M/S CHINTAMANI BUILDERS, Nagpur V. A.C.I.T CENTRAL. CIRCLE-1(2), Nagpur

ITA 420/NAG/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2133 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 13-04-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 05-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Keywords: Bonafide belief

Judgement Text

1 ITA NO. 420/NAG/2014 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. NO. 420 /NAG/2014. ASSESSMENT YEAR : 200 9 - 10 . M/S CHINTAMANI BUILDERS, ASSTT. COMMISSIONER OF INCOME - TAX, NAGPUR. VS. CENTRAL CIRCLE - 2(1), NAGPUR. APPELLANT. RESPONDENT. APPELLANT BY : SHRI MANOJ MORYANI. RESPONDENT BY : SHRI A.R. N INAWE. DATE OF HEARING : 13 - 07 - 2016 DATE OF PRONOUNCEMENT : 14 TH JULY, 2016 O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LE A RNED CIT(APPEALS) - III, NAGPUR DATED 01 - 07 - 2014 AND PERTAINS TO ASSESSMENT YEAR 2009 - 10. THE GROUNDS OF APPEAL READ AS UNDER : 1. THE PENALTY U/S 271(1)(C) IMPOSED IS ILLEGAL, INVALID AND BAD IN LAW. 2. THE PENALTY IMPOSED AT RS.10,00,000/ - IS UNJUSTIFIED, UNWARRANTED AND EXCESSIVE. 3. THE COMMISSIONER OF INCOME - TAX (APPEALS) - III, NAGPUR ERRED IN CONFIRMIN G THE PENALTY AT RS.10,00,000/ - . THEREFORE, PENALTY IMPOSED IS ILLEGAL, INVALID AND BAD IN LAW. 2. IN THIS CASE AS PER THE AIR INFORMATION THE ASSESSEE FIRM HAS SOLD THE LAND FOR A CONSIDE R ATION OF RS.99,90,000/ - . THIS WAS NOT DISCLOSED IN THE RETURN OF INCOME. WHEN THE ASSESSEE WAS CONFRONTED IN THIS REGARD, THE NET PROFIT EARNED FROM THIS TRANSACTION AMOUNTING TO RS.28,75,000/ - WAS OFFERED FOR TAXATION . PENALTY PROCEEDINGS WERE ALSO INITIATED. ASSESSEES EXPLANATION IN THIS REGARD WAS THAT THE ASSESSEE FIRM HAD EXECUTED THE POWER OF ATTORNEY IN THE NAME OF 2 ITA NO. 420/NAG/2014 ONE OF HIS PARTNER SHRI RAJU ITKELWAR FOR EXECUTING ANY DEAL WITH REGARD TO THE SAID LAND AND FURTHER THAT SHRI RAJU ITKALWAR HAD CARRIED OUT THE SAID TRANSACTION OF SALE OF LAND TO M/S PYRAMID REALTOR S ON BEHALF OF THE ASSESSEE FIRM ON 13 - 03 - 2009. THE ASSESSEE FURTHER CLAIMED THAT THE PARTNER I.E. SHRI RAJU ITKALWAR DID NOT INFORM THE ASSESSEE FIRM ABOUT THE EXECUTION OF THE SALE DEED AND THEREFORE THE INCOME FROM THE SAID TRANSACTION COULD NOT BE RECO GNIZED IN THE PROFIT & LOSS ACCOUNT AND THUS COULD NOT BE OFFERED FOR TAXATION WHILE FILING THE RETURN OF INCOME. HOWEVER, THIS CONTENTION WAS NOT ACCEPTED BY THE LEARNED CIT(APPEALS) WHO ALSO FOUND SOME DISCREPANCY IN THE NAME MENTIONED IN THE SALE DEED. LEARNED CIT(APPEALS) PROCEEDED TO AFFIRM THE PENALTY OF RS.10,00,000/ - . 3 . AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 4 . I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT IN IDENTI CAL CASE THIS ITAT IN THE CASE OF DCIT VS. M/S YOGASHEM BUILDES & DEVELOPERS IN ITA NO. 219/NAG/2014 VIDE ORDER DATED 24 - 11 - 2015 HAS DELETED SIMILAR LEVY OF PENALTY. LEARNED COUNSEL FURTHER SUBMITTED THAT THE DISCREPANCY NOTED BY THE LEARNED CIT(APPEALS) IN THE NAME IS NOT MATERIAL AS THE PAN NO. MENTIONED WAS THE SAME AND THERE WAS SOME MINOR DISCREPANCY. LEARNED COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE FIRM WAS IN A BONAFIDE BELIEF THAT THE LAND HAS NOT BEEN SOLD. THAT T HIS IS EVIDENT FROM THE FACT TH AT IN THE BALANCE SHEET PREPARED AND SUBMITTED THE LAND WAS STILL BEING SHOWN AS STOCK IN TRADE. IT WAS ONLY AFTER THE SAME WAS DETECTED DURING ASSESSMENT PROCEEDINGS THAT IN SUBSEQUENT BALANCE SHEET THE LAND WAS TAKEN OUT OF STOCK. LEARNED COUNSEL SUBMITT ED THAT IF THE ASSESSEE HAD ANY MALAFIDE INTENTION THE ASSESSEE WOULD NOT HAVE CONTINUE D TO SHOW THE LAND IN THE BALANCE SHEET AFTER THE SAME HAS BEEN SOLD. HENCE LEARNED COUNSEL SUBMITTED THAT THE L EVY OF PENALTY IS NOT JUSTIFIED AS THE CONDUCT OF THE ASSESSEE CAN NOT BE SAID TO BE CONTUMACIOUS. 3 ITA NO. 420/NAG/2014 5 . UPON CAREFUL CONSIDERATION I FIND THAT THERE IS CONSIDERABLE COGENCY IN THE SUBMISSION OF LEARNED COUNSEL OF THE ASSESSEE. IN IDENTICAL CASE THIS TRIBUNA L IN THE CASE OF M/S YOGASHEM BUILDES & DEVELOPERS (SUPRA) HAS DELETED SIMILAR PENALTY. THE TRIBUNAL HELD AS UNDER : WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH AND CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE CASE LAWS CITE D. ALTHOUGH, IT IS TRUE THAT THE IMPUGNED SALE TRANSACTION WAS NOT DISCLOSED BY THE ASSESSEE AS PER THE RETURN FILED BUT, IT APPEARS THAT THERE WAS SOME MISUNDERSTANDING AMONG THE PARTNERS VIS - A - VIS THE ASSESSEE FIRM. IN THIS REGARD, A FINDING WAS GIVEN BY THE LEARNED CIT (A) THAT THE PROPERTY IN QUESTION WAS APPEARING IN THE BALANCE SHEET OF THE FIRM IN EARLIER YEAR AS WELL AS IN THE BALANCE SHEET OF THE CURRENT FINANCIAL YEAR ENDED ON 31 - 03 - 2009. HAD THE TRANSACTION WAS IN THE KNOWLEDGE OF THE ASSESSEE FIRM, THEN, NATURALLY IT WOULD NOT HAVE APPEARED IN THE BALANCE SHEET. IT HAS ALSO BEEN EXPLAINED THAT SHRI NILESH CHANDANWAR WAS HAVING A POWER OF ATTORNEY TO SELL THE PROPERTY ON BEHALF OF THE FIRM. HOWEVER, HE HAD NOT INFORMED THE SALE TRANSACTION TO THE ACCOUNTANT OF THE FIRM DUE TO WHICH NO ENTRY OF SALE WAS RECORDED IN THE BOOKS OF ACCOUNT OF THE FIRM. IN SUPPORT OF THE SAID CLAIM THAT ALL THE PARTNERS HAD NOT SIGNED THE SAID DEED, A COPY OF THE SAME IS ALSO PLACED IN THE COMPILATION. IN THE LIGHT OF THIS FACT, WE ARE OF THE CONSIDERED OPINION THAT THE MATTER IS COVERED BY THE PROVISIONS OF EXPLANATION 1 (A) OF SECTION 271 (1) ( C) OF THE IT ACT WHICH PRESCRIBE THAT WHERE IN RESPECT OF ANY FACTS, THE MATERIAL FOR COMPUTATION OF THE TOTAL INCOME OF A NY PERSON, AND SUCH PERSON FAILS TO OFFER OR EXPLAIN OR OFFERS EXPLANATION WHICH IS FOUND BY THE A O TO BE FALSE, THEN, FOR THE PURPOSE OF SECTION 271(1) (C) OF THE IT ACT SUCH INCOME REPRESENTS THE CONCEALED INCOME. HOWEVER, AS PER THE FACTS OF THIS CASE, THE ASSESSEE HAD OFFERED AN EXPLANATION AND THE EXPLANATION OFFERED BY THE ASSESSEE COULD NOT BE SAID TO BE ALTOGETHER A FALSE EXPLANATION. THEREFORE, THE EXCEPTION AS PROVIDED IN THIS EXPLANATION THAT IN A SITUATION WHEN THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT UNTRUE OR FALSE, THEN OUT OF THE AMBITS OF CONCEALMENT PROCEEDINGS. IN THE CASE OF D & H SECHERON ELECTRODES LTD., (SUPRA), A VIEW WAS EXPRESSED BY THE HON'BLE MADHYA PRADESH HIGH COURTTHAT WHEN THE FACTUAL VERSION OF THE ASSESSEE HAS BEEN ACCEPTED, THEN IT IS NOT A GOOD GROUND TO IMPOSE CONCEALMENT PENALTY. THE HON'BLE HIGH COURT HAS OPINED THAT THE ASSESSEE HAVING SURRENDERED THE INCOME AND THE TRIBUNAL HAVING GIVEN REASONS FOR ACCEPTING THE FACTUAL VERSION OF THE ASSESSEE AND FOUND THAT THERE WAS NO MENS - REA AS CO NT EMPLATED ULS 271(1) (C) OF THE IT ACT. CANCELLATION OF PENALTY WAS JUSTIFIED. 4 ITA NO. 420/NAG/2014 6 . IT IS NOT THE CASE THAT HONBLE HIGH COURT HAS REVERSED THIS DECISION. ACCORDINGLY I FIND THAT S FACT OF THE CASE ARE SIMILAR TO THE ONE DEALT WITH BY THE TRIBUNAL ABOVE. HENCE RESPECTFULLY FOLLOWING THE PRECEDENT AND THE DISCUSSION AS ABOVE, I SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE LEVY OF PENALTY. 7 . IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER P RONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF JULY,2016. SD/ - ( SHAMIM YAHYA) ACCOUNTANT MEMBER. NAGPUR, DATED: 14 TH JULY, 2016. COPY FORWARDED TO : 1. M/S CHINTANI BUILDERS, C/O MANOJ MORYNI, ADVOCATE, 1 ST FLOOR, SUDAMA BHAVAN, NEA R SUT MARKET, GANDHIBAGH, NAGPUR - 440002. 2. A.C.I.T., CENTRAL CIRCLE - 1( 2 ) , NAGPUR. 3. C.I.T. - (CENTAL) .NAGPUR. 4. CIT(APPEALS), - II I, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGIS TRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.