DCIT, Vellore V. Gems Park Hotel (P) Ltd., Tiruvannamalai

ITA 722/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81293 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 01-12-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 17-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: A MAHESH
• Keywords: Unexplained investment

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 722/MDS/2013 ( / ASSESSMENT YEAR: 2005-06) THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-I, VELLORE-632 001. VS M/S. GEMS PARK HOTEL (P) LTD. 66, PONDY-BANGALORE HIGHWAY, CHENGAM ROAD, TIRUVANNAMALAI. PAN: AABCG8996R ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. A.V.SREEKANTH, JCIT /RESPONDENT BY : MR. A. MAHESH, FCA / DATE OF HEARING : 1 ST DECEMBER, 2014 /DATE OF PRONOUNCEMENT : 5 TH DECEMBER, 2014 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX, (APPEALS)-IX, CHENN AI DATED 28.12.2012 FOR THE ASSESSMENT YEAR 2005-06 I N DELETING THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 2. BRIEF FACTS ARE THAT ASSESSEE, A PRIVATE LIMITE D COMPANY, IS INTO HOTEL BUSINESS FILED ITS RETURN O F INCOME ON 27.12.2006 DECLARING LOSS OF ` 17,15,000/-. DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2005 -06 THE ASSESSEE COMPANY CONSTRUCTED A HOTEL BUILDING ARUN AI 2 ITA NO.722/MDS/2013 ANANDA AND DECLARED THE VALUE OF THE PROPERTY AT ` 1,33,10,465/-. THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS REFERRED THE PROPERTY TO VAL UATION CELL TO ASCERTAIN THE ACTUAL INVESTMENT MADE BY THE ASSESSEE. THE DEPARTMENTAL VALUATION OFFICER VALUED THE PROPE RTY AT ` 2,03,00,000/-. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT AND BROUGHT THE DIFFERENCE IN VALUE OF P ROPERTY AS PER DVOS REPORT AND AS ADMITTED BY THE ASSESSEE TO TAX AS UNEXPLAINED INVESTMENT. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEA LS). THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT REFERENCE MADE BY THE ASSESSING OFFICER UNDER SECTI ON 142A TO VALUATION OFFICER IS BAD IN LAW. ON FURTHER APPE AL BY THE REVENUE BEFORE THE TRIBUNAL, THIS TRIBUNAL SET ASID E THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND RES TORED THE ORDER OF THE ASSESSING OFFICER HOLDING THAT THE REFERENCE MADE BY THE ASSESSING OFFICER TO THE VALUATION OFFI CER IS NOT BAD IN LAW. THE TRIBUNAL DID NOT GO INTO THE MERITS OF THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT O F DIFFERENCE IN COST OF CONSTRUCTION. THE ASSESSING O FFICER ISSUED PENALTY NOTICE TO THE ASSESSEE AND IN RESPON SE TO THE 3 ITA NO.722/MDS/2013 SAID NOTICE, THE ASSESSEE FILED ITS REPLY STATING T HAT THERE IS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME AND COST OF CONSTRUCTION REPORT FROM THE REGISTERED VALUER HAS BEEN FILED ALONG WITH THE RETURN OF INCO ME TO CORROBORATE THE COST OF CONSTRUCTION DEBITED IN THE BOOKS OF ACCOUNTS. HOWEVER, THE ASSESSING OFFICER PASSED OR DER UNDER SECTION 271(1)(C) OF THE ACT LEVYING MINIMUM PENALTY. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISS IONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERING THE SUBMISSIONS OF THE ASSESS EE AND THE DECISIONS OF THE JURISDICTIONAL HIGH COURT DELE TED THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE ASSESSING OFFICER IN IMPOSING PENALTY UNDER SECTION 271(1)(C) OF THE ACT STATING THAT THERE IS CONCEALM ENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS BY T HE ASSESSEE IN VIEW OF THE DIFFERENCE IN THE COST OF C ONSTRUCTION ADMITTED BY THE ASSESSEE AND AS PER THE DEPARTMENTA L VALUERS REPORT. 4 ITA NO.722/MDS/2013 3. COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTS THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND PLACES RELIANCE ON THE DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. KAR CHINNI KRISHNA CHETTY (2 46 ITR 121), TPK RAMALINGAM VS. CIT (211 ITR 520) AND CIT VS. APSARA TALKIES (155 ITR 303) AND SUBMITS THAT MERE DIFFERENCE IN COST OF CONSTRUCTION AS PER THE BOOKS AND AS PER THE DEPARTMENTAL VALUATION OFFICERS REPORT CANNOT BE THE BASIS FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) O F THE ACT. 4. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISIONS RELIED ON. THE ASSESSING OFFICER LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE D IFFERENCE OF COST OF CONSTRUCTION ADMITTED BY THE ASSESSEE AND T HE COST OF CONSTRUCTION ESTIMATED BY THE DVO IGNORING THE SUBM ISSIONS OF THE ASSESSEE THAT THERE IS NO CONCEALMENT OF INC OME. THE SUBMISSION OF THE ASSESSEE WAS THAT VALUATION RECOR DED IN THE BOOKS OF ACCOUNTS WAS SUPPORTED BY THE VALUATIO N REPORT FILED ALONG WITH THE RETURN OF INCOME. THE BOOKS OF ACCOUNTS WERE AUDITED UNDER BOTH THE COMPANIES ACT & INCOME TAX ACT. THE ASSESSING OFFICER DID NOT POINT OUT ANY DE FECT WHATSOEVER IN THE BOOKS OF ACCOUNT AND THEREFORE TH ERE IS NO 5 ITA NO.722/MDS/2013 CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS IN RESPECT OF COST OF CONSTRUCTION RECORDED IN THE BOOKS OF ACCOUNTS. THE COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE PENALTY OBSERVING AS UNDER:- 4.2 I T IS SEEN FROM THE FACTS OF THE CASE THAT THE APPELLANT IS MAINTAINING BOOKS OF ACCOUNT AND THE SAME WERE AUDITED AS PER THE COMPANY'S ACT. THE APPELLANT SUBMITTED AN ESTIMATE OF COST OF CONSTRUCT I ON FROM THE APPROVED VALUER . HOWEVER, AO IN ORDER TO ASCERTAIN THE ACTUAL AMOUNTS SPENT IN THE COST OF CONSTRUCTION REFERRED THE PROPERTY TO THE DVO. AO ACTED UPON THE DVO'S REPORT AND BROUGHT THE DIFFERENCE IN THE VA L UES BETWEEN DVO'S REPORT AND THE APPROVED VA L UER TO TAX U/S 69B OF THE ACT. IT IS IMPORTANT TO NOTE THAT THE AO HAS NOT BROUGHT OUT ANY MATERIAL EVIDENCE TO SHOW THAT THE APPELLANT HAS CONCEALED ANY PARTICULARS O F INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME . IN THE ABSENCE OF MAKING ANY FINDING THAT THE APPELLANT HA S INVESTED MORE THAN WHAT H AS BEEN SHOWN IN THE RETURN OF INCOME WITH REGARD TO THE CONSTRUCTION OF THE H OTE L 'ARUNAI ANAND' THE AO HAS NOT ESTABLISHED THAT THE APPELLANT HAS CONCEALED THE I NCOME OR FURN I SHED INACCURATE PARTICULARS OF I NCOME. FURTHER, THE HON'BLE J UR I SD I CTIONA L H I GH COURT I N THE ABOVE MENT I ONED DEC I SIONS HELD THAT NO P ENALTY IS L EV I AB L E ON ACCOUNT OF MERE DIFFERENCE BETWEEN ADMITTED COST OF CONSTRUCT I ON AND COST ESTIMATED BY THE DEPARTMENTAL VALUER . RESPECTFUL L Y FOLLOWING THE ABOVE DEC I SIONS, I HEREBY DIRECT THE AO TO DELETE THE PENALTY LEVIED OF RS . 24,46,337/- U/S 271(1)(C) OF THE ACT. 5. ON READING OF THE ABOVE FINDINGS OF THE COMMISSI ONER OF INCOME TAX (APPEALS), WE COMPLETELY AGREE WITH H IM THAT 6 ITA NO.722/MDS/2013 THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY MATER IAL EVIDENCE TO SHOW THAT THE ASSESSEE HAS CONCEALED AN Y PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTI CULARS OF INCOME. THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND THE ACCOUNTS & COST OF CONSTRUCTION WERE RECORDED IN TH E BOOKS OF ACCOUNTS. BOOKS WERE AUDITED UNDER BOTH COMPANIES A CT AND INCOME TAX ACT. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DISCREPANCY IN THE ACCOUNTS OR VOUCHERS MAI NTAINED BY THE ASSESSEE AND BOOKS WERE NOT REJECTED. THE ASSESSEE FILED ESTIMATE FROM THE REGISTERED VALUER ALONG WITH ITS RETURN OF INCOME TO SUPPORT THE COST ADMITTED B Y THE ASSESSEE. THE ASSESSING OFFICER HAS NOT GIVEN ANY FINDING THAT THE ASSESSEE SUPPRESSED THE COST OF CONSTRUCT ION LEADING TO CONCEALMENT OF INCOME. THE HONBLE JURI SDICTIONAL HIGH COURT IN THE CASE OF TPK RAMALINGAM VS. CIT(SU PRA) AND THE CIT VS. APSARA TALKIES (SUPRA) HELD THAT FI NDING OF CONCEALMENT CANNOT BE BASED ON DVOS ESTIMATE ALONE WITHOUT EVIDENCE TO SHOW THAT ASSESSEE HAS UNDERST ATED CONSTRUCTION EXPENSES. IT WAS HELD THAT DIFFERENCE BETWEEN COST OF CONSTRUCTION DISCLOSED BY THE ASSESSEE AND COST ESTIMATED BY THE DEPARTMENTAL VALUER AS WELL AS APP ROVED 7 ITA NO.722/MDS/2013 VALUER IS NOT SUFFICIENT TO HOLD THAT THERE HAD BEE N CONCEALMENT OF INCOME. IN THE CASE OF CIT VS. KAR CHINNI KRISHNA CHETTY (246 ITR 121) THE HONBLE JURISDICT IONAL HIGH COURT CONSIDERING THE ABOVE TWO DECISIONS HELD AS U NDER:- WE DO NOT FIND ANY ERROR IN THE REASONING OF THE TRIBUNAL. UNDER SECTION 271(1)(C) OF THE ACT THE AUTHORITY IS GIVEN THE DISCRETION TO LEVY A PENALTY IF THERE IS CONCEALMENT OF PARTICULARS OF INCOME AND EVEN AS REGARDS THE QUANTUM OF THE PENALTY THERE IS A DISCRETION. THAT DISCRETION WAS AVAILABLE TO THE TRIBUNAL AS WELL WHEN IT CONSIDERED THE MATTER IN APPEAL. OF GREATER IMPORTANCE IS THE NECESSITY FOR A DEFINITE FINDING THAT THERE IS CONCEALMENT, A S WITHOUT SUCH A FINDING OF CONCEALMENT, THERE CAN BE NO QUESTION OF IMPOSING ANY PENALTY. THE MERE REVISION OF THE INCOME TO A HIGHER FIGURE BY THE ASSESSING AUTHORITY DOES NOT AUTOMATICALLY WARRANT AN INFERENCE OF CONCEALMENT OF THE EXPENDITURE ON THE CONSTRUCTION. THE ADDITION TO THE INCOME OF THE ASSESSEE BASED ON THE REPORT OF THE VALUER WAS RIGHTLY REGARDED BY THE TRIBUNAL AS BEING INSUFFICIENT FOR RECORDING A FINDING OF CONCEALMENT OF INCOME. CONCEALMENT IMPLIES SOME DELIBERATE ACT ON THE PART OF THE ASSESSEE IN WITHHOLDING THE TRUE FACTS FROM THE AUTHORITIES. TH E FACT THAT THE VALUER ASSESSED THE BUILDING AT A FIGURE HIGHER THAN THE ONE REPORTED BY THE ASSESSEE DOES NOT BY ITSELF AS OBSERVED EARLIER LEAD TO THE INFERENCE THAT THERE HAD BEEN CONCEALMENT. THIS COURT IN THE CASE OF T. P. K. RAMALINGAM V. CIT (1995) 211 ITR 520 (MAD) IN SIMILAR CIRCUMSTANCES SET ASIDE THE ORDER OF THE TRIBUNAL WHICH HAD UPHELD THE LEVY OF PENALTY ON AN ASSESSEE WHOSE INCOME HAD BEEN ASSESSED AT A HIGHER FIGURE SOLELY ON THE BASIS OF THE 8 ITA NO.722/MDS/2013 VALUER'S REPORT WHICH SHOWED THE COST OF CONSTRUCTION AT A FIGURE HIGHER THAN THE ONE REPORTED BY THE ASSESSEE. THIS COURT FOLLOWED ITS EARLIER DECISION IN THE CASE OF CIT V. APSARA TALKIES (1985) 155 ITR 303 (MAD) AND HELD THAT CONCEALMENT MUST BE DELIBERATE AND THERE BEING NO PROOF OF SUCH DELIBERATE CONCEALMENT, THE IMPOSITION OF PENALTY WAS NOT WARRANTED. THE FACTS OF THIS CASE ARE SIMILAR. THERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAD DELIBERATELY CONCEALED THE COST OF CONSTRUCTION. THE ASSESSEE HAD REPORTED THE COST OF CONSTRUCTION AT RS. 70,000. THE ASSESSEE WAS NOT REQUIRED TO REPORT THE PROGRESS OF THE CONSTRUCTION AS THE RETURN DID NOT REQUIRE HIM TO DO SO. THE FIGURE GIVEN BY THE ASSESSEE AS THE COST OF CONSTRUCTION WAS REVISED BY THE ASSESSING AUTHORITIES ON THE BASIS OF THE REPORT OF THE VALUER AND ADDITION MADE TO THE ASSESSEE'S ASSESSABLE INCOME. SUCH ADDITION IN THE CONTEXT CANNOT BE REGARDED AS ADDITION OF INCOME CONCEALED WHICH WOULD ATTRACT THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE TRIBUNAL HAS RECORDED A FINDING THAT THERE IS NO MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE CONCEALED ANY OF ITS INCOME FOR THE ASSESSMENT YEAR UNDER APPEAL SO AS TO ATTRACT THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. 6. IN THE CASE ON HAND, THE PENALTY WAS LEVIED ONLY BASED ON THE DIFFERENCE IN THE COST OF CONSTRUCTION ESTIMATED BY THE ASSESSEE AND COST OF CONSTRUCTION ESTIMATED BY THE DVO. THERE IS NO FINDING WHASOEVER TO SAY THAT ASSESSEE HAS UNDERSTATED THE CONSTRUCTION EXPENSES. IN VIEW OF THE ABOVE DECISIONS AND IN THE FACTS & 9 ITA NO.722/MDS/2013 CIRCUMSTANCES OF THE CASE, WE HOLD THAT THERE IS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSEE. THUS, THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING T HE PENALTY IS UPHELD AND THE GROUNDS RAISED BY THE REV ENUE ARE REJECTED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 5 TH DAY OF DECEMBER, 2014 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDR A PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED, 5 TH DECEMBER, 2014 SOMU 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .