EVERST ASSOCIATES, MUMBAI V. ITO 13(1)(2), MUMBAI

ITA 6457/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0144 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 21-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH OJHADR
• Keywords: Additional evidence

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./6457/MUM/2014, /ASSESSMENT YEAR: 2008-09 EVEREST ASSOCIATES NATWAR HOUSE, R.NO.17, 1 ST FLOOR 42, ABDUL REHMAN STREET MUMBAI-400 003. PAN:AABFE 1065 G VS. ACIT, -13 (1) MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) ./I.T.A./6991/MUM/2014, /ASSESSMENT YEAR: 2008-09 ACIT, -13 (1) MUMBAI. VS. EVEREST ASSOCIATES MUMBAI-400 003. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI RAJESH OJHA-DR ASSESSEE BY: SHRI RAHUL HAKANI / DATE OF HEARING: 30/05/2017 / DATE OF PRONOUNCEMENT: 05.07.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDERS,DATED 14/08/2014,OF THE CIT (A)-24,MUMBAI,THE ASSESSING OFFICER (AO)AND THE ASSESSEE HAVE FILED CROSS-APPEAL FOR TH E ABOVE-MENTIONED ASSESSMENT YEAR. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF BUILDER S AND DEVELOPERS OF LAND,FILED ITS RETURN OF INCOME ON 27/09/2008,DECLARING INCOME OF RS 22.8 8 LAKHS.THE AO COMPLETED THE ASSESSMENT ON 22/12/2010,U/S.143(3)OF THE ACT,DETER MINING THE ITS INCOME AT RS. 89.66 LAKHS. ITA/6457/MUM/2014. 2. EFFECTIVE GROUND OF APPEAL, RAISED BY THE ASSESSEE, IS ABOUT CONFIRMING THE PENALTY U/S. 271(1)(C)(1)(C)OF THE ACT.DURING THE ASSESSMENT PRO CEEDINGS,THE AO DIRECTED THE ASSESSEE TO FURNISH THE DETAILS OF WORK-IN-PROGRESS(WIP) FOR TH E PROJECT FROM THE DAYS OF INCEPTION.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, THE AO HELD THAT THE ASSESSEE HAD INFLATED THE WORK IN PROGRESS AS ON 31/03/2004 BY AN AMOUNT OF R S. 29.25 LAKHS. ACCORDINGLY, HE REDUCED THE SAID AMOUNT AND DETERMINED THE VALUE OF WIP AT RS. 91.50 LAKHS. THE ASSESSEE DID NOT FILE ANY APPEAL AGAINST THE ORDER OF THE AO. IT WAS FOUN D BY HIM THAT IT HAD NOT REDUCED THE AMOUNT OF RS. 29.25 LAKHS FROM THE WIP AS ON 01/04/ 2007. IN VIEW OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2004-05, THE AO HELD THAT T HE OPENING WIP AS ON 01/04/2007 STOOD INFLATED BY RS. 19.25 LAKHS. 6457&6991/M/14- EVEREST ASSOCIATES 2 2.1. THERE WAS ONE MORE ISSUE ABOUT THE WIP.DURING THE C OURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2007-08,THE AO FOUND THAT THE W ORK IN PROGRESS AS ON 31/03/2007 WAS FOUND INFLATED BY RS.3.41 LAKHS ON ACCOUNT OF EXCES S LABOUR CHARGES.ACCORDINGLY,WORK IN PROGRESS WAS REDUCED TO THE EXTENT OF RS.3,41,600/- .THE ASSESSEE DID NOT AGITATE THE ISSUE IN THAT REGARD.THE AO REDUCED THE AMOUNT OF RS. 3.41 L AKHS FROM THE AMOUNT OF WIP AND ADDED THE SAME TO THE TOTAL OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. 2.2. IN THE APPELLATE PROCEEDINGS,FIRST APPELLATE AUTHO RITY (FAA)CONFIRMED THE ADDITION MADE BY THE AO HOLDING THAT NO APPEAL HAD BEEN FILE D BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2007-08,THAT THE ORDE R HAD REACHED FINALITY. 2.3. THE AO HAD ALSO DISALLOWED LABOUR CHARGES OF RS. 44 .36 LAKHS U/S.40 OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED THE DETAILS OF TAX DEDUCTED AT SOURCE.HE OBSERVED THAT THE ASSESSEE HAD MADE LATE PAYMENT WITHIN THE MEANING OF SECTION 40,THAT THE EXPENDITURE CLAIMED BY IT WAS TO BE DIS ALLOWED.FINALLY, DISALLOWANCE OF RS.44,36, 520/-WAS MADE U/S.40. THE FAA CONFIRMED THE ADDITIO N MADE BY THE ASSESSING OFFICER ON THE BASIS OF ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BHARTI SHIPYARD LTD. 2.4. WHILE COMPLETING THE ASSESSMENT, THE AO INITIATED P ENALTY U/S.271(1)(C) AND ACCORDINGLY NOTICE U/S.274 R.W.S.271(1)(C) WAS ISSUED. AS PER T HE AO THE ASSESSEE DID NOT SUBMIT ANY EXPLANATION TO THE SHOW CAUSE NOTICE FOR IMPOSING P ENALTY.ACCORDINGLY,HE HELD THAT IT HAD FURNISHED INACCURATE PARTICULARS OF INCOME.REFERRIN G TO THE EXPLANATION 1 TO THE SECTION 271(1)(C), HE HELD THAT ASSESSEE HAD RENDERED ITSEL F LIABLE FOR PENALTY.HE LEVIED A PENALTY OF RS.67.03 LAKHS FOR FURNISHING INACCURATE PARTICULAR S OF INCOME FOR THE YEAR UNDER CONSIDERATION. 2.5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FAA AND MADE DETAILED DISCUSSION. AFTER CONSIDERING THE AVA ILABLE MATERIAL HE HELD THAT DISALLOWANCES OF RS.19.25 LAKHS ON ACCOUNT OF INFLATION OF WIP A ND DISALLOWANCE OF RS.44.30 LAKHS U/S. 40 HAVE BEEN DELETED/REMANDED BACK TO THE FILE OF THE AO BY THE TRIBUNAL, THAT THE PENALTY ON BOTH THE COUNTS WOULD NOT SURVIVE.WITH REGARD TO DI SALLOWANCE OF RS.3.41 LAKHS WITH RESPECT TO REDUCTION IN WIP HE OBSERVED THAT THE ASSESSEE D ID NOT PREFER ANY APPEAL BEFORE THE TRIBUNAL, THAT THE TRIBUNAL DID NOT HAVE ANY OPPORT UNITY TO ADJUDICATE THE ISSUE, THAT THE ASSESSEE HAD ARGUED THAT IT HAD DISCLOSED ALL THE I NFORMATION ABOUT THE PERSON WHO HAD RECEIVED LABOUR CHARGES, THAT THE RETURN OF INCO ME FOR THE AY 2007-08 WAS FILED BEFORE THE 6457&6991/M/14- EVEREST ASSOCIATES 3 SCRUTINY ASSESSMENT OF THE YEAR UNDER CONSIDERATION , THAT IT COULD NOT ADJUST/CORRECT THE WIP IN THE AY 2007-08 AND IN THE SUBSEQUENT AY.AFTER CO NSIDERING SUBMISSION OF THE ASSESSEE THE FAA HELD THAT THE ASSESSEE WAS WAITING FOR THE DECISION OF THE AO TO POINT OUT THE MISTAKE IN DECLARING THE WIP, THE ASSESSEE WERE DUT Y BOUND TO DISCLOSE TRUE AND CORRECT FACTS WHILE FILING THE RETURN, THAT THE AO HAD NOTICED TH E INFLATION OF WIP ON ACCOUNT OF LABOUR CHARGES, THAT DURING APPELLATTE PROCEEDINGS IT COUL D NOT SUBSTANTIATE ITS EXPLANATION. FINALLY, HE UP HELD THE PENALTY LEVIED BY THE AO ON ACCOUNT OF ADDITION OF RS.3.41 LAKHS, REFERRING TO EXPLANATION I TO SECTION 271(1)(C) OF THE ACT. 2.6. BEFORE US, THE AUTHORISED REPRESENTATIVE (AR) ARGUE D THAT HE ASSESSEE HAD FILED CONFIRMATION LETTER AND BANK STATEMENT AS ADDITIONA L EVIDENCES DURING THE APPELLATE PROCEEDINGS THAT IT HAD DEDUCTED TAX AT SOURCE, THA T RECONCILIATION STATEMENT WAS FILED, THAT IF RECONCILIATION DETAILS WERE PERUSED IT WOULD BE CLE AR THAT THERE WAS NO UNRECONCILED AMOUNT.HE REFERRED TO PAGE -28 OF THE PB I.E. THE B ALANCE SHEET FOR THE YEAR UNDER CONSIDERATION WHERE THE AMOUNT WAS SHOWN AS DUE FRO M THE PARTY AND FURTHER ARGUED THAT ASSESSEE HAD MADE A BONAFIDE CLAIM, THAT THE ASSESS MENTS AND PENALTY PROCEEDINGS WERE DIFFERENT,THAT IT WAS NOT A FIT CASE FOR LEVY OF CO NCEALMENT PENALTY.THE DEPARTMENTAL REPRESEN -TATIVE (DR)SUPPORTED THE ORDER OF THE FAA. 2.7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE AO HAD REDUCED WIP BY RS.3.41 LAKHS ON ACCOUNT OF E XCESS LABOUR CHARGES DEBITED TO WIP IN RESPECT OF ISHWAR DAYAL CHAVDA(IDC)IN THE ASSESSME NT FOR THE AY.2007-08,THAT WHILE COMPLETING THE ASSESSMENT FOR AY.2008-09 HE REDUCED RS.3,41,600/- FROM THE OPENING WIP, THAT IN THE QUANTUM PROCEEDINGS THE ASSESSEE FILED ADDITIONAL EVIDENCES BEING CONFIRMATION FROM IDC(PG-63-70 OF THE PB),THAT IT ALSO FILED BAN K STATEMENT, LEDGER ACCOUNT AND RETURN OF INCOME OF IDC (PG-71-94 OF THE PB),THAT THE FAA CON FIRMED THE ADDITION MADE BY THE AO, THAT THE ASSESSEE DID NOT AGITATE THE ISSUE BEFORE THE TRIBUNAL, THAT THE AO LEVIED PENALTY U/S. 271(1)(C)AND SAME WAS CONFIRMED BY THE FAA. IN OUR OPINION,THERE IS NO NEED FOR ANY AUTHORITY T O STATE THAT ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE INDEPENDENT AND SEPARATE AN D THAT QUANTUM ADDITION SHOULD NOT ALWAYS LEAD TO LEVY OF CONCEALMENT PENALTY.WHILE I NVOKING THE PROVISIONS OF SECTION 271(1) (C)OF THE ACT,THE AO HAS TO CONSIDER THE EXPLANATIO N FILED BY THE ASSESSEE,DURING THE PENALTY PROCEEDINGS.IN THE INSTANT CASE,THE ASSESSEE HAD FI LED ADDITIONAL EVIDENCE BEFORE THE FAA DURING THE QUANTUM PROCEEDINGS.THE CONFIRMATION LET TER OF IDC AND THE OTHER DOCUMENTS 6457&6991/M/14- EVEREST ASSOCIATES 4 AVAILABLE IN THE PAPER BOOK CLEARLY INDICATE THAT T HE CLAIM MADE BY THE ASSESSEE COULD NOT BE TERMED A MALAFIDE CLAIM.IT IS ALSO NOTEWORTHY THAT THE ASSESSEE HAD DEDUCTED TDS ON LABOUR CHARGES AND SAME WERE NOT FOUND TO BE BOGUS OR NON- GENUINE.THE AO HAS NOT CHALLENGED THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE I.E. THE PROJECT COMPLETION METHOD. CONSIDERING THE ABOVE,WE ARE OF THE OPINION THAT TH E CLAIM MADE BY THE ASSESSEE WAS BONAFIDE AND LEGAL CLAIM AND DISALLOWANCE OF THE SA ME SHOULD NOT BE VISITED BY PENAL PROVISIONS.THEREFORE,REVERSING THE ORDER OF THE FAA WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. ITA/6991/MUM/2014 : 3. THE SOLITARY GROUND OF APPEAL RAISED BY AO IS ABOUT DELETING THE PENALTY WITH REGARD TO ADDITION/DISALLOWANCE MADE U/S.40 FOR NON CREDIT OF TDS.IN THE EARLIER PART OF OUR ORDER WE HAVE MENTIONED THAT TRIBUNAL HAD DELETED THE ADDIT ION MADE BY THE AO ON ACCOUNT OF NON DEDUCTION OF TAX AT SOURCE, WHILE ADJUDICATING THE QUANTUM APPEAL. THEREFORE, IN OUR OPINION THE ORDER OF THE FAA IS NOT SUFFERING FORM ANY LEG AL INFIRMITY. CONFIRMING THE SAME, WE UPHOLD HIS ORDER AND DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO . AS A RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWE D AND THE APPEAL OF THE AO STANDS DISMISSED. ORDER PRONO UNCED IN THE OPEN COURT ON 5 TH JULY, 2017. 5 , 2017 SD/- SD/- ( / RAM LAL NEGI ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 05.07 .2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.