ITO 25(2)1, MUMBAI V. JAYESH D GORAGANDHI, MUMBAI

ITA 4359/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92568 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 01-01-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 31-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Keywords: Bonafide belief
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ' J ' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI SANJAY ARORA , ACCOUNTANT MEMBER ITA NO. 4359/MUM/2013 (ASSESSMENT YEAR: 2003 - 04 ) INCOME TAX OFFICER - 25(2)(1) VS. SHRI JAYESH D. GORAGANDHI C - 11, ROOM NO. 107, PRATYAKSH KAR BHAVAN, BKC, BANDRA (E) MUMBAI 400051 A - 1. JAYESH APTS., CHANDAVARKAR LANE, BORIVALI ( W) MUMBAI 400092 PAN - AAKPG1389C APPELLANT RESPONDENT APPELLANT BY: SHRI AKHILENDRA YADAV RESPONDENT BY: SHRI PRAKASH JHUNJHUNWALA DATE OF HEARING: 18.0 5. 2015 DATE OF PRONOUNCEMENT: 18.05.2015 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY CIT(A) - 35, MUMBAI AND IT PERTAINS TO A.Y. 2003 - 04. 2. PENALTY LEVIED BY THE AO UNDER SECTION 271(1)(C) OF THE ACT , ON THE GROUND THAT ASSESSEE FURNISHED INACCURATE PARTICULARS, HAVING BEEN CANCELLED BY THE CIT(A) , REVENUE IS IN APPEAL BEFORE US. FOLLOWING GROUNDS WERE RAISED BEFORE THE TRIBUNAL: - (I) ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY LEVIED BY THE ASSESSING OFFICER U/S. 271(1)(C) OF THE ACT STATING THAT THE FURNISHING OF THE INACCURATE PARTICULARS OF INCOME OCCURRED DUE TO BONAFIDE BELIEF THAT SUCH INCOME IS TAXABLE IN SUBSEQUENT YEAR AND FURTHER THE ISSUE WAS REALLY A DEBATABLE ISSUE, WITHOUT APPRECIATING THE FACT THAT MAJOR PART OF THE AMOUNT WAS RECEIVED IN THE A.Y. 2003 - 04 AND ADDITION MADE BY THE ASSESSING OFFICER IN THE INCOME HAS BEEN CONFIRMED BY THE LD. CIT( A). (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY BY HOLDING THAT THE A.O. HAS FAILED TO PROVE MENSREA IGNORING THE FACT THAT MENSREA IS NO LONGER REQUIRED TO PROVE WHILE LEVYING PENALTY U/S . 271(1)(C) OF THE I.T. ACT. ITA NO. 4359/MUM/2013 SHRI JAYESH D. GORAGANDHI 2 3. FACTS NECESSARY FOR DISPOSAL OF THE APPEAL ARE STATED IN BRIEF. ASSESSEE WAS ENGAGED IN THE BUSINESS OF UNDERTAKING CONTRACTS AND DEVELOPING PROJECTS IN THE NAME AND STYLE OF M/S. D.G. BUILDERS. ASSESSEE COMPLETED A PROJECT CALLED DHANESHWAR TOWER AND THE FSI AVAILABLE THEREON WAS AGREED TO BE SOLD IN THE OPEN MARKET. DURING THE COURSE OF SURVEY ACTION UNDER SECTION 133A OF THE ACT ON 03.02.2006 AO NOTICED A PAPER WHICH INDICATES THAT THE ASSESSEE ENTERED INTO AN AGREEMENT TO SELL FSI/TDR AND RECEIVED SOME CONSIDERATION IN ADVANCE. AS PER THE AGREEMENT ASSESSEE WAS TO SELL THE FSI/TDR TO GROUP OF BUILDERS AT A CONSIDERATION OF ` 1.61CRORES. THOUGH MAJORITY OF THE SUM WAS RECEIVED DURING THE PREVI O US YEAR RELEVANT TO A.Y. 2003 - 04 THE SUM WAS SHOWN AS LIABILITY/ADVANCE RECEIVED AND THE AMOUNT SPENT IN CONNECTION WITH OBTAINING FSI/TDR WAS NOT SHOWN AS EXPENDITURE PERTAINING TO THIS YEAR. THE RETURN FOR A.Y. 2003 - 04 WAS FILED ON 28.11.2003 WHEREIN HE HAS NOT OFFERED TO TAX THE INCOME ON SALE OF FSI/TDR. HOWEVER, ON 31.10.2004 HE HAS FILED RETURN FOR A.Y. 2004 - 0 5 WHEREIN HE HAS OFFERED THE SUM TO TAX. AO WAS OF THE OPINION THAT THE AMOUNT RECEIVED ON SALE OF FSI/TDR IS ASSESSABLE TO TAX IN A.Y. 2003 - 04 BUT HE DID NOT ALLOW THE EXPENDITURE INCURRED IN CONNECTION WITH SALE OF FSI/TDR. THE LEARNED CIT(A), ON AN APPEAL FILED BY THE ASSESSEE, DIRECTED THAT THE EXPENDITURE SHOULD BE SET OFF AGAINST THE INCOME AND THE NET INCOME HAS TO BE BROUGHT TO TAX IN A.Y. 20 03 - 04. THE QUANTUM PROCEEDINGS HAVE ATTAINED FINALITY. 4. UNDER THESE CIRCUMSTANCES THE AO INITIATED PENALTY PROCEEDINGS FOR A.Y. 2003 - 04 ON THE GROUND THAT ASSESSEE HAS COMMITTED DEFAULT UNDER SECTION 271(1)(C) OF THE ACT HAVING FURNISHED INACCURATE PARTICUL ARS AND CONCEALING INCOME THEREBY MAKING HIMSELF LIABLE FOR PENALTY. IN THIS REGARD HE OBSERVED AS UNDER: - 7. AS FAR AS THE MERITS OF THE CASE ARE CONCERNED, M/S. KRUPA BUILDERS GOT POSSESSION OF CLEAR FSI IN OCTOBER, 2002. THE COMMENCEMENT CERTIFICATE O N THE ABOVE PROPERTY ISSUED BY BMC WAS DATED 14.10.2002. M/S. KRUPA BUILDERS COMMENCED CONSTRUCTION ON THE SAID PLOT ON 15 TH OCTOBER, 2002. IT IS WORTHWHILE TO MENTION THAT CONSTRUCTION WORK BY BUYER, I.E. M/S. KRUPA BUILDERS IS TO BE DONE ON 4198.0 7 SQ.FT . ONLY WHICH WAS ALREADY GIVEN TO IT IN OCTOBER, 2002 . NO CONSTRUCTION IS ITA NO. 4359/MUM/2013 SHRI JAYESH D. GORAGANDHI 3 TO BE DONE ON TDR. TDR IS MAINLY FOR GETTING PERMISSION FOR CONSTRUCTING MORE FLOORS ON SAME FSI, I.E., ON 4198.07 SQ.FT. M/S. KRUPA BUILDERS WAS GRANTED COMMENCEMENT CERTIFICATE (TH ROUGH JAYESH GORAGANDHI, THE APPELLANT) ON 14.10.2002 BY BMC. M/S. KRUPA BUILDERS CONSUMED AREA PER FLOOR OF 259.42 SQ.MTRS. COMMENCEMENT CERTIFICATE FOR STILT & 1 ST FLOOR WAS RECEIVED ON 13.1.2003 AND FOR 2 ND TO 7 TH FLOOR ON 28.7.2003 FROM BMC. ABOVE PERM ISSION WAS GRANTED BY BMC MUCH BEFORE TH E AGREEMENT FOR PURCHASE OF TDR . APPELLANT HAD NOT TO CONSTRUCT BUILDING ON TDR BUT HAD TO RETURN TDR TO BMC IN LIEU OF PERMISSION FOR MORE FLOORS ON SAME FSI. M/S. KRUPA BUILDERS STARTED CONSTRUCTION ON FSI ON 15 TH OCTOBER, 2002 AFTER GETTING PERMISSION FROM BMC. M/S. KRUPA BUILDERS PAID MORE THAN 80% PAYMENT TO THE ASSESSEE FOR BUYING TDR SO THAT IT CAN CONSTRUCT MORE FLOORS ON FSI ALREADY GIVEN TO IT IN OCTOBER 2002. HAD THERE BEEN TRUTH THAT TDR FROM M/S. BHOOMI D EVELOPERS WAS PURCHASED DURING THE PERIOD RELEVANT TO A.Y. 2004 - 05, PAYMENT AGAINST PURCHASE OF TDR COULD HAVE NOT BEEN MADE DURING THE PERIOD RELEVANT TO A.Y. 2003 - 04 AND WITHIN 3 DAYS FRO M THE END OF A.Y. 2003 - 04. THIS SHOWS THAT AN AGREEMENT OF OCTOBER 2003 AND PART PAYMENT TO M/S. BHOOMI DEVELOPERS AGAINST PURCHASE OF TDR ON 3.4.2003 WAS DELIBERATELY DONE NOT TO SHOW THE REAL INCOME OF THE ASSESSEE FIRM DURING THE YEAR UNDER CONSIDERATIO N. THUS, THE AGREEMENT ENTERED WITH M/S. BHOOMI DEVELOPERS DURING THE PERIOD OF A.Y. 2004 - 05 WAS AN EYE WASH. THEREFORE, IT IS CLEAR THAT THE ASSESSEE HAD INTENTIONALLY MADE THESE ARRANGEMENTS TO REDUCE THE REAL INCOME DURING THE YEAR UNDER CONSIDERATION. IN VIEW OF THE ABOVE, IT IS CLEARLY ESTABLISHED AND UNDISPUTED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS AND CONCEALED PARTICULARS OF INCOME TO THE TUNE OF RS.1,61,62,977/ - . 5. AGGRIEVED, ASSESSEE CHALLENGED THE LEVY OF PENALTY ON THE GROUND THA T HE WAS UNDER THE BONAFIDE IMPRESSION THAT THE SALE CONSIDERATION IS ASSESSABLE TO TAX IN THE SUBSEQUENT YEAR AS THE SALE DEED OF TDR WAS EXECUTED IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2004 - 05. IT WAS ALSO SUBMITTED THAT THERE ARE TWO POSSIBLE VIEWS ON TH E MATTER AND ASSESSEE ADOPTED ONE LEGAL VIEW AND CONSIDERING THE BONAFIDES OF THE CLAIM IT IS NOT A FIT CASE FOR LEVY OF PENALTY. HE ALSO RELIED UPON VARIOUS CASE LAW IN THIS REGARD APART FROM NARRATING THE SEQUENCE OF EVENT S TO HIGHLIGHT THAT ASSESSEE DID NOT OFFER THE INCOME TO TAX IN THE ASSESSMENT YEAR UNDER CONSIDERATION ONLY ON ACCOUNT OF A BONAFIDE BELIEF THAT IT WAS TAXABLE IN THE SUBSEQUENT YEAR AND IN FACT ASSESSEE OFFERED TO TAX VOLUNTARILY IN THE SUBSEQUENT YEAR AND THUS THE SAME WAS WITHIN THE KNOWLEDGE OF THE AO. THE SURVEY TOOK PLACE ONLY IN 2006 WHEREAS THE RETURN FOR BOTH THE YEARS WERE FILED MUCH BEFORE AND ALL THE FACTS WERE ALREADY ON RECORD BEFORE THE ITA NO. 4359/MUM/2013 SHRI JAYESH D. GORAGANDHI 4 AO. THUS IT CANNOT BE SAID TO BE A CASE OF CONCEALMENT OF INCOME WITH A MALAFIDE REASON . 6. THE LEARNED CIT(A) OBSERVED THAT ASSESSEE EXECUTED THE DEVELOPMENT AGREEMENT WITH M/S. KRUPA BUILDERS FOR SALE OF FSI/DTR ON 08.10.2003, WHICH FALLS IN A.Y. 2003 - 04. AS PER CLAUSE 8 OF THE SAID AGREEMENT VENDOR HAS TO HANDOVER THE VACANT PEACEFUL POSSESS ION OF THE PROPERTY ON EXECUTION OF THE AGREEMENT. THE MUNICIPAL RECEIPTS DATED 14.06.2003 STATES THAT ASSESSEE PAID THE AMENDMENT PLAN FEES TO THE BMC ON 14.06.2003, WHICH FALLS IN A.Y. 2003 - 04 . ASSESSEE EXECUTED THE IRREVOCABLE POWER OF ATTORNEY IN FAVOU R OF GROUP OF BUILDERS ON 08.10.2003. THE POSSESSION OF FSI WAS ONLY 4198 SQ.FT., WHICH WAS OBTAINED BY M/S. KRUPA BUILDERS IN OCTOBER, 200 2 , WHICH FALLS IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2003 - 04 BUT THERE IS NO REFERENCE ON THE BALANCE FSI/TDR AREA OF 19 54 2 SQ.FT. IN FACT ASSESSEE PURCHASED TDR A DMEASURING 12809 SQ.FT. ON 21.04 .2003 , WHICH DATE FALLS IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2004 - 05. UNDER THESE CIRCUMSTANCES, THE LEARNED CIT(A) OBSERVED THAT IT WOULD BE INCORRECT TO PRESUME THAT ASSESSEE WOU LD HAVE SOLD FSI/TDR DURING A.Y. 2003 - 04 BEFORE PURCHASE OF SUCH TDR. HE HAS ALSO TAKEN INTO CONSIDERATION SEVERAL CASE LAW TO FINALLY CONCLUDE THAT IT CANNOT BE SAID THAT ASSESSEE HAS CONCEALED INCOME OR FURNISHED INCORRECT PARTICULARS OF INCOME. IT CAN A T BEST BE A BONAFIDE ERROR ON THE PART OF THE ASSESSEE IN OFFERING TO TAX THE INCOME ON SALE OF FSI/TDR IN THE SUBSEQUENT YEAR , IN WHICH CASE PENALTY SHOULD NOT BE LEVIED SINCE ASSESSEE HAS TENDERED APPROPRIATE EXPLANATION. HE THUS CANCELLED THE PENALTY LE VIED BY THE AO. 7. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. WE HAVE HEARD THE LEARNED D.R. AS WELL AS THE LEARNED COUNSEL FOR THE ASSESSEE AND CAREFULLY PERUSED THE RECORD. IT IS NOT IN DISPUTE THAT THE TDR ADMEASURING 12 809 SQ.FT. WAS PURCHASED ON 21.04.20 03 , WHICH FALLS IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2004 - 05 . A S PER THE WRITTEN AGREEMENT WITH M/S. KRUPA BUILDERS ASSESSEE WAS SUPPOSED TO HANDOVER THE ORIGINAL DEED AND OTHER RELEVANT DOCUMENTS TO COMPLETE THE TRANSACTION. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE THE CLAIM OF THE ASSESSEE THAT HE WAS OF THE B ONAFIDE BELIEF THAT IT WAS ITA NO. 4359/MUM/2013 SHRI JAYESH D. GORAGANDHI 5 ASSESSABLE TO TAX ON SALE OF TDR IN A.Y. 2004 - 05, CANNOT BE RULED OUT. THUS, FOR THE DETAILED REASONS GIVEN BY THE CIT(A) WE ARE OF THE VIEW THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY AND ACCORDINGLY DISMISS THE APPEAL. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MAY, 2015. SD/ - SD/ - ( SANJAY ARORA ) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 18 TH MAY, 2015 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 35 , MUMBAI 4. THE CIT 25 , MUMBAI CITY 5. THE DR, J BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.