RAJESHRI ASSOCIATES, MUMBAI V. DCIT 24(2), MUMBAI

ITA 631/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0985 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2006-2007
• Appeal Filed On: 08-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PURSHOTAM KUMAR
• Assessee Lawyers: D SRIRAM A R S; CHANDNI PATEL
• Keywords: Gift; Principle of natural justice

Judgement Text

ITA NO. 631/MUM/2016 A.Y. 2006 - 07 M/S RAJESHRI ASSOCIATES VS. DCIT 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, M UMBAI BEFORE SHRI P.K BANSAL, VICE PRESIDENT AND SHRI RAVISH SOOD, JM ITA NO. 631 /MUM/201 6 ( / ASSESSMENT YEAR:20 06 - 07 ) M/S RAJESHRI ASSOCIATES, 102/KENT TOWER CHS. LTD, NURSING LANE, MALAD WEST, MUMBAI - 400 064 . / VS. DCIT 24 (2), 6 TH FLOOR, C - 13 PRATYAKSHAKKAR BHAWAN, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI 400 051. ./ ./ PAN NO. AAAFE7827A ( / APPELLANT) : ( / RESPONDENT ) / APPELLANT BY : MS. CHANDNI PATEL & SH. D. SRIRAM. , A.R S . / RESPONDENT BY : SHRI PURSHOTAM KUMAR , D.R. / DATE OF HEARING : 27 .1 1 .2017 / DATE OF PRONOUNCEMENT : 08 . 01 .201 8 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 41 , MUMBAI, DATED 19.11.2015 , WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 271(1)(C) OF THE INCOME - TAX ACT, 1961 (FOR SHORT ACT), DATED 02.03.2012 . THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAD RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL: - ITA NO. 631/MUM/2016 A.Y. 2006 - 07 M/S RAJESHRI ASSOCIATES VS. DCIT 2 1. THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) [CIT(A)] IN AFFIRMING THE PENALTY OF RS. 2,84,218/ - IMPOSED ON THE ASSESSEE IS UNSUSTAINABLE AND NON - SPEAKING IN LAW SINCE IT I S (A) AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE; (B). AGAINST THE PRINCIPLE OF EQUITY AND NATURAL JUSTICE AND (C). WITHOUT ADJUDICATING THE GROUNDS RAISED BY THE APPELLANT. THE ORDER OF CIT(A) IS LIABLE TO BE SET ASIDE ON THIS GROUND. 2. THE CIT(A) HAS ERRED IN UPHOLDING THE PENALTY IMPOSED BY THE ASSESSING OFFICER ON ADDITION OF RS. 4,00,000/ - MADE TO THE INCOME OF THE ASSESSEE MERELY ON THE BASIS OF EXCESS TAX WITHHELD BY THE PARTY M/S SIDDHIVINAYAK CONSTRUCTION CO. 3. THE CIT(A) HAS ERRED IN UPHO LDING THE PENALTY IMPOSED BY THE ASSESSING OFFICER ON ADDITION OF RS. 4,44,382/ - MADE TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF HOUSE PROPERTY WHICH WAS USED BY THE ASSESSEE FOR STORING OF GOODS ESSENTIAL FOR ITS BUSINESS. 4. THE CIT(A) HAS ERRED IN HOLD ING THAT THE EXPLANATION OF THE ASSESSEE ARE NOT BONAFIDE AND INCONSISTENT. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM WHICH IS ENGAGED IN THE BUSINESS OF A CONTRACTOR HAD FILED ITS RETURN OF INCOME FOR A.Y. 20 06 - 07 ON 15.12.2008 , DECLARING AN INCOME OF RS. 55,22,750/ - . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE ACT. THE CASE OF THE ASSESSEE WAS THEREAFTER TAKEN UP FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2). 3. TH AT DURING TH E COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O OBSERVED THAT THE ASSESSEE HAD SHOWN CERTAIN IMMOVABLE PROPERTIES AS AN INVESTMENT IN THE BALANCE SHEET, BUT HOWEVER, NO INCOME WAS OFFERED IN RESPECT OF THE SAME. THE ASSESSEE ON BEING CALLED UPON BY THE A.O SUBMITTED ITS REPLY, AS UNDER: (I). THAT AS FAR AS THE S HOP NOS. 3,4,5, 6 & 7 WERE CONCERNED, AS THE SAME WERE SUBJECT ED TO A DISPUTE BETWEEN THE SOCIETY AND THE B UILDER, THEREFORE, THE ASSESSEE, WAS NOT PERMITTED TO USE THE ITA NO. 631/MUM/2016 A.Y. 2006 - 07 M/S RAJESHRI ASSOCIATES VS. DCIT 3 SHOPS FOR ANY BUSINESS ACTIVIT IES AND WAS USING THE SAME AS A GODOWN. (II). THAT AS REGARDS THE FLAT NOS. 203 & 502 AT KENT HEIGHTS, IT WAS SUBMITTED THAT THE FLAT NO. 203 WAS BEING USED AS AN ADDITIONAL OFFICE PREMISES, WHILE FOR THE FLAT NO. 502 WAS USED FOR STORAGE SPACE FOR BOOKS, STATIONARY ETC. 4. THE A.O HOWEVER NOT PERSUADED TO SUBSCRIBE TO THE AFORESAID E XPLANATION OF THE ASSESSEE OBSERVED THAT AS THE ASSESSEE HAD CLEARLY SHOWN THE AFORESAID IMMOVABLE PROPERTIES AS AN INVESTMENT IN ITS BALANCE SHEET, THEREFORE, THE CLAIM OF THE ASSESSEE THAT THE SAID RESPECTIVE PROPERTIES WERE BEING EXPLOITED FOR ITS BUS INESS PURPOSES COULD NOT BE ACCEPTED. THE A.O IN THE BACKDROP OF HIS AFORESAID OBSERVATIONS WORKED OUT THE ANNUAL LETTABLE VALUE (FOR SHORT ALV) OF THE PROPERTY UNDER SEC. 22 R.W.S 23 OF THE ACT AT RS. 6,34,831/ - AND AFTER ALLOWING STATUTORY DEDUCTION OF 30% UNDER SEC. 24 MADE AN ADDITION OF RS. 4,44,382/ - UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN THE HANDS OF THE ASSESSEE. 5 . THE A.O FURTHER OBSERVED THAT THOUGH A PERUSAL OF THE AIR INFORMATION REVEALED THAT THE ASSESSEE HAD RECEIVED AN AMOUNT OF RS. 6,50,000/ - FROM M/S SIDDHIVINAYAK CONSTRUCTION COMPANY, AS UNDER: DATE AMOUNT 04.10.2005 RS. 6,50,000/ - 31.10.2005 RS. 4,00,000/ - TOTAL RS. 6,50,000/ - ,BUT HOWEVER, THE ASSESSEE HAD ACCOUNTED FOR RECEIPT OF ONLY RS. 2,50,000/ - IN THE C ONTRACT RECEIPTS FOR THE YEAR UNDER CONSIDERATION IN CONTEXT OF THE SAID CLIENT . THE ASSESSEE RECONCILING THE VARIANCE SUBMITTED BEFORE THE A.O THAT THOUGH IT HAD RECEIVED AN AMOUNT OF RS. ITA NO. 631/MUM/2016 A.Y. 2006 - 07 M/S RAJESHRI ASSOCIATES VS. DCIT 4 2,50,000/ - FROM THE AFORESAID PARTY, BUT HOWEVER, DUE TO A DISPUTE AS THE SAID CLIENT HAD DECLINED TO MAKE THE PAYMENT OF THE AMOUNT OF RS. 4,00,000/ - , THEREFORE, THE SAID AMOUNT WAS NEVER RECEIVED BY THE ASSESSEE. 6. THE A.O AFTER DELIBERATING ON THE EXPLANATION OF THE ASSESSEE WAS HOWEVER NOT PERSUADED TO ACCEPT THE SA ME. THE A.O OBSERVED THAT AS THE ASSESSEE WAS MAINTAINING ITS ACCOUNTS ON MERCANTILE SYSTEM OF ACCOUNTANCY, THEREFORE, IT REMAINED UNDER AN OBLIGATION TO HAVE RECOGNIZED THE INCOME AT THE TIME WHEN THE BILL OF RS. 4 LAC WAS RAISED ON THE CLIENT AND THE NON - RECOVERY OF THE AMOUNT COULD ONLY HAVE BEEN ROUTED THROUGH THE BOOKS OF ACCOUNT BY SUBSEQUENTLY RAISING A CLAIM OF BAD DEBT. THUS, THE A.O ON THE BASIS OF HIS AFORESAID OBSERVATIONS MADE AN ADDITION OF RS. 4 LAC IN THE HANDS OF THE ASSESSEE. 7. AGGRIEVED , THE ASSESSEE CARRIED THE ORDER OF THE A.O IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING ON THE FACTS OF THE CASE DID NOT FIND FAVOUR WITH THE CONTENTIONS OF THE ASSESSEE AND VIDE HIS ORDER DATED 21.10.201 0 DISMISSED THE APPEAL. THE ASSESSEE DID NOT ASSAIL THE ORDER OF THE CIT(A) BEFORE THE TRIBUNAL, WHICH THUS ATTAINED FINALITY. 8. THE A.O CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY UNDER SEC. 271(1)(C) MAY NOT BE IMPOSED IN RESPECT OF THE AFORESAID ADDITIONS MADE IN ITS HANDS, V IZ. (I). ADDITION UNDER THE HEAD IN C OME FROM HOUSE PROPERTY: RS. 4,44,382/ - ; AND (II). ADDITION TOWARDS SUPPRESSED CONTRACT RECEIPTS : RS. 4,00,000/ - . THE EXPLANATION OFFERED BY THE ASSESSEE DID NOT FIND FAVOUR WITH THE A.O, WHO AFTER DELIBERATING ON THE F ACTS CONCLUDED THAT AS THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE BONAFIDES OF ITS EXPLANATION , THEREFORE, PENALTY UNDER SEC. 271(1)(C) EXPLANATION 1(B) WAS CLEARLY ATTRACTED. THE A.O ON T H E ITA NO. 631/MUM/2016 A.Y. 2006 - 07 M/S RAJESHRI ASSOCIATES VS. DCIT 5 BASIS O F HIS AFORESAID CONVICTION IMPOSED A PENALTY OF RS. 2,84,218/ - IN THE HANDS OF THE ASSESSEE. 9. AGGRIEVED, THE ASSESSEE ASSAILED THE PENALTY IMPOSED BY THE A.O UNDER SEC. 271(1)(C) BEFORE THE CIT(A). THE CIT(A) NOT BEING PERSUADED TO SUBSCRIBE TO THE CONTENTIONS OF THE ASSESSEE UPHELD THE PE NALTY IMPOSED BY THE A.O AND DISMISSED THE APPEAL. 10. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) SUSTAINING THE PENALTY IMPOSED BY THE A.O UNDER SEC. 271(1)(C) HAD CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORISED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE TOOK US THROUGH THE FACTS OF THE CASE. THE LD. A.R SUBMITTED THAT THE ORDER OF THE CIT(A) DISMISSING THE QUANTUM APPEAL OF THE ASSESSEE WAS NOT FURTHER CARRIED IN APPEAL BEFORE THE TRIBUN AL. THE LD. A.R ADVERTING TO THE ADDITION OF RS.4 LAC MADE BY THE A.O TOWARDS SUPPRESSED CONTRACT RECEIPTS, TOOK US THROUGH THE COPY OF THE LEDGER ACCOUNT OF ITS CLIENT, VIZ. M/S SIDDHIVINAYAK CONSTRUCTION AS APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESS EE FOR THE YEAR UNDER CONSIDERATION ( PAGE 77 ) OF THE ASSESSES PAPER BOOK (FOR SHORT APB). T H E LD. A.R SUBMITTED THAT THE ASSESSEE WHO HAD UNDERTAKEN CERTAIN CONSTRUCTION WORK FOR M/S SIDHIVINAYAK CONSTRUCTION HAD THOUGH RAISED AN INVOICE OF RS. 6,50,000/ - FOR THE SAME, BUT HOWEVER, BEFORE RECORDING OF THE SAME IN THE BOOKS OF ACCOUNT THE SAID CLIENT DISPUTED THE PAYMENT OF THE AMOUNT. IT WAS SUBMITTED BY THE ASSESSEE THAT IT WAS THEREAFTER AGREED THAT M/S SIDHIVINAYAK CONSTRUCTION WOULD IN DISCH ARGE OF ITS LIABILITY PAY ONLY AN AMOUNT OF RS. 2,50,000/ - . THE LD. A.R SUBMITTED THAT AS M/S SIDHIVINAYAK CONSTRUCTION HAD AGREED FOR A PAYMENT OF RS. 2,50,000/ - ONLY, THEREFORE, THE ASSESSEE RECORDED ONLY AN AMOUNT OF RS. 2,50,000/ - TOWARDS THE CONTRACT RECEIPTS IN RESPECT OF THE SAID CLIENT, AND ALSO RAISED THE CLAIM FOR THE CREDIT OF TDS CORRESPONDING TO THE ITA NO. 631/MUM/2016 A.Y. 2006 - 07 M/S RAJESHRI ASSOCIATES VS. DCIT 6 SAID AMOUNT ONLY. THE LD. A.R SUBMITTED THAT THE CLIENT M/S SIDHIVINAYAK CONSTRUCTION HAD THOUGH ACCOUNTED AN AMOUNT OF RS. 6,50,000/ - AS PAYABLE T O THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION, BUT HOWEVER, HAD THEREAFTER WRITTEN BACK AN AMOUNT OF RS. 4 LAC IN THE FINANCIAL YEAR 2007 - 08. THE LD. A.R AVERRED THAT NOW WHEN ONLY AN AMOUNT OF RS. 2,50,000/ - WAS RECEIVED FROM THE AFORESAID CLIENT, VI Z. M/S SIDHIVINAYAK CONSTRUCTION, THEREFORE, NO SUPPRESSION OF THE CONTRACT RECEIPTS COULD BE INFERRED. THE LD. A.R IN ORDER TO DRIVE HOME HER CONTENTION THAT IN THE ABSENCE OF RECEIPT OF THE AMOUNT OF RS. 4 LAC FROM THE AFORESAID CLIENT, VIZ. M/S SIDHIVIN AYAK CONSTRUCTION, THE SAME COULD NOT HAVE BEEN ASSESSE D AS THE INCOME OF THE ASSESSEE RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF KERALA IN THE CASE OF KARN VIR MEHTA VS. COLLECTOR OF CUSTOMS, COCHIN (1998) 97 E.L.T 42 (KER) . 11. THAT AS REGARDS THE ADDITION OF RS.4,44,382/ - MADE BY THE A.O UNDER THE HEAD INCOME FROM HOUSE PROPERTY, IT WAS SUBMITTED BY THE LD. A.R THAT AS THE SHOP NOS. 3,4,5,6 AND 7 WERE NOT IN POSSESSION OF THE ASSESSEE DUE TO DISPUTE BETWEEN THE BUILDER AND THE SOCIETY, THERE FORE, NO INCOME WAS OFFERED FOR THE SAME UNDER THE HEAD HOUSE PROPERTY. THAT AS REGARDS THE FLAT NOS. 502 AND 203 AT KENT ESTATE, IT WAS SUBMITTED BY THE ASSESSEE THAT AS BOTH OF THE PROPERTIES WERE BEING EXPLOITED BY THE ASSESSEE FOR ITS BUSINESS PURPOS ES, THEREFORE, THE ISSUE OF DETERMINING THE ANNUAL LETTABLE VALUE UNDER SEC. 22 OF THE ACT DID NOT ARISE AT ALL. THE LD. A.R IN SUPPORT OF HER CONTENTION THAT AS THE ASSESSEE HAD NOT BEEN PUT INTO POSSESSION OF THE SHOPS NO. 3,4,5,6 AND 7 AFTER PURCHASING THE SAME, THEREFORE, IN THE ABSENCE OF EXERCISE OF POWERS BY THE ASSESSEE AS AN OWNER OF THE PROPERTY UNDER CONSIDERATION, THE ALV OF THE SAME COULD NOT HAVE B EEN BROUGHT TO TAX IN HIS HANDS RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF COMMISSIONER OF I NCOME - TAX VS. GAEKWAD ITA NO. 631/MUM/2016 A.Y. 2006 - 07 M/S RAJESHRI ASSOCIATES VS. DCIT 7 & CO. (2005) 277 ITR 553 (GUJARAT) . THE LD. A.R IN ORDER TO PUT TO REST ANY DOUBT AS REGARDS HER CLAIM THAT THE POSSESSION OF THE AFORESAID SHOPS WERE IN DISPUTE, THEREIN TOOK US THROUGH PAGE 35 OF THE APB, WHICH IS A LETTER DATED 01.09.2006 ADDRESSED BY THE SOCIETY, VIZ. GODS GIFT COOPERATIVE HOUSING SOCIETY TO THE ASSESSEE, WHEREIN THE SOCIETY HAD REFUSED TO ENROL THE ASSESSEE AS A MEMBER OF THE SOCIETY WITH RESPECT TO THE SHOP NOS. 3 TO 7. ALTE RNATIVELY, IT WAS SUBMITTED BY THE LD. A.R THAT EVEN OTHERWISE AS THE ADDITION IN RESPECT OF THE ALV OF THE PROPERTY WAS MADE BY THE A.O ON AN ADHOC BASIS , THE SAME WAS THUS NOT MAINTAINABLE. TH AT IN THE BACKDROP OF THE AFORESAID FACTS IT WAS VEHEMENTLY SU BMITTED BY THE LD. A.R THAT NO PENALTY UNDER SEC. 271(1)(C) OF THE ACT WAS CALLED FOR IN THE HANDS OF THE ASSESSEE. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 1 2. WE HAVE HEARD THE LD. AUTHORISED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT OUR INDULGENCE IN THE PRESENT APPEAL IS SOUGHT FOR ADJUDICATING THE VALIDITY OF THE PENALT Y IMPOSED BY THE A.O UNDER SEC. 271(1)(C) IN RESPECT OF ADDITIONS MADE IN THE HANDS OF THE ASSESSEE ON TWO GROUNDS , VIZ. (I). ADDITION UNDER THE HEAD INCOME FROM HOUSE PROPERTY: RS. 4,44,382/ - ; AND (II). ADDITION TOWARDS SUPPRESSED CONTRACT RECEIPTS : RS. 4,00,000/ - . 1 3 . WE SHALL FIRST ADVERT TO THE PENALTY IMPOSED UNDER SEC. 271(1)(C) IN RESPECT OF THE ADDITION MADE BY THE A.O TOWARDS INCOME FROM HOUSE PROPERTY OF RS. 4,44,382/ - . WE FIND THAT THE ASSESSEE HAD DULY DISCLOSED THE FACT OF HAVING PURCHASED TH E PROPERTIES UNDER CONSIDERATION, VIZ. (I). SHOP NOS. 3,4,5, 6 & 7 IN GODS GIFT COOPERATIVE HOUSING SOCIETY; AND (II). FLAT NOS. 502 AND 203 AT KENT ESTATE, IN ITS BALANCE SHEET THAT WAS ENCLOSED ALONGWITH THE RETURN OF INCOME FOR THE ITA NO. 631/MUM/2016 A.Y. 2006 - 07 M/S RAJESHRI ASSOCIATES VS. DCIT 8 YEAR UNDER CONSIDERATION. THE A.O WHILE FRAMING THE ASSESSMENT, BEING OF THE VIEW THAT THE PROPERTIES WERE HELD BY THE ASSESSEE AS INVESTMENT, HAD THUS MADE AN ADDITION OF THEIR RESPECTIVE ALV IN THE HANDS OF THE ASSESSEE . WE FIND THAT THE ASSESSEE HAD ASSAILED THE D ETERMINING OF THE ALV OF THE SHOP NOS. 3,4,5, 6 & 7 IN GODS GIFT COOPERATIVE HOUSING SOCIETY, FOR THE REASON THAT NOW WHEN IT WAS NOT PUT INTO EXCLUSIVE POSSESSION OF THE SAID RESPECTIVE SHOPS, THEREFORE, THE ALV OF THE SAME COULD NOT BE BROUGHT TO TAX IN ITS HANDS. WE HAVE PERUSED THE LETTER DATED 01.09.2006 ADDRESSED BY THE SOCIETY, VIZ. GODS GIFT COOPERATIVE HOUSING SOCIETY TO THE ASSESSEE, WHEREIN THE SOCIETY HAD DECLINED TO ENROL THE ASSESSEE AS A MEMBER OF THE SOCIETY IN RESPECT OF THE SHOP NOS. 3 T O 7 . WE ARE OF THE CONSIDERED VIEW THAT THE FACT THAT THE ASSESSEE WAS NOT PUT INTO EXCLUSIVE POSSESSION OF THE AFORESAID SHOPS CAN SAFELY BE GATHERED FROM THE AFORESAID CORRESPONDENCE OF THE SOCIETY WITH THE ASSESSEE. WE FIND THAT THE HONBLE HIGH COURT O F GUJARAT IN THE CASE OF COMMISSIONER OF INCOME - TAX VS. GAEKWAD & CO. (2005) 277 ITR 553 (GUJARAT) HAD HELD THAT IF AN ASSESSEE IS NOT IN A POSITION TO EXERCISE HIS RIGHT AS OWNER OF THE PROPERTY PURCHASED BY HIM THEN THE INCOME FROM THE PROPERTY CANNOT BE BROUGHT TO TAX IN HIS HANDS. WE ARE OF THE CONSIDERED VIEW THAT NOW WHEN THE ASSESSEE WAS NOT ENJOYING THE EXCLUSIVE RIGHTS OF AN OWNER IN RESPECT OF THE SHOPS IN THE SOCIETY, THEREFORE, IN T H E BACKDROP OF THE FACT THAT NOW THE ASSESSING OF THE ALV OF THE PROPERTY IN ITSELF WAS NOT FREE FROM DOUBTS, THEREFORE, NO PENALTY UNDER SEC. 271(1)(C) AS REGARDS THE ADDITION MADE ON THE SAID COUNT IN THE HANDS OF THE ASSESSEE WOULD BE JUSTIFIED . WE MAY HOWEVER CLARIFY THAT OUR OBS ERV A TIONS RECORDED HEREINABOVE ARE ONLY IN CONTEXT OF THE VALIDITY OF THE PENALTY IMPOSED UNDER SEC. 271(1)(C) IN THE HANDS OF THE ASSESSEE AND WOULD IN NO WAY PREJUDICE THE QUANTUM ITA NO. 631/MUM/2016 A.Y. 2006 - 07 M/S RAJESHRI ASSOCIATES VS. DCIT 9 ADDITION MADE IN THE HANDS OF THE ASSESSEE , WHICH AS CONCEDED BY THE LD A. R HAD ATTAINED FINALITY. 14. WE SHALL NOW ADVERT TO THE PENALTY UNDER SEC. 271(1)(C) IMPOSED IN RESPECT OF THE ALV OF THE FLAT NOS. 502 AND 203 AT KENT ESTATE, WHICH HAD BEEN ASSESSED IN THE HANDS OF THE ASSESSEE. WE FIND THAT THE LD. A.R HAD CLAIMED THAT THE AFORESAID RESPECTIVE FLATS WERE BEING USED FOR THE BUSINESS PURPOSES BY THE ASSESSEE, VIZ. FLAT NO. 203 WAS BEING USED AS ADDITIONAL OFFICE PREMISES, WHILE FOR FLAT NO. 502 WAS BEING USED AS STORAGE SPACE FOR BOOKS, STATIONERY ETC. WE ARE OF THE CONSI DERED VIEW THAT AS THE ASSESSEE HAD FAILED TO SUBSTAN TIATE ITS AFORESAID CONTENTION OF USING THE FLATS FOR ITS BUSINESS PURPOSES, THEREFORE, THE ALV OF THE SAME HAD BEEN BROUGHT TO TAX UNDER THE HEAD HOUSE PROPERTY. WE ARE OF THE CONSIDERED VIEW THAT THOUG H THE AFORESAID CLAIM OF THE ASSESSEE HAD REMAINED UNPROVED, BUT NOT DISPROVED, THEREFORE, THE SAME THOUGH MAY JUSTIFY AN ADDITION IN ITS HANDS IN THE COURSE OF T HE ASSESSMENT PROCEEDINGS, BUT HOWEVER, NO PENALTY UNDER SEC. 271(1)(C) ON THE BASIS OF THE SA ID UNPROVED CLAIM OF THE ASSESSEE CAN BE IMPOSED. WE FIND THAT OUR AFORESAID OBSERVATIONS ARE FORTIFIED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. UPENDRA V. MITHANI (ITA (L) NO. 1860 OF 2009), DATED 05.08.2009 WHEREIN THE H ONBLE HIGH COURT HAD OBSERVED AS UNDER: - THE ISSUE INVOLVED IN THE APPEAL REVOLVES A ROUND DELETION OF PENALTY UNDER SECTION 271(1)(C) OF THE I.T. ACT. THE TRIBUNAL HAS CONCURRED WITH THE VIEW TAKEN BY THE COMMISSIONER OF INCOME TAX (A). THE COMMISSIONER OF INCOME TAX (A) HAS RIGHTLY TAKEN A VIEW THAT NO PENALTY CAN BE IMPOSED IF THE FACTS AND CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT THE AMOUNT DOES NOT REPRESENT CONCEALED INCOME AS WITH THE HYPOTHESIS THAT IT DOES. IF ITA NO. 631/MUM/2016 A.Y. 2006 - 07 M/S RAJESHRI ASSOCIATES VS. DCIT 10 THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED, I.E. IT IS NOT ACCEPTED BUT CIR CUMSTANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEES CASE IS FALSE. THE VIEW TAKEN BY THE TRIBUNAL IS A REASONABLE AND POSSIBLE VIEW. THE APPEAL IS WITHOUT ANY SUBSTANCE. THE SAME IS DISMISSED IN LIMINE WITH NO ORDER AS TO CO STS. W E THUS BEING OF THE CONSIDERED VIEW THAT THE CLAIM OF THE ASSESSEE THAT IT WAS USING THE FLATS NO. 203 AND 502 FOR ITS BUSINESS PURPOSE S HAD NOT BEEN DISPROVED, THEREFORE, NO PENALTY UNDER SEC. 271(1)(C) ON THE SAID COUNT COULD HAVE BEEN VALIDLY IMP OSED IN ITS HANDS ON THE SAID COUNT . WE THUS IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS DELETE THE PENALTY IMPOSED BY THE A.O AND SUSTAINED BY THE CIT(A) AS REGARDS THE ADDITION OF RS. 4,44,382/ - MADE IN THE HANDS OF THE ASSESSEE. THE GROUND OF APPEAL N O. 3 IS ALLOWED. 13. WE SHALL NOW TAKE UP THE PENALTY IMPOSED UNDER SEC. 271(1)(C) IN THE HANDS OF THE ASSESSEE AS REGARDS THE SUPPRESSED CONTRACT RECEIPTS OF RS. 4 LAC. WE FIND THAT THE LD. A.R H AD AVERRED THAT THE ASSESSEE WHICH HAD UNDERTAKEN CERTAIN CONSTRUCTION WORK FOR ITS CLIENT, VIZ. M/S SIDHIVINAYAK CONSTRUCTION , HAD THOUGH RAISED AN INVOICE OF RS. 6,50,000/ - FOR THE SAME, BUT HOWEVER, BEFORE RECORDING OF THE SAME IN THE BOOKS OF ACCOUNT THE SAID CLIENT DISPUTED THE PAYMEN T OF THE AMOUNT. IT WAS SUBMITTED THAT AS SUBSEQUENTLY M/S SIDHIVINAYAK CONSTRUCTION AGREED TO PAY ONLY AN AMOUNT OF RS. 2,50,000/ - , THEREFORE, FOR THE SAID REASON THE ASSESSEE ACCOUNTED FOR THE CONTRACT RECEIPT FROM THE SAID CLIENT ONLY TO THE SAID EXTENT AND RAISED THE CLAIM FOR THE CREDIT OF THE TDS CORRESPONDING TO THE SAID AMOUNT ONLY. W E FIND THAT THOUGH M/S SIDHIVINAYAK CONSTRUCTION HAD DURING THE YEAR UNDER CONSIDERATION ACCOUNTED AN AMOUNT OF RS. 6,50,000/ - AS PAYABLE TO THE ASSESSEE, BUT HOWEVER, HAD THEREAFTER ITA NO. 631/MUM/2016 A.Y. 2006 - 07 M/S RAJESHRI ASSOCIATES VS. DCIT 11 WRITTEN BACK AN AMOUNT OF RS. 4 LAC IN THE FINANCIAL YEAR 2007 - 08. WE FIND THAT THE AFORESAID CLAIM OF THE ASSESSEE STANDS DULY FORTIFIED ON A PERUSAL OF THE LEDGER ACCOUNT OF THE ASSESSEE AS APPEARING IN THE BOOKS OF ACCOUNT OF M/S SIDDHIVI NAYAK CONSTRUCTION FOR THE F.Y. 2007 - 08 ( PAGE 79 OF APB). WE ARE OF THE CONSIDERED VIEW THAT NOW WHEN THE ASSESSEE IN THE BACKDROP OF THE AFORESAID FACTS WAS IN ACTUAL RECEIPT OF AN AMOUNT OF RS. 2,50,000/ - FROM ITS AFORESAID CLIENT, VIZ. M/S SIDDHIVINAYAK CONSTRUCTION CO., AND HAD ALSO CLAIMED THE CREDIT AS REGARDS THE TDS CORRESPONDING TO THE SAID AMOUNT ONLY, THEREFORE, THE BONAFIDES OF THE ASSESSEE AS REGARDS NOT ACCOUNTING FOR THE CO NTRACT RECEIPTS OF RS. 4 LAC STANDS DULY ESTABLISHED. WE THUS ARE OF THE CONSIDERED VIEW THAT AS THE BONAFIDES OF THE EXPLANATION OF THE ASSESSEE AS REGARDS NOT ACCOUNTING FOR THE AMOUNT OF RS. 4 LAC STANDS PROVED, THEREFORE, SADDLING THE ASSESSEE WITH PENALTY UNDER SEC. 271(1)(C) AS REGARDS THE SAID AMOUNT WOULD NOT BE JUSTIFIED. WE THUS FOR THE AFORESAID REASONS VACATE THE PENALTY IMPOSED BY THE A.O UNDER SC. 271(1)(C) IN THE HANDS OF THE ASSESSEE AS REGARDS THE SUPPRESSED CONTRACT RECEIPTS OF RS. 4 LAC. THE GROUND OF APPEAL NO. 2 IS ALLOWED. 14. THE GROUN D OF APPEAL NO. 1 IS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. THE GROUND OF APPEAL NO. 4 BEING GENERAL IS DISMISSED AS NOT PRESSED. THE APPEAL OF THE ASSESSEE ALLOWED. ORDER PRO NOUNCED IN THE OPEN COURT ON 08 / 01 /201 8 SD/ - SD/ - ( P.K BANSAL ) (RAVISH SOOD) VICE PRESIDENT JUDICIAL MEMBER MUMBAI ; 08 . 01 .201 8 PS. ROHIT KUMAR ITA NO. 631/MUM/2016 A.Y. 2006 - 07 M/S RAJESHRI ASSOCIATES VS. DCIT 12 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI