Appeal Details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 3021 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 7 month(s) 30 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
26-09-2016
Appeal Filed By
Assessee
Bench Allotted
SMC
Assessment Year
2006-2007
Appeal Filed On
27-01-2015
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND I.T.A. NO. 572/M/2015 (ASSESSMENT YEAR: 2006 - 2007 ) HEERA PANNA CHS LTD, BHULABHAI DESAI ROAD, HAJI ALI, MUMBAI 400 026. / VS. INCOME TAX OFFICER 16(2)(1), MUMBAI. ./ PAN : AACFH7760C ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENT BY : SHRI SUJIT BANGAR / DATE OF HEARING : 27.07 .2016 / DATE OF PRONOUNCEMENT : 26 .09.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 27.1.2015 IS AGAINST THE ORDER OF THE CIT (A) - 27, MUMBAI DATED 25.9.2014 FOR THE ASSESSMENT YEAR 2006 - 07. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN PARTLY CONFIRMING THE PENALTY UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD CIT (A) FAILED TO APPRECIATE THAT THE CLAIM OF THE APPELLANT WAS BONAFIDE AND NOT HAVING ANY MALAFIDE INTENTION TO DEFRAUD REVENUE. 3. THE LD CI T (A) OUGHT TO HAVE APPRECIATED THAT THERE WAS NO CONCEALMENT OF ANY INCOME OR PARTICULARS IN ANY MANNER WITHIN THE MEANING OF PROVISIONS OF SECTION 27(1)(C) OF THE ACT. 4. WITHOUT PREJUDICE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT (A) FAILE D TO APPRECIATE THAT THE CLAIM WAS BONAFIDE AND DEBATABLE. 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CO - OPERATIVE HOUSING SOCIETY (CHS) AND FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 68,784/ - . AO COMPLETE D THE ASSESSMENT U/S 143(3) OF THE ACT AFTER MAKING ADDITION OF RS. 15 LAKHS AND THE ASSESSED INCOME WAS DETERMINED AT RS. 19,61,280/ - . IN THE ASSESSMENT, AO NOTICED THAT THE ASSESSEE RECEIVED RS. 15 LAKHS FROM ONE M/S. DEESHA LEASECON PVT LTD (DEESHA). THE ASSESSEE ALLOWED DEESHA TO ERECT A SCAFFOLDING FOR A DISPLAY AGAINST THE RECEIPT OF RS. 15 LAKHS. RS. 1 LAKH WAS RECEIVED TOWARDS THE ADVERTISEMENT RIGHTS @ RS. 15,000/ - PER MONTH. IN ADDITION, ASSESSEE ALSO RECEIVED RS. 14 LAKHS FOR MEETING THE INC IDENTAL EXPENDITURE @ RS. 7 LAKHS PER MONTH. THE ASSESSEE OFFERED THE SAID RS. 1 LAKH AS INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES. ASSESSEE ACCOUNTED FOR THE SAME AS MISCELLANEOUS RECEIPTS. REGARDING RS. 14 LAKHS, ASSESSEE ACC OUNTED FOR THE SAME IN THE BOOKS OF ACCOUNTS AS REIMBURSEMENTS UNDER THE MAINTENANCE ACCOUNT AND THE SAME WAS NOT OFFERED TO TAX. THE CIT (A) CONFIRMED THE ADDITION AND THE MATTER WENT TO THE TRIBUNAL VIDE ITA NO.3758/M/2011, DATED 15.3.2013, WHEREIN THE TRIBUNAL CONFIRMED THE ADDITION. SUBSEQUENTLY, AO LEVIED THE PENALTY AND THE SAID AMOUNT OF RS. 15 LAKHS AND RS. 5,01,230/ - WAS THE DEMAND RAISED. IN THE PENALTY PROCEEDINGS, ASSESSEE SUBMITTED THAT M/S. DEESHA WAS GIVEN RIGHT TO DISPLAY THE BANNER OF 80 X 120 SIZE ON THE SCAFFOLDING ERECTED FOR HOLDING OF THE DISPLAY. THE AMOUNT OF RS. 14 LAKHS WAS PAID FOR MEETING THE REPAIRS AND WHITE WASH OF THE BUILDING. THE LEASE PERIOD IS 2 MONTHS. M/S. DEESHA MADE THE ABOVE PAYMENT TO MAINTAIN THE SAID SCAFFO LDING , ROUND THE CLOCK SECURITY WATCH AND WARD, ACCESS CHARGES, STORAGE CHARGES ETC. ASSESSEE SUBMITTED THAT THESE ARE THE AMOUNTS INCURRED BY THE ASSESSEE WHICH WERE REIMBURSED BY M/S. DEESHA AND THEREFORE, THE SAID REIMBURSEMENTS DO NOT CONSTITUTE THE I NCOME OF THE ASSESSEE. ASSESSEE CLAIMED TO HAVE SPENT RS. 2,64,000/ - FOR ERECTION OF SCAFFOLDING; RS. 10,58,629 / - TOWARDS PAINTING TWO LAYERS OF PAINTING ON THE SOCIETY BUILDING AND RS. 77,370/ - BEING COST OF MATERIAL AND OTHER ACCESSORIES. AO ALSO PERUS ED THE TWO AGREEMENTS IE ONE FOR THE SUM OF RS. 1 LAKH AND THE OTHER FOR THE SUM OF RS. 14 LAKHS AND NOTICED THAT THE SAID AGREEMENTS CONSTITUTE SELF SERVING DOCUMENT TO SUITE THE ASSESSEES ATTEMPT TO NOT TO DISCLOSE RS. 14 LAKHS FOR TAXATION. ON PERUSA L OF THE SAID AGREEMENTS, AO NOTICED THAT THE SAID SECOND AGREEMENT DOES NOT REFER THE AREA OF THE BUILDING BEFORE PAINTING AND CAME TO THE CONCLUSION THAT THE PAINTING OF THE ENTIRE BUILDING WAS NOT BORNE WITHIN THE FACTS. AO FURTHER REASONED THAT M/S. D EESHA NEVER AGREED TO REIMBURSE THE EXPENDITURE INCURRED FOR PAINTING OF THE ENTIRE BUILDING. AS PER THE AO, THE TWO AGREEMENTS WERE PREPARED TO SUITE THE ASSESSEES PLAN TO CONCEAL THE PARTICULARS OF INCOME AND THEY CONSTITUTE SHAM AGREEMENT. THEREFOR E, AO LEVIED THE PENALTY OF RS. 5,01,230/ - WAS LEVIED RELATABLE TO THE ADDITION OF RS. 15 LAKHS. 3. DURING THE FIRST APPELLATE PROCEEDINGS, ASSESSEE REITERATED THE ABOVE REASONS AND ALSO FILED WRITTEN SUBMISSIONS WHICH ARE EXTRACTED IN PARA 2.3.1 OF THE CI T (A)S ORDER. REFERRING TO THE FINDING OF THE TRIBUNAL ON THE QUANTUM ADDITIONS, CIT (A) EXTRACTED THE RELEVANT PARAS OF THE TRIBUNALS ORDER IN PARA 2.4.3 OF HIS ORDER. REFERRING TO PARAS 6 TO 8 OF THE ORDER OF THE TRIBUNAL, CIT (A) HIGHLIGHTED THE FAC T THAT THE ASSESSEE PAID A SUM OF RS. 3,75,360/ - TO THE BMC TOWARDS ADVERTISING FEES. IT IS NOT NOTICED WHEN THE SAID AMOUNT WAS PAID TO THE BMC HOW THE ASSESSEE CAN COLLECT RS. 1 LAKH AS RENT FROM M/S. DEESHA. HOWEVER, REASONING THAT THE CLAIM OF REIMBU RSEMENT IS NOT PROPER, THE CIT (A) MENTIONED THAT M/S. DEESHA HAS NO REASON TO BEAR THE EXPENDITURE ON PAINTING OF THE ENTIRE BUILDING, WHICH IS A LIFE OF NOT LESS THAN TWO YEARS WHEN M/S. DEESHAS LEASE PERIOD IS ONLY FOR 2 MONTHS. HE ALSO UNDERLINED THA T THE FINDING OF THE TRIBUNAL ON THE COMMISSION, WHERE THE TRIBUNAL HELD AS UNDER: - THE AFFAIRS ARE SO ARRANGED THAT THE COST TO BE INCURRED BY THE SOCIETY FOR THEIR REGULAR MAINTENANCE WAS BORNE BY THE SAID COMPANY AND RECEIPTS WERE BIFURCATED INTO TWO A GREEMENTS. 4. TRIBUNAL ALSO NOTED THAT THE MAINTENANCE OF THE SCAFFOLDING AND THE RELATE STRUCTURES ARE PART AND PARCEL OF THE REGULAR MAINTENANCE AND THEREFORE, INCURRING OF THE EXPENDITURE ON PAINTING, WATCH AND WARD ETC HAS NO RELEVANCE ON ADVERTISEME NT. THEREFORE, THESE CANNOT BE ALLOWED U/S 37(1) OR SECTION 57 OF THE ACT. TRIBUNAL DISMISSED THE ALTERNATIVE CONTENTIONS ALSO. RELYING ON THE VARIOUS DECISIONS DISCUSSED IN PARA 2.4.14 TO 2.4.20, CIT (A) CONFIRMED THE PENALTY LEVIED U/S 271(1)(C) OF TH E ACT RELATABLE TO THE ADDITION OF RS. 14 LAKHS. THE PENALTY RELATABLE TO THE SUM OF RS. 1 LAKH, WHICH WAS ALREADY OFFERED BY THE ASSESSEE IN THE RETURN OF INCOME WAS DELETED. AGGRIEVED WITH THE SAME, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. DURING THE PROCEEDINGS BEFORE THE TRIBUNAL , NONE APPEARED TO REPRESENT THE ASSESSEES CASE. WITH THE HELP OF THE LD DR, I PROCEED TO ADJUDICATE THIS APPEAL ON MERITS. IT IS THE CASE OF THE ASSESSEE THAT THE ISSUE RELATING TO THE LEVY OF PENALTY ON THE SUM OF RS. 14 LAKHS WHICH WAS DISCLOSED IN THE RETURN OF INCOME UNDER MAINTENANCE ACCOUNT BUT THE SAME WAS NOT OFFERED TO TAX ON THE GROUND OF REIMBU RSEMENTS. WITHOUT PREJUDICE, ASSESSEE ALSO RAISED THE ARGUMENT THAT THE SAID AMOUNT WAS RECEIVED FROM THE NOMINAL ME MBER IE M/S. DEESHA. AS PER THE LD COUNSEL FOR THE ASSESSEE, SUCH PERSONS ARE ALSO COVERED BY THE PRINCIPLE OF MUTUALITY AND THEREFORE, RS. 14 LAKHS IS NOT TAXABLE AT ALL. IT IS THE SUBMISSION OF THE ASSESSEE T HAT RS. 14 LAKHS WAS RECEIVED BY THE ASSES SEE TOWARDS SPECIFIC PERFORMANCE IE MAINTENANCE, TO MEET THE COST OF ERECTION OF SCAFFOLDING, WATCH AND WARD AND OTHER CHARGES. WITH REGARD TO THE AMOUNT DISCLOSED IN THE MAINTENANCE ACCOUNT, IT IS THE SUBMISSION OF THE ASSESSEE THAT THERE IS NO PENALTY WITH REGARD TO THE DISCLOSURE OF THE PARTICULARS AND ON THIS GROUND ALONE, PENALTY SHOULD NOT BE SUSTAINED. AS PER THE RECORD AVAILABLE BEFORE THE TRIBUNAL, ASSESSEE COULD NOT JUSTIFY WHY THE ENTIRE BUILDING HAS TO BE PAINTED AT THE COST OF M/S. DEESHAS EXPENDITURE WITHOUT OFFERING THE SAID RECEIPTS TO TAX. NO EVI DENCE IS BROUGHT FORTH ON RECORD / BEFORE ME AS THE SPECIFIC EXPENDITURE INCURRED FOR THE ADVERTISEMENTS OF THE COMPANY BY M/S. DEESHA. THERE IS NO RELEVANT MATERIAL TO DEMONSTRATE AS TO WHY TH E FEES TO BMC AMOUNTING TO RS. 3,75,360/ - WAS PAID WHEN THE RENTAL INCOME RECEIVED BY THE ASSESSEE IS ONLY RS. 50,000/ - . 6. ON THE OTHER HAND, LD DR FOR THE REVENUE RELIED HEAVILY ON THE ORDER OF THE ITAT, CIT (A) AND THE AO FOR FACTS AND LEGAL PROPOSITION S. 7. AFTER HEARING THE LD DR AND ON PERUSAL OF THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RE LEVANT MATERIAL PLACED ON RECORD, I FIND, I T IS AN UNDISPUTED FACT THAT THE ASSESSEE RECEIVED THE SAID AMOUNT OF RS. 14 LAKHS FROM M/S. DEESHA AND THE SA ME WAS SPENT TOWARDS PAINTING OF THE ENTIRE BUILDING SPENDING A SUM OF RS. 10,58,629/ - . SOME OF THE AMOUNT WAS SPENT FOR ERECTING THE SCAFFOLDING FOR BEARING THE DISPLAY BOARDS. IT IS THE CLAIM OF THE ASSESSEE THAT THESE AMOUNTS CONSTITUTE REIMBURSEMENT S BY M/S. DEESHA AND REIMBURSEMENTS ARE OUTSIDE THE SCOPE OF CHARGEABILITY TO TAX. THESE ARGUMENTS WERE DISMISSED BY THE TRIBUNAL IN THE QUANTUM PROCEEDINGS AND THE TRIBUNAL HELD THAT THE ASSESSEE RESORTED TO CREATE AGREEMENT FOR SELF - SERVING AND THE ASS ESSEE ARRANGE ITSELF AFFAIRS TO NOT TO BRING THE SAID RECEIPTS OF RS. 14 LAKHS TO TAX . IN THE LIGHT OF THE ABOVE, I EXAMINED THE VARIOUS ISSUES AND FIND THAT THEY ARE UNSUSTAINABLE WITH REFERENCE TO THE DOCUMENTS ON ONE SIDE AND THE CONDUCT OF THE ASSESSE E ON THE OTHER. AS NOTICED BY THE TRIBUNAL IN ITS ORDER (SUPRA), I AM UNABLE TO UNDERSTAND AS TO HOW RS. 1 LAKH WAS RECEIVED TOWARDS BIMONTHLY RENT WHEN THE BMC FEES ITSELF IS EXCEEDED THE SUM OF RS. 3.75 LAKHS (ROUNDED OFF). FURTHER, I AM UNABLE TO APPR ECIATE THE FACT OF M/S. DEESHA REIMBURSED THE EXPENDITURE ON THE PAINTING OF THE ENTIRE BUILDING AMOUNTING TO MORE THAN RS. 10.5 LAKHS WHEN THE SCAFFOLDING FOR DISPLAY OF THE ADVERTISEMENT IS ONLY IN THE AREA OF 80 X 120 SQ FT. I AM ABSOLUTELY CONVINCED O N THE FACT THAT THE AFFAIRS ARE NOT WELL SO FAR AS THE ACCOUNTING OF THE AMOUNT OF RS. 14 LAKHS IS CONCERNED. ASSESSEE IS NOT FORTHCOMING WITH ALL THE FACTS IN THIS REGARD. THEREFORE, I AM OF THE OPINION THAT THE SECOND AGREEMENT CONSTITUTES SELF - SERVIN G DOCUMENT . THE JUDGMENT IN THE CASE OF RELIANCE PETRO PRODUCTS LTD ( 322 ITR 158) (SC) WILL NOT HELP THE ASSESSEE AS THE FACTS ARE ENTIRELY DIFFERENT. WE HAVE ALSO PERUSED THE CONTENTS OF PARAS 2.4.20 AND 2.4.21 OF THE CIT (A)S ORDER AND FIND THEY ARE RELEVANT. CONSIDERING THE IMPORTANCE OF THE SAID PARAS FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE SAME ARE EXTRACTED AS UNDER: - 2.4.20. IN VIEW OF THE ABOVE FACTUAL AND LEGAL ANALYSIS, I DO NOT FIND ANY INFIRMITY IN THE ACTION OF THE LD AO AND ACCORDINGLY, CONFIRM THE ACT OF IMPOSITION OF PENALTY BY THE LD AO ESPECIALLY KEEPING IN VIEW THE FOLLOWING CASE LAWS: - I) SHARMA ALLOYS (I) LTD (2013) 37 TAXMANN.COM 51 (MAD.) PENALTY LEVIABLE FOR DELIBERATE DECEPTION OF THE CLAIM. IN THE GARB OF BONA FI DE CLAIM THE ASSESSEE CANNOT ESCAPE LEVY OF PENALTY. THE OBJECT BEHIND THE ENACTMENT OF SECTION 271(1)(C) READ WITH EXPLANATIONS INDICATES THAT THIS SECTION HAS BEEN ENACTED TO PROVIDE FOR A REMEDY FOR LOSS OF REVENUE. II) SALIM AKHTAR VS. ACIT (2013) TAXMANN.COM 608 (MUM) (TRIB) WHETHER ON FACTS, REVENUE AUTHORITIES RIGHTLY RECORDED TRANSACTIONS IN QUESTION TO BE A DEVICE, AND A LOSS , THUS, WAS SELF INFLICTED IN ORDER TO REDUCE THE ASSESSEES TAXABLE INCOME HELD YES PENALTY CONFIRMED. 2.4.21. HOWEVER, I AM IN AGREEMENT WITH THE WITHOUT PREJUDICE GROUND TAKEN BY THE APPELLANT THAT PENALTY SHOULD NOT HAVE BEEN LEVIED ON RS. 1 LAKH WHICH WAS DULY OFFERED FOR TAXATION IN THE RETURN OF INCOME. IN THE FACTS OF THE CASE, THE COMPUTATION OF PENALTY HA D TO BE MADE ON THE ADDITIONAL INCOME RS. 14 LAKHS AND NOT RS. 15 LAKHS AS MADE BY THE AO AND THEREFORE, TO THAT EXTENT THE PENALTY IMPOSED NEEDS TO BE REWORKED. ACCORDINGLY, WHEREAS GROUND NOS. 2, 3, 5 AND 6 ARE DISMISSED. GROUND NO.4 IS ALLOWED. CONSE QUENTLY, GROUND NO.1 IS PARTLY ALLOWED AS REGARDS THE QUANTUM OF PENALTY. 8. CONSIDERING THE ABOVE, I AM OF THE OPINION, THE ORDER OF THE CIT (A) IN CONFIRMING THE PENALTY RELATABLE TO RS. 14 LAKHS IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTE RFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOU NCED IN THE OPEN COURT ON 26 TH SEPTEMBER, 2016. SD/ - (D. KARUNAKARA RAO) ACCOUNTANT MEMBER MUMBAI ; 26 .09.2016 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI
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