDSHREE LEASING & CON.PVT LTD MUMBAI PAGE 2 OF 5 AMOUNT PAID TO THE LAND OWNER WAS RECEIVED BACK WHI CH WAS REPAID TO THE BANK WITH INTEREST. THE INTEREST AMOUNT AND OTHER EXPENSES DEBITED TO THE PROJECT COST WERE CHARGED TO THE PRO FIT & LOSS A/C UNDER THE HEAD LOSS ON CLOSURE OF ANDHERI PROJECT . THE ASSESSING OFFICER IN THE ASSESSMENT DISALLOWED THE LOSS AS CA PITAL IN NATURE AND INITIATED PENALTY PROCEEDINGS UNDER SECTION 271 (1)(C). IT WAS THE CONTENTION OF THE ASSESSEE THAT THESE EXPENDITURES ARE NOTHING BUT INTEREST EXPENSES AND OTHER MISCELLANEOUS EXPENDITU RE PERTAINING TO THE PROJECT ANDHERI AND SO MERE DISALLOWANCE ON CLA IM DOES NOT ATTRACT PENALTY PROCEEDINGS. HOWEVER, ASSESSING OFF ICER LEVIED PENALTY ON THE SAID AMOUNT AS THE CIT (A) CONFIRMED THE DISALLOWANCE IN THE QUANTUM PROCEEDINGS. CONSIDERIN G THE SUBMISSIONS OF THE ASSESSEE, THE CIT (A) DELETED TH E PENALTY HOLDING AS UNDER: 9. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD.AR AND GONE THROUGH THE ASSESSMENT ORDER. PENALT Y U/S. 271(1)(C) IS APPLICABLE IN CASES OF CONCEALMEN T OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INC OME. THE FACTS OF THE APPELLANTS CASE HAVE TO BE APPRAI SED IN THE LIGHT OF THIS PROVISION. PRECISELY, IT IS TO BE SEEN WHETHER CLAIMING THE LOSS ON CLOSURE OF ANDHERI IN ITS P&L ACCOUNT CONSTITUTED THE ACT OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME. THE FACT THAT THE ENTERED INTO A DEAL FO R ACQUIRING THIS PARTICULAR LAND IN ANDHERI THE ASSES SMENT RECORD. THE LOAN TAKEN FOR FINANCING THIS PURCHASE INTEREST PAYABLE ON SUCH LOAN HAS ALSO BEEN DISCLOS ED BY THE APPELLANT IN ITS BOOKS AND STATEMENT OF ACCO UNTS. IN FACT THE TOTAL AMOUNT OF LOSS CLAIMED BY THE APP ELLANT DURING THIS YEAR HAS BEEN WORKED OUT OVER A PERIOD OF FOUR YEARS FROM AYS: 1999-2000 TO 2002-03. EACH YEA R THE INTEREST AND OTHER EXPENSES INCURRED ON THIS PR OJECT HAVE BEEN DISCLOSED IN THE BOOKS AND CARRIED FORWAR D TO THE NEXT YEAR. SUCH EXPENSES CARRIED FORWARD OVER T HE YEARS HAVE BEEN FINALLY CLAIMED AS A LOSS IN THIS Y EAR AS THE LAND DEAL FELL THROUGH. THERE IS NO DISPUTE REG ARDING ITA NO.2938 OF 2008 ANANDSHREE LEASING & CON.PVT LTD MUMBAI PAGE 3 OF 5 THE FACTS OR THE FIGURES. ONLY DISPUTE WAS WHETHER THE AMOUNT CAN BE CLAIMED AS A REVENUE LOSS AGAINST CUR RENT YEARS INCOME. THE AO DISALLOWED THE CLAIM AS A CAP ITAL LOSS. IN FACT HE HAS OBSERVED THAT, THE PORTION OF LOSS PERTAINING TO THIS YEAR MAYBE ALLOWED BUT EARLIER Y EARS BROUGHT FORWARD LOSS CANNOT BE ALLOWED. CIT(A) HAS HELD IT TO BE A CAPITAL LOSS AND NOT ALLOWABLE AS DEDUCT ION WHILE COMPUTING THE INCOME. NOW, THE MERIT OF THE C LAIM OF EXPENDITURE BY THE APPELLANT AND THE STAND TAKEN BY THE AO IS A DIFFERENT MATTER. EVEN IF THE DISALLOWA NCE OF LOSS AND THE ADDITION TO THE APPELLANTS INCOME IS CONFIRMED, IT WILL NOT AUTOMATICALLY JUSTIFY THE IM POSITION OF PENALTY U/S. 271(1)(C). THE ADDITION TO THE RETU RNED INCOME AND THE PENALTY U/S. 271(1)(C) ARE TWO DIFFE RENT THINGS. FOR THE PURPOSE OF IMPOSING PENALTY U/S. 271(1)(C) IT IS RELEVANT TO SEE WHETHER THE ACT OF CLAIMING THE LOSS WILL CONSTITUTE A CASE OF CONCEALMENT OF I NCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE FACTS RELATING TO LAND DEAL IN ITS ENTIRETY HAVE BEEN DIS CLOSED IN THE APPELLANTS BOOKS AND STATEMENT OF ACCOUNTS ENCLOSED TO THE RETURN AND THERE IS NO DISPUTE REGA RDING SUCH FACTS OR FIGURES. WHETHER THE ANDHERI PROJECT WAS A NEW VENTURE OR A PART OF THE APPELLANTS REGULAR BU SINESS OF DEVELOPMENT OF PROPERTY IS DEBATABLE. ACCORDINGL Y WHETHER THE LOSS IS A CAPITAL LOSS OR A REVENUE LOS S ALLOWABLE IN COMPUTING THE APPELLANTS INCOME IS A DEBATABLE MATTER. THE CIT(A) HAS DECIDED IN FAVOUR OF THE REVENUE AND THE APPELLANT IS IN APPEAL BEFORE T HE ITAT. EVEN IF THE CLAIM MADE BY THE APPELLANT REGAR DING THE REVENUE LOSS IS NOT ACCEPTED, SUCH CLAIM CANNOT BE CONSIDERED AS CONCEALMENT OF INCOME. THE DECISION O F THE RAJASTHAN HIGH COURT IN THE CASE OF HARSH VARDHAN CHEMICALS AND MINERALS REPORTED IN 259 ITR 212 WILL BE RELEVANT IN THIS REGARD. IT HAS BEEN HELD IN THIS C ASE THAT WHERE AN ARGUABLE, CONTROVERSIAL OR DEBATABLE DEDUC TION IS CLAIMED, THE CLAIM COULD NOT BE SAID TO BE FALSE , OTHERWISE IT WOULD BECOME IMPOSSIBLE FOR ANY ASSESS EE TO RAISE ANY DEDUCTION WHICH MIGHT BE DEBATABLE. IT WAS NOT THE INTENTION OF THE LEGISLATURE TO MAKE PUNISH ABLE SUCH CLAIMS, IF THEY WERE NOT ACCEPTED. IN THE PRES ENT CASE, THE APPELLANT HAS MADE ONLY A DEBATABLE CLAIM AND MAKING THE CLAIM CANNOT BE CONSIDERED AS FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. THE AO HAS NOT MENTIONED AS TO ITA NO.2938 OF 2008 ANANDSHREE LEASING & CON.PVT LTD MUMBAI PAGE 4 OF 5 HOW CLAIMING THE LOSS CONSTITUTES CONCEALMENT OF IN COME OR FURNISHING INACCURATE PARTICULARS OF INCOME. HE HAS ONLY REFERRED TO CIT(A)S ORDER WHERE THE ADDITION H AS BEEN CONFIRMED. HOWEVER, THE CIT (A) HAS CONFIRMED THE ADDITION ONLY BECAUSE IN HIS VIEW THE LOSS WAS OF C APITAL NATURE AND CANNOT BE ALLOWED WHILE COMPUTING THE APPELLANTS INCOME. THIS, IN ITSELF DOESNT ESTABLI SH OR SUGGEST CONCEALMENT OF INCOME. AS HAS BEEN HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF T.ASHOK PAI VS CIT, 292 ITR 11, THE WORD INACCURATE IN THE CONTEXT OF LEVYING PENALTY U/S. 271(1)(C) SIGNIFIES A DELIBERA TE OMISSION ON THE PART OF THE ASSESSEE. SUCH DELIBERA TE ACT MUST BE EITHER FOR THE PURPOSE OF CONCEALMENT OF IN COME OR FURNISHING INACCURATE PARTICULARS. THE FACTS OF THE PRESENT CASE DO NOT SUGGEST SUCH A SITUATION. FURTH ER, THE DECISION OF THE SUPREME COURT IN THE CASE OF DI LIP N SHROFF VS JCIT, 291 ITR 519 AND K.C. BUILDERS VS AC IT, 265 IR 562 WILL ALSO SUPPORT THE APPELLANT. IN VIEW OF THIS, I HOLD THAT THERE IS NO REASON FOR IMPOSITION OF PENALTY U/S. 271(1) (C) IN THIS CASE. THE PENALTY I S THEREFORE CANCELLED. 3. AFTER CONSIDERING THE RIVAL ARGUMENTS OF LEARNED DE PARTMENTAL REPRESENTATIVE AND LEARNED COUNSEL, WE ARE OF THE O PINION THAT THE CIT (A) HAS CORRECTLY ANALYZED THE ISSUE AND DELETE D THE PENALTY. THERE IS NO DISPUTE WITH REFERENCE TO THE FACT THAT THE ASSESSEE HAS UNDERTAKEN THE PROJECT AND BORROWED FUNDS. ON CLOSU RE OF THE PROJECT AS IT COULD NOT BE PURSUED, BECAUSE OF THE CERTAIN RESTRICTIONS, THE ASSESSEE CLAIMED LOSS ON CLOSURE OF ANDHERI PROJECT AS BUSINESS LOSS. THE AO AND CIT (A) CONSIDERED THE SAME AS CAPITAL LOSS AND NOT ALLOWED THE SET OFF. MERE CLAIM BY THE ASSESSEE WHICH WAS NOT ACCEPTED BY THE ASSESSING OFFICER DOES NOT ENTITLE LEVY OF PENALTY UNDER SECTION 271(1)(C) AS THERE IS NEITHER CONCEALMENT NOR FURNISHING OF INACCURATE PARTICULARS. PRINCIPLES ES TABLISHED BY HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIAN CE PETROPRODUCTS PVT. LTD, 322 ITR 158 (SC) APPLY TO THE FACTS OF THE ITA NO.2938 OF 2008 ANANDSHREE LEASING & CON.PVT LTD MUMBAI PAGE 5 OF 5 CASE. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT (A) AND REJECT REVENUE GROUNDS. 4. IN THE RESULT, REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH APRIL, 2012. SD/- SD/- (D.K.AGARWAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 20 TH APRIL, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, H BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI