S.P. BUILDERS, MUMBAI V. ITO 12(3)(4), MUMBAI

ITA 4168/MUM/2012

• Counselvise Citation: 416819914 RSA 2012
• Duration Of Justice: 3 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2015
• Appeal Filed By: Assessee
• Bench Allotted: E
• Next Hearing Date: 09-07-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 13-06-2012
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Bonafide belief; Difference of opinion

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ./ ITA N O . 4168 / MUM/20 1 2 ( / ASSESSMENT YEAR : 2005 - 20 06 ) M/S S.P.BUILDERS, 309, GUNDECHA CHAMBERS, N.M.ROAD, FORT, MUMBAI - 400001 VS. ITO 12(3)(4), MUMBAI ./ ./ PAN/GIR NO. : A A BFS 0338 Q ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI VIMAL PUNMIYA & SHRI HIMANSHU GANDHI /REVENUE BY : SHRI NEIL PHILIP / DATE OF HEARING : 09 /0 7 / 2015 / DATE OF PRONOUNCEMENT 08/10 /2015 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) , MUMBAI , DATED 9 - 3 - 2012, FOR THE ASSESSMENT YEAR 2005 - 06 , IN THE MATTER OF IMPOSITION OF PENALTY U/S. 271 (1)(C) OF THE ACT. 2. THE ASSESSEE IS AGGRIEVED BY THE ACTION OF THE CIT(A) IN CONFIRMING THE PENALTY U/S.271(1)(C) OF THE ACT OF RS.86,88,110/ - ON THE ADDITION OF RS.2,77,00,000/ - . 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A FIRM WHICH IS CARRYING ON BUSINESS OF BUILDING CONSTRUCTION AND HAD COMPLETED TWO PROJECTS VIZ. PASCHIM APARTMENTS CONSISTING A TO C WING AND SHAAN APARTMENTS CONSISTING ITA NO. 4168/12 2 ONLY ONE WING I.E. D WING LONG BACK. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE IN THE BALANCE SHEET HAS SHOWN ADVANCE AGAINST PASCHIM APARTMENTS, KALPAVRUKSHA DE VELOPERS, MERCURY PLANTS, ETC. THE ASSESSEE WAS REQUIRED TO SUBMIT EXPLANATION ALONG WITH VARIOUS DETAILS, HOWEVER, THE ASSESSEE DID NOT FIND ANY FAVOUR FROM THE AO AND ACCORDINGLY THE AO ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT RS.2,77,00,000/ - AND DISALLOWED THE SAME. BEING AGGRIEVED WITH THE ORDER OF AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A), THE CIT(A) DELETED THE ADDITION SO MADE BY THE AO AND I N FURTHER APPEAL BEFORE THE TRIBUNAL BY THE REVENUE , THE ORDER OF THE CIT(A) WAS SET ASIDE AND THE ASSESSMENT ORDER OF THE AO WAS UPHELD. IN VIEW OF THE SAME, THE AO LEVIED PENALTY OF RS. 86,88,110/ - ON THE ADDITION OF RS. 2.77 CR., AGAINST WHICH THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) AND THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FROM THE RECORD WE FOUND THAT ON 30 - 9 - 1972, THE ASSESSEE PURCHASED FROM M/S MC GHIA & CO. LAND MEASURING 11,889 SQ.METERS IN MAHIM AREA WITH BUILDINGS AND STRUCTURES STANDING THEREON AT KASHINATH DHURU AND YADAV PATIL LANE, OFF VEER SARVARKAR MARG, MUMBAI . ON 18 - 10 - 1972 THE ASSESSEE LEASED OUT 4,910 SQ. METERS OF LAND TO M/S MERCURY PAINTS & VARNISHES LTD. FOR A PERIOD OF 7 YEARS AND 3 MONTHS I.E. TILL 31 - 12 - 1979. 5. IN 1975 - 1976, THE ASSESSEE SUBMITTED REDEVELOPMENT PLAN OF THE PROPERTY TO THE CORPORATION FOR CONSTRUCTING TOWERS. ASSESSEE CONSTRUCTED ITA NO. 4168/12 3 BUILDIN G WHICH IS PASCHIM APARTMENT, TOWER A, B, C & SHAAN APARTMENT TOWER D, BUT COULD NOT CONSTRUCT TOWER E AS THE SAI D LAND WAS IN OCCUPATION OF M/ S MERCURY PAINTS (TO WHOM LAND WAS LEASED). THE BUILDINGS HAVE BEEN COMPLETED AND ALL APARTMENTS THEREIN SOLD AND ARE FULLY OCCUPIED BY THE FLAT PURCHASERS. ON 6 - 10 - 2000, THE ASSESSEE FILED A SUIT AGAINST MERCURY PAINTS AND VARNISHES LIMITED FOR EJECTMENT (EVICTION FROM PROPERTY) AND OTHER RELIEFS. THE TENANT ALSO FILED SUIT SEEKING TO ESTABLISH TENANCY RIGHTS IN RE SPECT OF THE SUIT PROPERTY USED AND OCCUPIED BY THEM. ON 28 - 7 - 2003, THE ASSE SSEE ENTERED INTO AN MOU WITH M/ S CLASS CONSTRUCTION & HOTELS PVT. LTD. GRANTING THEM DEVELOPMENT RIGHTS IN RESPECT OF T HE LAND IN OCCUPATION OF M/S MERCURY PAINTS. AN ADVANC E OF 51 LACS WAS PAID TO THE ASS SSEE. THE MOU COULD NOT BE COMPLETED AND THE SAME WAS CANCELLED ON 02.04.2004 . ON 23 - 12 - 2002 , THE ASSESSEE ENTERED INTO AN MOU WITH KALPAVRUKSHA DEVELOPERS FOR CONSTRUCTING BUILDING E ON THE 4,190 SQ. METERS OF LAND WHICH WAS IN OCCUPATION OF MERCURY PAINTS AND VARNISHES LTD. AN ADVANCE OF RS. 51 LACS WAS TO BE PAID IN ADVANCE AND OTHER AMOUNTS FOR DIFFERENT PURPOSES. THE TERMS OF THE MOU COULD NOT BE COMPLIED WITH WHICH LED TO A SUIT AND COMPROMISE AND ANOTHER DEVELOPMENT AGREEME NT DATED 22.01.2004. FURTHER ON 2 - 4 - 2004 THE ASSESSEE AND CLASS CONSTRUCTION & HOTEL PVT. LTD. AGREED TO CANCEL THE MOU DATED 23.12.2002 ON PAYING 3.75 C RORES AS COMPENSATION TO THEM. 6. WE ALSO FOUND THAT DEED OF MODIFICATION WAS ENTERED INTO BETWEEN TH E ASSESSEE AND KALPAVRUKSHA DEVELOPERS WHEREBY THE ASSESSEE ITA NO. 4168/12 4 AGREED TO SELL THE SUIT PROPERTY ON 'AS IS WHERE IS' BASIS. FURTHER ON 28.02.05, D EED OF CONVEYANCE WAS EXECUTED BETWEEN THE ASSESSEE AND KALPAVRUKSHA DEVELOPERS WHEREBY THE ASSESSEE CONVEYED THE PROPERTY DESCRIBED AS 11,889 SQ. METERS AND M/ S KALPAVRUKSHA WAS TO PAY THE ASSESSEE A SUM OF 7.01 C R . (WHICH INCLUDED 3.75 CRORES PAYABLE TO CLASS CONSTRUCT ION AS DAMAGES) AND TWO OTHER PARTIES INCLUDING SHAAN APARTMENT CO - OP HOUSING SOCIETY AND PASCHIM AP ARTMENTS. THE NET SUM RECEIVABLE BY THE ASSESSEE WAS 2,77,00,000. THE DISPUTES AROSE BETWEEN THE SELLER AND THE PURCHASERS (PERTAINING TO 4,910 SQ. METERS WHICH WAS OCCUPIED BY MERCURY PAINTS & VARNISHES LTD.) AND THEY ALSO JOINED THE PENDING PROCEEDINGS I N THE SMALL CAUSE COURT. THE CONVEYANCE DEED SPECIFICALLY MENTIONS AS UNDER.. ....... AND WHEREAS PRESENTLY NO FURTHER DEVELOPMENT ON THE SAID PROPERTY IS POSSIBLE AS THE REMAINING PORTION OF THE SAID PROPERTY ARE IN POSSESSION AND OCCUPATIO N OF THE SA ID LESSEE/TENANT/ M/ S MERCURY PAINTS & VARNISHES LTD. AND WHEREAS THE LEASE HAS EXPIRED AND THEREAFTER THE SAID LESSEE/TENANT FILED A SUIT IN APPROPRIATE COURT IN MUMBAI, SEEKING TO ESTABLISH TENANCY RIGHTS IN RESPECT OF THE SAID PROPERTY IN THEIR USE AN D OCCUPATION. AND WHEREAS THE VENDORS HAVE ALSO FILED SUIT AGAINST THE SAID LESSEE TENANT FOR EJECTMENT AND OTHER RELIEFS AND THE SAME IS PENDING ... ' THIS BASICALLY PROVES THAT THE LAND SOUGHT TO BE TRANSFERRED ALREADY HAD PENDING LITIGATIONS WITH RE SPECT TO ITS OCCUPATION AND POSSESSION. 7. ON 29 - 11 - 2005, S MALL CAUSE COURT DIRECTED THE COURT REGISTRAR TO TAKE THE POSSESSION OF THE SUIT PREMISES AND ALLOW THE ASSESSEE AND KALPAVRUKSHA DEVELOPERS TO REMAIN IN PHYSICAL AND ACTUAL POSSESSION OF THE PRE MISES AS AGENTS OF THE COURT RECEIVER. MERCURY PAINTS & VARNISHES LTD. WAS DIRECTED TO HAND OVER VACANT AND PEACEFUL POSSESSION ITA NO. 4168/12 5 OF THE PREMISES ON 1ST DECEMBER, 2005. M/S KALPAVRUKSHA DEVELOPERS ALSO FILED APPEAL NO.710/2005 ON 6 - 12 - 2005 AGAINST ORDER DATE D 29TH NOVEMBER, 2005 APPOINTING COURT RECEIVER. ON 8 - 12 - 2005, A PPEAL NO.219 OF 2006 FILED AGAINST ORDER DATED 30TH SEPTEMBER, 2005 BY KALPAVRUKSHA DEVELOPERS. ON 10 - 4 - 2006, CONSENT TERMS FILED. DISPUTES BETWEEN THE PARTIES WERE RESOLVED. ORDER DATED 10T H APRIL 2006 CONFIRMED THE CONSENT TERMS DATED 10TH APRI L, 2006. WE HAD ALSO GONE THROUGH THE C OPY OF THE CONSENT TERMS ANNEXED IN THE PAPER BOOK FROM PAGE NO. 6 - 15. THE ISSUE PERTAINING TO THE POSSESSION OF THE PREMISES WAS FINALLY SETTLED BY WAY OF THE C ONSENT TERMS ADDITIONAL CONSENT TERMS . ON 2 - 5 - 2006, ADDITIONAL CONSENT TERMS WERE FILED IN HIGH COURT (SUIT NO.3717 OF 2003) BETWEEN THE ASSESSEE AND KALPAVRUKSHA DEVELO PERS WHICH PROVIDE D AS FOLLOWS: A. THE ADDITIONAL CONSENT TERMS CONFIRMED THE AGREEMENT BETWEEN THE ASSESSEE AND KALPAVRUKSHA DEVELOPERS RECORDED IN CONSENT TERMS DATED 11TH NOVEMBER, 2003 AND FURTHER CONFIRMS THE EXECUTION OF DOCUMENTS BETWEEN THE PARTIES VIZ. I) CONVEYANCE EXECUTED ON 19TH AUGUST, 2004 II) CONVEYANCE RE - EXECUTED ON 28TH FEBRUARY, 2005 ILL) POWER OF ATTORNEY DATED 22ND JANUARY, 2004 B. THE ASSESSEE UNDERTOOK TO EXECUTE FURTHER DOCUMENTS AS PER THE DRAFT ATTACHED TO THE ADDITIONAL CONSENT TERMS C. THE DEVELOPERS AGREED TO PAY ENHANCED CONSIDERATION IN VIEW OF SETTLEME NT REFERRED TO THEREIN OF 2,01,00,000/ - ( 1,00,00,000/ - PAID ON OR BEFORE THE EXECUTION OF THE CONSENT TERMS AND THE SECOND INSTALLMENT OF 1,01,00,000/ - TO BE PAID ON REGISTRATION OF DEED OF RECTIFICATION AND ADDITIONAL CONSENT TERMS FILED IN THE COURT. 8. IN THE RETURN FILED FOR ASSESSMENT YEAR 2007 - 08 THE ASSESSEE OFFERED A SUM OF 4 . 78 CR. AS THEIR INCOME FOR A.Y.2007 - 2008. THE SUM COMPRISES OF RS. 2,77 CR. REFERRED TO IN CONVEYANCE DEED DATED 28TH ITA NO. 4168/12 6 FEBRUARY, 2005 AS MODIFIED BY THE DEED OF MODIFICATION S IGNED ON 10TH APRIL, 2006 AND FILED ON 2ND MAY, 2006. IN THE AUDITORS REPORT, T HE NOTES TO THE BOOKS OF ACCOUNTS OF A.Y. 2007 - 2008 CLEARLY STATE AS UNDER: 'THE ASSESSING OFFICER HAS ADDED '2,77,00,000 / - ON ACCOUNT OF SALE OF PASCHIM APARTMENT PLOT IN ASST . YEAR 2005 - 2006 AGAINST OUR NIL INCOME TAX RETURN. THE ASSESSE E HAS PREFERRED APPEAL TO CIT(A) - XII. CIT(A ) PASSED ORDER DATED 03.07.2008. THE CIT(A} HAS GRANTED RELIEF THAT INCOME FROM SALE OF PLOT ACCRUES IN ASSESSMENT YEAR 2007 - 2008. THE ASSESSEE HAS R ECEIVED FURTHER AMOUNT OF 2,01,00,000/ - AGAINST SAME PASCHIM APARTMENT PLOT OVER AND ABOVE 2,77,00,000/ - AS A F ULL AND FINAL SETTLEMENT. SO THE ASSESSEE FIRM HAS OFFERED TOTAL SALE VALUE 4,78,00,000/ - IN ASST. YEAR 2007 - 2008.' 9. ON THE BASIS OF ABOVE NO TE, THE AO TOOK THE VIEW THAT AS THE LAND TO THE DEVELOPER WAS CONV EYED VIDE CONV EYANCE DEED DATED 28 - 2 - 2005, HE MADE AN ADDITION OF RS. 2.77 CR IN THE A.Y.2005 - 06 . HOWEVER, IN AN APPEAL BEFORE THE CIT(A), HE ACCEPTED ASSESSEES CONTENTION THAT INCOME WILL BE TAXABLE IN THE YEAR WHEN LITIGATION GOT SETTLED. ACCORDINGLY, DELETED THE ADDITION MADE IN A.Y.2005 - 06 . WHILE DELETING THE ADDITION THE CIT(A) RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GODHRA ELECTRICITY CO. LTD., 225 ITR 746 AND B OKARO STEEL LTD. 236 ITR 315. FROM THE RECORD WE ALSO FOUND THAT PENALTY SO LEVIED WAS DROPPED BY THE AO ON 21 - 7 - 2008. HOWEVER, AFTER THE ORDER OF TRIBUNAL, THE AO AGAIN RE - INITIATED THE PENALTY PROCEEDINGS. 10. IT IS CLEARLY PROVED FROM THE CHRONOLOGICAL EVENTS NARRATED ABOVE THAT DIFFERENCE OF OPINION HAS COME OUT BETWEEN THE ASSESSMENT STAGE AND THE FIRST APPELLATE AUTHORITY STAGE WHEREIN THE AO HAD PASSED AN ORDER WHICH WAS UNFAVOURABLE FOR THE ASSESSEE. ON THE OTHER HAND, THE CIT(A) CONSIDERED THE MAT TER AND CONCLUDED THE SAME IN FAVOUR OF THE ITA NO. 4168/12 7 ASSESSEE. HENCE, PENALTY OUGHT NOT TO BE LEVIED IN A SITUATION WHERE THERE ARISES A DIFFERENCE OF OPINION . UNDER THE CIRCUMSTANCES DISCUSSED ABOVE, THE A SSESSEE CANNOT BE ACCUSED OF ANY CONCEALMENT OF INCOME. THE NOTES TO ACCOUNTS OF AY 2007 - 2008 ALSO GO ON TO CLEARLY STATE THE FACTS AND CIRCUMSTANCES OF THE PENDING LITIGATIONS PERTAINING TO AY 2005 - 2006 RELATED TO INCOME TAX AS WELL AS T HOSE PERTAINING TO POSSESSION. THERE IS ALSO NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS OFFERED ITS 'REAL INCOME' FOR TAXATION AND PAID THE TAX ACCORDINGLY IN THE RETURN OF INCOME FOR AY 2007 - 2008 AFTER THE CONVEYANCE ATTAINED FINALITY AND ALL LITIGATIONS CONCERNING THE SUBJECT MATTER OF CONVEYANCE WERE RESOLVE D. THUS, W HERE ASSE SSEE HAS FURNISHED ALL PARTICULARS OF INCOME, IMPOSITION OF PENALTY IS NOT AUTOMATIC IN NATURE. MER E MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW DOES NOT AMOUNT TO LEVYING OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. I T IS JUST A MATTER OF DIFFEREN CE BETWEEN ASSESSEE AND REVENUE REGARDING YEAR OF CHARGEABILITY OF INCOME AND NOT CONCEALMENT OF INCOME. INTENTION OF ASSESSEE IS NOT TO CONCEAL THE INCOME WHICH IS EVIDENT FROM THE FACT THAT ASSESSEE HAS FILLED APPEAL FOR A.Y. 2007 - 08 AGAINST THE ACTION O F DEPARTMENT ON REDUCTION OF THE INCOME OF RS.2,77,00,000/ - FROM TOTAL INCOME. IF THE INTENTION OF ASSESSEE IS BAD THEN WHY HE WILL FIL E APPEAL WHEN INCOME WAS REDUCED. THUS, IT IS MATTER OF JUST A DIFFERENCE O F OPINION REGARDING TAXATION O F PARTICULAR INC OME IN WHICH YEAR. FURTHERMORE, THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT INCOME WAS LIABLE TO TAX IN THE ASSESSMENT YEAR 2007 - 08 AND WHICH HAS ACTUALLY BEEN ITA NO. 4168/12 8 OFFERED IN THE ASSESSMENT YEAR 2007 - 08. THUS, IT IS NOT A FIT CASE FOR LEVY OF PENALTY ON A DIS PUTED INCOME. 11 . IN VIEW OF THE ABOVE DISCUSSION AND APPLYING THE PROPOSITION OF LAW LAID DOWN BY THE HONBLE SUPREME COURT AND HONBLE JURISDICTIONAL HIGH COURT AS DISCUSSED ABOVE, WE DO NOT FIND ANY MERIT FOR THE PENALTY IMPOSED U/S.271(1)(C) OF THE AC T FOR THE DISPUTED AMOUNT DURING THE YEAR UNDER CONSIDERATION, WHICH WAS ACTUALLY OFFERED TO TAX IN THE SUBSEQUENT YEAR WHEN IT ACTUALLY ACCRUED ON ACCOUNT OF RESOLVED DISPUTE. 1 2 . IN THE RESULT, APP EAL OF THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN TH E OPEN COURT ON THIS 08/10 / 201 5 . SD/ - SD/ - ( ) ( SANJAY GARG ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMB AI ; DATED 08/10 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR ) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//