DCIT CNE CIR 6, MUMBAI V. CONWOOD AGENCIES P. LTD, MUMBAI

ITA 8041/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8879 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 29-08-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 22-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARTI VISSANJI
• Keywords: Competent authority
• Section: 115JB; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI I.P.BANSAL,JUDICIAL MEMBER & SHRI P.M.JAGTAP, ACCOUNTANT MEMBER ITA NO.8041/MUM/2010(A.Y. 2008-09) THE DCIT, CEN.CIR.6, OLD CGO BLDG. ANNEXE, 9 TH FLOOR, M.K.ROAD, MUMBAI - 20 (APPELLANT) VS. M/S. CONWOOD AGENCIES PVT. LTD., D.B.HOUSE, YASHODHAM, GEN. A.K. VAIDYA MARG, MUMBAI - 400 063 PAN: AAACC 1459J) (RESPONDENT) REVENUE BY : SHRI RAJARSHI DWIVEDY ASSESSEE BY : MS. ARTI VISSANJI DATE OF HEARING : 29/08/2012 DATE OF PRONOUNCEMENT : 0 5/09/2012 ORDER PER I.P.BANSAL, J.M THIS APPEAL IS FILED BY THE REVENUE. IT IS DIRE CTED AGAINST THE ORDER PASSED BY LD. CIT(A)-36, MUMBAI DATED 15/09/2010 FOR ASSESSMENT YEAR 2008-09. THE GROUND OF APPEAL RAISED BY THE REVENU E READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING ADDITION OF RS.47,27,317/- MA DE U/S. 37(1) OF THE INCOME TAX ACT ON ACCOUNT OF PENALTY IMPOSED BY THE ADDL. COLLECTOR AND COMPETENT AUTHORITY ALTHOUGH THE ESSENTIAL CONDITI ONS LAID DOWN IN SECTION 37(1) WERE NOT SATISFIED. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVEL OPMENT AND CONSTRUCTION OF REAL ESTATE AND HAS ONE PROJECT ON HAND VIZ. KANDIVALI PROJECT. IT FILED ITS RETURN OF INCOME AT NIL SHOW ING LONG TERM CAPITAL LOSS OF RS.5,71,429/- AND IT HAS BEEN ASSESSED ALSO AT NIL WITH LONG TERM CAPITAL LOSS ON SALE OF SHARES WHICH IS ALLOWED TO BE CARRI ED FORWARD FOR FUTURE SET OFF ITA NO.8041/MUM/2010(A.Y. 2008-09) 2 TO THE EXTENT OF RS.5,71,421/-. HOWEVER, THE ASSES SEE HAS BEEN ASSESSED UNDER SECTION 115JB FOR WHICH THE PROFIT HAS BEEN C OMPUTED AT RS.2,82,732/- ON WHICH TAX PAYABLE BY THE ASSESSEE HAS BEEN WORKED OUT AT RS.29,121/-. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT A SUM OF RS.47,27,317/- WAS CLAIMED BY THE ASSESSEE AS PENALTY LEVIED BY THE ADDITIONAL COLLECTOR AND COMPETENT AUTHORITY CONS TITUTED UNDER THE APPLICABLE PROVISIONS OF URBAN LAND CEILING ACT (UL C ACT). THE AO CALLED FOR THE DETAILS AND IT WAS SUBMITTED THAT THE SAID AMOU NT WAS PAID IN RESPECT OF DEMAND NOTICE DATED 22/5/2007 AND IT WAS PAID ON 13 /8/2007. THE PENALTY WAS LEVIED FOR REGULARIZING THE ALLEGED DEF AULT OF NOT FILING SIX MONTHLY REPORT AS REQUIRED UNDER TERMS AND CONDITI ONS OF THE EXEMPTION ORDER ISSUED BY THE COMPETENT AUTHORITY CONSTITUTED UNDER ULC ACT GRANTING PERMISSION FOR DEVELOPMENT AND CONSTRUCTIO N OF THE LAND IN RESPECT OF WHICH THE DEVELOPMENT RIGHTS WERE ACQUIRED BY TH E ASSESSEE FOR DEVELOPMENT AND CONSTRUCTION OF KANDIVALI PROJECT PENDING COMPLETION AS OF THE YEAR ENDING 31/3/2008. THE SAID ORDER WAS CONT ESTED BY THE ASSESSEE BEFORE THE ADDITIONAL COMMISSIONER KONKAN DIVISION BASED ON THE REASONING PROPAGATED AND ADDITIONAL COMMISSIONER, KONKAN DIVISION VIDE HIS ORDER DATED 9/7/2007 HAS REMANDED THE MATTER BACK TO THE COMPETENT AUTHORITY FOR ENQUIRY AND FINAL DECISION ON MERIT A ND THE ORDER PASSED IS SUBJECT TO THE FINAL DECISION OF HONBLE HIGH COURT IN THE WRIT PETITION FILED. THUS IT WAS PLEADED THAT THE SAID AMOUNT IS ALLOWAB LE AS AN EXPENDITURE. HOWEVER, AO DID NOT AGREE WITH SUCH PROPOSITION OF THE ASSESSEE AND HAS HELD THAT THE PENALTY WAS LEVIED FOR NOT FILING THE SIX MONTHLY PROGRESS REPORT IS ON ACCOUNT OF INFRACTION OF LAW HENCE, NOT ADMISSIBLE AS EXPENDITURE. THE AO AGREED WITH THE ALTERNATIVE CO NTENTION OF THE ASSESSEE AND HAS ADDED THE SAID AMOUNT TO THE WORK-IN-PROGRE SS OF THE KANDIVALI PROJECT. IT IS IN THIS MANNER THE SAID AMOUNT WAS ALLOCATED TO THE PROJECT. 3.1 THE TREATMENT GIVEN BY THE AO WAS AGITATED IN A N APPEAL FILED BEFORE ITA NO.8041/MUM/2010(A.Y. 2008-09) 3 LD. CIT(A). IN ADDITION TO THE SUBMISSIONS MADE BE FORE AO THE ASSESSEE HAS ALSO RELIED ON THE FOLLOWING DECISIONS TO CONTENT THAT THE SAID AMOUNT WAS ALLOWABLE AS EXPENDITURE. 1. SWADESHI COTTON MILLS CO. LTD., VS. CIT 233 IT R 119(SC) 2. PRAKASH COTTON MILLS PVT. LTD. VS. CIT, 201 ITR 684 (SC), 3. CIT VS. HYDERABAD ALLWYIN METAL WORKS LTD., 172 ITR 113(AP) 4. CIT VS. INDUSTRIAL CABLES (INDIA) LTD., 162 TAX MAN 423 (P&H) 4. CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, LD. CIT(A) HAS ARRIVED AT A FINDING THAT SECTION 20 OF ULC ACT DEALS WITH THE POWER TO EXEMPT AND SECTION 21 DEALS WITH THE EXCESS VACANT LAND WHICH IS NOT TO BE TREATED AS EXCESS IN CERTAIN CASES. THERE WAS NO INDEPENDENT PROVISION IN THE ULC ACT FOR LEVYING OF SUCH PENALTY. THE PENALTY WAS LEVI ED WITH REFERENCE TO DECISION OF THE GOVERNMENT OF MAHARASHTRA, WHEREIN IT WAS IT WAS DECIDED TO LEVY A CHARGE OF RS.2.50 SQ.MTR. OF SURPLUS VACANT LAND EXEMPTED FOR DEVELOPMENT FOR REGULARIZING DEFAULT OF NOT FILING SIX MONTHLY PROGRESS REPORT AS WAS REQUIRED UNDER THE TERMS AND CONDITIONS OF T HE EXEMPT ORDER. EVEN THE ORDER LEVYING PENALTY WAS REMANDED BY THE FI RST APPELLATE AUTHORITY TO THE COMPETENT AUTHORITY FOR ENQUIRY AND FINAL DECI SION ON MERIT AND THAT ORDER IS SUBJECT TO FINAL DECISION OF THE HONBLE H IGH COURT IN THE WRIT PETITION. THE ULC HAS BEEN REPEALED IN NOVEMBER, 2 007. THE EXEMPTION ORDER PASSED BY THE GOVERNMENT IN RESPECT OF KANDIV ALI PROJECT IS STILL IN FORCE AND HAS NOT BEEN WITHDRAWN. THE AMOUNT OF PENALTY IS NOT FOR A VIOLATION OR INFRACTION OF LAW, IT IS A PROCEDURAL DEFAULT AND THUS ADDITION WAS NOT WARRANTED. LD. CIT(A) HAS DELETED THE ADDI TION. THE DEPARTMENT IS AGGRIEVED HENCE, HAS FILED THE AFOREMENTIONED APPEA L. 5. AFTER NARRATING THE FACTS RELYING UPON THE ASSE SSMENT ORDER, IT WAS SUBMITTED BY LD. D.R THAT PENALTY COULD NOT BE ALLO WED AS DEDUCTION IN VIEW OF EXPLANATION TO SECTION 37(1) OF THE INCOME TAX A CT,1961. HE SUBMITTED ITA NO.8041/MUM/2010(A.Y. 2008-09) 4 THAT LD. CIT(A) HAS WRONGLY ALLOWED THE RELIEF TO T HE ASSESSEE AND HIS ORDER SHOULD BE SET ASIDE AND THAT OF AO BE RESTORED. 6. ON THE OTHER HAND, RELYING UPON THE ORDER OF LD. CIT(A) IT WAS PLEADED BY LD. A.R THAT LD. CIT(A) HAS RIGHTLY GRANTED RELI EF TO THE ASSESSEE. SHE ALSO RELIED ON THE FOLLOWING DECISIONS:- 1. (2012) 341 ITR 480 (DEL) , CIT V PRASAD & CO. - PAYMENTS TO STOCK EXCHANGE FOR VIOLATION OF TRADING BEYOND EXPOSURE L IMIT, LATE SUBMISSION OF MARGIN CERTIFICATE AND DELAY IN DELIV ERING SHARES ARE NOT PENALTIES AND ALLOWED (PG.487) 2. (2009) 311 ITR 336 (P&H) CIT V HOSHIARI LAL KEW AL KRISHNAN - FINE PAID TO THE EXCISE AUTHORITY WAS ALLOWED. 3. (2007) 290 ITR 419 (SC) CIT VS. DISTILLER CO. L TD. - AMOUNT PAID FOR NOT AFFIXING LABEL ON ARRACK BOTTLES WAS NOT IN THE NATURE OF PENALTY (PG.429) 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF MATERIAL PLACED BEFORE US. THE FACTS HAVE ALREADY BEEN NARRATED IN THE ABOVE PART OF THIS ORDER. IT HAS BEEN OBSERVED BY LD. CI T(A) THAT ULC ACT DOES NOT HAVE THE PROVISIONS UNDER WHICH THE IMPUGNED PENALT Y HAS BEEN LEVIED. THE AMOUNT HAS BEEN CHARGED FROM THE ASSESSEE WITH REFE RENCE TO AN ORDER PASSED BY THE GOVERNMENT IN WHICH IT WAS MENTIONED THAT THE DEFAULT OF NOT FILING THE SIX MONTHLY RETURN CAN BE REGULARIZED BY CHARGING RS. 2.50 PER SQ.METER OF THE SURPLUS VACANT LAND. THE ASSESSEE HAS ALSO PAID SAID AMOUNT AND SUCH FACTS HAVE NOT BEEN DISPUTED BY THE REVENUE. KEEPING IN VIEW ALL THESE FACTS, WE ARE OF THE OPINION THAT TH ERE IS NO INFIRMITY IN THE ITA NO.8041/MUM/2010(A.Y. 2008-09) 5 RELIEF GRANTED BY LD. CIT(A). THEREFORE, WE DECLIN E TO INTERFERE IN THE ORDER PASSED BY LD. CIT(A) AND THE APPEAL FILED BY THE RE VENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 5 TH DAY OF SEPTEMBER, 2012 SD/ SD/- (P.M.JAGTAP ) (I.P.BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 5 TH SEPT., 2012. COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.R C BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM.