NATU PARANJAPE DEVELOPERS, THANE V. ITO WD 3(1), THANE

ITA 474/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93067 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 21-01-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Bonafide belief; Initiation of penalty proceedings; Reasonable cause
• Section: 143(3); 80IB; 11

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - B, BENCH , , BEFORE S/SH. JOGINDER S INGH ,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 474/ /MUM/20 1 4 , / ASSESSMENT YEAR - 20 0 9 - 10 M/S. NATU PARANJ A P E DEVELOPERS 304, RAJHANS OPP. GAONDEVI MAIDAN , NAUPADA, THANE - (W) PIN - 400 602. PAN: AAAAN 3794 K VS INCOME TAX OFFICER - WARD - 3(1) A WING, 6TH FLOOR, ASHAR IT PARK, ROAD NO.16Z, WAG H LE INDL. ESTATE THANE - (W) MUMBAI - 400 604. ( / A PPELLANT ) ( / RESPONDENT ) /ASSESSEE B Y :SHRI SUBODH RATNAPARKHI / REVENUE BY :SHRI YOGESH K AMAT - SR.AR / DATE OF HEARING : 29 - 0 6 - 2015 / DATE OF PRONOUNCEMENT : 29 - 0 6 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT. 19 . 1 1.201 3 OF CI T(A) - II , THANE , THE ASSESS EE , HAS RAISED FOLLOWING GROUNDS OF APPEAL: ON THE FACTS AND IN LAW, 1. THE LEARNED CIT(A) ERRED IN NOT ADMITTING THE APPEAL BY CONDONING THE DELAY IN FILING OF APPEAL BY 180 DAYS. (A) INSPITE OF ACCEPTING THAT THE SAID DE LAY WAS ON ACCOUNT OF BONAFIDE BELIEF ENTERTAINED BY THE APPELLANT THAT PENALTY U/S 271 (1)( C) WOULD NOT BE LEVIED ON THE AGREED MODIFICATION OF DEDUCTION U/S 801B(10) AND THEREFORE APPEAL WAS NOT REQUIRED TO BE FILED AGAINST ORDER U/S 143(3) DT.28.12 .2011. (B) NOT APPRECIATING THAT THE DELAY WAS ON ACCOUNT OF BONAFIDE AND SUFFICIENT CAUSE AND THEREFORE MERITED CONDONATION AND ACCORDINGLY THE APPEAL WAS REQUIRED TO BE ADMITTED FOR HEARING ON MERITS. 2. THE DISMISSAL OF APPEAL BY THE HON. CIT (A) H AS RESULTED IN CONFIRMATION OF ADDITION OF RS. 3,52,53,280/ - MADE BY LD. AO BY RESTRICTING THE BENEFIT OF DEDUCTION U/S 801B(10) IN RESPECT OF THE HOUSING PROJECT 'OZONE VALLEY' DEVELOPED AT VILLAGE PARSIK, TALUKA & DIST. THANE BY RELYING UPON THE PROV ISIONS OF SECTION 801B(13) R.W.S 801A (8) AND 801A(10) OF THE I.T, ACT 1961, WHICH ADDITION IS NOT MERITED BY FACTS AND IN LAW. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR VARY THE ABOVE GROUNDS AT ANY TIME BEFORE THE DECISION OF THE APP EAL. ASSESSEE IS AN ASSOCIATION OF P ERSONS (AO P ). IT IS ENGAGED IN THE BUSI NESS OF BUILDERS AND DEVELOPERS. IT FILED RETURN OF INCOME ON 2 4. 0 9. 20 09 DECLARING I NCOME AT RS. NIL . THE ASSESSING OFFICER ( AO ) COMPLETED THE ASSESSMENT ON 28.12. 20 11 , U / S. 143(3 ) OF THE ACT , DETERMINING THE INCOME OF THE ASSESSE E AT RS.3.52 CRORES . 474/M/14 NATU PARANJAPE(AY:09 - 10) 2 2. THE AOP WAS FORMED ON 11. 0 5. 2005 WITH AN INTENTION O F DEVELOPING A PROPERTY. IN CONSISTED OF EIGHT ( 8 ) MEMBERS WHO HAD PURCHASED A PLOT MEASURING 25164 SQ.MTRS ON 10. 0 7. 19 97. THEY D E CIDED TO CONDUCT BUSINESS UNDER THE NAME AND STYLE OF M/S. NATU PARANJ A PE D EVELOPERS (NPD) . IT TOOK VALUE OF LAND AT RS. 2.96 CR ORES AS STOCK I N TRADE IN THE BOOKS OF ACCOUNT.T HE INDIVIDUAL SHARE O F EACH MEMBER IN THE COST OF LAND WAS FIXED AT RS.37.00 LAC S AND ACCORDINGLY IT WAS RECORDED IN THE BOOKS OF ACCOUNT OF THE AO P . HOWEVER , THE AO WAS OF THE VIEW THAT BY TRANSFERRING LAND OF AO P AT BOOK V ALUE THE MEMBERS HAD AVOIDED CAPITAL GAIN TAX IN THEIR HANDS. HE MADE ENQUIRY WITH THE THE STAMP VALUE AUTHORITY WHO REPORTED THAT THE MARKET VALUE OF SAID PLOT AS ON 11. 0 5. 20 05 WAS RS. 6.48 CRORES. AS THE MARKET VALUE OF PLOT OF LAND AS ON DATE OF TRANSFER F ROM IND IVIDUAL T O AOB WAS HIGHER BY RS.3,52,53,280/ - ( RS. 6.48 - 2.96 CRORES) ,SO HE HELD T HAT THE PROVISION OF S E CTION 80IA (8 0IA(8) , 80IA(10) WERE ATTRACTED IN VIEW OF S ECTION 80IB(13) . HE CONFRONTED THE ASSESSEE AND ASKED IT AS TO WHY THE PROVISIONS OF S ECTION 80IA(8), 80IA(10) SH OU LD NOT BE APPLIED AND THE ELIGIBLE PROFIT U/S. 80IB(10) SH OU LD BE REDUCED BY RS. 3.5 3 CR ORES. VIDE IT S SUBMISSION, DATED 12.12. 20 11 , THE ASSESSEE STATED THAT THE CO - OWNERS HAD NOT SOLD THE PLOT OF LAND, THAT THEY HAD SIMPLY DEVELOPED THE PLOT UNDER THE NOMENCLATURE MPD. T HE AO INFORMED THE ASSESSEE THAT SUC H CONVERSION OF CA PITAL ASSET INTO S TOCK IN TRADE TANTAMOUNTED TO TRANSFER IN VIEW OF THE PROVISIONS OF S.2(47) OF THE ACT , A ND THE SAME WAS LIABLE FOR CAP ITAL GAINS TAX. VIDE ITS LETTER, DT.27.12. 20 11, THE ASSESSEE - AOP SUBMITTED THAT WITH THE INTENTION OF AVOIDING LONG DRAWN LITIGATION THE L AND COST COULD BE SUBSTITUTED AT RS. 6,48,53,380/ - IN PLACE OF RS. 2.96 CR ORES AS RECORDED IN THE BOOKS OF ACCOUNT, THAT THE PENALTY U/S. 271(1) (C) SHOULD NOT BE INITIATED AND LEVIED. THE AO FINALLY HELD THAT THE AOP HAD INFLATED ITS PROFIT BY AN AM OUN T OF RS.3.53 CR ORES , THAT THE AM OUN T IN QUESTION WAS LIABLE FOR TAXATION. HE A L SO INITIATED PENALTY PROCEEDINGS U/S. 271(1) (C) . THE AO IMPOSED PENALTY UNDER THE SAID SECTION VIDE ORDER DT.28. 0 6. 20 12 IMPOSING THE PENALTY AT RS.1.57 CR ORES . 3. AGGRIEVED BY THE OR DER OF THE AO, THE AOP PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE A UTHORITY (FAA) WITH A REQUEST TO CONDONE THE DELAY . BEFORE HIM, IT WAS STATED THAT THE ASSESSEE HAD AGREED FOR REDUCTION OF CLAIM OF DED UCTION MADE U /S .80IB(10) PROVIDED THAT THE PENAL TY WOULD NOT BE LEVIED ,T HAT THE ASSESSEE WAS UNDER THE BONAFIDE IMPRESSION THAT PENALTY U/S. 271 (1)(C) WOULD NOT BE LEVIED, T HAT IT DID NOT PREFER ANY APPEAL BEFORE FAA AGAINST THE ORDER CONTESTING THE ADDITION. AN AFFIDAVIT IN THAT REGARD WAS ALSO FILED. T HE ASSESSEE MADE ELABORATE EXPLANATION ON MERITS OF THE CASE BEFORE THE FAA. AFTER CONSIDERING THE FACTS AND SUBMISSION OF THE ASSESSEE, THE FAA HELD THAT ASS ESSMENT O RDER U/S. 143(3) WAS PASSED ON 28.12. 20 11, THAT THE ORDER WAS SERVED UPON THE ASSESSEE ALONGWITH THE DEMAND ON 29.12. 20 11, THAT THE DUE D ATE OF FILING WAS 28. 0 1. 20 12, THAT THE APPEAL HAD BEEN FILED ON 27. 0 7. 20 12, THAT THE ASSESSEE H AD REQUESTED FOR CONDONING THE DELAY, THAT IT HAD AGREED F OR DISALLOWANCE OF DED UCTION U/ S. 80IB(10) IN V IEW O F PROVISIONS OF S.80IA(8), THAT THERE WAS A CATEGORICAL ADMISSION OF DISALLOWANCE U/S.80IB(10) TO THE EXTENT DURING THE COURSE OF ASS ESSMENT P ROCEEDINGS, THAT PENALTY IMPOSED BY THE AO WAS SEPARATELY APPEAL A BLE, THAT IT HAD CONTESTED THE PENALTY ORDER PASS ED BY FILING SEPARATE APPEAL, THAT MERELY BECAUSE THE PENALTY HAD BEEN IMPOSED BELATED FILING OF APPEAL IN QUANTUM PROCEEDINGS WAS NOT JUSTIFIABLE, THAT IF IT HAD AN INTENTION TO CONTEST THE DISALLOWANCE MADE U / S 80IB(10) IT SH OU LD HAVE FILED APPEAL ON TIM E , DELAY IN FILING BY 474/M/14 NATU PARANJAPE(AY:09 - 10) 3 SIX MONTHS WAS NOT JUSTIFIED.HE HELD THAT THE APPEAL FILED BELATEDLY WAS NON - EST IN THE EYES OF LAW. FINALLY HE DISMISSED THE APPEAL FILED BY THE ASSESSEE . 4. DURING THE HEARING BEFORE US THE A UTHORISED R EPRESENTATIVE (AR) ARGUED THAT ASSESSEE HAD CLEAR L Y MENTIONED IN HIS LETTER THAT IT WOULD AGREE TO TH E ADD ITIO N IF NO PENALTY WAS LEVIED, THAT THERE WAS REASONABLE CAUSE FOR FILING THE APPEAL BELATEDLY, THAT THE FAA SHOULD HAVE CONDONED THE DELAY. DEPARTMENTAL REPRESENTATIVE ( DR ) SUPP ORTED TH E ORDER OF THE FAA . 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US .WE FIND THAT THAT AOP HAD AGREED TO REDUCE THE 80IB(10) DED UCTIO N ONCE THE AO INFORMED IT THAT AS PER THE PROV ISIONS OF S ECTION 80IB THE DED UCTIO N WAS EXC ESS, THAT THE ASSESSEE AGREED TO THE ADD ITIO N WITH THE CONDITION THAT PENALTY U/S. 271 (1)(C) WOULD NOT BE INITIATED OR IMPOSED, THAT WHILE FINALIZING THE ASS ESSMENT O RDER THE AO INITIATED PENA LTY AND HAD SERVED ASS ESSMENT ORDER THE VERY NEX T DAY, THAT THE ASSESSEE WAS AWARE OF INITIAT IO N OF PENALTY PROCEEDINGS, THAT IT DID NOT FILE APPEAL AGAINST THE QUANTUM PROCEEDINGS WITHIN THE STIPULATED TIME, PROVIDED BY THE A CT, BEFORE FAA, THAT THE APPEAL WAS FILED AFTER SIX MONT H S OF THE DUE DATE OF FILING OF APPEAL, THAT THE FAA DID NOT CONDONE THE DELAY. FROM THE ABOVE SEQUENCE, IT IS VERY CLEAR THAT THE ASSESSEE KNEW ABOUT INI TIATION O F PENALTY PROCEEDING S ON THE VERY NEXT DAY WHEN ASSESSMENT ORDER WAS P ASSED .THE P ENALTY NOTICE MUST H A V E BEEN ISSUE D TO THE ASSESSEE BEFORE IMPOSING PENALTY ON THE ASSESSEE, ON 28. 0 6. 20 12 . THE ASSESSEE HAS FILED AN APPEAL AGAINST THE PENALTY ORDER ALSO. BEFORE IMPOSING THE PENALTY A SHOW CAUSE NOTICE IS ALWAYS ISSUED TO THE ASSESSEE AND ASSESSEE IS SUPPOSED TO FILE A REPLY. THUS , ASSESS EE WAS VERY WELL AWARE OF THE INITIATION OF PENALTY PROCEEDINGS.THEREFORE, THE REASON GIVEN BY THE ASSSESSEE FOR NOT FILING THE QUANTUM APPEAL WITHIN THE STIPULATED TIME, IN OUR OPINION ,IS DEVOID OF MERITS.U PHO LDING THE ORDER OF THE FAA, WE DISMISS THE EFFEC TIVE GROUND OF APPEAL AGAINST THE ASSESSEE . EVEN ON THE MERITS THE ADDITION MADE BY THE AO IS AS PER THE PROVISIONS OF THE LAW. THE AO HAD EXPLAINED THE PROVISIONS OF THE S ECTION 80IB(8), 80IB(10 ), 80IB(13) TO THE ASSESSEE AND ONLY AFTER THAT IT HAD AGR EED FOR THE RED UCTION OF DED UCTIO N CLAIMED U/S. 80IB(10) OF THE ACT. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH , JUNE ,2015. 29.06 , 2015 SD/ - SD/ - ( / JOGINDER S INGH ) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 29 .0 6 .2015 . . . JV . SR.PS. 474/M/14 NATU PARANJAPE(AY:09 - 10) 4 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.