M/s. Galaxy Nirmaan (P) Ltd., New Delhi V. DCIT, New Delhi

ITA 741/DEL/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6644 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-01-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 10-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VASANTHAN
• Keywords: Business income; Depreciation; Search and seizure; Difference of opinion; Change of opinion
• Section: 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C : NEW DELHI BEFORE SH. I.C. SUDHIR , JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO. 741 /DEL/ 2014 ASSESSMENT YEAR: 2007 - 08 M/S. GALAXY NIRMAAN (P) LTD., 12 - RING ROAD, LAJPAT NAGAR, IV, NEW DELHI (PAN: AACCG5553D) VS. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 12, NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. PANKAJ GARGH, ADV. RESPONDENT BY SH. T. VASANTHAN, SR. DR DATE OF HEARING 12.01.2016 DATE OF PRONOUNCEMENT 24.02.2016 ORDER PER O.P. KANT , A. M. : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 19.12.2013 PASSED BY LEARNED COMM ISSIONER OF INCOME TAX(APPEALS) XXXI, NEW DELHI RAISING FOLLOWING GROUNDS OF APPEAL: 1. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX(A) HAS WRONGLY AND ILLEGALLY CONFIRMED THE PENALTY IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE INCOME TAX ACT. 2. BECAUSE UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT BEING WRONG AND BAD IN LAW SHOULD HAVE BEEN DELETED BY LEARNED COMMISSIONER OF INCOME TAX(APPEALS). THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN CON FIRMING THE SAME AND IGNORING THE APPELLANT S SUBMISSION. 2. THE FACTS IN BRIEF ARE THAT A SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF THE INCOME - TAX ACT, 1961 (FOR SHORT THE ACT ) WAS CARRIED OUT AT THE PREMISES OF 2 ITA NO. 741/DEL/2014, AY:2007 - 08 THE ASSESSEE ALONG WITH THE ASSESSSES OF RAJ DARBAR GROUP ON 31.07.2008 . A N OTICE UNDER SECTION 153A OF THE ACT WAS ISSUED ON 04.02.2010 FOR FILING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. IN RESPONSE, THE ASSESSEE FILED RETURN OF INCOME DECLARING NIL INCOME 25.03.2010. SUBSEQUENTLY, NOT ICE UNDER SECTION 143(2) AND 142 (1) OF THE ACT WERE ISSUED. THE ASSESSEE WAS ENGAGED IN BUSINESS OF REAL ESTATE DEVELOPMENT. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY DEVELOPED A REAL ESTATE PROJECTS IN THE NAME OF NARSI VILLAGE, SHASTRI PURAM , AGRA WHICH WAS SHOWN AS WORK - IN - PRO GRESS . DURING THE YEAR, THE ASSESSEE SHOWN INTEREST RECEIPT OF RS. 24,19,085 FROM LOAN GIVEN AND BANKS AND CLAIMED VARIOUS EXPENSES AGAINST THIS RECEIPT AND COMPUTED NET PROFIT AT RS. 2,85,123/ - . THE ASSESSEE ALSO SHOWN CAPITAL WORK - IN - PROGRESS OF RS. 7,77,17,533/ - . THE ASSESSING OFFICER HELD THAT THE INTEREST INCOME EARNED WAS NOT FROM THE MAIN ACTIVITY OF BUSINESS OF REAL ESTATE DEVELOPMENT AND THUS ASSESSED THE ENTIRE INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES AND THE EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT WERE DISALLOWED. THE ASSESSEE CLAIMED RS. 1,02,314/ - AS COMMISSION ON SALE OF PLOTS , HOWEVER, NO PLOTS WAS SHOWN TO BE SOLD DURING THE YEAR AND, THEREFORE, COMMISSION EXPENSES DEBITED IN PROFIT AND LOSS ACCOUNT WAS DISALLOWED AND ADDED TO THE WORK - IN - PROGRESS AGAINST THE PROJECT NARSI VILLAGE . THE ASSESSING OFFICER ALSO INITIATED PENALTY PROCEEDINGS AGAINST TH E ASSESSEE UNDER SECTION 271(1)(C) OF THE ACT. THE LD CIT(A) , HOWEVER, DID NOT AGREE WITH THE AO AND RESTRICTED THE ADDITION UPTO THE COMMISSION EXPENSES OF RS. 1,02,314 AND BUSINESS PROMOTION EXPENSES OF 3 ITA NO. 741/DEL/2014, AY:2007 - 08 RS. 1,85,768 , HOLDING THE SAME AS NOT LINKED TO THE BUSINESS RECEIPT. ACCORDINGLY, T HE ASSESSING OFFICER ISSUE D A NOTHER SHOW - CAUSE NOTICE FOR IMPOSING PENALTY UNDER S ECTION 271(1)(C) OF THE ACT ON 01.03.2013 FIXING THE CASE ON 11.03.2013 . HOWEVER, NONE ATTENDED ON THE GIVEN DATE AND NO REPLY WAS FILED. THUS, T HE ASSESSING OFFICE R LEVIED PENALTY IN RESPECT OF DISALLOWANCE OF COMMISSION ON SALES OF PLOTS OF RS. 1,02,314/ - AND BUSINESS PROMOTION EXPENSES OF RS. 1,85,768/ - . ON APPEAL BEFORE THE LD. CIT(A), HE UPHELD THE PENALTY LEVIED BY THE ASSESSING OFFICER. AGGRIEVED BY THE FINDINGS OF THE LD. CIT(A), THE ASSESSEE IS BEFORE US. 3. IN BOTH THE GROUNDS, THE SOLE ISSUE INVOLVED IS IN RESPECT OF CONFIRMING THE PENALTY OF SECTION 271(1)(C) BY THE LD. CIT(A). 3.1 LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE PROJECT OF THE ASSESSEE WAS COMMENCED THOUGHT NO SALE COULD BE EFFECTED DURING THE YEAR AND, THEREFORE, THE DISAL LOWANCE OF THE EXPENSES HAS BEEN MADE BY THE ASSESSING OFFICER HOLDING THE SAME TO BE CONNECTED WITH CAPITAL WORK - IN - PROGRESS AND THERE IS NOT CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND IT WAS ONLY A MATTER OF CHANGE OF OPINION, WHET HER THE EXPENSES WAS CAPITAL OR REVENUE IN NATURE AND EVEN IF EXPENSES ARE HELD TO BE CAPITAL WORK IN PROGRESS , SAME WOULD BE ALLOWED TO THE ASSESSEE AT LATER POINT OF TIME WHILE CLAIMING SALE OF REAL ESTATE. IN SUPPORT OF HIS CONTENTION, HE RELIED ON TH E JUDGMENT OF CIT VS RELIANCE PETRO PRODUCTS P LTD REPORTED IN 322 ITR 158 AND THE DECISION OF THE 4 ITA NO. 741/DEL/2014, AY:2007 - 08 ITAT, CHANDIGARH BENCH IN THE CASE OF ACIT VS. TORQUE PHARMACEUTICALS PVT. LTD., REPORTED IN 173 TTJ 96. 3.2 ON THE OTHER HAND, LD. SR. DR SUBMITTED THAT TH E CLAIM OF THE ASSESSEE WAS NOT A DEBATABLE CLAIM BUT IT WAS CLEARLY AN INADMISSIBLE CLAIM WHICH WAS NOT ALLOWED ACCORDING TO THE LAW. HE FURTHER RELIED ON THE FINDINGS OF THE LD. CIT(A). 3.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE DISALLOWANCE IN RESPECT OF COMMISSION ON SALE OF PLOT S OF RS. 1,02,304/ - AND BUSINESS PROMOTIONS EXPENSES OF RS. 1,85,768/ - WHICH WAS CLAIMED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT , HAVE BEEN HELD BY THE CIT(A) AS NOT LINKED WITH THE B USINESS RECEIPT . IT IS NOT THE CASE OF THE ASSESSING OFFICER OR OF THE CIT(A) THAT THESE EXPENSES CLAIMED BY THE ASSESSEE WERE BOGUS OR FALSE. THE ASSESSING OFFICER HAS MERE LY HELD THAT THE EXPENSES WERE CAPITAL IN NATURE AS AGAINST CLAIMED AS REVENUE IN N ATURE BY THE ASSESSEE AND DISALLOWED FROM THE PROFIT AND LOSS ACCOUNT AND DIRECTED TO INCLUDE IN THE CAPITAL WORK IN PROGRESS. IN OUR OPINION, MAKING OF CLAIM FOR CERTAIN DEDUCTION BY ITSELF WOULD NOT AMOUNT TO CONCEALMENT OR FURNISHING OF INACCURATE PARTI CULARS OF INCOME OF THE ASSESSEE. AS HELD BY T HE TRIBUNAL IN THE CASE OF TORQUE PHARMACEUTICALS PVT. LTD. (SUPRA) VIDE PARA 8 OF THE ORDER AS UNDER: 8. THE LEARNED CIT(A) ALSO CANCELLED THE PENALTY WITH REGARD TO ADDITION MADE ON ACCOUNT OF WEB SOFTWARE DEVELOPMENT EXPENSES. THE AO TREATED THE EXPENDITURE TO BE CAPITAL IN NATURE AND ALLOWED HEAVY DEPRECIATION WHICH RESULTED INTO PART ADDITION. THE ASSESSEE CLAIMED THE EXPENDITURE TO BE REVENUE IN NATURE, HOWEVER, AO TOOK IT TO BE CAPITAL IN NATURE. THEREF ORE, IT WAS MERE CASE OF CHANGE OF OPINION AND AS SUCH WOULD NOT WARRANT LEVY OF PENALTY. THE LEARNED CIT(A), THEREFORE, CORRECTLY DELETED THE PENALTY ON THAT ADDITION. 5 ITA NO. 741/DEL/2014, AY:2007 - 08 3.4 ON PERUSAL OF THE ABOVE DECISION, WE FIND THAT IN CASE OF EXPENDITURE CLAIMED BY THE ASSESSEE, HOWEVER, HELD BY THE ASSESSING OFFICER AS CAPITAL IN NATURE, IT WAS A MERE CASE OF CHANGE OF OPINI ON AND DELETION OF THE PENALTY BY THE CIT(A) WAS UPHELD. RESPECTFULLY, FOLLOWING THE ABOVE DEC ISION AND ALSO THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD., (SUPRA ), WE DIRECT TO DELETE THE PENALTY LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE ACT IN RESPECT OF DISALLOWANCE ON COMMISSION OF RS. 1,02,304/ - AND BUSINESS PROMOTIONS EXPENSES OF RS. 1,85,768/ - AND SUSTAINED BY THE LD CIT(A) IN IMPUGNED ORDER . ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. 4. IN THE RESULT, THE APPEAL IS ALLOWED. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 2 4 T H FEBRUARY , 2016 . S D / - S D / - ( I.C. SUDHIR ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 4 T H FEBRUARY , 2016 . RK/ - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI