ASHISH GANDHI BUILDERS, MUMBAI V. ITO WD 10(2)(3), MUMBAI

ITA 6337/MUM/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2907 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-05-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 14-09-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VINITA J MENON
• Assessee Lawyers: D C SEJPAL
• Keywords: Reasonable cause; Difference of opinion; Revised return

Judgement Text

1 , ' INCOME TAX APPELLATE TRIBUNAL,MUMBAI- A,BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & SANJAY GARG,JUDICIAL MEMBER /.ITA NO.6337/MUM/2011, /ASSESSMENT YEAR-2002-03 M/S. ASHISH GANDHI BUILDERS & DEVELOPERS,B-11/188, MATRU ASHISH, RAJAWADI CHS,GHATKOPAR EAST MUMBAI-400 077. PAN:AACCA 3552 A VS THE INCOME TAX OFFICER WARD-10(2)(3) ROOM NO.431, AAYAKAR BHAVAN M.K. ROAD MUMBAI400 020. ( / ASSESSEE) ( / RESPONDENT) /ASSESSEE BY : SHRI D.C. SEJPAL / REVENUE BY : MS. VINITA J. MENON / DATE OF HEARING :09 - 09-2015 / DATE OF PRONOUNCEMENT :14 -09-2015 , 1961 1961 1961 1961 254 254 254 254( (( (1 11 1) )) ) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDERS DT.04.07.2011 OF CIT(A)-21,M UMBAI, THE ASSESSEE, HAS FILED FOLLOWING GROUNDS OF APPEAL: 1(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DISMISSING THE APPELLANT'S APPEAL ON THE GROUND OF PROCEDURAL DELAY IN FILING THE APPEAL BEFORE HIM WITHIN THE PRESCRIBED TIME LIMIT. 1(B) THE LD.CIT(A) FURTHER ERRED IN DISMISSING THE SAID APPEAL ON PROCEDURAL GROUND WITHOUT AFFORDING AN OPPORTUNITY TO THE APPELLANT TO SUBSTA NTIATE THE APPELLANT'S EXPLANATION THEN GIVEN BEFORE THE LD.CIT(A) TO THE EFFECT THAT THE FILING OF APPEAL BEFORE HIM WAS CONSIDERABLY DELAYED 'ON ACCOUNT OF THE DEATH OF THE ACCOUNTANT' AS THE SAID ACCOUNTANT WAS IN EXCLUSIVE EMPLOYMENT IN THE APPELLANT' FOR A LONG PERIOD OF 35 YEARS AND ALSO THAT THE APPELLANT IS IN A POSITION TO PRODUCE THE COPY OF THE SAID ACCOUNTANT'S 'DEATH CE RTIFICATE'. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN CONFIRMING THE ORDER U/S. 271 (1)(C) ON MERITS LEVYING A PENALTY OF RS.10,87,011/- IN SPITE OF THE VALID SUBMISSIONS MA DE BY THE APPELLANT ON THE ISSUE. 3. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIF Y OR VARY ANY GROUNDS OF APPEAL. BRIEF FACTS: THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 31.1 0.2002 DECLARING LOSS AT RS.22.86 LAKHS,WHICH WAS PROCESSED U/S.143(1)OF THE ACT.AFTE R RE-OPENING THE ASSESSMENT U/S.147 OF THE ACT,THE AO COMPLETED THE RE-ASSESSMENT ON 25.02 .2008 DETERMINING THE INCOME OF THE ASSESSEE AT RS.47.86 LAKHS. AS PER THE AO,THE ASSESSEE WAS FOLLOWING PROJECT CO MPLETION METHOD(PCM),THAT IT HAD DEBITED THE CONSTRUCTION TO WORK IN PROGRESS(WIP),T HAT POSSESSION OF THE PROJECT BEING DEVELOPED AT VASHI HAD BEEN HANDED OVER TO THE OCCU PANTS IN THE AY.2002-03,THAT THE MUNICIPAL CORPORATION HAD ISSUED CERTIFICATE IN THE SAME YEAR.ACCORDINGLY,THE AO HELD THAT THE PROJECT HAD COMPLETED IN AY.2002-03,THAT THE AD VANCES HAD TO BE TAXED AS INCOME OF THE ASSESSEE FOR THAT YEAR AFTER REDUCING THE WIP AND B ROUGHT FORWARD LOSSES.FINALLY,HE ASSESSED THE INCOME OF THE ASSESSEE AT RS.47.86 LAKHS.AGGRIEVED BY THE ORDER O F THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA),WHO PARTL Y ALLOWED THE APPEAL.HE HELD THAT WIP FIGURE SHOULD BE TAKEN AT RS.10.14 CRORES IN PLACE OF RS.9.77 CRORES ADOPTED BY THE AO.AS PER ASHISH GANDHI BUILDERS & DEVELOPERS-633711.AY.02-03 2 HIS DIRECTIONS,INCOME OF THE ASSESSEE WAS REVISED T O RS.30.44 LAKHS. 2. DURING THE ASSESSMENT PROCEEDINGS,THE ASSESSEE WAS ASKED AS TO WHY THE PENALTY PROCEEDINGS U/S. 271(1)(C)SHOULD NOT BE LEVIED.IN I TS REPLY THE ASSESSEE STATED THAT DIFFERENCE OF INCOME WAS DUE THE RE-COMPUTATION OF WIP BY THE AO.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,THE AO HELD THAT THE ASSESSEE WAS F OLLOWING PCM,THAT THE PROFIT EARNED OUT OF ITS ACTIVITIES WAS LIABLE FOR TAXATION AS PER THE S YSTEM FOLLOWED BY IT,THAT IT USED TO REFLECT YEARWISE FIGURE OF WIP IN THE STATEMENT OF ACCOUNTS OF EACH AY.,THAT THE CORRECT PROFIT WAS ARRIVED AT ONLY AFTER PROCEEDINGS WERE INITIATED U/ S.147 OF THE ACT.INVOKING THE PROVISIONS OF SECTION 271(1)(C)EXPL.4(A)OF THE ACT,HE LEVIED A PE NALTY OF RS.10.87 LAKHS FOR CONCEALING THE INCOME AND FURNISHING INACCURATE PARTICULARS. 3. PENALTY ORDER WAS CHALLENGED BEFORE THE FAA.IN THE PENALTY PROCEEDINGS THE ASSESSEE STATED THAT THERE WAS DELAY IN FILING APPEAL,THAT SAME WAS ATTRIBUTABLE TO THE DEATH OF THE ACCOUNTANT,THAT ALL THE PAPERS WERE LYING WITH HIM. THE,FAA HELD THAT THE ASSESSEE HAD NOT PRODUCED ANY DOCUMENTARY EVIDENCE THAT DELAY WAS AC TUALLY RESULT OF THE DEATH OF THE ACCOUNTANT,THAT IT WAS NOT A REASONABLE CAUSE FOR F ILING APPEAL LATE BY SIX MONTHS,THAT APPEAL WAS LIABLE TO BE DISMISSED BECAUSE OF DELAY. WITHOUT PREJUDICE TO DISMISSAL OF APPEAL ON ACCOUNT OF DELAY,THE FAA DELIBERATED UPON THE MERITS OF THE CASE.HE OBSERVED THAT THE ASSETS OF T HE ASSESSEE WERE SHOWN AS PLOTS OF LAND IN THE BALANCE SHEET,THAT THE ASSESSEE HAD INFORMED TH E AO DURING THE ASSESSMENT PROCEEDINGS FOR THE AY. 2005-06 THAT COPIES OF OCCUPATION CERTI FICATES WERE FILED FOR ALL THE PROJECTS OF NAVI MUMBAI, THAT AS PER THE ASSESSEE OC FOR KANDIV ILI PROJECT WAS OBTAINED BY THE FLAT OWNERS THEMSELVES FROM THE MUNICIPAL AUTHORITIES.TH E FAA FOUND THAT IN THE STATEMENT RECORDED DURING THE COURSE OF SURVEY THE SECRETARY OF THE SOCIETY STATED THAT THEY HAD BEEN RESIDING IN THE SAID BUILDING SINCE JUNE,2001,THAT THE AO HAD BROUGHT TO THE NOTICE OF THE ASSESSEE THE OC HAD BEEN ISSUED ON 20.02 1998 FOR N AVI MUMBAI PROJECT,THAT OC FOR KANDIVILI PROJECT WAS OBTAINED BEFORE THE END OF TH E AY.UNDER APPEAL,THAT ALL THE PROPERTIES WERE CERTIFIED TO BE FIT FOR OCCUPATION BY THE MUNI CIPAL AUTHORITIES.THE FAA FURTHER HELD THAT WHILE FILING RETURN OF INCOME IT HAD CLAIMED THAT T HE PROJECTS WERE IN THE STAGE OF WIP AND THAT SAME WERE INCOMPLETE,THAT FLATS IN THE SAID PR OJECTS WERE ALREADY OCCUPIED,THAT THE ASSESSEE WAS REQUIRED TO OFFER INCOME IN RESPECT OF SUCH PROJECTS IN THE AY. UNDER CONSIDERATION,THAT IT WAS AWARE THAT THE MUNICIPAL AUTHORITIES HAD ISSUED COMPLETION CERTIFICATE(CC)IN RESPECT OF THOSE PROPERTIES,THAT IT WAS ALSO AWARE THAT PURCHASERS HAD TAKEN POSSESSION OF THE FLATS,THAT THERE WAS NO REASON FO R THE ASSESSEE TO CLAIM THAT PROJECTS WERE INCOMPLETE,THAT WIP DETAILS SHOWED THAT AFTER 31.03 .2002 THE ASSESSEE INCURRED LITTLE EXPENSES,THAT DETAILS OF EXPENSES INCURRED AFTER TH AT DATE DID NOT SUPPORT THE CLAIM OF THE ASSESSEE THAT WITHOUT INCURRING SUCH EXPENSES THE P ROJECTS COULD NOT HAVE BEEN SAID TO HAVE BEEN COMPLETED,THAT IT HAD IN ITS RETURN CLAIMED TH AT THE PROJECT WERE INCOMPLETE,THAT IT HAD FILED INACCURATE PARTICULARS OF INCOME,THAT DURING THE ASSESSMENT OR PENALTY PROCEEDINGS IT DID NOT FILE ANY BONAFIDE EXPLANATION,THAT THE ASSESSEE CASE OF RELIANCE PETROPRODUCTS PVT.LTD.(322ITR158), RELIED UPON BY THE ASSESSEE WA S OF NO HELP TO IT.FINALLY,HE UPHELD THE PENALTY ORDER OF THE AO. 4. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE(AR) CONTENDED THAT ASSESSEE HAD DISCLOSED ALL NECESSARY FACTS, THAT HE HAD NOT HIDDEN ANYTHING WHILE FILING THE RETURN, THAT THERE WAS DIFFERENCE OF OPINION BETWEE N THE AO AND THE ASSESSEE , THAT IT WAS FOLLOWING A PARTICULAR METHOD OF ACCOUNTING, HE REL IED UPON THE CASE OF RELIANCE PETRO PRODUCTS(322 ITR 158),GIRISH DEVCHAND RAJANI(33 TAX MANN.COM174) AND NARANG INTERNATIONAL HOTELS PVT. LTD. (22 TAXMANN.COM 147) .DEPARTMENTAL REPRESENTATIVE(DR) ASHISH GANDHI BUILDERS & DEVELOPERS-633711.AY.02-03 3 SUPPORTED THE ORDER OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL.WE FIND THAT THE ASSESSEE HAD FILED THE DEATH CERTIFICATE OF THE ACCOUNTANT AND W E HOLD THAT THERE WAS A REASONABLE CAUSE FOR NOT FILING THE APPEAL IN TIME.WE FIND THAT THE FAA HAD DISMISSED THE APPEAL NOT ONLY BECAUSE IT WAS FILED LAT,BUT HE HAD DELIBERATED UPON THE IS SUE ON MERITS ALSO.THEREFORE,IN OUR OPINION,THE ISSUE OF DELAY IN FILING RETURN IS ACAD EMIC IN NATURE. COMING TO THE MERITS OF THE PENALTY ORDERS,IT IS FO UND THAT THE AO HAD RE-CALCULATED THE WIP AND HAD TAXED IT IN THE YEAR UNDER APPEAL,THAT THE FAA HAD PARTLY ALLOWED THE APPEAL IN QUANTUM PROCEEDINGS,THAT THE ASSESSEE HAD NOT DISPU TED THAT THE OC AND THE CC WERE ISSUED BY THE MUNICIPAL AUTHORITIES WITH REGARD TO THE PRO JECTS COMPLETED BY IT,THAT IT WAS AWARE THAT THE TENANTS HAD OCCUPIED THE FLATS.IN SPITE OF THES E FACTS,IT WAS CLAIMING THAT WORK WAS GOING ON, I.E.THE PROJECTS WERE INCOMPLETE AND THAT THE I NCOME WAS NOT TAXABLE IN THAT YEAR.EACH ACCOUNTING YEAR IS A DIFFERENT UNIT AND INCOME ARIS ING, ACCRUING OR RECEIVED IN A PARTICULAR YEAR HAS TO BE OFFERED FOR TAXATION IN THAT PARTICU LAR YEAR UNLESS AND UNLESS THERE EXITS SOME REASONABLE CAUSE FOR DEFERRING THE SAME TO OTHER YE AR/(S).IN THE CASE BEFORE US,THE ASSESSEE HAS NOT PROVED,DURING THE ASSESSMENT AND APPELLATE PROC EEDINGS,THAT THE INCOME HAD NOT ACCRUED TO IT-EVEN AFTER RECEIVING THE OC AND CC.IT HAD TO PRODUCE DOCUMENTARY EVIDENCE THAT EVEN AFTER GETTING THE CERTIFICATES THE PROJECTS REMAINE D INCOMPLETE AND IT HAD TO INCUR SUBSTANTIAL EXPENDITURE FOR COMPLETING THEM.WE DO NOT FIND ANY SUCH EXERCISE WAS DONE BY IT.THEREFORE, IF THE AO AND THE FAA HELD THAT THE ASSESSEE HAD CO MPLETED THE PROJECTS IN THE YEAR UNDER APPEAL AND HAD NOT OFFERED THE CORRESPONDING INCOME IN THE YEAR IN WHICH IT SHOULD HAVE BEEN OFFERED,THEN THEY WERE NOT UNJUSTIFIED.WHILE DECIDI NG THE CONCEALMENT PENALTY CASES WHAT IS TO BE CONSIDERED IS THE EXPLANATION FILED BY THE AS SESSEE IN RESPONSE TO THE NOTICE ISSUED BY THE AO FOR LEVYING PENALTY. DURING THE COURSE OF SU RVEY PROCEEDINGS AND ENQUIRIES MADE BY THE DEPARTMENT, IT WAS FOUND THAT THE PROJECTS UNDE RTAKEN BY THE ASSESSEE HAD ALREADY COMPLETED AND WERE OCCUPIED BY THE PURCHASERS. IN T HESE CIRCUMSTANCES IN ABSENCE OF ANY CONTRARY EVIDENCE IT COULD NOT BE SAID THAT PROJECT S WERE IN THE STAGE OF WORK IN PROGRESS.IT IS A FACT THAT THE ASSESSEE WAS FOLLOWING METHOD OF PR OJECT COMPLETION. THE FAA HAS GIVEN CATEGORICAL FINDING OF FACT THAT AFTER 31.3.2002 VE RY LITTLE EXPENSES WAS INCURRED BY THE ASSESSEE FOR COMPLETING THE SO CALLED PROJECTS AND THAT IT HAD INCORRECTLY CLAIMED IN THE RETURN OF INCOME THAT THE PROJECTS WERE INCOMPLETE. HERE WE WOULD ALSO LIKE TO DISCUSS THE CASES RELIED UPON BY THE ASSESSEE.IN THE CASE OF RELIANCE PETROPRODUCTS PVT.LTD.(SUPRA)THE COURT HAS HELD THAT NO INFORMATION,GIVEN IN THE RETURN,WAS FOUND TO BE INCORRECT OR INACCURATE, THA T THE CASE OF THE AO WAS THAT SUBMITTING AN INCORRECT CLAIM IN LAW AMOUNTED IN FURNISHING INACC URATE PARTICULARS, THAT THE INTERPRETATION ADOPTED BY THE AO WAS NOT AS PER LAW.THE HONBLE CO URT HAD HELD THAT MAKING AN INCORRECT CLAIM IN LAW DID NOT TANTAMOUNT TO FURNISHING OF IN ACCURATE PARTICULARS IN THE CASE BEFORE US, THE FACTS ARE TOTALLY DIFFERENT-THE SURVEY PROCEEDI NGS,AS STATED EARLIER,BROUGHT CERTAIN FACTS AND IT WAS FOUND THAT THE ASSESSEE HAD NOT OFFERED THE INCOME THAT WAS TO BE OFFERED FOR THE YEAR UNDER APPEAL.THEREFORE,IN OUR OPINION,THE CASE RELI ED UPON BY THE ASSESSEE IS OF NO HELP.IN CASE OF GIRISH DEVCHAND RAJANI (SUPRA),IT WAS FOUND THAT THE ASSESSEE HAD REVISED THE RETURN AFTER THE DEATH OF HIS BROTHER WHO WAS LOOKING AFTE R THE BUSINESS.THE HONBLE COURT HAD HELD THAT IT WAS NOT THE CASE OF THE REVENUE THAT THE AS SESSEE FILED REVISED RETURN AS SOME INACCURATE PARTICULARS OF INCOME WERE DETECTED BY THE AO DURIN G THE COURSE OF ASSESSMENT.IN OUR OPINION FACTS OF THE CASE OF GIRISH DEVCHAND RAJAN I HAVE NOT RELEVANCE TO THE CASE BEFORE US. IN THE CASE OF NARANG INTERNATIONAL HOTELS(SUPRA),I T WAS FOUND THAT THE ASSESSEE HAD MADE PAYMENTS IN TERMS OF A CONSENT DECREE ON EARLIER OC CASIONS, AS PER THE ORDER OF THE HIGH ASHISH GANDHI BUILDERS & DEVELOPERS-633711.AY.02-03 4 COURT, THAT THE PAYMENTS MADE BY IT WERE ALLOWED.CO NSIDEIRNG THOSE PECULIAR FACTS PENALTY LEVIED U/S. 271(1)(C) OF THE ACT WAS DELETED BY THE TRIBUNAL.IN OUR OPINION THE FACTS OF BOTH THE CASES ARE TOTALLY DIFFERENT.IN THESE CIRCUMSTAN CES, WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL I NFIMITY.CONFIRMING HIS ORDER, WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE ASSESSEE . AS A RESULT,APPEAL FILED BY THE ASSESSEE STAND DIS MISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH OCTOBER,2015. 14 ,2015 SD/- SD/- ( / SANJAY GARG) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE: 14 .09.2015 . . . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.