PILOT CONSTRUCITON P.LTD, MUMBAI V. ITO 10(2)(2), MUMBAI

ITA 5307/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9414 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 12-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 13-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: UTTAM CHAND BOTHRA
• Keywords: Business income; Bonafide belief; Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C , MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. 5307/MUM/2011 ASSESSMENT YEAR : 2007-08 M/S. PILOT CONSTRUCTION PRIVATE LIMITED 402, SAGAR AVENUE, PLOT B-54 JUNCTION OF LALLUBHAI PARK AND S.V. ROAD, ANDHERI (W) MUMBAI-400 058. PAN NO. AACCP 2128 D VS. INCOME TAX OFFICER WARD 10(2)(2) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI UTTAM CHAND BOTHRA RESPONDENT BY : SHRI VIJAY KUMAR JAISWAL DATE OF HEARING : 12.11.12 DATE OF PRONOUNCEMENT : 21.11.12 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER D ATED 24.5.2011 OF CIT(A) FOR THE ASSESSMENT YEAR 2007-08. T HE ONLY DISPUTE RAISED IN THIS APPEAL IS REGARDING LEVY OF PEN ALTY UNDER SECTION 271B OF THE ACT FOR FAILURE TO GET THE BOOKS OF ACCOUNT AUDITED. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE WHO WAS IN THE BUSINESS OF CONSTRUCTION, HAD TAKEN BOOKING ADVANCE OF RS.11.25 CR ORES FROM ITA NO.5307/M/11 A.Y. 07-08 2 M/S. WELSPUN GUJARAT STAHI ROBERN LTD. THE ASSESSEE HOWE VER HAD NOT FILED THE TAX AUDIT REPORT UNDER SECTION 44AB. T HE AO THEREFORE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY PENALTY UNDER SECTI ON 271B SHOULD NOT BE IMPOSED. THE ASSESSEE SUBMITTED THAT THE PRO VISION OF SECTION 44AB WERE APPLICABLE ONLY WHEN SALES, TURNOVER OR GROSS RECEIPTS EXCEED RS.40.00 LACS. ASSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD AND THEREFORE SALES WERE TO BE ACCOUNT ED ONLY IN THE YEAR OF COMPLETION OF THE PROJECT. THE ASSESSEE HAD O NLY RECEIVED ADVANCE WHICH HAD LATER BEEN REFUNDED. THEREFORE, PRO VISIONS OF SECTION 44AB WERE NOT APPLICABLE. THE AO HOWEVER DID N OT ACCEPT THE CONTENTIONS RAISED. IT WAS OBSERVED BY HIM THAT EVEN TH E ADVANCE RECEIVED HAD AN ELEMENT OF INCOME AND THEREFORE, ACCOU NTS WERE REQUIRED TO BE AUDITED. THE AO REFERRED TO THE DECISI ON OF THE LUCKNOW BENCH OF THE TRIBUNAL IN THE CASE OF GOPAL KRISHAN BUIL DERS (91 ITD 124). ACCORDINGLY HE LEVIED PENALTY UNDER SECTION 271B AMOUNTING TO RS.1.00 LACS. 3. THE ASSESSEE DISPUTED THE DECISION OF AO AND REITERATE D THE SUBMISSIONS MADE EARLIER BEFORE CIT(A) THAT ADVANCE WAS N OT BUSINESS RECEIPT, AND THEREFORE PROVISIONS OF SECTION 44AB WERE N OT APPLICABLE. THE AMOUNT HAD LATER BEEN REFUNDED ALSO. THEREFORE, NO PENALTY COULD BE LEVIED. CIT(A) HOWEVER WAS NOT SATISFIED BY THE EXP LANATION GIVEN ITA NO.5307/M/11 A.Y. 07-08 3 AND AGREED WITH AO THAT ADVANCE CONTAINED AN ELEMENT OF INCOME, AND ACCORDINGLY CONFIRMED THE LEVY OF PENALTY. 4. BEFORE US, THE LD. AR SUBMITTED THAT THE ASSESSEE HAD TAKEN UP A PRESTIGIOUS SRA PROJECT IN CONNECTION WITH WHICH M/S. WEL SPUN GUJARAT STAHI ROBERN LTD. HAD GIVEN ADVANCE. THE PROPERTY HO WEVER HAD SEVERAL ENCROACHMENTS AND EFFORTS WERE STILL GOING ON FOR REMOVING THE ENCROACHMENTS. THE PROJECT HAD NOT STARTED EVEN TODAY. THE ADVANCE TAKEN HAD ALREADY BEEN REFUNDED TO THE PARTY BY THE YEAR 2010. SINCE BUSINESS ITSELF HAD NOT STARTED THERE WAS NO QUESTION OF BUSINESS RECEIPT AND THEREFORE PROVISION OF SECTION 44AB WERE NO T APPLICABLE. THE LD. AR REFERRED TO THE DECISION OF HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. MANGAL DAYAK CHIT FUND (92 ITD 258) IN WHICH IT WAS HELD THAT THE TERM SALES, TURNOVER AND GROSS RECEI PTS HAD TO BE INTERPRETED WITH REFERENCE TO ITEMS WHICH GO INTO P&L ACCOUNT OF THE CONCERN. IT WAS POINTED OUT THAT ADVANCE DOES NOT GO INT O THE P&L ACCOUNT AND, THEREFORE, ADVANCE CAN NOT BE CONSIDERED AS G ROSS RECEIPTS. THE LD. AR ALSO REFERRED TO THE JUDGMENT OF THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF DINESH KUMAR GOEL (239 I TR 46) IN WHICH IT WAS HELD THAT RECEIPT OF ADVANCE FROM CLIENTS FOR SER VICES TO BE RENDERED IN THE SUCCEEDING YEAR COULD NOT BE CONSIDERED AS INCOME ACCRUED DURING THE YEAR. IT WAS THEREFORE URGED THAT T HERE BEING NO BUSINESS RECEIPT, THE ASSESSEE WAS NOT REQUIRED TO GET THE BOOKS OF ITA NO.5307/M/11 A.Y. 07-08 4 ACCOUNT AUDITED. IN ANY CASE IT WAS POINTED OUT THAT WHE THER ADVANCE COULD BE CONSIDERED AS BUSINESS RECEIPT WAS A DEBATABLE ISSU E AND THE DECISION OF THE ASSESSEE NOT TO GET THE ACCOUNT AUDITED HAS TO BE CONSIDERED AS BONAFIDE. IT WAS ALSO POINTED OUT THAT THE ASSESSEE BEING A COMPANY HAD GOT THE ACCOUNTS AUDITED. THE DEFAU LT WAS ONLY IN RELATION TO TAX AUDIT REPORT WHICH WAS NOT OBTAINE D AS THE ASSESSEE DID NOT HAVE ANY TAXABLE INCOME. IT WAS ACCORDINGLY URG ED THAT THE PENALTY LEVIED SHOULD BE DELETED . THE LD. DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING LEVY O F PENALTY UNDER SECTION 271B OF THE ACT WHICH IS LEVIABLE FOR DEFAULT IN GETTING OF BOOKS OF ACCOUNT AUDITED UNDER SECTION 44AB. THE SAID SECTION IS APPLICABLE ONLY WHEN SALES, TURNOVER OR GROSS RECEIPTS OF BUSINESS EXCEE D RS.40.00 LACS. IN THIS CASE THE ASSESSEE WHO IS A BUILDER HAD RECEIVED ADVANCE OF RS.11.25 CRORES FROM ONE PARTY. THE BUSINESS COU LD NOT START AS PROPERTY HAD SEVERAL ENCROACHMENTS. IT IS SUBMITT ED THAT THE BUSINESS HAD NOT STARTED EVEN TILL DATE AND ADVANCE TAK EN HAS BEEN REFUNDED FULLY BY THE YEAR 2010. THE ADVANCE RECEIVED WHICH IS REQUIRED TO BE ADJUSTED AGAINST FUTURE INCOME CAN NOT B E CONSIDERED AS GROSS RECEIPT OF BUSINESS OR TURNOVER. THIS VIEW IS SUPPO RTED BY THE DECISION OF THE TRIBUNAL AND THE JUDGMENT OF THE HIGH COURT RELIED ITA NO.5307/M/11 A.Y. 07-08 5 UPON BY THE LD. AR EARLIER. THE REVENUE HAS RELIED O N THE DECISION OF THE LUCKNOW BENCH OF THE TRIBUNAL IN CASE OF CIT VS. GOP AL KRISHAN BUILDERS (SUPRA), IN WHICH CASE IT HAS BEEN HELD THAT ADV ANCE RECEIVED FROM CUSTOMERS HAS TO BE CONSIDERED AS GROSS RECEIPTS FOR THE PURPOSE OF SECTION 44AB. THIS DECISION OF THE TRIBUNAL CAN NOT BE FOLLOWED IN VIEW OF THE JUDGMENT OF HON'BLE HIGH COURT OF DELHI I N CASE OF DINESH KUMAR GOEL (SUPRA). MOREOVER, THE ISSUE BEING DEBATABL E, THE PLEA OF THE ASSESSEE THAT IT WAS OF THE VIEW THAT BOOKS WERE NOT REQUIRED TO BE AUDITED UNDER SECTION 44AB HAS TO BE CONSIDERED AS BONAFI DE. IT IS A SETTLED LEGAL POSITION THAT BONAFIDE BELIEF CONSTITUTES A REASONABLE CAUSE AND THEREFORE, WE ARE OF THE VIEW THAT LEVY OF PENALTY ON THE FACTS OF THE CASE WILL NOT BE JUSTIFIED. WE ACCORDINGLY S ET ASIDE THE ORDER OF CIT(A) AND DELETE THE PENALTY LEVIED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.11.2012. SD/- SD/- (VIVEK VARMA ) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 21.11.2012. JV. ITA NO.5307/M/11 A.Y. 07-08 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.