SOHANLAL M JAIN, MUMBAI V. ITO 2(1), THANE

ITA 5776/MUM/2013

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9703 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 27-06-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 24-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Business income; Revision of order; Opportunity of being heard; Principle of natural justice; Question of law; Revised return
• Section: 80C; 143(3); 142(1); 133A

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.5776 & 5777/ MUM/2013 ( / ASSESSMENT YEAR: 2005 - 06 & 2008 - 09) SHRI. SOHANLAL M. JAIN, D - 505, TULIP, THE VALLEY OF FLOWER, THAKUR VILLAGE, KANDIVALI(E), MUMBAI - 400101 / V. ITO 2(1) , THANE ./ PAN : AHRPJ4078M ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY: SHRI. VIMAL PUNAMIYA REVENUE BY : SHRI. V. JUSTIN (DR) / DATE OF HEARING : 28 - 02 - 2018 / DATE OF PRONOUNCEMENT : 27 - 03 - 2018 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER T HESE TWO APPEALS, FILED BY THE A SSESSEE, BEING I.T.A. NO.5776 & 5777/ MUM/2013 F OR ASSESSMENT YEAR 2005 - 06 & 2008 - 09 ARE DIRECTED AGAINST SEPARATE APPELLATE ORDER S DATED 01.07.2013 & 08.07.2013 RESPECTIVELY PASSED BY LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - II, THANE (HEREINAFTER CALLED THE CIT(A)) FOR ASSESSMENT YEAR 2005 - 06 & 2008 - 09 RESPECTIVELY , APPELLATE PROCEEDINGS HAD ARISEN BEFORE LEARNED CIT(A) FROM THE ASSESSMENT ORDE R DATED 24.12.2009 FOR ASSESSMENT YEAR 2005 - 06 PASSED I.T.A. NO.5776 & 5777/MUM/2013 2 BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 143(3) R.W.S. 263 OF THE INCOME - TAX ACT,1961 & PENALTY ORDER DATED 27.06.2011 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 271(1)(C) OF THE 1961 ACT FOR AY 2008 - 09 . 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL IN ITA NO. 5776/ MUM/2013 FOR ASSESSMENT YEAR 2005 - 06 FILED WITH THE INCOME - TAX APPELLATE TRIBUN AL, MUMBAI (HEREINAFTER CALLED THE TR IBUNAL) READ AS UNDER: - 1. THE LEARNED CIT (APPEALS) HAS ERRED IN BY CALCULATING THE NET PROFIT @12.68% ON CLOSING WIP. THE REASONS ASSIGNED BY HIM FOR DOING THE SAME ARE WRONG AND INSUFFICIENT. PROVISION OF THE ACT OUGHT TO HAVE BEEN PROPERLY CONSTRUED BEFORE ESTIMATING THE SAME. REGARDS BEING HAD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE SAID ESTIMATION OUGHT NOT TO HAVE BEEN MADE. 2. THE LEARNED CIT (APPEALS) HAS ERRED IN BY CONFIRMING THE ADOPTION OF PERCENTAGE COMPLETION METHOD INS TEAD OF PROJECT COMPLETION METHOD ADOPTED BY THE ASSESSEE. THE REASONS ASSIGNED BY HIM FOR DOING THE SAME ARE WRONG AND INSUFFICIENT. PROVISION OF THE ACT OUGHT TO HAVE BEEN PROPERLY CONSTRUED BEFORE ADOPTING THE SAME. REGARDS BEING HAD TO THE FACTS AND CI RCUMSTANCES OF THE CASE, THE SAID ADOPTION OUGHT NOT TO HAVE BEEN MADE. 3. ORDER PASSED IS BAD IN LAW AND CONTRARY TO THE PROVISION OF THE ACT. 4. APPELLANT LEAVES TO ADD/ MODIFY/ DELETE/ ALTER ANY/ ALL GROUNDS OF APPEALS. 3. THE GROUNDS OF APPEA L RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL IN ITA NO. 5777/ MUM/2013 FOR ASSESSMENT YEAR 2008 - 09 FILED WITH THE TRIBUNAL READ AS UNDER: - 1. THE LEARNED CIT (APPEALS) HAS ERRED IN BY CONFIRMING THE PENALTY LEVIED BY THE LEARNED ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT,1961. THE REASONS ASSIGNED BY HIM FOR DOING THE SAME ARE WRONG AND INSUFFICIENT. PROVISION OF THE ACT OUGHT TO HAVE BEEN PROPERLY CONSTRUED BEFORE DISALLOWING THE SAME. REGARDS BEING HAD TO THE FACTS AND CIRCUM STANCES OF THE CASE, THE SAID PROVISION OUGHT NOT TO HAVE BEEN APPLICABLE. 2. ORDER PASSED IS BAD IN LAW AND CONTRARY TO THE PROVISION OF THE ACT. 3. APPELLANT LEAVES TO ADD/ MODIFY/ DELETE/ ALTER ANY/ ALL GROUNDS OF APPEALS. 4. FIRST WE SHALL TAKE UP APPEAL OF THE ASSESSEE IN ITA NO. 5776/MUM/2013 FOR AY 2005 - 06. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A BUILDER & DEVELOPER AND IS PROPRIETOR OF TWO CONCERNS VIZ. M/S. I.T.A. NO.5776 & 5777/MUM/2013 3 SUVIDHA DEVELOPERS & M/S. S.V. DEVELOPER. THE ASSESSEE HAD SHOWN OPENING WIP OF RS. 1,86,56,185/ - , PURCHASES OF RS. 2,46,733/ - & CLOSING WIP OF RS. 1,63,74 , 535/ - . THE ASSESSEE SHOWED SALES OF RS. 23,71,500/ - AND HAS SHOWN TOTAL SUM OF ADVANCE OF RS. 1,11,85.163/ - RECEIVED AGAINST FLAT/SHOP BOOKING AS ON 31.03.2005. TH E ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S. 143(2) SUBMITTED THAT THE ASSESSEE HAD SELECTED PROJECT COMPLETION METHOD AS ASSESSEE HAD THE CHOICE TO SELECT METHOD IN CONSTRUCTION BUSINESS. THE ASSESSEE SUBMITTED THAT THIS PROJECT WAS STARTED IN 1995 AND SINCE THE ASSESSEE HAD THE CHOICE , THE ASSESSEE ADOPTED PROJECT COMPLETION METHOD INSTEAD OF PERCENTAGE COMPLETION METHOD. T HE AO REJECTED THE CONTENTION S OF THE ASSESSEE AND OBSERVED THAT ASSESSEE IS RE QUIRED TO FOLLOW SUC H METHOD OF ACCOUNTING WHICH WOULD RESULT IN DISCLOSURE OF TRUE , FAIR AND CORRECT PICTURE OF ITS ACCOUNTS AND BY FOLLOWING THE PROJECT COMPLETION METHOD OF ACCOUNTING THE ASSESSEE IS NOT PRESENTING THE CORRECT , TRUE AND FAIR PICTURE OF ITS TAXABLE PROFIT . THE AO RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF BRITISH PAINTS P. LTD. 188 ITR 44 , BSR FOOTWEAR 77 ITR 857 AND ALSO DECISION IN THE CASE OF CHAMPION CONSTRUCTION 5 ITD 495, BHAGYA NAGAR CONSTRUCTION 46 ITD 236 , THE AO APPLIED PE RCENTAGE COMPLETION METHOD. THE AO ALSO OBSERVED T HAT THE ASSESSEE HAS ONLY INCURRED EXPENDITURE OF RS. 2,46,733/ - TOWARDS PURCHASES DURING THE YEAR UNDER CONSIDERATION AND NO OTHER EXPENDITURE WAS INCURRED TOWARDS THE COST OF THE PROJECT WHICH LED AO TO C ONCLUDE THAT THE PROJECT OF THE ASSESSEE WAS COMPLETE WHILE THE INCOME HAS NOT BEEN OFFERED FOR TAXATION . THE ASSESSEE DID NOT FURNISH AREA WISE DETAILS OF THE PROJECT ON YEAR TO YEAR BASIS NOR THE ASSESSEE PRODUCED BOOKS OF ACCOUNTS BEFORE THE AO. THE AO ALSO OBSERVED THAT IN SUBSEQUENT YEARS TH E ADVANCES SHOWN BY THE ASSESSEE AS ON 31 - 03 - 2005 HAVE COME DOWN WHICH ALSO SHOWS THAT THE PROJECT WAS COMPLETE AND THE ASSESSEE OUGHT TO HAVE DECLARE D THE PROFIT FROM THE SAID PROJECT . THE AO OBSERVED THAT THE ASS ESSEE IS SHOWING WIP AND AGAINST WHICH ADVANCES ARE SHOWN , THE ASSESSEE HAS TO BE GIVEN BENEFIT OF COST OF CONSTRUCTION BECAUSE AS PER 1961 ACT INCOME IS TO BE BRO UGHT TO TAX AND NOT THE RECEIPTS , THUS THE AO ESTIMATED INCOME TO THE TUNE OF 40% OF THE ADV ANCE OF RS. 1,11,85,163/ - BEING SHOWN AS ON 31 - 03 - 2005 WHICH COMES TO RS. 44,74,065/ - AND THE SAME WAS BROUGHT TO TAX BY THE AO VIDE ASSESSMENT ORDER DATED 24.12.2009 PASSED U/S 143(3) R.W.S. 263 OF THE 1961 ACT . I.T.A. NO.5776 & 5777/MUM/2013 4 5. AGGRIEVED BY THE ASSESSMENT ORDER DATE D 24.12.2009 PASSED BY THE AO U/S 143(3) R.W.S. 263 OF THE 1961 ACT, THE ASSESSEE FILED FIRST APPEAL BEFORE THE LEARNED CIT - A WHO UPHELD THE DECISION OF THE AO THAT PERCENTAGE COMPLETION METHOD BE APPLIED AND ALSO ESTIMATED NET PROFIT @ 12.68% ON CLOSING WIP OF RS. 1,63,74,535/ - AS AGAINST 40% APPLIED BY THE AO BY HOLDING AS UNDER , VIDE APPELLATE ORDER DATED 01 - 07 - 2013 : - 4. I HAVE CAREFULLY CONSIDERED THE FACTS ON RECORD, SUBMISSION OF THE APPELLANT AND THE REMAND REPORT OF THE AO. I FIND THAT THE CIT - I, THANE, HAS AN ORDER U/S. 263 DATED 18/03/2009. IN THE ORDER U/S. 263, HE OBSERVED THAT THE APPELLANT WAS NOT FOLLOWING C ORRECT METHOD OF ACCOUNTING FOR THE PURPOSES OF RECOGNITION OF REVENUE AS IT WAS POSTPONING THE TAX LIABILITY. ACCORDINGLY, RELYING UPON VARIOUS DECISIONS OF COURTS/TRIBUNAL, HE HAD HELD THAT PERCENTAGE COMPLETION METHOD OF ACCOUNTING SHOULD BE ADOPTED FOR ARRIVING AT THE CORRECT PROFIT. ACCORDINGLY, HE DIRECTED THE A.O. TO ADOPT PERCENTAGE COMPLETION METHOD OF ACCOUNTING WHILE FRAMING FRESH ORDER AFTER PROVIDING PROPER OPPORTUNITIES TO THE APPELLANT AND EXAMINING THE RELEVANT DETAILS. SINCE THE CIT - I, THAN E, VIDE ORDER U/S. 263 HAS DIRECTED THE A.O. TO ADOPT PERCENTAGE COMPLETION METHOD FOR DETERMINING THE NET PROFIT, THE CONSEQUENTIAL ORDER OF THE A.O ON THIS ISSUE IS NOT APPEALABLE BEFORE THE CIT(A). THEREFORE, I AM OF THE CONSIDERED VIEW THAT THE ACTION OF A.O. IN APPLYING THE PERCENTAGE COMPLETION METHOD NEEDS TO BE UPHELD AND ACCORDINGLY, THE SAME IS UPHELD. * 4.1 ON PERUSAL OF THE MATERIAL AVAILABLE ON RECORD, IT IS OBSERVED THAT THE PROJECT WAS BEING DEVELOPED BY THE APPELLANT IN THE NAME OF M/S. S.V. DEVELOPERS SINCE A.Y. 1995 - 96 AND THE APPELLANT HAS SHOWN PROFIT FOR THE FIRST TIME IN A.Y. 2003 - 04 AT RS. 7,86,039/ - ON TOTAL SALES OF RS. 75,05,930/ - . DURING THE YEAR UNDER CONSIDERATION, THE PROFIT HAS BEEN SHOWN AT RS. 79,890/ - ON TOTAL SALE S OF RS. 2 2,91,610/ - . THUS, UP TO THE YEAR UNDER CONSIDERATION, THE APPELLANT HAS SHOWN NET PROFIT FROM THE CONSTRUCTION BUSINESS AT RS. 19,15,549/ - ON TOTAL SALES OF RS. 1,51,05,5807 - GIVING A PERCENTAGE OF 12.68%. VIDE LETTER DT. 15TH OCTOBER, 2010, THE APPELLANT HAS FURNISHED A CHART OF STAGE OF COMPLETION OF PROJECT AND IN THE YEAR UNDER CONSIDERATION, THE PROJECT HAS BEEN STATED TO BE COMPLETED TO THE EXTENT OF 97.08%. THUS, FROM THE MATERIAL AVAILABLE ON RECORD AS ALSO FROM THE SUBMISSION OF THE APPELLANT HIMSE LF, IT IS CLEAR THAT THE PROJECT WAS ALMOST COMPLETE. HENCE ON THIS PREMISE ALSO, THE APPELLANT WAS REQUIRED TO DISCLOSE NET PROFIT ON ACCRUAL BASIS ON THE ENTIRE PROJECT AS NO SUBSTANTIAL WORK WAS REQUIRED TO BE DONE FURTHER. 4.2 NOW, ONLY ISSUE WHICH REM AINS TO BE DECIDED IS THE RATE OF PROFIT. IT IS NOTICED THAT THE APPELLANT HIMSELF HAS DISCLOSED A NET PROFIT OF 12.68% ON THE TOTAL SALES OF RS. 1,51,05,580/ - IN THREE YEARS AS DETAILED ABOVE AND HENCE THERE CANNOT BE A BETTER COMPARABLE CASE THAN THE APP ELLANT'S OWN CASE. IN VIEW OF THESE FACTS, I AM OF THE CONSIDERED VIEW THAT A NET PROFIT RATE OF 12.68% IS REQUIRED TO BE APPLIED ON THE CONSTRUCTION WORK COMPLETED BY THE APPELLANT INSTEAD OF ADVANCES RECEIVED. ACCORDINGLY, THE A.O. IS DIRECTED TO APPLY A NET PROFIT OF 12.68% ON CLOSING WIP OF RS. 1,63,74,535/ - AND ASSESS THE NET PROFIT ACCORDINGLY. NEEDLESS TO MENTION THAT THE COST OF SALES MADE IN EARLIER YEARS HAVE BEEN DELETED FROM THE WIP AND HENCE THE CLOSING WIP IS ONLY REQUIRED TO BE CONSIDERED FOR ESTIMATION OF THE PROFIT FOR THE YEAR UNDER I.T.A. NO.5776 & 5777/MUM/2013 5 CONSIDERATION. WITH THESE FINDINGS, GROUND NOS. 1 TO 6 BEING RELATED TO THE ESTIMATION OF NET PROFIT STAND DISPOSED OFF, ACCORDINGLY. 6. A GGRIEVED BY THE APPELLATE ORDERS DATED 01 - 07 - 2013 PASSED BY THE LEARNED CIT(A), THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL . I T IS STATED BY L D. COUNS EL FOR THE ASSESSEE BEFORE THE B ENCH THAT THE PROJECT WAS STARTED IN THE YEAR 1995 AND SINCE THEN THE ASSESSEE IS FOLLOWING PROJECT COMPLETION METHOD WHICH WAS ACCEPTED BY REVENUE . IT WAS STATED THAT THE ENTIRE PROFIT ARISING FROM THIS PROJECT WAS OFFERED FOR TAXATION IN AY 2008 - 09 AND IF THIS PROFIT AS ESTIMATED BY LEARNED CIT - A IS BROUGHT TO TAX THEN IN THAT CASE IT WILL LEAD TO DOUBLE TAXATION OF T HE SAME INCOME WHICH IS NOT PERMISSIBLE . IT WAS SUBMITTED THAT THE PROJECT WAS COMPLETED IN THE FINANCIAL YEAR 2007 - 08 AND ASSESSEE HAS VOLUNTARILY DECLARED ENTIRE PROFIT ARISING FROM THIS PROJECT IN THE AY 2008 - 09. THE ASSESSEE ALSO SUBMITTED THAT PROJE CT COMPLETION METHOD IS ONE OF THE RECOGNIZED METHODS OF ACCOUNTING . THE ASSES SEE RELIED ON THE FOLLOWING CASE LAWS: - 1. CIT V/S DLF UNIVERSAL LTD. ITA N. 159 OF 2010 (DEL HC) 2. SABH INFRASTRUCTURE LIMITED, NEW DELHI VS. DCIT, ITA NO. 4572(DEL) OF 2009 3. DCIT V/S ANSAL LANDMARK TOWNSHIP P LTD. ITA NO.2859/ DEL/2012 4. UNIQUE ENTERPRISES VS. ITO [2010 - TIOL - 737 - I TAT - MUM 5. PRESTIGE EST ATE PROJECTS (P) LTD, VS. DY. CIT (2010)33 DTR 514 (BANG.) 6. C1T V . TATA IRON & STEEL CO. LTD, (1 977J 106 ITR 363 (BOM HC) 7. SWASTIK GROUP VERSUS ACI T 15(3), MUMBAI 8. SHET H DEVELOPERS P. LTD, MUMBAI VS I TO ITAT MUMBAI 18 JULY, 2012 9. ASSTT CIT V DHARTI ESTATE(2011] 129 I TD 1 (MUM)(TM), 10. PREM ENTERPRISES V/S ITO ( 2012] 25 TAXMANN.COM 179 (MUM.) 11. NANDI HOUSING (P.) LTD. V/.S DCIT ( 2004] 2 SOT 395 (BANG.) 12. H.M. CONSTRUCTIONS V/S JCIT[2003] 84ITD 429 (BANG.) 13. CITV. VRAJ DEVELOPERS [IT APPEAL NO. 19 (AHD.) OF 2008 14. CIT V/S UMANG HIRALAL THAKKAR 2014] 42 TAXMANN.COM 194 (GUJARAT) 1 5. ADITYA BUILDERS V/S CIT[2013] 39 TAXMANN.COM 178 (MUMBAI - TRIB.) THE LD. DR ON THE OTHER HAND RELIED UPON THE ORDER S OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE MATTER CAN BE RESTORED TO THE FILE OF THE AO FOR VERIFICATION OF THE CONTENTION OF THE ASSESSEE THAT THE PROFITS ARISING FROM THIS PROJECT HAD SUFFERED TAXATION IN AY 2008 - 09. 7.W E HAVE CONSIDERED RIVAL CONTENTION S AND PERUSED THE MATERIAL ON RECORD INCLUDING CASE LAWS RELIED UPON BY BOTH THE PARTIES . W E HAVE OBSERVED THAT THE ASSESSEE IS A BUILDER & DEVELOPER AND IS A PROPRIETOR OF TWO CONCERNS VIZ. M/S. SUVIDHA DEVELOPERS & M/S. S.V. DEVELOPER. WE HAVE OBSERVED THAT THE I.T.A. NO.5776 & 5777/MUM/2013 6 ASSESSEE HAS CLAIMED TO BE DEVELOPING THIS PROJECT SINCE 1995 ON WHICH INCOME HAS BEEN CLAIMED TO BE OFFERED TO TAXATION ON P ROJECT COMPLETION METHOD INSTEAD OF PERCENTAGE COMPLETION METHOD . IT IS CLAIMED THAT T HE R EV ENUE HAS ACCEPTED THIS METHOD OF ACCOUNTING IN EARLIER YEARS AND DURING THE IMPUGNED ASSESSMENT YEAR ONLY THE R EVENUE HAS APPLIED PERCENTAGE COMPLETION METHOD. THE AO APPLIED NET PROFIT OF 40% ON WIP TO ASSESSEE INCOME ON PERCENTAGE COMPLETION METHOD ON THIS PROJECT WHILE L EARNED CIT(A) ASSESSED THE INCOME @12.68% BASED ON PROFIT DECLARED IN EARLIER YEARS. THE ASSESSEE HAS CLAIMED TO HAVE OFFERED TO TAX ENTIRE INCOME ARISING FROM THIS PROJECT IN AY 2008 - 09 WHEN THE PROJECT WAS CLAIMED BY THE ASSESSEE TO HAVE BE EN COMPLETED. THESE CONTENTION S OF THE ASSESSEE NEED VERIFICATION BY THE AUTHORITIES BELOW AS IT REQUIRE VERIFICATION OF FACTS OF SEVERAL ASSESSMENT YEARS . IT IS CLAIMED THAT T HE REVENUE HAS CONSISTENTLY SINCE 1995 ACCEPTED THE PROJECT COMPLETION METHOD IN THE CASE OF ASSESSEE AND IT IS ONLY DURING THE IMPUGNED ASSESSMENT YEAR VIDE PROCEEDINGS CONDUCTED U/S 263 OF THE 1961 ACT , IT WAS PROPOSED TO DEVIATE FROM THE CONSISTENT STAND TAKEN BY REVENUE. THE PRINCIPLES OF RES - JUDICATA ARE NOT APPLICABLE TO INCOME - TAX PROCEEDI NGS BUT CONSISTENCY HAS TO BE MAINTAINED. AT THIS STAGE WE WOULD LIKE TO REPRODUCE HERE IN UNDER RELEVANT EXTRACT OF JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. MANISH BUILDWELL PRIVATE LIMITED REPORTED IN (2011) 245 CTR 397(DEL) AS UNDER: 6. QUESTIONS NOS. 2 AND 3 ARE CONNECTED. THEY ASSAIL THE DECISION OF THE TRIBUNAL RENDERED IN PARAGRAPH 20 OF ITS ORDER. AN ADDITION OF RS. 28,21,000/ - WAS MADE BY THE ASSESSING OFFICER ON THE FOOTING THAT THE ASSESSEE WAS ADOPTING THE PROJECT COMPLETION METHOD OR THE COMPLETED CONTRACT METHOD, WHICH WAS NOT PROPER AND THE PROFITS OF THE BUSINESS SHOULD BE COMPUTED ON THE BASIS OF THE PERCENTAGE COMPLETION METHOD UNDER WHICH THE PROFITS OF THE DEVELOPMENT AND CONSTRUCTION BUSINESS OF THE ASSESSEE GET ASSES SED OVER A PERIOD OF YEARS, KEEPING PACE WITH THE PROGRESS IN THE CONSTRUCTION/DEVELOPMENT OF THE PROJECT. THE CIT (A) HOWEVER HELD THAT THE ASSESSEE HAD NO REASON TO WITHHOLD THE HANDING OVER OF POSSESSION OF THE SPACE TO THE PURCHASER IN RESPECT OF A PRO JECT WHICH IS COMPLETED AND THAT WHEREVER POSSESSION WAS NOT HANDED OVER TO THE PURCHASER, IT WAS FOR THE REASON THAT THE PROJECT WAS NOT COMPLETED. HE FURTHER FOUND THAT A BUYER WHO HAS PAID THE ENTIRE SALE CONSIDERATION WOULD IMMEDIATELY DEMAND POSSESSIO N AND THE ENTIRE SALE CONSIDERATION COULD BE RECEIVED BY THE ASSESSEE ONLY ON COMPLETION OF THE PROJECT. ON THESE FACTS IT WAS NOTED BY THE CIT (A) THAT UNLESS THE BUYER MAKES FULL PAYMENT THE ASSESSEE COULD NOT I.T.A. NO.5776 & 5777/MUM/2013 7 HAND OVER POSSESSION NOR GET THE SALE TRANSA CTION REGISTERED. A FURTHER FINDING RECORDED BY THE CIT (A) WAS THAT THE IMPUGNED PROJECT WAS COMPLETED ONLY IN THE ACCOUNTING PERIOD RELEVANT TO THE ASSESSMENT YEAR 2008 - 09 AND IN SUPPORT OF THIS FINDING, HE NOTED THAT A COPY OF THE COMPLETION/OCCUPANCY C ERTIFICATE WAS PLACED ON THE RECORD OF THE ASSESSING OFFICER. HE FURTHER RECORDED A FINDING THAT AFTER THE ISSUE OF THE OCCUPANCY CERTIFICATE AND TILL THE DATE OF THE ASSESSMENT ORDER, POSSESSION OF ALMOST 75% OF THE DEVELOPED AREA WAS HANDED OVER TO THE B UYERS WHO MADE FULL PAYMENT AND THE SALE DEEDS WERE ALSO EXECUTED. THEREAFTER, POSSESSION OF 20% OF THE REMAINING AREA WAS HANDED OVER TO THE BUYERS. THE POSSESSION OF THE BALANCE 5% OF THE DEVELOPED AREA COULD NOT BE HANDED OVER TO THE REMAINING BUYERS BE CAUSE THEY COULD NOT MAKE FULL PAYMENT AND TAKE POSSESSION. ON THESE FINDINGS THE CIT (A) HELD THAT THE ALLEGATION OF THE ASSESSING OFFICER THAT THE ASSESSEE WAS ADOPTING A METHOD OF ACCOUNTING NAMELY THE PROJECT COMPLETION METHOD, TO SUIT ITS CONVENIENCE TO BOOK INCOME WAS BASELESS. A FURTHER FINDING RECORDED BY THE CIT (A) IS THAT THERE WAS NO MANIPULATION IN THE BOOKS OF ACCOUNTS. SO FAR AS THE METHOD OF ACCOUNTING IS CONCERNED, THE CIT (A) HELD THAT THE PROJECT COMPLETION METHOD IS A WELL RECOGNIZED AND ACCEPTED METHOD OF ACCOUNTING AND WAS THE ONLY METHOD SUITABLE FOR ANY DEVELOPER WHO HAS TO DELIVER A COMPLETED PRODUCT TO THE BUYER. ULTIMATELY THE CIT (A) HELD AS UNDER: - 'THUS ON OVERALL PERUSAL OF THE ASSESSMENT ORDER IT IS SEEN THAT NEITHER ANY DEFECT HAS BEEN POINTED OUT BY THE ASSESSING OFFICER IN THE METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT NOR ANY FINDING HAS BEEN GIVEN THAT TRUE AND FAIR PROFITS CANNOT BE DEDUCED FOLLOWING THE SAID METHOD OF ACCOUNTING. NO EVIDENCE WAS FOUND DURING THE COURSE OF SEARCH TO SHOW THAT THE BOOKS OF ACCOUNT ARE NOT PROPERLY MAINTAINED BY THE APPELLANT. THE MAIN THRUST OF THE ASSESSING OFFICER IN MAKING THE ADDITION IS THAT THE ASSESSEE IS DEFERRING THE PAYMENT OF TAXES. BUT THIS ALLEGATION OF THE ASSESSING O FFICER CANNOT BE ACCEPTED AS THE ASSESSEE IS CONSISTENTLY FOLLOWING A METHOD OF ACCOUNTING WHICH IS WELL RECOGNIZED IN DEVELOPMENT BUSINESS AND HAS BEEN ACCEPTED BY THE ASSESSING OFFICER ALSO IN THE OTHER GROUP CASES. THUS THE ADDITION IS HEREBY DELETED.' 7. THE AFORESAID FINDING OF THE CIT (A) WAS APPROVED BY THE TRIBUNAL WITH THE OBSERVATION THAT THE DEPARTMENT HAS ACCEPTED THE ASSESSEE'S METHOD OF ACCOUNTING NAMELY, THE PROJECT COMPLETION METHOD AND THEREFORE THERE WAS NO JUSTIFICATION FOR ADOPTING THE P ERCENTAGE COMPLETION METHOD FOR ONE YEAR ON SELECTIVE BASIS. 8. IT IS WELL SETTLED THAT THE PROJECT COMPLETION METHOD IS ONE OF THE RECOGNIZED METHODS OF ACCOUNTING. IN CIT V. HYUNDAI HEAVY I.T.A. NO.5776 & 5777/MUM/2013 8 INDUSTRIES CO. LTD. [2007] 291 ITR 482 / 161 TAXMAN 191 (SC) THE SUPREME COURT HELD AS FOLLOWS: - 'LASTLY, THERE IS A CONCEPT IN ACCOUNTS WHICH IS CALLED THE CONCEPT OF CONTRACT ACCOUNTS. UNDER THAT CONCEPT, TWO METHODS EXIST FOR ASCERTA INING PROFIT FOR CONTRACTS, NAMELY, 'COMPLETED CONTRACT METHOD' AND 'PERCENTAGE OF COMPLETION METHOD'. TO KNOW THE RESULTS OF HIS OPERATIONS, THE CONTRACTOR PREPARES WHAT IS CALLED A CONTRACT ACCOUNT WHICH IS DEBITED WITH VARIOUS COSTS AND WHICH IS CREDITE D WITH REVENUE ASSOCIATED WITH A PARTICULAR CONTRACT. HOWEVER, THE RULES OF RECOGNITION OF COST AND REVENUE DEPEND ON THE METHOD OF ACCOUNTING. TWO METHODS ARE PRESCRIBED IN ACCOUNTING STANDARD NO.7. THEY ARE 'COMPLETED CONTRACT METHOD' AND 'PERCENTAGE OF COMPLETION METHOD'. THIS VIEW WAS REITERATED BY THE SUPREME COURT IN CIT V. BILAHARI INVESTMENT (P.) LTD. [2008] 299 ITR 1/168 TAXMAN 95 WITH THE FOLLOWING OBSERVATIONS: 'RECOGNITION/IDENTIFICATION OF INCOME UNDER THE 1961 ACT IS ATTAINABLE BY SEVERAL METHODS OF ACCOUNTING. IT MAY BE NOTED THAT THE SAME RESULT COULD BE ATTAINED BY ANY ONE OF THE ACCOUNTING METHODS. THE COMPLETED CONTRACT METHOD IS ONE SUCH METHOD. SIMILARL Y, THE PERCENTAGE OF COMPLETION METHOD IS ANOTHER SUCH METHOD. UNDER THE COMPLETED CONTRACT METHOD, THE REVENUE IS NOT RECOGNIZED UNTIL THE CONTRACT IS COMPLETE. UNDER THE SAID METHOD, COSTS ARE ACCUMULATED DURING THE COURSE OF THE CONTRACT. THE PROFIT AND LOSS IS ESTABLISHED IN THE LAST ACCOUNTING PERIOD AND TRANSFERRED TO THE PROFIT AND LOSS ACCOUNT. THE SAID METHOD DETERMINES RESULTS ONLY WHEN THE CONTRACT IS COMPLETED. THIS METHOD LEADS TO OBJECTIVE ASSESSMENT OF THE RESULTS OF THE CONTRACT. ON THE OTHE R HAND, THE PERCENTAGE OF COMPLETION METHOD TRIES TO ATTAIN PERIODIC RECOGNITION OF INCOME IN ORDER TO REFLECT CURRENT PERFORMANCE. THE AMOUNT OF REVENUE RECOGNIZED UNDER THIS METHOD IS DETERMINED BY REFERENCE TO THE STAGE OF COMPLETION OF THE CONTRACT. TH E STAGE OF COMPLETION CAN BE LOOKED AT UNDER THIS METHOD BY TAKING INTO CONSIDERATION THE PROPORTION THAT COSTS INCURRED TO DATE BEARS TO THE ESTIMATED TOTAL COSTS OF CONTRACT. THE ABOVE INDICATES THE DIFFERENCE BETWEEN THE COMPLETED CONTRACT METHOD AND TH E PERCENTAGE OF COMPLETION METHOD.' (UNDERLINING OURS) 9. AFTER THE ABOVE JUDGMENTS OF THE SUPREME COURT IT CANNOT BE SAID THAT THE PROJECT COMPLETION METHOD FOLLOWED BY THE ASSESSEE WOULD RESULT IN DEFERMENT OF THE PAYMENT OF THE TAXES WHICH ARE TO BE ASS ESSED ANNUALLY UNDER THE INCOME TAX ACT. ACCOUNTING STANDARDS 7 (AS7) ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA ALSO RECOGNIZE THE POSITION THAT IN THE CASE OF CONSTRUCTION CONTRACTS, THE I.T.A. NO.5776 & 5777/MUM/2013 9 ASSESSEE CAN FOLLOW EITHER THE PROJECT COMPLETION ME THOD OR THE PERCENTAGE COMPLETION METHOD. IN VIEW OF THE JUDGMENTS OF THE SUPREME COURT ( SUPRA ), THE FINDING OF THE CIT (A), UPHELD BY THE TRIBUNAL, DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. FURTHER, THE TRIBUNAL HAS ALSO FOUND THAT THERE WAS NO JUSTIFICATION ON THE PART OF THE ASSESSING OFFICER TO ADOPT THE PERCENTAGE COMPLETION METHOD FOR ONE YEAR (THE YEAR UNDER APPEAL) ON SELECTIVE BASIS. THIS WILL DISTORT THE COMPUTATION OF THE TRUE PROFITS AND GAINS OF THE BUSINESS. FOR THESE REASONS, WE ARE OF THE VIEW THAT NO SUBSTANTIAL QUESTION OF LAW ARISES. WE, THEREFORE, DECLINE TO ADMIT QUESTION NOS. 2 AND 3. WE ARE OF THE CONSIDER ED VIEW THAT THIS MATTER NEED TO BE RESTORED TO THE FILE OF THE AO FOR VERIFICATION WHETHER THE ASSESSEE HAS OFFE RED ENTIRE INCOME ARISING FROM THIS P ROJECT IN AY 2008 - 09 WHEN THE PROJECT WAS STATED BY THE ASSESSEE TO BE COMPLETED AND ALSO TO VERIFY SINCE WHEN THE PROJECT COMPLETION METHOD WAS ADOPTED BY THE ASSESSEE FOR COMPUTING INCOME FROM THIS PROJECT AS THE PROJECT WAS STATED TO BE STARTED IN 1995 AND THE STAND ADOPTED BY THE REVENUE FOR THE EARLIER YEARS IN ACCEPTING PROJECT COMPLETION METHOD OF EARLIER YEARS . IF THE AFORESAID CONTENTIONS OF THE ASSESSEE ARE FOUND TO BE CORRECT, THEN ADDITIONS WILL S TAND DELETED. NEEDLESS TO SAY THAT THE AO SHALL GRANT PROPER AND ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LAW. THE AO SHALL ADMIT EVIDENCES FILED BY THE ASSESSEE IN ITS DEFENCE IN THE INTEREST OF SUBSTANTIAL JUSTICE. WE ORDER ACCORDINGLY. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 5776/MUM/2013 FOR AY 2005 - 06 IS ALLOWED FOR STATISTICAL PURPOSES. 9 . NOW WE WILL TAKE UP APPEAL OF THE ASSESSEE IN ITA NO. 5777/MUM/2013 FOR AY 2008 - 09 . A SURVEY ACTION WAS CARRIED OUT BY REVENUE U/S 133A IN THE CASE OF THE ASSESSEE ON 05.09.2008 IN WHICH THE BOOKS OF ACCOUNTS/DOCUMENTS FOUND WERE INVENTORISED AND STATEMENT OF SON OF THE ASSESSEE SHRI J ITENDRA SOHANLAL JAIN WAS RECORDED. IN THE STATEMENT , HE HAS OFF ERED RS. 1,71,00,000 / - AS INCOME AGAINST INVESTMENT IN LAN D PERTAINING TO A.Y.2003 - 04, RS. 50,89,283 / - AGAINST UN - GENUINE CRED ITORS PERTAINING TO A.Y. 2006 - 07 AND RS. 53,11,000 / - AS CASH PERTAINING TO A. Y . I.T.A. NO.5776 & 5777/MUM/2013 10 2008 - 09. ACCORDINGLY , THE ASSESSEE REVISED THE RETURN OF INCOME FOR EARLIER YEARS AND FILED RETURN FOR THE YEAR UNDER CONSIDERATION BY DULY DISCLOSING T HE DECLARATION AMOUNT AS INCOME. APART FROM THIS DECLARATION , THE ASSESS EE HAS DISCLOSED PROFIT OF RS.90,66,117/ - FRO M PROPRIETARY CONCERN M/S. S. V. DEVELOPER A ND CLAIMED LOSS OF RS. 9,98, 408/ - FROM M/S. SUVIDHA DEVELOPERS THE O THER PROPRIETARY CONCERN. THUS THE TOTAL RETURN ED INCOME DECLARED BY THE ASSESSEE WAS RS. 1,33,78,8 01/ - AND AFTE R CLAIMING THE DEDUCTION U/S 80C AT RS. 1,00,000/ - , THE TOTAL TAXABLE INCOME WAS RS.1,32,78,801/ - . DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S. 143(2) BEFORE THE AO, THE ASSESSEES COUNSEL SHRI. HASRNUKH PALAN VOLUNTARILY SUBMITTED THAT DUE TO ACCOUNTANTS MISTAKE THE COMPENSATION RECEIVED IN A.Y. 2008 - 09 FROM M/S. CHHEDA HOUSI NG BY M/S SUVIDHA DEVELOPERS REMAINED TO BE CONSIDERED AS INCOME. IT WAS SUBMITTED THAT T HE ACCOUNTANT DUE TO HIS IGNORANCE TREATED THIS C OMPENSATION AS LOAN. ACCORDINGLY , THE ASSESSEE OFFERED THE SAID COMPENSATION OF RS. 30,00,000/ - AS ASSESSEES INCOME FOR AY 2008 - 09 WHICH RESULTED IN A PROFIT OF RS. 20,01,592/ - IN SAID PROPRIETARY CONCERN M/S SUVIDHA DEVELOPERS INSTEAD OF LOSS OF RS.9,9 8, 408/ - FOR THE IMPUGNED ASSESSMENT YEAR UNDER CONSIDERATION BEFORE US . PENALTY PROCEEDING U/S. 27 1(1)(C) WERE INITIATED BY THE AO FOR ASSESSEE'S ACT OF FURNISHING IN ACCURATE PARTICULARS OF HIS INCOME TO THE TUNE OF RS. 30.00.000/ - , VIDE ASSESSMENT ORDER DA TED 31 - 12 - 2010 PASSED BY THE AO U/S 143(3) OF THE 1961 ACT . PENALTY PROCEEDINGS WERE INITIATED BY THE AO U/S 271(1)(C) AGAINST THE ASSESSEE FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME TO THE TUNE OF RS. 30,00,000/ - WHICH DULY FOUND MENTIONED IN THE ASSESSMENT ORDER U/S 143(3) DATED 31 - 12 - 2010 PASSED BY THE AO . 10 . THE AO INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME WHICH LED TO THE LEVY OF PENAL TY OF RS. 10,19,700/ - VIDE PENALTY ORDER DATED 27 - 06 - 201 1 PASSED BY THE AO U/S 271(1)(C) , AS THE ASSESSEE DID NOT ATTENDED BEFORE THE AO NOR FILED ANY EXPLANATION BEFORE THE AO W.R.T. DECLARATION OF COMPENSATION OF RS. 30,00,000/ - FROM CHEDDA HOUSING AS LOAN INSTEAD OF BEING DECLARED AS INCOME . 11. AGGRIEVE D BY THE PENALTY ORDER DATED 27 - 06 - 2011 PASSED BY THE AO U/S 271(1)(C) , THE ASSESSEE FILED FIRST APPEAL BEFORE THE LEARNED CIT(A) , T HE I.T.A. NO.5776 & 5777/MUM/2013 11 LEARNED CIT - A CONFIRM ED THE PENALTY LEVIED BY THE AO U/S 271(1)(C), VIDE APPELLATE ORDER DATED 08 - 07 - 2013, BY HOLDING AS UNDER: - 4. I HAVE CAREFULLY CONSIDERED THE FACTS O N RECORD AND SUBMISSION OF THE L D. A.R. INCLUDING THE DOCUMENTARY EVIDENCES ENCLOSED THEREWITH. IT IS NOTICED THAT THE CASE WAS SELECTED UNDER A SCRUTINY AND HENCE NOTICE UNDER SECTION 143(2) WAS ISSUED ON 09/07/2009. FURTHER NOTICES U/S. 143(2) AND 142(1) WERE ISSUED ON 16/09/2010 REQUE STING ASSESSEE TO FURNISH DETAILS AND PRODUCE BOOKS OF ACCOUNT, BANK STATEMENT, BILLS, VOUCHERS ETC., IN SUPPORT OF INCOME DECLARED IN THE RETURN OF INCOME. THE ASSESSEE THROUGH HIS AR SUBMITTED VARIOUS DETAILS SUCH AS AUDIT REPORT, BANK STATEMENT, PURCHAS E DEED OF PROPERTIES, LEDGER EXTRACT OF EXPENSES, DETAILS OF CREDITORS, DETAILS OF UNSECURED LOANS WITH CONFIRMATION AND ADVANCES ETC. SINCE THE ASSESSEE WAS REQUIRED TO FURNISH CONFIRMATION IN RESPECT OF UNSECURED LOANS AND CREDITORS, HE AT THAT POINT OF TIME REALIZED THAT HE WOULD BE CAUGHT BY THE ASSESSING OFFICER FOR INCORRECT CLAIM OF LOAN OF RS. 30 LAKHS. THEN HE CAME FORWARD FOR DISCLOSING A SUM OF RS. 30 LAKHS RECEIVED AS COMPENSATION FOR THE TAXATION PURPOSES VIDE LETTER DATED 20/09/2010 STATING TH AT THE SUM WAS SHOWN AS LOAN BY MISTAKE. IN HIS WRITTEN SUBMISSION, FILED DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT HAS STATED SIMILAR REASONS THAT THE DISCLOSURE WAS MADE VOLUNTARILY AND HENCE NO PENALTY WAS IMPOSABLE. IN SUPPORT OF HIS CO NTENTIONS, HE HAS RELIED UPON VARIOUS CASE LAWS AS MENTIONED IN THE WRITTEN SUBMISSION REPRODUCED IN PARA 3 ABOVE. FROM THE FACTS OF THE CASE, THUS IT IS CLEAR THAT THE ASSESSEE HAD NO INTENTION TO DISCLOSE THE COMPENSATION OF RS. 30 LAKHS AS INCOME PARTIC ULARLY WHEN THE CHANCES OF A SCRUTINY ASSESSMENT ARE VERY RARE AS ONLY LESS THAN 3% CASES ARE SCRUTINISED. UNDER THESE CIRCUMSTANCES, THE PENAL PROVISIONS ARE TO BE INVOKED IN ORDER TO CREATE EFFECTIVE LEVEL OF DETERRENCE SO AS TO ENSURE VOLUNTARY COMPLIAN CE IN DISCLOSING THE CORRECT INCOME IN THE RETURNS OF INCOME. SINCE, THE APPELLANT HAS COME FORWARD FOR DISCLOSING THE INCOME OF RS. 30 LAKHS FALSELY SHOWN AS LOAN ONLY AFTER SERVICE OF NOTICES UNDER SECTION 143(2) AND 142(1) REQUIRING VARIOUS DETAILS, THE SAME CANNOT BE SAID TO BE A VOLUNTARY ACT ON THE PART OF APPELLANT. EVEN IN THE CASES OF FILING OF REVISED RETURN OF INCOME SHOWING HIGHER INCOME DUE TO RESTRAIN AND FEAR AND SUSPECTED CONCEALMENT BY THE A.O., PENALTY IS HELD TO BE IMPOSABLE BY THE HON'BL E COURT IN THE CASES OF HAKAM SINGH AND OTHERS, 124 ITR 228 (ALL.) AND RADHESHYAM, 123 ITR 125 (ALL.) 4.1 I HAVE ALSO GONE THROUGH THE CASE LAWS RELIED BY THE APPELLANT AND FIND THAT THESE CASE LAWS PERTAINED TO THOSE CIRCUMSTANCES WHERE THE SURREN DER WA S MADE ON THE CONDITION TH AT NO PENALTY WOULD BE LEVIABLE OR THE SURRENDER WAS MADE TO BUY MENTAL PEACE AND AVOID LITIGATION. HOWEVER, IN THE PRESENT CASE OF APPELLANT, THOSE CONDITIONS ARE NOT SATISFIED, AND IN FACT, THE DISCLOSURE WAS MADE OF A FALSE CLA IM AT THE TIME WHEN THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN THE LOANS AND CREDITORS BY FILING CONFIRMATION ETC. 4.2 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, THEREFORE, I AM OF THE CONSIDERED VIEW THAT APPELLANT HAS CONCEALE D PARTICULARS OF INCOME BY SHOWING THE COMPENSATION OF RS. 30 LAKHS AS LOAN WHILE FILING THE RETURN OF INCOME AND HENCE IT IS FIT CASE FOR IMPOSITION OF I.T.A. NO.5776 & 5777/MUM/2013 12 PENALTY U/S. 271(1 )(C) OF THE ACT. ACCORDINGLY, THE PENALTY IMPOSED BY A.O. AT RS. 10,19,700 IS CONFIRM ED. 12 . AGGRIEVED BY THE APPELLATE ORDERS DATED 08 - 07 - 2013 PASSED BY LEARNED CIT(A), THE ASSESSEE HAS COME IN AN APPEAL BEFORE THE TRIBUNAL . T HE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE HAS VOLUNTARILY OFFERED TO TAX SAID INCOME OF RS. 30,0 0,000/ - WHICH WAS COMPENSATION RECEIVED FROM CHEDDA HOUSING BUT WAS EARLIER DECLARED BY MISTAKE AS L OAN OF RS. 30,00,000/ - FROM CHED DA HOUSING BY THE ASSESSEE. IT WAS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT IT WAS VOLUNTARILY DISCLOSURE MADE BY THE ASSESSE BEFORE BEING DETECTED BY THE AO. THE LD. DR ON THE OTHER SUBMITTED THAT SURVEY WAS COND UCTED BY THE REVENUE U/S. 133A AND ASSESSEE DID NOT DECLARE D SAID INCOME DURING THE COURSE OF SURVEY U/S 133A ON 05 - 09.2008 NOR FILED THE SAID INCOME IN THE RETURN OF INCOME FILED ON 29 - 09 - 2008 . THE LEARNED DR SUBMITTED THAT IT IS ONLY WHEN THE ASSESSEE WAS CORNERED AND WAS ASKED TO FILE LOAN CONFIRMATIONS BY THE AO , THE ASSESSEE CAME WITH THE PLEA THAT THIS A COMPENSATION RECEIPT FROM CHEDDA HOUSING AND NO T THE LOAN FROM SAID CONCERN . THE LEARNED DR ALSO RELIED UPON THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF MAK DATA PRIVATE LTD (2013) 38 TAXMAN N .COM 448 (SC). T HE LD. AR ON THE OTHER HAND RELIED UPON THE DECISION IN THE CASE OF CIT VS. BHAVIN K UMAR M DA GLI (2017)79 TAXMAN.COM 392 (GUJ). 13. WE HAVE CONSIDERED RIVAL CONTENTION S AND HAVE PERUSED THE MATERIAL ON RECORD INCLUDING CASE LAWS RELIED ON BY BOTH THE PARTIES. W E HAVE OBSERVED THAT THE ASSESSEE IS A BUILDER & DEVELOPER AND PROPRIETOR OF T WO CONCERNS MAINLY M/S. SUVIDHA DEVELOPERS & M/S. S.V. DEVELOPER. THE ASSESSEE WAS SUR VEYED BY THE REVENUE U/S. 133A ON 05.09.2008 . S EVERAL BOOKS OF ACCOUNTS/DOCUMENTS DURING THE COURSE OF SURVEY WERE FOUND WHICH WERE INVENTO RISED BY REVENUE . STATEMENT O F SON OF THE ASSESSEE WAS RECORDED AND HE MADE CERTAIN DISCLOSURE OF INCOME . THE ASSESSEE FILED RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 29 - 09 - 2008. W HEN THE ASSESSMENT PROCEEDING S U/S 143(3) R.W.S. 143(2) WERE GOING ON , THE ASSESSEE DECLARED VOLUNTARILY INCOME OF RS. 30,00,00 0 / - BEING COMPENSATION RECEIVED FROM CHED DA HOUSING WHICH WAS EARLIER DECLARED AS LOAN IN THE BOOKS OF ACCOUNT AND THE SAME WAS OFFERED AS AN INCOME DURING THE COURSE OF ASSESSMENT . I.T.A. NO.5776 & 5777/MUM/2013 13 THESE FACTS ARE EMANATING FROM THE ASSESSMENT ORDER PASSED BY THE AO U/S 143(3) . WHILE ON THE OTHER HAND LEARNED CIT(A) HAS RECORDED A N ALTOGETHER CONTRA RY FINDING THAT WHEN THE ASSESSEE WAS ASKED TO FILE DETAILS OF LOANS ALONG WITH CONFIRMATIONS VIDE NOTICES ISSUED BY THE AO U/S 142(1) AND 143(2) BOTH DATED 16 - 09 - 2010 , THE ASSESSEE BEING UNABLE TO SUBMIT LOAN CONFIRMATION AND BEING CORNERED , OFFERED THE SAID AMOUNT OF RS. 30,00,000/ - AS INCOME BEING COMPENSATION FROM CHEDDA HOUSING INSTEAD OF BEING A LOAN AS WAS DISCLOSED EARLIER DURING S URVEY U/S 133A ON 05 - 09 - 2008 AND RETURN OF INC OME FILED WITH THE REVENUE ON 29 - 09 - 2008 . THESE ARE ALTOGETHER CONTRARY FINDINGS OF FACT RECORDED BY LOWER AUTHORITIES AND IT IS ALSO NOT ON RECORD WHETHER LEARNED CIT(A) SOUGHT ANY REMAND REPORT FROM THE AO TO ARRIVE AT THIS CONTRARY FINDINGS OF FACTS. THE ASSESSEE IS STILL MAINTAINING THAT THE ASSESSEE CAME FORWARD WITH THE SAID DISCLOSURE VOLUNTARILY WITHOUT BEING CORNERED BY REVENUE WHILE THE REVENUE IS CONTENDING THAT IT IS ONLY AFTER WHEN THE ASSESSEE WA S CORNERED BY REVENUE , THE ASSESSEE CAME FORWARD AND MADE DISCLOSURE OF INCOME VOLUNTARILY BEING COMPENSATION FROM CHEDDA HOUSING WHICH WAS EARLIER DISCLOSED AS AN UNSECURED LOAN. IT IS VERY CRUCIAL TO HAVE CORRECT FACTS ON RECORD AND THERE HAS TO BE AD I DEM AS TO THE FINDINGS OF THE AUTHORITIES BELOW SO AS TO ESTABLISH BONAFIDE OF THE ASSESSEE OR THERE NEED TO BE PROPER JUSTIFICATION FOR ARRIVING AT CONTRARY FINDINGS AND IT CAN NOT BE LEFT IN THE REALM OF SPECULATION . IT IS ALSO NOT ON RECORD AS TO UNDER WHAT CIRCUMSTANCES, THE SAID INCOME WAS EARNED BY THE ASSESSEE AND WHAT MADE THE ASSESSEE IN NOT DISCLOSING THE SAID INCOME. THE ASSESSEE IS CLAIMING THAT THE SAME TO BE AN ACCOUNTANT MISTAKE. THIS ASPECT ALSO NEEDS TO BE LOOKED INTO TO ESTABLISH THE BONA FIDE OF THE ASSESSEE AND WHETHER THE ASSESSEE IS ABLE TO COME OUT WITH REASONABLE EXPLANATIONS AND JUSTIFICATIONS TO COME OUT OF CLUTCHES OF PENALTY PROVISIONS U/S 271(1)(C) OF THE 1961 ACT . THUS, KEEPING IN VIEW THE FACTUAL MATRIX OF THE ENTIRE CASE AND RECORDS BEFORE US , WE ARE OF THE CONSIDERED VIEW THAT THIS MATTER NEEDED TO BE RESTORED TO THE FILE OF THE AO FOR RECORDING THE ENTIRE FACTUAL MATRIX OF THE CASE AND THEN ARRIVE AT THE DECISION AS TO THE LEVIABILITY OF PENALTY U/S 271(1)(C) OF THE 1961 AC T IN ACCORDANCE WITH LAW. THE ASSESSEE SHALL BE GRANTED PROPER AND ADEQUATE OPPORTUNITY OF BEING HEARD IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LAW. WE ORDER ACCORDINGLY. I.T.A. NO.5776 & 5777/MUM/2013 14 14 . IN THE RESULT AP PEAL OF THE ASSESSEE IN ITA NO. 5777 /MUM/2013 FOR AY 2008 - 09 IS ALLOWED FOR STATISTICAL PURPOSES . 15. IN THE RESULT BOTH THE APPEAL S OF THE ASSESSEE IN ITA NO. 5776 - 5777/MUM/2013 FOR AY 2005 - 06 AND 2008 - 09 RESPECTIVELY ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COU RT ON 2 7 . 03.2018 2 7 .03.2018 S D / - S D / - (MAHAVIR SINGH ) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 2 7 .03.2018 NISHANT VERMA SR. PRIVATE SECRETARY COPY TO 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI 4 . THE CIT - CONCERNED, MUMBAI 5 . THE DR BENCH, H 6 . MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI