M/s. SHRI RAM BUILDERS, Indore V. The ACIT 1(2), Indore

ITA 617/IND/2014

• Counselvise Citation: 61722714 RSA 2014
• Duration Of Justice: 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 29-08-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 29-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MOHMD JAVED
• Assessee Lawyers: C P RAWKA
• Keywords: Wrong claim; Difference of opinion
• Section: 43B; 28

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., .., % BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER SHRI RAM BUILDERS 451 APOLLO TOWERS, 2 M G ROAD, INDORE VS. ACIT 1(2) INDORE / APPELLANT / RESPONDENT PAN:ABDFS 0091 D / APPELLANT BY SHRI C. P. RAWKA, CA / RESPONDENT BY SHRI MOHMD. JAVED, SR. (DR) / DATE OF HEARING 17.10.2016 / DATE OF PRONOUNCEMENT 07.11.2016 / O R D E R PER O.P.MEENA, ACCOUTANT MEMBER. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-I, INDORE[HERE INAFTER REFERRED TO AS THE CIT(A)], DATED 25.07.2014 AND PE RTAINS TO ASSESSMENT YEAR 2004-05, 2005-06 AND 2008-09 AS AGA INST APPEAL DECIDED IN RESPECT PENALTY ORDER U/S. 271(1) (C) ALL DTD. . . ./ I.T.A. NO. 615-616-617/IND/2014 %' ' / ASSESSMENT YEAR:2004-05/2005-06 & 2008-09 M/S. SHRI RAM BUILDERS /I. T. A. NO.615-616-617/IND /2014/AY04-0,05-06 & 08-09 PAGE 2 OF 8 28.03.2011 OF INCOME TAX ACT, 1961 (HEREIN AFTER RE FERRED TO AS 'THE ACT) BY THE ACIT 1(2) INDORE [HEREINAFTER REFE RRED TO AS THE AO]. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF A PPEAL WHICH HAS BEEN COMBINED IN SINGLE GROUND FOR THE SAKE OF CONVENIENCE: 1. THAT THE LD. CIT (A) ERRED IN LAW AND FACTS OF THE CASE AND LEVIED THE PENALTY UNDER SECTION 271(1) (C) OF INCOME TAX ACT, 1961. AT RS. 3,15,273/- FOR AY 0405, RS. 2 ,35,663/- FOR AY 2005-06 AND RS. 54,500/- FOR AY 2008-09 WITH OUT CONSIDERING FULL FACTS AND LEGAL POSITION THAT THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD. CIT (A) IS TOTALLY WRONG AND ILLEGAL ON THE FACTS OF THE CASE. 2. SINCE COMMON ISSUE IS INVOLVED AND FACTS ARE IDENTI CAL, HENCE THESE ARE BEING DECIDE BY COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. BRIEF FACTS ARE THAT THE ASSESSEE HAS CLAIMED PROVI SIONS OF PENDING LAND DEVELOPMENT EXPENSES AMOUNTING TO RS. 28.50 LAKHS FOR THE ESTIMATED COST. BUT SINCE EXPENDITURE WAS NOT INCURRED DURING THE YEAR, PROPORTIONATE PART OF COS T OF THE LAND SOLD I.E. RS. 9,55,374/- FOR AY 04-05 AND RS. 7,14, 132/- FOR AY 05-06 WERE DISALLOWED ON WHICH PENALTY PROCEEDING U NDER SECTION 271(1) (C) WERE ALSO INITIATED. SIMILARLY FOR AY 08 -09, IT WAS NOTICED THAT THE ASSESSEE HAS CLAIMED COST OF LAND SOLD @117.76 PER SQ. FEET WHEREAS IN AY 2006-07, THE COST OF LAN D WAS DETERMINED AT 100.27 PER SQ. FEET HENCE SAME WAS A DOPTED WHICH RESULTED IN ADDITION OF RS. 1,59,597/- ON WHI CH ALSO PENALTY PROCEEDING UNDER SECTION 271(1) (C) WAS ALS O INITIATED. THE CIT (A) DISMISSED THE APPEAL AGAINST THIS ADDIT ION. IT WAS EXPLAINED TO THE AO THAT CERTIFICATE OF ARCHITECT S UPPORTED M/S. SHRI RAM BUILDERS /I. T. A. NO.615-616-617/IND /2014/AY04-0,05-06 & 08-09 PAGE 3 OF 8 EXPENSES AND NOWHERE PENDING WORK WAS DOUBTED, THUS THE ASSESSEE HAD FURNISHED EXPLANATION, WHICH IS NOT FO UND FALSE HENCE, PENALTY IS NOT LEVIABLE. HOWEVER, THIS EXPLA NATION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE ON THE GROUND THA T THE ASSESSEE HAS BEEN FOLLOWING MERCANTILE SYSTEM OF AC COUNTING AND IN THIS SYSTEM ANY EXPENDITURE IS ALLOWABLE ONLY IF THE SAME IS INCURRED IRRESPECTIVE OF THE FACTS THAT SAME IS PAI D. SUCH EXPENSES WILL GO UNDER THE HEAD ADVANCE PAYMENTS WHICH ARE NOT ALLOWABLE U/S. 28 TO 43B OF THE ACT. THE AO ALS O OBSERVED THAT CASE LAWS QUOTED BY THE ASSESSEE ARE DISTINGUI SHABLE ON FACTS. IN THIS CASE, THE ASSESSEE INTENTIONALLY CLA IMED EXPENSES TO REDUCE HIS INCOME. IN VIEW OF THESE FACTS , THE AO LEVIED PENALTY AT RS. 3,15,273/- ON CONCEALED INCOME OF RS. 9,55,3 74/ FOR AY04-05, RS.2,35,663/- ON CONCEALED INCOME OF RS. 7 ,14,132/- FOR AY05-06 AND RS. 54000/- ON CONCEALED INCOME OF RS. 1,59,597/- FOR AY08-09 BEING 100% OF TAX SOUGHT TO BE EVADED. BEING, NOT SATISFIED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A). THE CIT (A) NOTED THAT THE CIT (A) AND TRI BUNAL CONFIRMED SUCH CLAIM OF FUTURE EXPENSES; HENCE, QUANTUM HAS B ECOME FINAL. THUS THE CLAIM BEING FALSE, AND, INFLATED EXPENSES AMOUNTS TO FURNISHING INACCURATE PARTICULARS OF INCOME & THUS ATTRACTS CONCEALMENT OF PENALTY AS HELD IN THE CASE OF ANAND LIQUORS 232 ITR 35(KER), GATES FOAM & RUBBER CO. 91 ITR 64(KER) . ACCORDINGLY, THE PENALTY WAS CONFIRMED. 4. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEF ORE THE TRIBUNAL. THE LD. AR FOR THE ASSESSEE SUBMITTED BEF ORE US, THAT THE ASSESSEE IS ENGAGED IN REAL ESTATE AND CONSTRUC TION BUSINESS. SINCE THE PERIOD OF PROJECTS RUNS IN SEVERAL YEARS, THE M/S. SHRI RAM BUILDERS /I. T. A. NO.615-616-617/IND /2014/AY04-0,05-06 & 08-09 PAGE 4 OF 8 DEVELOPMENT EXPENSES, IF BOOKED ON ACTUAL BASIS, WO ULD CAUSE DISTORTION IN THE RECOGNITION OF THE REVENUE. THERE FORE, AS PER ARCHITECT`S CERTIFICATE, THE EXPENSES HAVE TO BE LO ADED PER SQUARE FEET AREA. RESULTANTLY, THE EXPENSES DUE HAVE TO BE ACCOUNTED FOR ON PRO RATA BASIS AS DISCUSSED IN THE SUBMISSIONS M ADE BEFORE THE AO. UNFORTUNATELY, THIS WORKING DID NOT FIND FA VOUR OF THE APPELLATE AUTHORITIES AS THEY HAVE GONE IN LETTER A ND SPIRIT AND NOT APPRECIATE THE TRUE PICTURE AND NATURE OF BUSIN ESS. THE LD. AR CONTENDED THAT THE AO DID NOT DREW SATISFACTION AS IN PARA 3.9 PAGE 6, THE AO STATED THAT AS THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME PENALTY PROCE EDING U/S. 271(1) (C) IS HEREBY INITIATED. THIS PHRASEOLOGY DO ES NOT CONTAIN THE ASPECT OF SATISFACTION. THE LD. AR FURTHER SUBM ITTED THAT LD. CIT (A) HAS CONFIRMED THE PENALTY AS TRIBUNAL HAS C ONFIRMED THE QUANTUM ADDITION. THUS, SOLE GROUND OF DISMISSAL OF PENALTY APPEAL IS THE VERDICT IN QUANTUM OF APPEAL; HENCE, LD. CIT (A) GUIDED BY FINDING OF QUANTUM APPEAL AND DID NOT APP RECIATE SUBMISSIONS OF THE ASSESSEE. IT IS SETTLED LAW THAT PENALTY PROCEEDING ARE DIFFERENT FROM ASSESSMENT PROCEEDING S. THE LD. AR RELIED IN THE CASE OF CIT VS. DHARAMCHAND L SHAH (1 993) 204 ITR 462(BOM) WHEREIN IT WAS HELD THAT PENALTY PROCEEDING ARE DISTINCT FROM ASSESSMENT PROCEEDINGS-ASSESSMENT PRO CEEDINGS AND PENALTY PROCEEDING ARE TWO SEPARATE AND DISTINC T PROCEEDINGS. THE FACTS THAT CERTAIN ADDITIONS WERE MADE IN ASSES SMENT PROCEEDINGS WOULD NOT AUTOMATICALLY JUSTIFY THE REV ENUE TO IMPOSE PENALTY U/S. 271(1) (C). IT WAS CONTENDED THAT ALL THE EXPENSES OUT OF DEVELOPMENT EXPENSES ARE DULY ACCOUNTED FOR AND THE METHOD OF ACCOUNTING DULY REFLECTED IN THE AUDIT RE PORT AND M/S. SHRI RAM BUILDERS /I. T. A. NO.615-616-617/IND /2014/AY04-0,05-06 & 08-09 PAGE 5 OF 8 EVERYTHING WAS DISCLOSED. THE AO HAS NOT POINTED OU T ANY BASIS TO HOLD THAT THE ASSESSEE HAS CONCEALED THE INCOME. THE LD. AR FURTHER CITED DECISION IN THE CASE OF K.C. BUILDERS VS. ASST. CIT (2004) 265 ITR 562(SC). THE LD. AR ALSO RELIED ON T HE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SI DDHARTHA ENTERPRISE 322 ITR 80(MP) WHEREIN IT WAS HELD THAT FOR PENALTY FOR CONCEALMENT TO BE LEVIED, THERE MUST BE SOME EL EMENT OF DELIBERATE DEFAULT. PENALTY CANNOT BE LEVIED WHERE A WRONG CLAIM MADE BY MISTAKE. SIMILARLY, JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SHAHBAD CO-COOPERATIVE SUGAR MILLS LTD. 322 ITR 73 (MP) WHILE DEALING WITH WRONG CLAIM OF DEDUCTION PENALTY CANNOT BE LEVIED FOR A CLAIM MADE WHICH IS NOT ALLO WED. THE CLAIM OF DEDUCTION MADE BY THE ASSESSEE CAN BE DESCRIBE A S INACCURATE COMPUTATION OF INCOME FOR WHICH PENALTY FOR CONCEAL MENT CANNOT BE LEVIED. THE AR ALSO RELIED IN THE CASE OF CIT V RELIANCE PETROPRODUCTS PVT. LTD. (322 ITR 158(SC) WHEREAS I T WAS HELD THAT MERELY BECAUSE THE ASSESSEE HAS CLAIMED THE EX PENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE BY THE REVENUE, PENALTY U/S 271(1) (C) OF THE ACT CANNOT B E ATTRACTED. IN VIEW OF ABOVE, IT HAS BEEN URGED THAT PENALTY LEVIE D BY THE AO BE DELETED. 5. WE HAVE CONSIDERED THE FACTS AND PERUSED THE MATERI AL ON RECORD. THE PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT TH E AO CONSIDERED THE DEVELOPMENT EXPENSES CLAIMED ON PRO RATA BASIS AS PER METHOD OF ACCOUNTING BEING FOLLOWED BY THE A SSESSEE. THIS METHOD WAS BASED ON CERTIFICATE ISSUED BY THE ARCHI TECT AND BOOKS OF ACCOUNTS WERE DULY AUDITED. HOWEVER, THE C LAIM OF ACCOUNTING WAS NOT FOUND ACCEPTABLE BY THE AO HENCE IT WERE M/S. SHRI RAM BUILDERS /I. T. A. NO.615-616-617/IND /2014/AY04-0,05-06 & 08-09 PAGE 6 OF 8 DISALLOWED WHICH CAME TO BE SUSTAINED UP TO THE LEV EL OF TRIBUNAL. HOWEVER, THERE IS NO ALLEGATION OR OBSERVATION OF T HE AO IN THE ASSESSMENT ORDER THAT ANY FACT MATERIAL TO THE COMP UTATION OF INCOME WAS EITHER NOT DISCLOSED OR WAS FOUND TO BE WRONG. THE ADDITION HAS BEEN MADE BASED ON FACTS DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME AND DURING THE COURSE OF AS SESSMENT PROCEEDINGS AS AND WHEN DEMANDED BY THE AO. THE DISALLOWANCE OF DEVELOPMENT EXPENSES IS MADE ON DIF FERENCE OF OPINION FROM THE POINT OF VIEW OF THE ASSESSEE. IT IS TRITE LAW THAT PENALTY PROCEEDINGS ARE DISTINCT AND SEPARATE PROCE EDINGS FROM ASSESSMENT PROCEEDINGS. THE FINDING RECORDED IN THE ASSESSMENT ORDER IS NOT CONCLUSIVE FOR DECIDING THE IMPOSITION OF PENALTY. IT ONLY HAS A PERSUASIVE VALUE. ANY FINDING RECORDED I N THE ASSESSMENT ORDER DOES NOT MEAN THAT THE PENALTY HAS TO BE IMPOSED AUTOMATICALLY. 6. CLAUSE (A) OF EXPLANATION 1 TO SECTION 271 (L) (C) PROVIDES THAT THE PENALTY WOULD BE DEEMED TO ATTRACT WHERE IN RESPECT OF A FACT MATERIAL TO THE COMPUTATION OF INCOME EITHER NO EXP LANATION IS OFFERED, OR EXPLANATION OFFERED IS FOUND TO BE FALS E. IN THIS CASE, THE ASSESSEE HAS CLAIMED DEVELOPMENT EXPENSES AS PE R METHOD OF ACCOUNTING EMPLOYED BY IT. THEREFORE, THERE IS NO Q UESTION OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE PENALTY CANNOT BE LEVIED MERELY BECAUSE THE EXPENSES AS CLA IMED WAS NOT FOUND ACCEPTABLE. THUS, THE ASSESSEE HAS OFFERED EX PLANATION, WHICH WAS NOT FOUND TO BE FALSE, AND ACCORDINGLY CL AUSE (A) OF EXPLANATION 1TO SECTION 271(1)(C) DOES NOT COVER IT S CASE. CLAUSE (B) OF EXPLANATION 1TO SECTION 271(1)(C) PROVIDES THAT WHERE THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE ITS EXPLANATIO N AND FAILS TO M/S. SHRI RAM BUILDERS /I. T. A. NO.615-616-617/IND /2014/AY04-0,05-06 & 08-09 PAGE 7 OF 8 PROVE THAT SUCH EXPLANATION IS BONAFIDE AND ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED, PENALTY IS LEVIABL E. WE FIND THAT THE CLAIM OF EXPENSES BASED ON ARCHITECT CERTIFICAT E. JUST BECAUSE APPELLANTS EXPLANATION WAS NOT FOUND ACCEP TABLE BY THE AO, IT DOES NOT FOLLOW THAT THAT THE APPELLANT WAS UNABLE TO SUBSTANTIATE HIS EXPLANATION BY PROVIDING VARIOUS E VIDENCES AND JUDICIAL OPINIONS. EXPLANATION 1 DOES THEREFORE, NO T COVER THE CASE OF THE ASSESSEE. BASED ON THE FACTS OF THE CAS E, WE NOTE THAT ADDITION BASED ON DIFFERENCE OF OPINION DOES NOT IP SO FACTO ATTRACT PENALTY OF CONCEALMENT OF INCOME. THE HONBLE SUPRE ME COURT IN CASE OF CIT V RELIANCE PETROPRODUCTS PVT. LTD. (32 2 ITR 158(SC) HELD THAT MERELY BECAUSE THE ASSESSEE HAS CLAIMED T HE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NO T ACCEPTABLE BY THE REVENUE, PENALTY U/S 271(1) (C) OF THE ACT C ANNOT BE ATTRACTED. THE OTHER DECISION OF VARIOUS HIGH COURT S AND JURISDICTIONAL HIGH COURT AS DISCUSSED ABOVE AND RE LIED BY THE LD. AR SUPPORTS OUR VIEW. THEREFORE, THE PENALTY OF LEV IED FOR ASSESSMENT YEAR 2004-05, 2005-06 AND 2008-09 IS HER EBY CANCELLED. THIS GROUND OF APPEAL FOR AY 04-05,05-06 AND 08-09, IS, THEREFORE ALLOWED. 7. IN THE RESULT, THE APPEAL IS ALLOWED. 8. THE ORDER PRONOUNCED IN OPEN COURT ON 07.11.2016. SD/- SD/- ( . . ) (D.T.GARASIA) JUDICIAL MEMBER ( . . ) (O.P.MEENA) ACCOUNTANT MEMBER M/S. SHRI RAM BUILDERS /I. T. A. NO.615-616-617/IND /2014/AY04-0,05-06 & 08-09 PAGE 8 OF 8 & / DATED : 7TH NOVEMBER, 2016.OPM