M/s Greenline Constructions Ltd., New Delhi V. ACIT, New Delhi

ITA 5793/DEL/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6799 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 15-02-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 21-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN RAWAL SENIOR
• Keywords: Business income; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH SMC-I : NEW DELHI) BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER ITA NO.5793/DEL./2015 (ASSESSMENT YEAR : 2004-05) M/S. GREEENLINE CONSTRUCTIONS LTD., VS. ACIT, CIRC LE 12 (1), (PRESENTLY KNOWN AS M/S. UNITECH NEW DELHI. RESIDENTIAL RESORTS LTD.), 6, COMMUNITY CENTRE, SAKET, NEW DELHI. (PAN : AAACG2305H) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI GAGAN KUMAR, ADVOCATE REVENUE BY : SHRI ROBIN RAWAL, SENIOR DR DATE OF HEARING : 15.02.2016 DATE OF PRONOUNCEMENT : 15.02.2016 O R D E R THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER THE ACT) WHICH HAS BEEN CONFIRMED BY THE CIT (A) AMOUNTING T O RS.5,50,000/-. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSI NG OFFICER, ON THE PERUSAL OF THE PROFIT & LOSS ACCOUNT ANNEXED WITH THE RETURN O F INCOME, NOTED THAT THE ASSESSEE HAS NOT EARNED ANY BUSINESS INCOME DURING THE YEAR BUT THE ASSESSEE COMPANY HAS RECEIVED AN INTEREST INCOME AMOUNTING T O RS.9,12,200/- WHICH HAS BEEN SET OFF IN THE INTEREST EXPENDITURE INCURRED F OR DEVELOPMENT OF THE LAND AND INCLUDED IN THE PROJECT-IN-PROGRESS. THE AO, AFTER RELYING ON THE DECISION OF THE ITA NO.5793/DEL./2015 2 HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKA LIES CHEMICAL & FERTILIZER LTD. 227 ITR 172, TOOK A VIEW THAT THE SAID INTER EST INCOME HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. THE EX PENSES INCURRED ARE NOT TO BE ALLOWED AS THE ASSESSEE HAS NOT COMMENCED ITS BU SINESS. THE ASSESSEE WENT IN APPEAL AGAINST ASSESSING OF THE SAID INCOME UNDE R THE HEAD INCOME FROM OTHER SOURCES. THE CIT (A) DISMISSED THE APPEAL O F THE ASSESSEE. THE ASSESSEE DID NOT FILE ANY FURTHER APPEAL. 3. THE AO THEREUPON ISSUED SHOW-CAUSE NOTICE TO THE ASSESSEE WHY PENALTY U/S 271(1)(C) OF THE ACT MAY NOT BE IMPOSED ON THE ASSESSEE. THE AO ULTIMATELY LEVIED THE PENALTY U/S 271(1)(C) BY OBSERVING THAT THE ASSESSEE MADE AN INCORRECT CLAIM AND IF THE ASSESSMENT HAS NOT BEEN MADE UNDER SCRUTINY, THE INCOME HAS ESCAPED THE ASSESSMENT. HE TOOK THE VIEW THAT IT I S A CASE WHERE THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME. 4. I HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONS IDERED THE SUBMISSIONS ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. I DO AGREE WITH THE LD. AR THAT THE ASSESSMENT PROCEEDINGS AS WELL AS THE PENA LTY PROCEEDINGS BOTH ARE DIFFERENT PROCEEDINGS. IF THE ASSESSEE HAS NOT FILE D THE APPEAL AGAINST THE ORDER OF THE CIT (A), IT CANNOT BE CONSTRUED THAT THE ASSESS EE CANNOT TAKE THE PLEA ON MERITS ABOUT THE QUANTUM ADDITION DURING THE COURSE OF PENALTY PROCEEDINGS. THE CASE OF THE ASSESSEE IS THAT IT HAS ALREADY SET UP THE BUSINESS AS THE ASSESSEE HAS PURCHASED THE LAND. THE ASSESSEE HAS, IN THIS REGARD, RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. WHI RLPOOL OF INDIA LTD. 318 ITR 347. HONBLE DELHI HIGH COURT IN THAT DECISION HAS CLEARLY LAID DOWN THAT ITA NO.5793/DEL./2015 3 SETTING UP OF BUSINESS IS DIFFERENT FROM COMMENCEME NT OF THE BUSINESS AND ANY EXPENDITURE INCURRED AFTER SET UP OF THE BUSINESS H AS TO BE A REVENUE EXPENDITURE. THERE IS NO DISPUTE IN THIS REGARD THAT THE ASSESSE E IS INVOLVED IN CONSTRUCTION BUSINESS AND, THEREFORE, THE MOMENT THE ASSESSEE BO UGHT THE LAND, IT CAN BE SAID THAT THE BUSINESS HAS ALREADY SET UP. THE ASSESSEE WHILE INCURRING THE DEVELOPMENT EXPENSES REDUCED THE INTEREST RECEIVED FROM THE FDR FROM THE DEVELOPMENT EXPENSES / PROJECT-IN-PROGRESS, THEREBY HE REDUCED CONSTRUCTION AND DEVELOPMENT/PROJECT-IN-PROGRESS COST AS PER THE ACC OUNTING NORMS FOLLOWED BY THE ASSESSEE. THE FDRS WERE PLEDGED WITH THE BANK AS A BANK GUARANTEE FOR THE CONSTRUCTION AND THE DEVELOPMENT WORK. THE FDRS WE RE DULY SHOWN IN THE BALANCE SHEET, THE PARTICULARS SHOWN IN THE BALANCE SHEET CANNOT BE REGARDED TO BE INCORRECT WHATEVER THE ASSESSEE HAS AGITATED IN THE BALANCE SHEET, THE SAID AMOUNT HAS THE SAME NATURE. IN MY VIEW, THE CASE O F THE ASSESSEE IS DULY COVERED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE CIT VS. RELIANCE PETROPRODUCTS LIMITED - 322 ITR 158, TO WHICH THE U NDERSIGNED WAS THE AUTHOR IN THE TRIBUNAL, AND THE HONBLE SUPREME COURT HAS LAID DOWN THAT MERE MAKING OF THE CLAIM WHICH IS NOT ASCERTAINABLE IN LAW BY I TSELF WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. IN THE INSTANT CASE, THE ASSESSEE HAS DULY SUBMITTED THE P ARTICULARS IN RESPECT OF THE INTEREST ON FDR AND REDUCED THE SAME OUT OF THE PRO JECT EXPENSES. THE CLAIM MADE BY THE ASSESSEE HAS NOT BEEN ACCEPTED BY THE A O, THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE HAS SUBMITTED INACCURATE PAR TICULARS AS THE AO HAS TAKEN A VIEW WHICH IS DIFFERENT FROM THE VIEW TAKEN BY THE ASSESSEE. ITA NO.5793/DEL./2015 4 5. I HAVE ALSO GONE THROUGH THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DHOOMKETU BUILDERS & DEVELOPMENT (P .) LTD. REPORTED IN 34 TXMANN.COM 18 (DELHI), A COPY OF WHICH WAS FILED BY THE LD. COUNSEL AT THE FAG END OF THE HEARING. THIS DECISION, I NOTED, SUPPOR TED THE CONTENTION OF THE ASSESSEE THAT THERE IS A DIFFERENCE IN THE SETTING UP OF THE BUSINESS AS WELL AS THE COMMENCEMENT OF THE BUSINESS. THE EXPENSES INCURRE D AFTER THE SETTING OF THE BUSINESS ARE TO BE TREATED AS REVENUE EXPENDITURE. THE ACQUISITION OF LAND MAY BE A FIRST STEP IN THE COMMENCEMENT OF THE BUSINESS BUT SECTION 3 OF THE ACT DOES NOT SPEAK OF COMMENCEMENT OF THE BUSINESS. IT SPEA KS ONLY OF SETTING OF THE BUSINESS. THIS POSITION THUS SUPPORTS THE CONTENTI ON OF THE ASSESSEE THAT THE CLAIM MADE BY THE ASSESSEE WAS A BONAFIDE ONE. I A M, THEREFORE, OF THE VIEW THAT IT IS NOT A FIT CASE WHERE IT CAN BE SAID THAT THE ASSESSEE HAS FILED THE INACCURATE PARTICULARS AND ACCORDINGLY, THE ASSESSEE IS LIABLE FOR PENALTY U/S 271(1)(C) OF THE ACT. I ACCORDINGLY SET ASIDE THE ORDER OF THE CIT (A). 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 15 TH DAY OF FEBRUARY, 2016. SD/- (P.K. BANSAL) ACCOUNTANT MEMBER DATED THE 15 TH DAY OF FEBRUARY, 2016/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.