The DCIT, (Central), Bhopal V. M/s. Soumya Homes Pvt. Ltd., Bhopal

ITA 663/IND/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5869 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-06-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 12-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Keywords: Audit objection; Question of law
• Section: 143(3); 80IB; 147; 148

Judgement Text

SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 1 IN THE INCOME TAX APPELLATE TRIBUNA L INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NOS.663 TO 666/IND/2016 A.YS.2002-02 TO 20045-05 & 2006-07 DY.COMMISSIONER OF INCOMETAX (CENTRAL), BHOPAL ::: APPELLANT VS M/S SOUMYA HOMES PVT. LTD. BHOPAL ::: RESPONDENT APPELLANT BY SHRI MOHD. JAVED RESPONDENT BY NONE DATE OF HEARING 18.7.2016 DATE OF PRONOUNCEMENT 18.7.2016 O R D E R THESE APPEALS ARE PREFERRED BY THE ASSESSEE AGAINST THE CONSOLIDATED ORDER OF THE LEARNED CIT(A)-II, BHOP AL, DATED 6.9.2013. SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 2 2. THE ONLY ISSUE RAISED IN THESE APPEALS IS THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CANCELLING THE PEN ALTY LEVIED BY THE ASSESSING OFFICER IN THESE CASES. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED RETURNS OF INCOME FOR THE ASSESSMENT YEARS UNDER CONSIDERATION AS UNDER :- A.Y. RETURNED INCOME RS. DEDUCTION CLAIMED U/S 80IB RS. 2002 - 03 NIL 1,75,498 2003 - 04 1,43,680 8,18,902 2004 - 05 3,89,925 20,92,376 THESE RETURNS WERE PROCESSED U/S 143(1) EXCEPT FOR ASSESSMENT YEAR 2004-05 WHERE ORDER HAS BEEN PASSED U/ S 143(3) OF THE ACT. HOWEVER, VIDE ASSESSMENT ORDERS D ATED 18.11.2009 PASSED U/S 147 READ WITH SECTION 143(3) O F THE ACT DEDUCTION CLAIMED U/S 80IB HAS BEEN DISALLOWED BY THE ASSESSING OFFICER FOR EACH OF THE YEAR UNDER CONSIDER ATION AND THE ADDITION MADE TO THE RETURNED INCOME. THE SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 3 ASSESSEES APPEALS AGAINST THESE ASSESSMENT ORDERS HAVE BEEN DISMISSED BY THE THE LEARNED CIT(A) AND THE TRI BUNAL. ACCORDINGLY, PENALTY PROCEEDINGS U/S 271(1)(C) HAVE B EEN INITIATED BY THE ASSESSING OFFICER AND BY PLACING COM PLETE RELIANCE ON THE ASSESSMENT ORDER, ASSESSING OFFICER H AS HELD THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICUL ARS OF INCOME AND CONCEALED ITS INCOME. RESULTANTLY, PENAL TY U/S 271(1)( OF THE ACT WAS IMPOSED BY THE ASSESSING OFFICER FOR EACH OF THE ASSESSMENT YEARS INVOLVED IN THESE APP EALS. 4. BEING AGGRIEVED WITH THE PENALTY U/S 271(1)(C) OF THE ACT LEVIED BY THE ASSESSING OFFICER, THE ASSESSEE WE NT IN APPEAL BEFORE THE LEARNED CIT(A). BEFORE THE LEARNED C IT(A) THE ASSESSEE MADE THE FOLLOWING SUBMISSIONS :- THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DE VELOPMENT AND CONSTRUCTION OF RESIDENTIAL HOUSING PROJECT NAM ELY SOUMYA VIHAR PHASE II,III & IV, BHEL, BHOPAL. AND SOUMYA ENCLAVE EXTENTION, CHUNNA BHATTI, BHOPAL. IN THIS C ASE RETURN OF INCOME WAS FILED BY THE ASSESSEE ON THE BASIS OF AUDITED ACCOUNTS AND DEDUCTION U/S 80IB(10) WAS CLAIMED WH ICH WAS DULY SUPPORTED BY THE CERTIFICATE OF TAX AUDIT OR. THE SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 4 ASSESSEE WAS ENGAGED IN THE BUSINESS OF DEVELOPING A HOUSING PROJECT WHICH WAS ENTITLED TO DEDUCTION U/S 80IB(10). THE DEDUCTION U/S 80IB(10) WAS ALLOWED I N THE REGULAR ASSESSMENT FRAMED U/S 143(3). THEREAFTER CE RTAIN AMENDMENTS WERE MADE IN THE PROVISIONS OF SECTION 8 0IB(10) BY FINANCE (NO.2) ACT,2004.PRIOR TO AMENDMENT MADE IN SECTION 80IB(10) BY FINANCE (NO.2) ACT, 2004, THERE WAS NO REQUIREMENT TO OBTAIN ANY COMPLETION CERTIFICATE. T HE REQUIREMENT OF COMPLETION CERTIFICATE WAS MADE EFFE CTIVE FROM ASS.YR. 2005-06. SIMILARLY, THE DEFINITION OF BUIL T-UP AREA WAS ALSO INTRODUCED BY FINANCE (NO.2)ACT,2004. ON THE BASIS OF AUDIT OBJECTION THE CASE WAS REOPENED U/S 147 ON THE GROUND THAT COMPLETION CERTIFICATE WAS NOT OBTA INED UP TO 31-03-2008. THE AMENDED PROVISIONS OF SECTION 80IB( 10) WHICH BECAME EFFECTIVE FROM ASS.YR. 2005-06 WERE MA DE APPLICABLE TO A.Y. 2004-05 ALSO AND THE DEDUCTION W AS DISALLOWED IN RE-ASSESSMENT PROCEEDINGS. THE SUBMIS SION OF THE ASSESSEE THAT THE AMENDMENTS MADE BY THE FINANC E (NO.2) ACT,2004 WERE PROSPECTIVE ONLY AND NOT RETRO SPECTIVE IN OPERATION WERE NOT ENTERTAINED. THE A.O. ALSO RA ISED OTHER GROUNDS THAT THE ASSESSEE WAS MERELY ACTING AS CON TRACTOR AND THE LAND WAS ALSO NOT OWNED BY THE ASSESSEE. PE NALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATED AND HARSH PENALTY WAS ALSO LEVIED FOR FURNISHING INACCURATE PARTICULA R OF INCOME AT THE RATE OF 2 TIMES THE TAX SOUGHT TO BE EVADED. IT IS RESPECTFULLY SUBMITTED THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THERE WAS NO CONCEALMENT OR THE ASSESSEE HAS NOT FURNISHED ANY INACCURATE PARTICULA R OF INCOME TO JUSTIFY LEVY OF PENALTY THAT TOO AT THE R ATE TWO TIMES THE TAX SOUGHT TO BE EVADED. AS SUBMITTED ABOVE, TH E CLAIM OF THE DEDUCTION WAS GRANTED BY THE A.O. IN ORIGINAL ASSESSMENT PROCEEDING AND THE SAME WAS DISALLOWED I N REASSESSMENT PROCEEDING APPLYING AMENDED PROVISIONS OF SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 5 SECTION 80IB(10) WHICH WERE MADE APPLICABLE PROSPEC TIVELY ONLY W.E.F. ASSESSMENT YEAR 2005-06. THIS VIEW HAS BEEN HELD BY VARIOUS HIGH COURTS AND JURISDICTIONAL TRIB UNAL SUBSEQUENTLY IN MANY CASES. RELIANCE IS PLACED ON T HE FOLLOWING DECISIONS:- (I) 353 ITR 1 (KARN) CIT VS. G.R. DEVE LOPER (II) 19 ITJ 172(TRIB)(INDORE) FORTUNE BUILDERS VS. ACIT (III) 19 ITJ 276(TRIB)(INDORE) PRIYADHARSHNI CONSTRUCTION (IV) 17 ITJ 136(TRIB) (INDORE) ESSAR CONSTRUCTION (P ) LTD (V) 18 ITJ 762 (TRIB) (INDORE) GLOBAL REALITY VS. ITO THE OTHER ISSUES RAISED BY THE A.O. THAT THE ASSES SEE WAS ACTING MERELY AS CONTRACTOR AND NOT AS DEVELOPER HA VE ALSO BEEN SUBSEQUENTLY DECIDED BY VARIOUS HIGH COURT AND JURISDICTIONAL TRIBUNAL WHEREIN IT HAS BEEN HELD TH AT WHEN THE ASSESSEE HAS DEVELOPED THE PROJECT AND UNDERTAK EN TO ASSUME RISK ASSOCIATED WITH THE PROJECT, MERE SALE OF PLOT AT INTERMEDIATE STAGE TO ENABLE THE CUSTOMER TO OBTAIN LOAN ETC DOES NOT DISENTITLE THE CLAIM OF THE ASSESSEE AS DE VELOPER OF THE PROJECT. RELIANCE IS PLACED ON THE DECISION OF HONBLE GUJRAT HIGH COURT IN 341 ITR 403 (GUJ) CIT VS. RADH E DEVELOPER AND ALSO OF DECISION OF JURISDICTIONAL TR IBUNAL IN CASE OF M/S GAYATRI BUILDERS (COPY ENCLOSED). EVEN OTHERWISE, AS PER CIRCULAR OF BOARD NO. 4/ 2009 DT. 30-06-2009, THE ASSESSEE WAS ENTITLED TO CLAIM BENE FIT OF DEDUCTION ON ITS INCOME DERIVED FROM HOUSING PROJEC T FOR ASS.YR. 2004-05 WITHOUT OBTAINING COMPLETION CERTIF ICATE. THE BOARD CIRCULAR PROVIDED THAT DEDUCTION OF SECTION 8 0IB(10) COULD BE ALLOWED TO THE ASSESSEE IN INITIAL YEARS I F THE INCOME IS OFFERED ON THE BASIS OF PERCENTAGE COMPLETION ME THOD. THE ASSESSEE WAS REQUIRED TO PRODUCE COMPLETION CERTIFI CATE WITHIN SPECIFIED TIME. IF THE CERTIFICATE OF COMPLE TION WAS NOT SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 6 OBTAINED, THEN THE DEDUCTION WAS REQUIRED TO BE DIS ALLOWED BY RE-OPENING THE CASE U/S 148. THE ASSESSEE HAS C LAIMED DEDUCTION U/S 80IB(10) AS THE ASSESSEE WAS FOLLOWI NG PARTIAL COMPLETION METHOD TO RECOGNIZE INCOME . IN THE FACT AND CIRCUMSTANCES OF THE CA SE, THERE WAS NO CONCEALMENT OF INCOME OR THE ASSESSEE HAS FURNIS HED ANY INACCURATE PARTICULARS OF ANY INCOME TO JUSTIFY LEV Y OF PENALTY. THE ASSESSEE HAS MERELY MADE A CLAIM OF DEDUCTION B ASED ON CIRCULAR OF BOARD. THE CLAIM OF THE ASSESEE WAS DULY SUPPORTED BY AUDITED ACCOUNTS AND WAS BASED ON PROV ISION OF SECTION 80IB(10) WHICH EXISTED AT THE TIME OF FI LING OF RETURN OF INCOME. THE CLAIM OF THE ASSESSEE WAS ACCEPTED B Y THE A.O. IN ORIGINAL ASSESSMENT PROCEEDING. THE REQUIR EMENT OF COMPLETION CERTIFICATE WAS NOT APPLICABLE PRIOR TO A.Y. 2005- 06. THE ASSESSEE HAS APPLIED FOR THE COMPLETION CER TIFICATE. BUT DUE TO PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, THE DEDUCTION WAS NOT ALLOWED. MERE DISALLOWANCE OF A L EGAL AND BONA FIDE CLAIM CANNOT BE MADE SOLE REASON FOR LEV Y OF PENALTY OF CONCEALMENT OF INCOME OR FURNISHING OF I NACCURATE PARTICULARS. IT IS FURTHER SUBMITTED THAT TH AT ISSUE OF ALLOWBAILTY OF DEDUCTION U/S 80IB(10) WAS IN ANY C ASE WAS A DEBATABLE ISSUE. ACCORDING TO THE A.O., THE AMEN DED PROVISIONS INSERTED BY FINANCE(NO.2) ACT,2004 WERE RETROSPECTIVE . THE CONSISTENT VIEW OF JUDICIAL PRO NOUNCEMENT TREATS THE AMENDMENTS AS PROSPECTIVE ONLY. THE ISSU E OF DEVELOPER VS. CONTRACTOR HAS ALSO BEEN NOW DECI DED IN FAVOUR OF ASSESSEE.. THE ASSESSEE HAS COMPLIED WITH ALL OTHER CONDITIONS ENABLING ASSESSEE TO CLAIM DEDUCTION U/S 80IB(10) IN RETURN OF INCOME ON THE BASIS OF CIRCULAR OF BOA RD DT. 30-06- 2009. THE HONBLE HIGH COURT HAVE ADMITTED THE APPE AL OF THE ASSESSEE ON THE SUBSTANTIAL QUESTION OF LAW IN ASS.YR. SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 7 2006-07 ON SIMILAR ISSUES. THE ADMITTED QUESTION OF LAW IS AS UNDER:- I.T.A. NO. 117 OF 2012 29/08/2012 SHRI MUKESH AGRAWAL, COUNSEL FOR THE APPELLANT. SHRI SANJAY LAL, COUNSEL FOR THE RESPONDENT. IT IS SUBMITTED BY SHRI AGRAWAL THAT SIMILAR QUESTI ONS ARE INVOLVED IN ITA NO.156/2011 WHICH HAS ALREADY BEEN ADMITTED BY THIS COURT ON 24/11/2011. IN VIEW OF THE AFORESAID, THIS APPEAL IS ADMITTED O N THE FOLLOWING SUBSTANTIAL QUESTIONS OF LAW 3.2. WHETHER A DEEMED SANCTION OR COMPLETION CERTI FICATE IN TERMS OF SECTION 301 OF MUNICIPAL CORPORATION ACT, 1956 WILL HOLD GOOD AND VALID FOR THE PURPOSES OF CLAIMING DEDUCTION U/S 80-IB(10) OF THE INCOME TAX ACT, WHEN ADMITTEDLY THE APPELLANT HAD APPLIED FOR GRANT OF COMPLETION CERTIFICATE MUCH BEFORE STATUTO RY DEADLINE ? 3.4. WHETHER AMENDED DEFINITION OF BUILT-UP AREA (AS INSERTED IN 80-IB(14)] WOULD APPLY TO THE CASE/HOUS ING PROJECT OF THE APPELLANT DISENTITLING THEM FOR CLAI MING DEDUCTIONS/EXEMPTIONS, PARTICULARLY WHEN IN THE PRE VIOUS ASSESSMENT YEAR THEY WERE HELD TO BE ENTITLED FOR BEING GRANTED DEDUCTION U/S 80-IB (10) IN VIEW OF T HE PREVIOUSLY APPLICABLE DEFINITION OF BUILT-UP AREA AS PER RULE 2(29) OF THE BHUMI VIKAS RULES 1984? NOTICE ON BEHALF OF THE RESPONDENT IS ACCEPTED BY S HRI SANJAY LAL. BE LISTED FOR HEARING ALONG WITH ITA NO.156/2012. (KRISHN KUMAR LAHOTI) (SMT.VIMLA JAIN) JUDGE JUDGE SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 8 THE APPEAL OF THE ASSESSEE FOR ASS.YR. 2004-05 IS PENDING FOR ADMISSION IN HIGH COURT. IT HAS BEEN HELD BY TH E HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. LIQUID I NVESTMENT & TRADING CO. LTD THAT WHEN SUBSTANTIAL QUESTION OF LAW IS ADMITTED ON A ISSUE, IT ITSELF SHOW THAT THE ISSUE COVERED THEREIN IS DEBATABLE AND AS SUCH THERE IS NO CASE O F CONCEALMENT OF INCOME OR OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. 5. ON CONSIDERATION OF THE ABOVE SUBMISSIONS OF THE ASSESSEE, THE LEARNED CIT(A) OBSERVED AS UNDER :- 4. THE APPELLANTS SUBMISSIONS ALONG WITH PENALTY ORDERS HAVE BEEN CONSIDERED CAREFULLY & ARE FOUND ACCEPTABLE. THE APPELLANT COMPANY HAS MADE CLAIM OF DEDUCTION U/S 80IB(10) FOR THESE THREE YEARS IN RES PECT OF HOUSING PROJECT NAMELY SOUMYA VIHAR PHASE- II,III, & IV, BHEL, BHOPAL & SOUMYA ENCLAVE EXTENSION,CHUNNA BHATTI, BHOPAL. BY VIRTUE OF ASSESSMENT ORDERS PASS ED U/S 147 RWS 143(3), AO HAS HELD THE APPELLANT TO BE MERELY A CONTRACTOR AND NOT DEVELOPER ON THE GROUND THAT PERMISSION FROM LOCAL MUNICIPAL AUTHORITY & OWNERSH IP OF LAND LIES WITH SANDHYA BHEL SHRAMIK GRIH NIRMAN SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 9 SAHKARI SANSTHA MARYADIT WITH WHOM THE APPELLANT COMPANY HAS ENTERED INTO AGREEMENT FOR BUILDING AN D CONSTRUCTION OF RESIDENTIAL UNITS THEREON. THESE UN ITS ARE THEN SOLD TO INDIVIDUALS WITHOUT ANY REGISTRATION A S REGISTRY IS DONE AT THE PLOT LEVEL ONLY. FURTHER, T HE FACT THAT NO COMPLETION CERTIFICATE HAS BEEN OBTAINED FROM TH E LOCAL AUTHORITY AS PER THE AMENDED PROVISIONS OF SEC 80I B(10) BUT POSSESSION HAS ALSO BEEN GIVEN BEFORE OBTAINING THE COMPLETION CERTIFICATE HAS MADE THE APPELLANT COMPA NY NOT ELIGIBLE FOR SUCH CLAIM. THE THEN CIT(A)-II, BH OPAL HAS UPHELD AOS ORDER VIDE HIS ORDER DT. 25.02.2011 IN APPEAL NO. CIT(A)-II/BPL/IT-64,65 & 66/09-10. HBLE ITAT, INDORE BENCH, INDORE IN ITS ORDER DT 20.12.2011 IN ITA NO.74 TO 76/IND/2011 HAS ONLY UPHELD THE PROCEEDING S INITIATED U/S 148 BY RELYING ON DECISION OF HBLE SUPREME COURT IN CASE OF RAJESH JHAVERI 291 ITR 50 0 SINCE ORIGINAL PROCEEDINGS HAVE BEEN COMPLETED U/S 143(1) ONLY FOR AY 2002-03 & 2003-04. FOR AY 2004-0 5, EVEN THOUGH ASSESSMENT WAS FRAMED U/S 143(3) BUT TH E REOPENING WAS WITHIN FOUR YEARS, THEREFORE, AO HAS SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 10 JUSTIFICATION FOR INITIATION OF PROCEEDINGS U/S 148 . HBLE ITAT IN THE SAID ORDER HAS NOT ADJUDICATED ON THE MERITS OF THE ADDITION MADE BY THE AO AND AS CONFIRMED BY THE CIT(A) FOR THE REASON THAT THE APPELLANTS AR HAS CONCEDED THAT IT HAS NO CASE. 4.1 AO HAS IMPOSED THE PENALTY U/S 271(1)(C) FOR THE REASONS THAT SINCE THE APPELLANT DID NOT HAVE REQUI RED COMPLETION CERTIFICATE AND WAS NOT A DEVELOPER AND BUILDER OF HOUSING PROJECTS, IT HAS FURNISHED INACC URATE PARTICULARS & CONCEALED ITS INCOME BY CLAIMING DED UCTION U/S 80IB WHICH IT WAS NOT ENTITLED TO IN THE FIRST PLACE. FROM RECORDS, IT IS SEEN THAT THE APPELLANT HAS CLA IMED DEDUCTION U/S 80IB ON YEAR TO YEAR BASIS AS PER PAR TIAL COMPLETION METHOD FOLLOWED BY IT. IT MAY BE NOTED T HAT A CLARIFICATION HAS BEEN ISSUED BY CBDT VIDE INSTTN. NO. 4/2009 DTD 30.06.2009 WHEREIN IT WAS CLARIFIED THAT WHERE AN ASSESSEE IS SHOWING PROFIT ON PARTIAL COMPLETION, THE DEDUCTION U/S 80IB(10) CAN BE ALLOW ED ON YEAR TO YEAR BASIS. HOWEVER, IF IN A CASE, IT IS LA TER ON SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 11 FOUND THAT THE CONDITION OF COMPLETION OF CONSTRUCT ION OF THE HOUSING PROJECT WITHIN THE SPECIFIC TIME OF FOU R YEARS HAS NOT BEEN SATISFIED, THE DEDUCTION GRANTED TO TH E ASSESSEE IN THE EARLIER YEARS SHOULD BE WITHDRAWN. IT WOULD BE RELEVANT TO REPRODUCE THE INSTRUCTION NO.4 OF 2009 DATED 30.06.2009 AS UNDER : INSTRUCTION NO. 4/2009, DATED 30-6-2009 UNDER SUB-SECTION (10) OF SECTION 80-IB AN UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECT S IS ALLOWED A DEDUCTION OF 100 PER CENT OF ITS PROFI TS DERIVED FROM SUCH PROJECTS IF IT COMMENCED THE PROJ ECT ON OR AFTER 1-10-1998 AND COMPLETES THE CONSTRUCTIO N WITHIN FOUR YEARS FROM THE FINANCIAL YEAR IN WHICH THE HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY. 2 . CLARIFICATIONS HAVE BEEN SOUGHT BY VARIOUS CCSIT ON THE ISSUE WHETHER THE DEDUCTION UNDER SECTION 80-IB(10) WOULD BE AVAILABLE ON A YEAR-TO-Y EAR BASIS WHERE AN ASSESSEE IS SHOWING PROFIT ON PARTIA L COMPLETION OR IF IT WOULD BE AVAILABLE ONLY IN THE YEAR OF COMPLETION OF THE PROJECT UNDER SECTION 80-IB(10 ). 3. THE ABOVE ISSUE HAS BEEN CONSIDERED BY THE BOARD AND IT IS CLARIFIED AS UNDER: (A) THE DEDUCTION CAN BE CLAIMED ON A YEAR-TO-YE AR BASIS WHERE THE ASSESSEE IS SHOWING PROFIT FROM PARTIAL COMPLETION OF THE PROJECT IN EVERY YEAR. (B) IN CASE IT IS LATER, FOUND THAT THE CONDITIO N OF COMPLETING THE PROJECT WITHIN THE SPECIFIED TIME-LI MIT OF SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 12 4 YEARS AS STATED IN SECTION 80-IB(10) HAS NOT BEEN SATISFIED, THE DEDUCTION GRANTED TO THE ASSESSEE IN THE EARLIER YEARS SHOULD BE WITHDRAWN. 4. THE ABOVE INSTRUCTION WILL OVERRIDE EARLIER CLARIFICATION ON THIS ISSUE CONTAINED IN MEMBER (R) S D.O. LETTER NO. 58/MISC./2008/CIT(IT&CT), DATED 29- 4-2008 AND MEMBER (IT)S D.O. LETTER NO. 279/MISC./46/08-ITJ, DATED 2-5-2008. THUS, IT CANNOT BE SAID THAT THE APPELLANT HAS NOT MADE BONA-FIDE CLAIM FOR DEDUCTION U/S 80IB(10) ON THE H OUSING PROJECT FOR THE YEARS UNDER APPEAL AS THE RETURNS O F INCOME OF THESE THREE ASSESSMENT YEARS WERE FURNISHED BEFO RE THE DUE DATE OF COMPLETION OF CONSTRUCTION OF HOUSING P ROJECT AS REQUIRED U/S 80IB(10)(A)(II). SUBSEQUENTLY, WHEN IT WAS FOUND THAT THE APPELLANT FAILED TO PRODUCE THE COMP LETION CERTIFICATE FOR THE HOUSING PROJECT BEFORE THE SPEC IFIED DATE, AO MAY BE JUSTIFIED IN DISALLOWING THE CLAIM OF DED UCTION U/S 80IB(10) ON THE BASIS OF THESE INSTRUCTIONS AND RELEVANT PROVISIONS OF THE IT ACT THOUGH IN CASE OF THE APP ELLANT EVEN THE AMENDED PROVISIONS OF SEC 80IB(10) REGARDING COMPLETION CERTIFICATE ARE NOT FOUND APPLICABLE FOR THESE THREE YEARS BEING INTRODUCED BY THE FINANCE (NO.2) ACT, 2 004 SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 13 W.E.F. 01-04-2005. HOWEVER, IT CANNOT BE SAID THAT THE CLAIM MADE BY THE APPELLANT WAS FALSE AND MALAFIDE. 4.2 IT MAY BE NOTED THAT ASSESSMENT PROCEEDINGS AN D PENALTY PROCEEDINGS ARE DIFFERENT, DISTINCT AND SEP ARATE. FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS ARE GERMANE AND RELEVANT BUT IT DOES NOT FOLLOW THAT EV ERY ADDITION / DISALLOWANCE JUSTIFIES AND COMPULSORILY MANDATES IMPOSITION OF PENALTY U/S 271(1)(C). THE SUBJECT MA TTER OR THE CORE ISSUE IN THE QUANTUM FOR ASSESSMENT PROCEEDING S IS COMPUTATION OF CORRECT INCOME AS PER THE RELEVANT P ROVISIONS OF THE INCOME TAX ACT AND THE SUBJECT MATTER OF THE PENALTY PROCEEDINGS IS THE CONDUCT OF THE ASSESSEE I.E. CON CEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME W HICH HAS RESULTED IN ADDITIONS IN THE ASSESSMENT PROCEEDINGS . THOUGH MENS-REA IS NOT REQUIRED OR NECESSARY TO IMPOSE PEN ALTY FOR CONCEALMENT U/S 271(1)(C) BUT WHERE THE ASSESSEE HA S MADE A BONA-FIDE CLAIM OF DEDUCTION, THE CLAIM COULD NOT BE SAID TO BE FALSE MAKING IT LIABLE FOR PENALTY U/S 271(1)(C) . THE PENALTY U/S 271(1)(C) IS IMPOSED WHEN AN ASSESSEE C ONCEALS HIS INCOME OR FURNISHES INACCURATE PARTICULARS OF I NCOME. BUT SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 14 WHERE AN ASSESSEE MAKES A BONA-FIDE CLAIM OF ANY DEDUCTION OR EXPENDITURE THEN EVEN IF SUCH CLAIM IS DISALLOWED, IT DOES NOT MAKE SUCH CLAIM LIABLE FOR PENALTY U/S 271(1)(C). LEVY OF PENALTY IS NOT AN AUTOMATIC CONSEQUENCE WHEN A DISALLOWANCE IS MADE IN THE ASSESSMENT ORDER. MERELY MAKING A CLAIM WHICH IS HE LD AS NOT SUSTAINABLE UNDER LAW DOES NOT LEAD TO IMPOSITI ON OF PENALTY WHEN THE ASSESSEE HAD FURNISHED FULL DETAIL S IN THE RETURN ITSELF AND THE CLAIM WAS REASONABLE, PLAUSIB LE OR DEBATABLE. ISSUE OF OWNERSHIP OF LAND, TREATMENT AS DEVELOPER VS CONTRACTOR, REQUIREMENT OF COMPLETION CERTIFICATE AND BUILT UP AREA, RETROSPECTIVE APPLICABILITY OF P ROVISIONS OF THE ACT ARE ALL DEBATABLE ISSUES. IN FACT IN CASE O F CIT VS RADHE DEVELOPERS (2012) 341 ITR 403 (GUJ), HBLE HI GH COURT HAS HELD THE ASSESSEE ENTITLED FOR DEDUCTION U/S 80IB ON SIMILAR ISSUES OF OWNING LAND IN ITS NAME AND TR EATMENT AS DEVELOPER OF HOUSING PROJECT. FURTHER, IN THIS CASE, THE APPELLANT HAS FURNISHED ALL THE MATERIAL FACTS RELATING TO THE CLAIM OF DEDUCTI ON U/S 80IB(10) IN ITS RETURNS OF INCOME WHICH IS BASED ON AUDIT SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 15 REPORT IN FORM NO.10CCB OBTAINED FROM PRESCRIBED CERTIFYING AUTHORITY I.E. CHARTERED ACCOUNTANT. THU S, IT IS CLEAR THAT THE APPELLANT HAS DECLARED ALL THE MATER IAL FACTS RELEVANT TO THE DEDUCTION U/S 80IB(10) AND CLAIM MA DE BY THE APPELLANT IS BONA-FIDE. THEREFORE, EVEN IF THE CLAIM OF THE APPELLANT FOR DEDUCTION U/S 80IB(10) IS DISALLOWED IN THE ASSESSMENT PROCEEDINGS, IT WILL NOT AMOUNT TO FURNI SHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME BY THE APPELLANT AND, THEREFORE, THE APPELLANT IS NOT LIABLE FOR PENALTY U/S 271(1)(C) OF THE ACT. 4.3 THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. HARSHWARDHAN CHEMICALS AND MINERALS LTD. (2003) 259 ITR 212 (RAJ.) HAS AFFIRMED THE DECISION OF THE APP ELLATE TRIBUNAL THAT WHERE AN ARGUABLE, CONTROVERSIAL OR D EBATABLE DEDUCTION IS CLAIMED, THE CLAIM COULD NOT BE SAID T O BE FALSE, OTHERWISE IT WOULD BECOME IMPOSSIBLE FOR ANY ASSESS EE TO RAISE ANY CLAIM OR DEDUCTION WHICH MIGHT BE DEBATAB LE AND IT WAS NOT THE INTENTION OF THE LEGISLATURE TO MAKE PU NISHABLE SUCH CLAIMS U/S 271(1)(C) EVEN IF THEY ARE NOT ACCE PTED BY THE DEPARTMENT. SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 16 4.4 THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. RAJ OVERSEAS (2011) 336 ITR 261 (P & H) HAD AN OCCASION TO CONSIDER A SIMILAR ISSUE. IN THIS CASE, THE ASSESSEE CLAIMED DEDUCTION U/S 80IB OF THE IT ACT I N RESPECT OF INCOME FROM DUTY DRAW BACK. THE ASSESSING OFFICE R DISALLOWED THE CLAIM ON THE GROUND THAT THE INCOME DERIVED FROM DUTY DRAW BACK WAS NOT INCOME DERIVED FROM IND USTRIAL UNDERTAKINGS. PENALTY U/S 271(1)(C) WAS ALSO LEVIED . THE CIT (A) UPHELD THE VIEW OF THE ASSESSING OFFICER BUT TH E TRIBUNAL DELETED THE PENALTY. ON APPEAL BY THE DEPARTMENT, T HE HON'BLE HIGH COURT HELD AS UNDER (HEAD NOTE) : HELD, DISMISSING THE APPEAL, THAT IN VIEW OF THE FACTUAL FINDING OF THE TRIBUNAL, IT COULD NOT BE DISPUTED THAT THE ISSUE WAS DEBATABLE AND DEDUCTION CLAIMED BY THE ASSESSEE DID NOT LACK BONA-FIDES. PENALTY COULD NOT BE IMPOSED U/S 271(1)(C). IT MAY ALSO BE NOTED THAT THE HON'BLE SUPREME COURT DISMISSED THE DEPARTMENTS SLP AGAINST THE ABOVE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 17 VS. RAJ OVERSEAS SLP (CIVIL) NO.4509 OF 2011 ORDER DATED 11.02.2011. 4.5 IN ANOTHER CASE OF CIT VS. ARISUDANA SPINNING M ILLS LTD. (2010) 326 ITR 429 (P & H), THE HON'BLE PUNJAB & HARYANA HIGH COURT HAS CONSIDERED THE SIMILAR ISSUE WHEREIN THE ASSESSEE WAS ENGAGED IN THE BUSINESS O F MANUFACTURE OF YARN AND TRADING IN WOOL. IN ITS RET URN OF INCOME, THE ASSESSEE CLAIMED DEDUCTION U/S 80IA OF THE ACT IN RESPECT OF PROFITS DERIVED FROM TRADING TURN OVER I.E. TRADING IN RAW WOOL AND KNITTED CLOTH. THE RETURN O F INCOME FILED BY THE ASSESSEE WAS ACCOMPANIED BY THE AUDITED BALANCE SHEET, PROFIT & LOSS ACCOUNT AND AN AUDIT REPORT IN FORM NO. 10CCB RELATING TO THE CLAI M OF DEDUCTION U/S 80IA OF THE ACT. AO DENIED THE DEDUCT ION AND ALSO IMPOSED PENALTY U/S 271(1)(C). THE PENALTY WAS DELETED BY THE LD. CIT (A) AND THE VIEW OF THE CIT (A) WAS UPHELD BY THE HON'BLE TRIBUNAL. ON APPEAL BY THE DEPARTMENT, THE HON'BLE HIGH COURT HELD AS UNDER (H EAD NOTES) : SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 18 HELD, DISMISSING THE APPEAL, THAT WHEN THE RETURN OF INCOME WERE FILED, THE ISSUE WITH REGARD TO ENTITLE MENT OF DEDUCTION UNDER SECTION 80IA ON THE PROFITS DERI VED FROM TRADING TURNOVER I.E. TRADING IN RAW WOOL AND KNITTED CLOTH WAS DEBATABLE AND THIS ISSUE WAS LATE R SETTLED BY THE JUDGMENT OF THIS COURT IN LIBERTY IN DIA VS. CIT (2007) 293 ITR 520 (P & H) UPHELD BY THE SUPREME COURT IN LIBERTY INDIA VS. CIT (2009) 317 I TR 218. THEREFORE, THE TRIBUNAL HAD RIGHTLY CAME TO TH E CONCLUSION THAT THE ASSESSEE DID NOT DELIBERATELY O R CONSCIOUSLY CONCEAL THE TRUE PARTICULARS OF INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCOME. THE DELETION OF PENALTY WAS JUSTIFIED. 4.6 THE HON'BLE DELHI HIGH COURT HAS ALSO EXPRESSED THE SAME VIEW IN THE CASE OF CIT VS. DHARAMPAL PREMCHAN D LTD. (2010) 329 ITR 572 (DEL.). IN THIS CASE, THE A SSESSEE WAS ENGAGED IN THE MANUFACTURE OF FLAVOURED CHEWING TOBACCO AND KIWAM AND CLAIMED DEDUCTION U/S 80IA & 80IB OF THE INCOME TAX ACT, 1961. THE ASSESSMENT WA S MADE DENYING THE DEDUCTIONS CLAIMED U/S 80IA AND 80 IB. ON THE BASIS OF THE DISALLOWANCE, PENALTY WAS LEVIE D U/S 271(1)(C) OF THE ACT REJECTING THE ASSESSEES CONTE NTION THAT THE AMOUNTS DISALLOWED DID QUALIFY FOR DEDUCTI ONS UNDER SECTIONS 80IA AND 80IB OF THE ACT. THE LD. CI T (A) DELETED THE PENALTY ACCEPTING THE ASSESSEES CONTEN TION SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 19 THAT IT HAD DISCLOSED ALL MATERIAL FACTS PERTAINING TO THE COMPUTATION OF DEDUCTION ADMISSIBLE UNDER SECTIONS 80IA & 80IB AND THAT THE DIRECTORS REMUNERATIONS HAD BE EN DULY DEBITED IN THE HEAD OFFICE AND NO AMOUNT WAS ALLOCATED TOWARDS THE UNITS, THAT THE INTEREST EARN ED ON BANKS AND INTEREST PAID TO OTHERS HAD A DIRECT NEXU S TO THE BUSINESS ACTIVITIES AND, THEREFORE, DEDUCTIONS OF SAID AMOUNT WOULD BE ADMISSIBLE TO THE ASSESSEE. THE TRI BUNAL HELD THAT ALLOCATION OF EXPENSES BETWEEN THE HEAD O FFICE AND UNITS WOULD ALWAYS BE A DEBATABLE ISSUE AND AFF IRM THE ORDER OF COMMISSIONER (APPEALS). ON FURTHER APP EAL BY THE DEPARTMENT, THE HON'BLE HIGH COURT HELD AS UNDE R : HELD, DISMISSING THE APPEAL, THAT THE VIEW OF THE TRIBUNAL WAS JUSTIFIED. 4.7 REFERENCE CAN ALSO BE MADE TO THE DECISION O F HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIAN CE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC). IN THIS CASE, THE HON'BLE SUPREME COURT OBSERVED AS UNDER : A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 20 PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY , THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD 'PARTICULARS' USED IN SECTION 271(1)(C) WOULD EMBRA CE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPO SE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTL Y COVERED BY THE PROVISION, THE PENALTY PROVISION CAN NOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCUR ATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHIN G WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, T HE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETA ILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EX ACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS . WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORREC T OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. IN THE INSTANT CASE ALSO, THERE IS NO FINDING ON RE CORD THAT ANY DETAILS SUPPLIED BY THE APPELLANT IN ITS R ETURNS OF SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 21 INCOME FOR THESE YEARS ARE FOUND TO BE INCORRECT OR FALSE AND THEREFORE, THERE IS NO QUESTION OF LEVYING PENA LTY U/S 271(1)(C). A MERE MAKING OF A CLAIM U/S 80IB(10), W HICH WAS NOT ALLOWED BY THE ASSESSING OFFICER, BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OR CONC EALING THE INCOME. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND LEGAL POSITION OF THE ISSUE, I AM OF THE CONSIDERED VIEW THAT THE APPELLANT IS NOT LIABLE FOR PENALTY U/S 271(1)(C) FOR CLAIMING DEDUCTION U/ S 80IB(10) ON THE PROFITS DERIVED FROM A HOUSING PROJ ECT IN A.YS. 2002-03, 2003-04 AND 2004-05. ACCORDINGLY, PENALTY ORDERS U/S 271(1)(C) FOR THESE ASSESSMENT Y EARS IMPOSING PENALTY OF RS.1,25,300/-, RS.6,01,890/- AN D RS.15,01,280/- RESPECTIVELY ARE HEREBY, CANCELLED. 6. HAVING HEARD THE LEARNED DR AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT TH E LEARNED CIT(A) HAS CATEGORICALLY HELD THAT THERE IS NO FINDING ON RECORD THAT ANY DETAILS SUPPLIED BY THE ASSE SSEE IN ITS RETURNS OF INCOME FOR THESE YEARS ARE FOUND TO BE SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 22 INCORRECT OR FALSE AND, THEREFORE, THERE IS NO QUESTI ON OF LEVYING PENALTY U/S 271(1)(C). MERE MAKING OF A CLAIM U /S 80IB(10), WHICH WAS NOT ALLOWED BY THE ASSESSING OFFI CER, BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OR CONCEALING THE INCOME. I, THEREFORE, FI ND NO FLAW IN THE ORDER OF THE LEARNED CIT(A) AND ACCORDING LY HOLD THAT THE ASSESSEE IS NOT LIABLE TO PENALTY U/S 271(1)(C ) OF THE ACT FOR CLAIMING DEDUCTION U/S 80IB(10) ON THE P ROFITS DERIVED FROM A HOUSING PROJECT IN A.YS. 2002-03, 20 03-04 AND 2004-05. IN THIS VIEW OF THE MATTER, THE ORDER OF THE LEARNED CIT(A) IS UPHELD. 7. IN THE RESULT, THE APPEALS OF THE REVENUE STAND DISMISSED. PRONOUNCED IN OPEN COURT ON 18 TH JULY, 2016 SD/- (D.T. GARASIA) JUDICIAL MEMBER 18 TH JULY, 2016 SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 23 DN/- SOUMYA HOMES PVT. LTD. ITA NOS.663 TO 665/IND/2013 24