ANANT SHELTERS PVT. LTD., MUMBAI V. I.T.O.9(1)(1), MUMBAI

ITA 7473/MUM/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2251 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 03-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 04-11-2011
• Court: TRIBUNAL
• Department Lawyers: A G BHATKAR
• Section: 143(3)

Judgement Text

1 I.T.A. NO.7473 /MUM/2011 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI AMIT SHUKLA (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO.7473/MUM/2011 (ASSESSMENT YEAR: 2007-08) ANANT SHELTERS PVT LTD 21, VEENA BEEN GR FLR, OPP BANDRA RLY STATION, BANDRA (W, MUMBAI-50 VS ITO, 9(1)(1), MUMBAI PAN :AADCA7836N (APPELLANT) (RESPONDENT) APPELLANT BY SHRI NIRAJ SHETH RESPONDENT BY SHRI A.G. BHATKAR DATE OF HEARING : 12-07-2016 DATE OF PRONOUNCEMENT : 27-07-2016 O R D E R PER ASHWANI TANEJA, AM THIS APPEAL HAS BEEN FILED AGAINST THE ORDER OF COM MISSIONER OF INCOME TAX-(APPEALS) [HEREINAFTER CALLED CIT(A)] DATED 23- 08-2011 PASSED AGAINST PENALTY ORDER U/S 271(1)(C) DT. 10-06-2010 FOR A.Y. 2007-08 ON THE FOLLOWING GROUNDS: 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL), ER RED IN CONFIRMING THE LEVY OF PENALTY OF RS.3,60,200/-. 2 I.T.A. NO.7473 /MUM/2011 2. THE SOLITARY ISSUE IN THIS APPEAL IS WITH REGARD TO LEVY OF PENALTY OF RS.3,60,200/-. 3. THE BRIEF BACKGROUND AND FACTS OF THE CASE ARE T HAT DURING THE YEAR, ASSESSEE WAS ENGAGED IN THE BUSINESS OF BUILDER AN D DEVELOPER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY T HE ASSESSING OFFICER THAT ASSESSEE COMPANY WAS FOLLOWING PERCENTAGE COMPLETIO N METHOD OF ACCOUNTING WHEREBY ASSESSEE COMPANY WAS ESTIMATING GROSS PROFI T ON WORK DONE BASIS. IT WAS ALSO NOTICED BY THE ASSESSING OFFICER THAT PERC ENTAGE OF GROSS PROFIT DETERMINED ON THE BASIS OF WORK DONE OF VARIOUS PRE CEDING YEARS HAD LOT OF VARIATIONS AND THERE WAS LACK OF CONSISTENCY IN THE RESULTS SHOWN. UNDER THESE CIRCUMSTANCES, THE AO PROPOSED ESTIMATED GROSS PROF IT @14%. WITH A VIEW TO AVOID LITIGATION, THE ASSESSEE DID NOT FILE ANY APP EAL AGAINST THE ASSESSMENT ORDER. SUBSEQUENTLY, THE LD. AO INITIATED PENALTY PROCEEDINGS WHEREIN ASSESSEE REPLIED THAT ASSESSEE HAD OFFERED ADDITION AL INCOME OF RS.10.5 LAKHS ONLY FOR PAYMENT OF TAX ON VOLUNTARY BASIS AND THE ASSESSEE DID NOT MAKE THIS OFFER FOR LEVY OF PENALTY AS WELL. HOWEVER, THE AO WAS OF THE OPINION THAT ASSESSEE WAS FOLLOWING INCORRECT SYSTEM OF ACCOUNTI NG AND WAS DISCLOSING LESSER INCOME, AND THEREFORE, HE LEVIED PENALTY OF RS.3,60 ,200/- ON THE ADDITION OF RS.10.5 LAKHS. 4. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE LD. C IT(A) WHEREIN ARGUMENTS MADE BEFORE THE AO WERE REITERATED AND IT WAS ALSO SUBMITTED THAT ASSESSEE WAS CARRYING ON TWO PROJECTS DURING THE YE AR, ONE AT GOREGAON AND THE OTHER AT ANDHERI, BUT ONE CONSOLIDATED ACCOUNT WAS MAINTAINED FOR BOTH THE PROJECTS AND THE ARCHITECT OF THE ASSESSEE HAD CERTIFIED THE WORK IN PROGRESS AND ON THAT BASIS ACCOUNTS WERE PREPARED AND RETURN WAS FILED. THOUGH, OFFER FOR PAYMENT OF TAX ON ADDITIONAL INCOME WAS MADE, T HAT DOES NOT MEAN THAT ASSESSEE ACCEPTED ANY TYPE OF CONCEALMENT OF INCOME AND, THEREFORE, LEVY OF 3 I.T.A. NO.7473 /MUM/2011 PENALTY WAS NOT JUSTIFIED. BUT LD CIT(A) WAS NOT S ATISFIED WITH THE SUBMISSIONS OF THE ASSESSEE; HE CONFIRMED THE PENALTY WITH THE FOLLOWING OBSERVATIONS: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE SUBMISSIONS OF THE APPELLANT, PENALTY ORDER. THE A.O. HAD ELABORAT ED AT PARA 2 OF THE PENALTY ORDER THE REASONS FOR WHICH THE METHOD OF COMPUTATION OF GROSS PROFIT AND THE VALUATION OF WORK-IN-PROGRE SS WAS FLAWED. THE A.O. PROPOSED ADOPTION OF G.P. OF 14% OF THE WO RKS DONE AND VIDE LETTER DATED 18.12.09 THE ASSESSEE COMPANY ACCEPTED THE FLAWS AND OFFERED ADDITIONAL INCOME OF RS. 10.5 LAC S. THUS, THE DISCLOSURE OF ADDITIONAL INCOME WAS AFTER THE ANALY SIS AND EXAMINATION OF BOOKS OF A/C. AND DETECTION OF MISTA KES BY A.O IN THE BOOKS AND THUS THE DISCLOSURE CANNOT BE SAID TO BE VOLUNTARY BUT WAS PROMPTED AT THE INSTANCE OF A.O. UNDER THES E CIRCUMSTANCES THE LEVY OF PENALTY BY A.O. IS JUSTIF IED AND IS CONFIRMED. 5. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE U S AND SUBMISSIONS MADE BEFORE LD. CIT(A) WERE REITERATED. IT IS ALSO BROUGHT TO OUR NOTICE THAT ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING PERCENTAGE OF COMPLETION METHOD SINCE LAST SO MANY YEARS. IN A.Y. 2004-05, THE AO HAD MADE ADDITION BY ESTIMATING THE GP AT 15%. THE MATTER REACHED BEFOR E THE TRIBUNAL WHEREIN THE TRIBUNAL DELETED THE ADDITION ON THE GROUND THAT SI NCE THE ASSESSEE WAS FOLLOWING THIS SYSTEM CONSISTENTLY WHICH IS SUPPORT ED BY DULY MAINTAINED BOOKS OF ACCOUNT AND IN ABSENCE OF ANY DEFECTS HAVING BEE N BROUGHT OUT IN THE BOOKS OF ACCOUNTS AND WITHOUT REJECTING THE BOOKS OF ACCO UNT, NO ADDITION COULD HAVE BEEN MADE. IT IS FURTHER NOTED THAT IN A.Y. 2001-0 2 ALSO THE ASSESSMENT ORDER WAS PASSED U/S 143(3) WHEREIN METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE WAS ACCEPTED AND NO ADDITION WAS MADE. FURTHER, TH E ASSESSMENT FOR A.Y. 2003-04 WAS ALSO MADE U/S 143(3), AND THERE ALSO TH E METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE HAD BEEN ACCEPTED AND NO A DDITION IN THIS REGARD HAS BEEN MADE. COMING BACK TO THE FACTS OF THE CASE FOR THE YEAR UNDER CONSIDERATION, IT IS NOTED THAT THE ACCOUNTS SUBMIT TED BY THE ASSESSEE HAVE NEITHER BEEN REJECTED NOR ANY DEFECTS HAVE BEEN POI NTED OUT BY THE AO. THE 4 I.T.A. NO.7473 /MUM/2011 ADDITION WAS MADE BY THE AO PURELY ON THE BASIS OF ESTIMATE, THAT TOO, WITHOUT ANY BASIS, MUCH LESS, ANY SCIENTIFIC BASIS. THE AS SESSEE ACCEPTED THE ADDITION AND OFFERED TO PAY THE TAX WITH A VIEW TO BUY PEACE AND TO AVOID LITIGATION, AS IS CLEAR FROM THE FACTS BEFORE US. UNDER THESE CIRCUM STANCES, IT IS NOTED THAT NOTHING HAS BEEN BROUGHT ON RECORD BY THE LOWER AUT HORITIES TO SHOW ANY CONCEALMENT OF INCOME. THE ADDITION MADE ON ESTIMA TE BASIS CANNOT BE PUT INTO THE CATEGORY OF CONCEALED INCOME BY ANY STRETC H OF IMAGINATION. THE AO MADE THE ADDITION BECAUSE IN HIS OPINION, THE GP OF THE ASSESSEE WAS TO BE ESTIMATED AT A PARTICULAR PERCENTAGE. THE OPINION OF THE AO WAS PURELY SUBJECTIVE AND DISCRETIONARY AND WITHOUT ANY CONCRE TE BASIS. UNDER THESE CIRCUMSTANCES, NO PENALTY CAN BE LEVIED, AS PER LAW . IN THIS REGARD, WE FIND SUPPORT FROM THE JUDGEMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS UPENDRA V MITHANI DT 5-8-2009 (INCOME TAX APPEAL NO.1860 OF 2009) WHEREIN HONBLE HIGH COURT HAS OBSERVED AS UNDER: THE ISSUE INVOLVED IN THE APPEAL REVOLVES AROUND DE LETION OF PENALTY UNDER SECTION 271(1)(C) OF THE I.T. ACT. TH E TRIBUNAL HAS CONCURRED WITH THE VIEW TAKEN BY THE COMMISSIONER O F INCOME TAX (A). THE COMMISSIONER OF INCOME TAX (A) HAS RIG HTLY TAKEN A VIEW THAT NO PENALTY CAN BE IMPOSED IF THE FACTS AND CIRCUMS TANCES ARE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT THE AMOUNT DOES NOT REPRESENT CONCEALED INCOME AS WITH THE HYPOTHES IS THAT IT DOES. IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED, I.E. IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LE AD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE A SSESSEE'S CASE IS FALSE. THE VIEW TAKEN BY THE TRIBUNAL IS A REASONABLE AND POSSIBLE VIEW. THE APPEAL IS WITHOUT ANY SUBSTANCE. THE SAME IS DISMISSED IN LIMINE WITH NO ORDER AS TO COSTS. 6. THUS, IN VIEW OF THE AFORESAID LEGAL POSITION AND F ACTS OF THE CASE, WE FIND THAT PENALTY IN THIS CASE IS UNJUSTIFIED AND THE SA ME IS DIRECTED TO BE DELETED. 5 I.T.A. NO.7473 /MUM/2011 7. IN THE RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON THIS _27 TH ___ DAY OF JULY, 2016. SD/- SD/- (AMIT SHUKLA) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 27 JULY, 2016 PK/- & PATEL COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , A-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES