M/S PRAGATI CONSTRUCTION CO., Bhopal V. THE ITO-2(1), Bhopal

ITA 576/IND/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5738 (ITAT-INDORE)
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 24-08-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 26-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Assessee Lawyers: N D PATWA
• Keywords: Corroborative evidences
• Section: 147; 148

Judgement Text

1 PTAGATI CONSTRUCTION 576/IND/2016 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER ITA NO. 576/IND/2016 A.Y. 2005-06 PRAGATI CONSTRUCTION CO., BHOPAL PAN AAEFM 7518 H :: APPELLANT VS ITO-2(1), BHOPAL :: RESPONDENT ASSESSEE BY SHRI ASHISH GOYAL AND SHRI N.D. PATWA RESPONDENT BY SHRI MOHD. JAVED DATE OF HEARING 24.8.2016 DATE OF PRONOUNCEMENT 7.10.2016 O R D E R PER SHRI D.T. GARASIA, JM THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-I, BHOPAL, DATED 10.12.2015 WHEREIN T HE CONFIRMATION OF PENALTY IMPOSED U/S 271(1)(C) HAS B EEN CHALLENGED. 2 PTAGATI CONSTRUCTION 576/IND/2016 2. FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGE D IN THE BUSINESS OF CIVIL CONSTRUCTION AND TRANSPORTATION O F MATERIAL. IT FILED ITS RETURN ON 31.10.2005 SHOWING AN INCOME OF RS.4,650/- AFTER CLAIMING DEDUCTION U/S 80IB(10) OF THE I.T. ACT AT RS.6,83,525/-. THE CASE WAS REOPENED AFTER R ECORDING THE REASONS FOR MAKING REASSESSMENT U/S 147 AND A N OTICE U/S 148 OF THE ACT WAS ISSUED. AFTER EXAMINATION OF RECORDS, THE ASSESSING OFFICER NOTED AS UNDER: A) THE APPROVAL FOR THE IMPUGNED HOUSING PROJECT IS NOT IN THE NAME OF THE ASSESSEE. THUS, THE ASSESSEE HAS ACTED ONLY AS CONTRACTOR AND NOT AS BUILDER. FURTHE R, THE DEVELOPMENT PERMISSION ISSUED BY THE T & C PLANNING, BHOPAL IS ALSO NOT IN THE NAME OF THE ASSESSEE. APPROVAL OF THE BHOPAL MUNICIPAL CORPORAT ION IS FOR RE-ERECTION OR ALTERATION WHICH DOES NOT F ALL WITHIN THE DEFINITION OF DEVELOPMENT AND CONSTRUCT ION OF HOUSING PROJECT AS ENVISAGED U/S 80IB(10) OF THE A CT. B) NO COLONIZER LICENSE WAS OBTAINED BY THE ASSESSE E. 3 PTAGATI CONSTRUCTION 576/IND/2016 C) THE REGISTRIES OF THE FLATS/SHOPS HAVE BEEN EFFE CTED BY MPSRTC THROUGH ITS MD IN MOST OF THE CASES. THIS CLEARLY STIPULATES THAT THE ASSESSEE HAD CARRIED OUT CONSTRUCTION WORK ON BEHALF OF THE MPSRTC. THUS, THE ASSESSEE HAD ACTED MERELY AS CONTRACTOR. D) THE APPROVED VALUER DURING THE ASSESSMENT PROCEEDING FOR THE ASSESSMENT YEAR 2006-07 HAS FOUND THAT THE BUILT UP AREA OF COMMERCIAL SHOPS IS 30.52% OF THE TOTAL BUILT UP AREA OF THE PROJECT. THUS, THE REQUIREMENT OF SECTION 80IB(10) HAS BEEN VIOLATED. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER COMPLET ED THE ASSESSMENT U/S 143(3)/147 DISALLOWING THE CLAIM OF DEDUCTION U/S 80IB(10) AT RS.6,83,525/-. PENALTY PROCEEDINGS U/S 271(1) WERE SIMULTANEOUSLY INITIAT ED BY THE ASSESSING OFFICER AND FINALLY, THE ASSESSING OF FICER IMPOSED PENALTY AT RS.2,40,000/-. 4 PTAGATI CONSTRUCTION 576/IND/2016 3. MATTER CARRIED TO LD. CIT(A) AND LD. CIT(A), REL YING UPON SOME JUDICIAL PRONOUNCEMENTS, CONFIRMED THE PENALTY ORDER HOLDING THAT THE ASSESSEE HAS BEEN FOUND TO BE GUIL TY OF MAKING A CLAIM OF DEDUCTION WHICH WAS PATENTLY WRON G. THUS, THE ASSESSEE IS BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE HAS REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND ALSO SUBMITTED THAT PENALTY IS NOT IMPOSABLE IN THE PRES ENT CASE AS THE ASSESSEE APPLIED FOR COMPLETION CERTIFICATE AND EVEN AS PER SECTION 301 OF THE MUNICIPAL CORPORATION ACT, 1 956, THE COMPLETION CERTIFICATE WAS DEEMED TO GRANTED IF THE SAME WAS NOT GIVEN WITHIN FIFTEEN DAYS OF APPLICATION. FURTH ER, CORROBORATIVE EVIDENCES WERE FILED TO SHOW THAT THE PROJECT WAS COMPLETE IN FORM OF POSSESSION LETTERS. THE LAW CANNOT BE APPLIED RETROSPECTIVELY TO PROJECTS APPROVED PRI OR TO 01.04.2005. THUS, THE LEARNED COUNSEL FOR THE ASSES SEE CONTENDED THAT MERELY ON THE REASON THAT CLAIM WAS NOT ACCEPTABLE TO AUTHORITIES, THE PENALTY IS NOT JUSTI FIED. LEARNED COUNSEL FOR THE ASSESSEE FURTHER PLACED RELIANCE UP ON THE FOLLOWING DECISIONS: 5 PTAGATI CONSTRUCTION 576/IND/2016 1. CIT VS. CHD DEVELOPERS, 362 ITR 177 (DEL). 2. KURA HOMES , 151 ITD 31 (HYD TRIB.) 3. RAJ REALITY, 53 TAXMANN.COM 439 (TRIB INDORE) 4. CIT VS. RELIANCE PETROPRODUCTS LIMITED, 230 CTR 320 ( S.C.). 5. SURABHI HOMES IN ITA NO.325/IND/2014, ORDER DATE D 30.8.2015 (INDORE TRIBUNAL). THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT IN THE CASE OF RELIANCE PETROPRODUCTS LIMITED (SUPRA), IT WAS H ELD THAT MERELY FOR THE REASON THAT THE CLAIM OF THE ASSESSE E IS NOT ACCEPTABLE, PENALTY CANNOT BE LEVIED, AS THERE IS N O CONCEALMENT OR FURNISHING INACCURATE PARTICULARS. O N THE OTHER HAND, LD. DR RELIED ON THE ORDERS OF THE REVE NUE AUTHORITIES AND SUBMITTED THAT QUANTUM ADDITION HAS BEEN SUSTAINED IN VIEW OF THE ORDER OF THE JURISDICTIONA L HIGH COURT OF M.P., THEREFORE, PENALTY IS JUSTIFIED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. WE FIND THAT THE POSITION OF LAW REGARDING LEVY OF PENALTY U/S 271(1)(C) HAS UNDERGONE A SUBSTANTIAL CHANGE AFTER INSERTION OF EXPLANATION I TO SECTION 271(1)(C) WITH EFFECT F ROM 01.04.1976. EXPLANATION 1 TO SECTION 271(1)(C) RAIS ES A 6 PTAGATI CONSTRUCTION 576/IND/2016 PRESUMPTION THAT AS AND WHEN ANY AMOUNT IS ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME, THE SAME SHALL BE DEEMED OR REPRESENT THE INCOME IN RESPECT OF WHICH THE PARTICULARS HAVE BEEN CONCEALED. FURTHER WITH EFFEC T FROM 10.9.1986 AMENDMENT HAS BEEN MADE TO EXPLANATION 1( B) TO SECTION 271(1)(C), AFTER THIS AMENDMENT FURTHER ONU S HAS BEEN PLACED ON THE ASSESSEE TO PROVE THAT EXPLANATI ON FURNISHED BY HIM WAS BONA FIDE. THE POSITION NOW IS THAT UNLESS AND UNTIL THE ASSESSEE SUBSTANTIATES THE EXP LANATION AND PROVES THAT THE EXPLANATION WAS BONA FIDE, THE ADDITION MADE TO HIS INCOME SHALL BE DEEMED TO REPRESENT THE CONCEALED INCOME. ON ANALYSIS OF PROVISIONS OF SECT ION 271(1)(C), IT IS OBSERVED THAT EXPLANATION 1 TO SEC TION 271(1)(C) PROVIDES THE SITUATION, WHERE NO EXPLANAT ION FOR THE FAILURE IS OFFERED BY THE ASSESSEE OR WHERE THE EXP LANATION THAT HAS BEEN OFFERED IS FOUND TO BE FALSE OR WHERE THE ASSESSEE IS NOT ABOUT TO SUBSTANTIATE THE EXPLANATI ON OFFERED BY HIM. IN ALL THE CASES, THE AMOUNT ADDED OR DISAL LOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON SHALL BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH THE PAR TICULARS 7 PTAGATI CONSTRUCTION 576/IND/2016 HAVE BEEN CONCEALED. AS PER PROVISO TO THIS EXPLANA TION, THE ONUS TO ESTABLISH THAT EXPLANATION OFFERED WAS BONA FIDE AND FACTS RELATING TO SAME AND MATERIAL TO THE COMPUTAT ION OF HIS INCOME EVEN DISCLOSED BY HIM WILL BE ON THE PERSONS CHARGED FOR CONCEALMENT. AS PER THE PROVISIONS 2 TO EXPLAN ATION 1(B) NOW THE ENTIRE ONUS IS ON THE ASSESSEE TO NOT ONLY OFFER AN EXPLANATION BUT ALSO TO SUBSTANTIATE IT AND TO PROV E THAT THE PRESUMPTION WAS BONA FIDE. AT THE SAME TIME THE PRESUMPTION SO RAISED BY THE EXPLANATION 1 IS REBUT TABLE. THE EFFECT IS THAT UNLESS AND UNTIL REBUTS THE PRES UMPTION, HE WOULD BE LIABLE TO PENALTY U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961. IT IS NOW ESTABLISHED LAW THAT PRESUMPTI ON WOULD NOT STAND REBUTTED MERELY BY FURNISHING ANY GENERAL OR FANTASTIC OR FANCIFUL OR UNREASONABLE EXPLANATION B Y THE ASSESSEE, THE EXPLANATION SHOULD BE BASED ON COGENT AND RELEVANT MATERIAL AND SHOULD BE ACCEPTED TO THE AUT HORITIES. THE EXPRESSION FURNISHING THE INACCURATE PARTICULA RS OF INCOME HAS BEEN NOT DEFINED IN THE ACT. THE EXPRES SION INACCURATE REFERS TO NOT ONLY IN CONFORMITY WITH THE FACT OR TRUTH AND THAT IS AMENDMENT, WHICH IS RELEVANT IN T HE 8 PTAGATI CONSTRUCTION 576/IND/2016 CONTEXT OF FURNISHING INACCURATE PARTICULARS. THE M EANING BY FURNISHING INACCURATE PARTICULARS OF INCOME IMPLIES FURNISHING OF DETAILS OR INFORMATION ABOUT THE INCO ME WHICH ARE NOT IN CONFORMITY WITH THE FACT OR TRUTH. THE D ETAILS OR INFORMATION ABOUT INCOME DEALS WHICH ARE FACTUAL DE TAIL OF INCOME AND THIS CANNOT BE EXTENDED TO THE AREA, WHI CH ARE SUBJECTIVE SUCH AS STATUS OF TAXABILITY OF INCOME, ADMISSIBILITY OF DEDUCTION AND INTERPRETATION OF LA W. FURNISHING OF INACCURATE INFORMATION, THUS, RELATES TO FURNISHING THE FACTUAL INCORRECT DETAILS AND INFORM ATION ABOUT THE INCOME. THE ADMISSION OR REJECTION OF A C LAIM SUBJECT TO EXERCISE AND WHETHER THE CLAIM IS ACCEPT ED OR REJECTED HAS NOTHING TO DO WITH FURNISHING OF INACC URATE PARTICULARS OF INCOME. RAISING A LEGAL CLAIM, EVEN IF IT IS ULTIMATELY FOUND TO BE LEGALLY UNACCEPTABLE CANNOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. WE FIND THAT, IN THIS CASE, THE ASSESSEE HAS MADE A BONA FIDE CLA IM, WHICH WAS NOT ACCEPTED BY THE TAX AUTHORITY OR JUDICIAL AUTHORITY. WE FIND THAT THE ASSESSEES CLAIM WAS NOT ACCEPTED BY THE AUTHORITY, IT DOES NOT MEAN THAT THE ASSESSEE HAS F URNISHED 9 PTAGATI CONSTRUCTION 576/IND/2016 INACCURATE PARTICULARS OF INCOME. THE HON'BLE SUPRE ME COURT IN THE CASE OF UNION OF INDIA VS. RAJASTHAN SPINNING AND WEAVING MILLS REPORTED IN (2009) 13 SCC 448, CONSIDERED THE EARLIER DECISION OF THE HON'BLE SUPR EME COURT IN THE CASE OF UNION OF INDIA AND ORS VS. DHARMENDRA TEXTILES PROCESSORS & ORS., REPORTED IN (2008) 306 ITR 277 (SC) AND HELD THAT IT GOES WITHOUT SAYING THAT FOR APPLICABILITY OF SECTION 271(L)(C) OF THE ACT, COND ITION STATED THEREIN MUST EXIST. THE ABOVE SAID DECISION CAME UP FOR CONSIDERATION IN THE CASE OF COMMISSIONER OF INCOME TAX VS. RELIANCE PETROPRODUCTS PVT., LTD., REPORTED IN (2010) 322 ITR 158 (SC). ON READING OF SECTION 271(1)(C), THE HON'BLE SUPREME COURT POINTED OUT THAT IN ORDER TO BRING TH E CASE UNDER SECTION 271(1)(C), THERE HAS TO BE CONCEALMEN T OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY , THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION COULD NOT BE INVOKED. THUS, THE HON'BLE S UPREME COURT POINTED OUT THAT A MERE MAKING OF CLAIM, WHIC H IS 10 PTAGATI CONSTRUCTION 576/IND/2016 NOT SUSTAINABLE IN LAW, BY ITSELF, WOULD NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. THE READING OF THE DECISION OF THE HO N'BLE SUPREME COURT REFERRED TO ABOVE, THUS POINTS OUT TH AT FOR SUSTAINING PENALTY, THE BONA FIDE EXPLANATION OF TH E ASSESSEE MUST BE LOOKED AT, SO THAT THE CONTUMACIOU S CONDUCT OF THE ASSESSEE FOR THE PURPOSE OF SUSTAINI NG THE PENALTY WOULD BE TAKEN AS CONDITION THAT IS THE MAI N REQUIREMENT UNDER SECTION 271(L)(C) OF THE ACT. REFERRING TO THE DECISION IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS, (SUPRA), THE HON'BLE SUPREME COURT POINTED OUT THAT IN THE BACKGROUND OF SECTION 271(L )(C) OF THE ACT, THERE IS NO NECESSITY OF MENS REA BEING SHOWN BY THE REVENUE, HOWEVER REFERRING TO THE EXPLANATION T O SECTION 271(L)(C) PENALTY BEING A MULTIPLE LIABILITY, THE BONA FIDE OF THE CONDUCT OF THE ASSESSEE NECESSARILY ASS UMES SIGNIFICANT EVEN THOUGH WILLFULNESS OF THE ASSESSEE MAY NOT BE A CRITERIA, THE CONDUCT IS TO BE CONSIDERED. THU S, A MERE FACT THAT THE ADDITION IN THIS CASE HAS BEEN SUSTAI NED BY JUDICIAL AUTHORITY BY ITSELF WOULD NOT LEAD TO THE AUTOMATIC 11 PTAGATI CONSTRUCTION 576/IND/2016 APPLICATION TO SECTION 271(L) OF THE I.T. ACT. IN THE INSTANT CASE, THE ASSESSEE WAS CLAIMING DEDUCTION U/S 80IB( 10) OF THE ACT. TO CLAIM THE SAID DEDUCTION, THE ASSESSEE MUST COMPLETE THE PROJECT WITHIN THE STIPULATED TIME MEN TIONED IN THE ACT AND COMPLETION CERTIFICATE HAS TO BE OBTAIN ED BEFORE CLAIMING THE DEDUCTION. IN THE ASSESSEES CASE, THE COMPLETION CERTIFICATE WAS APPLIED FOR BY THE ASSES SEE BUT THAT WAS NOT GIVEN BY THE CONCERNED AUTHORITY. THE ASSESSEES CLAIM THAT POSSESSION LETTER OF THE PROJ ECT WAS GIVEN TO THE CONCERNED HOLDER OF THE PROPERTY, THER EFORE, THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IA(4) OF TH E ACT. IN THE MEANTIME, THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT THE COMPLETION CERTIFICATE SHOULD BE FILED BEF ORE CLAIMING THE DEDUCTION U/S 80-IB(10) OF THE ACT. THEREFORE, THE ASSESSEES CLAIM U/S 80IB(10) OF THE ACT WAS REJECT ED BY THE ASSESSING OFFICER. THE CLAIM OF THE ASSESSEE U/S 8 0IB(10) OF THE ACT WAS DISALLOWED MERELY ON TECHNICAL GROUND. THEREFORE, THE ASSESSEE HAS NOT FURNISHED ANY INACC URATE PARTICULARS OF INCOME OR THE ASSESSEE HAS NOT CONCE ALED ANY INCOME. WE ARE, THEREFORE, OF THE VIEW THAT THE DEC ISION OF THE 12 PTAGATI CONSTRUCTION 576/IND/2016 HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD.; 322 ITR 158 IS APPLICABLE TO TH E FACTS OF THE CASE. WE, RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE RELIANCE PETROPRODUCTS LI MITED, 230 CTR 320 ( S.C.), REVERSE THE ORDER OF THE LD. C IT(A). ACCORDINGLY, THE PENALTY IS DELETED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 7.10.2016 . SD/- (O.P. MEENA) ACCOUNTANT MEMBER SD/- ( D.T. GARASIA) JUDICIAL MEMBER DATED : 7.10.2016