ACIT CEN CIR CIR 2, MUMBAI V. GAUTAM ENTERPRISES, THANE

ITA 5847/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9065 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 10-12-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 21-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S SATYA MOORTHY
• Assessee Lawyers: S L RATNAPARKHI
• Keywords: Income from undisclosed sources; Search and seizure; Difference of opinion
• Section: 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. : 5847/MUM/2010 ASSESSMENT YEAR : 2005-06 ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2, THANE PAWAR INDUSTRIAL ESTATE, EDULJI ROAD, CHARAI, THANE 400 601 PAN NO. AABFG 0439 L GAUTAM ENTERPRISES SOHAM HOUSE, RAM MARUTI ROAD, THANE (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI S. SATYA MOORTHY RESPONDENT BY : SHRI S.L. RATNAPARKHI DATE OF HEARING : 10.12.2012 DATE OF PRONOUNCEMENT : 21.12.2012 ORDER PER RAJENDRA SINGH, AM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 15.04.2011 OF COMMISSIONER OF INCOME TAX (APPEALS), FOR THE ASSESSMENT YEAR 2005-06. THE ONLY DISPUTE RAISED BY THE REVENUE IN THIS APPEAL IS LEVY OF PENALTY U/S 271(1)(C) OF THE INCO ME TAX ACT. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06 HAD DECLARED TOTAL INCOME OF RS.4,33,073/- IN THE ORIGINAL RETURN FILED ON 31.10.2005. SUBSEQUENTLY, A SEARCH WAS CAR RIED OUT IN THE CASE OF THE ASSESSEE U/S 132 OF THE INCOME TAX ACT, DURING THE COURSE OF WHICH, IT WAS FOUND THAT THE ASSESSEE HAD NOT DECLARED INC OME IN RESPECT OF ITA NO. : 5847/MUM/2010 GAUTAM ENTERPRISES. AY : 2005-06 2 SEVERAL PROJECTS. THE MANAGING PARTNER SHRI CHETAN N. PAREKH IN HIS STATEMENT U/S 132(4) DATED 05.10.2006, IN RESPONSE TO QUESTION NO.15, DECLARED SUM OF RS.59.56 LACS AS INCOME OF THE ASSE SSEE, FOR THE ASSESSMENT YEAR 2005-06 ON ACCOUNT OF PROFIT FROM R EAL ESTATE PROJECTS. THEREAFTER, THE ASSESSEE IN THE RETURN FILED U/S. 1 53A DECLARED TOTAL INCOME OF RS.68,08,799/- ON 07.05.2007 AND ASSESSME NT WAS COMPLETED U/S 153A/ 143(3) ON 31.12.2008 IN WHICH THE TOTAL I NCOME DECLARED BY THE ASSESSEE WAS ACCEPTED. THE ASSESSING OFFICER AL SO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE INCOME TAX ACT. 2.1 THE ASSESSEE EXPLAINED THAT NO PENALTY COULD BE IMPOSED U/S 271(1)(C) AS INCOME RETURNED BY THE ASSESSEE HAD BE EN ACCEPTED. THE PENALTY COULD BE LEVIED IN RELATION TO ADDITION MAD E BY THE ASSESSING OFFICER. THE ASSESSEE ALSO REFERRED TO CLAUSE 2 OF EXPLANATION 5 OF SECTION 271(1)(C), AS PER WHICH IN CASE THE ASSESSEE HAD DE CLARED THE INCOME AND ALSO SPECIFIED IN THEIR STATEMENT, THE MANNER IN WH ICH SUCH INCOME HAS BEEN DERIVED, NO PENALTY WAS REQUIRED TO BE LEVIED. THE ASSESSING OFFICER HOWEVER, DID NOT ACCEPT THE EXPLANATION GIVEN. IT W AS OBSERVED BY HIM THAT THE ASSESSEE HAD DECLARED INCOME OF RS.4,33,07 3/- IN THE ORIGINAL RETURN AND ONLY AFTER THE SEARCH THE TOTAL INCOME O F RS.6,80,800/- WAS DECLARED. THUS, THE ASSESSEE HAD NOT DISCLOSED THE INCOME VOLUNTARILY. THE ASSESSING OFFICER THEREFORE, HELD THAT THE PENA LTY WAS LEVIABLE AND ACCORDINGLY, LEVIED THE PENALTY AT THE MINIMUM RATE OF 100% OF TAX SOUGHT TO BE EVADED AMOUNTED TO RS.23,33,039/-. ITA NO. : 5847/MUM/2010 GAUTAM ENTERPRISES. AY : 2005-06 3 2.2 THE ASSESSEE DISPUTED THE DECISION OF ASSESSING OFFICER AND SUBMITTED BEFORE CIT(A) THAT THE TOTAL INCOME HAD B EEN DETERMINED BY THE ASSESSING OFFICER ONLY ON THE BASIS OF INCOME D ECLARED IN THE RETURN OF INCOME AND THEREFORE, THERE WAS NO ADDITION BY ASSE SSING OFFICER IN RESPECT OF WHICH PENALTY COULD BE LEVIED. IT WAS AL SO SUBMITTED THAT THE INCOME OFFERED BY THE ASSESSEE WAS SUBJECT MATTER O F DIFFERENCE OF OPINION. IT WAS POINTED THAT THE ASSESSEE WAS CONSI STENTLY FOLLOWING THE METHOD OF OFFERING THE INCOME FROM VARIOUS BUILDING S AFTER COMPLETION OF CONSTRUCTION AND ON GRANT OF OCCUPATION CERTIFICATE BY THE AUTHORITIES. THE SEARCH PARTY WAS OF THE OPINION THAT SUCH INCOME WA S REQUIRED TO BE OFFERED ON COMPLETION OF CONSTRUCTION OF BUILDINGS EVEN IF THE OCCUPATION CERTIFICATE MIGHT HAVE NOT BEEN RECEIVED FROM THE M UNICIPAL CORPORATION. THE ASSESSEE DID NOT WANT TO ENTER INTO ANY DISPUTE AND TO AVOID LITIGATION ON THE ISSUE, HAD OFFERED THE CONCERNED INCOME TO T AX IN THE YEAR UNDER APPEAL. IT WAS NOT THE CASE THAT THE CONCERNED INCO ME WAS UNACCOUNTED INCOME OF THE ASSESSEE. ALL ENTRIES OF SALES OF UNI TS WERE DULY RECORDED IN THE BOOKS OF ACCOUNTS, AND THE INCOME DECLARED WAS ON THE BASIS OF ENTRIES ALREADY RECORDED IN THE BOOKS. IT WAS ONLY BECAUSE OF DIFFERENCE OF OPINION, THE INCOME WAS NOT DECLARED BY THE ASSESSE E EARLIER. 2.3 THE CIT(A) WAS SATISFIED BY THE EXPLANATION GIV EN. IT WAS OBSERVED BY HIM THAT NON DECLARATION OF INCOME EARLIER BY TH E ASSESSEE WAS BECAUSE OF THE DIFFERENCE OF OPINION AS TO WHETHER; INCOME FROM BUILDINGS SHOULD BE OFFERED TO TAX UNDER PROJECT COMPLETION M ETHOD ON RECEIPT OF OCCUPATION CERTIFICATE FROM MUNICIPAL CORPORATION O R ON SUBSTANTIAL ITA NO. : 5847/MUM/2010 GAUTAM ENTERPRISES. AY : 2005-06 4 COMPLETION OF THE BUILDINGS. THE ASSESSEE HAD BEEN FOLLOWING THE PRACTICE OF OFFERING SUCH INCOME ON ISSUE OF OCCUPATION CERT IFICATES. SUCH PRACTICE IN THE EARLIER YEARS HAD BEEN ACCEPTED BY DEPARTMEN T IN THE ASSESSMENTS COMPLETED U/S. 143(3). THIS METHOD HAD ALSO BEEN AC CEPTED BY THE ASSESSING OFFICER IN THE ASSESSMENT MADE U/S. 153A FOR THE ASSESSMENT YEARS PRIOR TO THE YEAR UNDER APPEAL. THE CIT(A) AL SO OBSERVED THAT THE ASSESSEE IN THE STATEMENT U/S. 132(4) HAD FIRST EXP LAINED AS TO WHY THE INCOME FROM THE COMPLETED PROJECT WAS NOT RECOGNISE D AND THEN TO AVOID ANY CONTROVERSY, THE ASSESSEE DURING THE SEARCH ITS ELF OFFERED INCOME. THE, INCOME DECLARED BY THE ASSESSEE IN THE RETURN FILED U/S 153A WAS ACCEPTED BY THE DEPARTMENT, WHICH WAS ON THE BASIS OF ENTRIES ALREADY MADE IN THE BOOKS OF ACCOUNTS CIT(A), THEREFORE, HE LD THAT PENALTY U/S 271(1)(C) WOULD NOT BE JUSTIFIED IN THIS CASE. AS R EGARDS THE OBSERVATION OF THE ASSESSING OFFICER THAT THE ASSESSEE WOULD NO T HAVE DECLARED THE INCOME IF THE SEARCH HAD NOT BEEN CONDUCTED, THE CI T(A) HELD THAT THE PENALTY WOULD NOT BE ATTRACTED ONLY FOR THE REASON THAT THE INCOME HAD BEEN DECLARED IN PURSUANCE TO SEARCH WHEN EXPLANATI ON 5 IN SECTION 271(1)(C) ITSELF PROVIDED IMMUNITY FROM LEVY OF PEN ALTY CIT(A), THEREFORE, SET ASIDE THE ORDER OF ASSESSING OFFICER LEVYING PE NALTY AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL. 3. BEFORE US THE LD. DEPARTMENTAL REPRESENTATIVE AP PEARING FOR THE REVENUE ASSAILED THE ORDER OF CIT(A). IT WAS SUBMIT TED THAT THE ASSESSEE HAD DECLARED THE ADDITIONAL INCOME ONLY AFTER SEARC H AND THEREFORE, IT WAS NOT A CASE OF VOLUNTARY DISCLOSURE AND, ACCORDINGLY , PENALTY WAS JUSTIFIED. ITA NO. : 5847/MUM/2010 GAUTAM ENTERPRISES. AY : 2005-06 5 IT WAS ALSO SUBMITTED THAT THE EXPLANATION 5 TO 271 (1)(C) WAS NOT APPLICABLE IN CASE OF ASSESSEE. ACCORDINGLY IT WAS URGE THAT THE ORDER OF CIT(A) BE SET ASIDE AND ORDER OF ASSESSING OFFICER LEVYING PENALTY SHOULD BE UPHELD. THE LD.AR FOR THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT NON-DECLARATION OF INCOME WAS DUE TO BONAFIDE DIFFE RENCE OF OPINION REGARDING THE METHOD OF COMPUTATION OF INCOME. THE ASSESSEE HAD EARLIER BEING DECLARING INCOME ONLY AFTER RECEIPT OF OCCUPA TION CERTIFICATE, IN RESPECT OF THE FLAT CONSTRUCTED AND SUCH TREATMENT HAD BEEN ACCEPTED BY THE ASSESSING OFFICER IN THE SCRUTINY OF THE ASSESS MENT MADE U/S. 143(3). EVEN AFTER SEARCH, IN THE ASSESSMENT OF EARLIER YEA RS U/S.153A, THE SAME METHOD FOLLOWED BY THE ASSESSEE HAD BEEN ACCEPTED. THEREFORE, NON DECLARATION OF INCOME IN THE ORIGINAL RETURN ON THE BASIS OF METHOD FOLLOWED BY THE ASSESSEE AND ACCEPTED BY DEPARTMENT HAD TO BE CONSIDERED BONAFIDE AND NO PENALTY CAN BE LEVIED IN SUCH CASES. IT WAS THUS URGED THAT THE ORDER OF CIT(A) SHOULD BE UPHEL D. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING LEVY OF PENALTY FOR CONCEALMENT OF INCOME U/S 271(1)(C) OF THE ACT IN RESPECT OF INCOM E DECLARED BY THE ASSESSEE DURING THE COURSE OF SEARCH. THE ASSESSEE HAD FILED THE ORIGINAL RETURN FOR THE AY 2005-06 ON 31.10.2005 IN WHICH IN COME DECLARED WAS RS.4,33,073/-. THE ASSESSEE IS A BUILDER WHO HAS BE EN FOLLOWING THE SYSTEM OF DECLARING INCOME IN RESPECT OF A PROJECT AFTER RECEIPT OF OCCUPATION CERTIFICATE AND ON THAT BASIS THE ASSESS EE HAD DECLARED TOTAL INCOME OF RS.4,33,073/-, FOR THE RELEVANT YEAR IN T HE ORIGINAL RETURN. ITA NO. : 5847/MUM/2010 GAUTAM ENTERPRISES. AY : 2005-06 6 THEREAFTER ON THE DATE OF SEARCH ON 04.10.2006, THE ASSESSEE WHEN POINTED OUT BY THE DEPARTMENT THAT INCOME SHOULD BE DECLARED ON THE BASIS OF COMPLETION OF PROJECT EVEN IF NO OCCUPATIO N CERTIFICATE HAD BEEN RECEIVED, THE ASSESSEE TO AVOID ANY LITIGATION DECL ARED ADDITION INCOME OF RS.59.56 LACS, AND ASSESSMENT HAD BEEN COMPLETED ON THE BASIS OF INCOME DECLARED BY THE ASSESSEE IN THE RETURN U/S.1 53A. 4.1 THE ISSUE IS WHETHER PENALTY U/S 270(1)(C) CAN BE LEVIED IN RESPECT OF SUCH DECLARATION OF INCOME. THE EXPLANATION 5A(I I) PROVIDES THAT IN CASE DURING COURSE OF SEARCH ASSESSEE IS FOUND TO BE OWN ER OF ANY INCOME BASED ON ANY ENTRY IN THE BOOKS OF ACCOUNTS AND OTH ER DOCUMENTS AND THE ASSESSEE CLAIMS THAT SUCH ENTRY OR TRANSACTIONS REP RESENT INCOME FOR PREVIOUS YEAR WHICH HAS ENDED BEFORE THE DATE OF SE ARCH AND INCOME HAS NOT BEEN DECLARED IN THE RETURN FILED BEFORE THE DA TE OF SEARCH OR IF THE DUE DATE OF FILING RETURN OF INCOME HAS EXPIRED ON DATE OF SEARCH AND NO RETURN OF INCOME HAS BEEN FILED, THEN THE ASSESSEE IS DEEMED TO HAVE CONCEALED THE PARTICULARS OF INCOME OR FURNISH INCU RRED PARTICULARS OF INCOME. IN THIS CASE, THE ASSESSEE HAD CLAIMED THAT THE INCOME RELATED TO THE ASSESSMENT YEAR IN WHICH THE OCCUPATION CERTIFI CATES WERE RECEIVED WHICH WAS AFTER THE DATE OF SEARCH. HOWEVER, TO AVO ID ANY LITIGATION, THE ASSESSEE ON THE SUGGESTION OF SEARCH PARTY HAD DECL ARED THE INCOME. THEREFORE, IN OUR VIEW, EXPLANATION 5A(II) WILL NOT BE APPLICABLE ON THE FACTS OF THE CASE. THOUGH THE CASE OF PENALTY IN RE SPECT OF ANY INCOME IS REQUIRED TO DETERMINED WITH RESPECT TO INCOME DECLA RED IN THE ORIGINAL RETURN AND IN CASE A PARTICULAR INCOME IS NOT DECLA RED IN THE ORIGINAL ITA NO. : 5847/MUM/2010 GAUTAM ENTERPRISES. AY : 2005-06 7 INCOME AND ITS FOUND SUBSEQUENTLY PENALTY CAN BE LE VIED BUT THAT IS ONLY WHEN THE EXPLANATION OF THE ASSESSEE FOR NOT SHOWIN G SUCH INCOME IN THE ORIGINAL INCOME IS NOT FOUND BONAFIDE. 4.2 IN THIS CASE THE EXPLANATION OF THE ASSESSEE IS THAT IT HAS BEEN DECLARING INCOME IN THE EARLIER YEARS BASED ON THE RECEIPT OF OCCUPATION CERTIFICATE WHICH HAD BEEN ACCEPTED BY THE ASSESSIN G OFFICER IN THE ASSESSMENTS MADE AFTER SCRUTINY MADE U/S 143(3) AND EVEN AFTER OF SEARCH AND SEIZURE, IN ASSESSMENTS U/S 153A FOR EAR LIER YEARS IN WHICH THE SAME SYSTEM FOLLOWED BY THE ASSESSEE HAD BEEN ACCEP TED BY THE ASSESSING OFFICER. UNDER THE CIRCUMSTANCES, THE EXP LANATION OF THE ASSESSEE FOR NOT SHOWING THE INCOME IN THE ORIGINAL INCOME HAS TO BE CONSIDERED AS BONAFIDE. WE, THEREFORE, SEE NO INFIR MITY IN THE ORDER OF CIT(A) FOR COMING TO THE CONCLUSION THAT THE PENALT Y U/S 271(1)(C) IS NOT LEVIABLE. ACCORDINGLY, ORDER OF CIT(A) IS CONFIRMED . 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON THIS 21 ST DAY OF DECEMBER, 2012. SD/- SD/- (VIVEK VARMA) (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 21.12.2012 ITA NO. : 5847/MUM/2010 GAUTAM ENTERPRISES. AY : 2005-06 8 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, G - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI RASIKA*