M/s Vanshee Builders & Developers Pvt Ltd , Bangalore V. Deputy Commissioner of Income Tax Circle-12(5), Bangalore

ITA 878/BANG/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4677 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-10-2020
• Assessment Year: 2011-2012
• Appeal Filed On: 24-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDAR RAJAN
• Assessee Lawyers: S V RAVISHANKAR
• Keywords: Business income; Bonafide mistake
• Section: 271(1)(c); 115JB; 43

Judgement Text

ITA NO.878/BANG/2019 M/S. VANSHEE BUILDERS & DEVELOPERS PVT. LTD., BENGA LURU IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.878/BANG/2019 ASSESSMENT YEAR: 2011-12 M/S. VANSHEE BUILDERS & DEVELOPERS PRIVATE LIMITED NO.684, 9 TH A MAIN, I STAGE INDIRANAGAR BENGALURU-560 038 PAN NO : AABCV3394G VS. DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE -12 (5) BENGALURU APPELLANT RESPONDENT APPELLANT BY : SHRI S.V. RAVISHANKAR, A.R. RESPONDENT BY : SHRI D.S. SUNDAR RAJAN, D.R. DATE OF HEARING : 20.10.2020 DATE OF PRONOUNCEMENT : 21.10.2020 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 18.3.2019 PASSED BY LD. CIT(A)-7, BENGALURU CONFIRM ING THE PENALTY LEVIED U/S 271(1)(C) OF THE INCOME-TAX ACT,1961 ['T HE ACT' FOR SHORT] BY THE ASSESSING OFFICER FOR THE A.Y. 2011-12. 2. FACTS RELATING TO THE CASE ARE DISCUSSED IN BRIE F. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROPERTY DEVELOPMENT. IT FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 30.9. 2011 DECLARING TOTAL INCOME OF RS.39,94,510/- UNDER NORMAL PROVISI ONS OF ACT AND ITA NO.878/BANG/2019 M/S. VANSHEE BUILDERS & DEVELOPERS PVT. LTD., BENGA LURU PAGE 2 OF 7 DECLARED BOOK PROFIT OF RS.8,49,857/- U/S 115JB OF THE ACT. IN THE SCRUTINY PROCEEDINGS, THE A.O. DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS.95,61,903/- BY MAKING CERTAIN ADDITI ONS. THE A.O. NOTICED THAT THE ASSESSEE HAS FURNISHED AUDIT REPOR T IN FORM NO.29B IN RESPECT OF BOOK PROFIT COMPUTED U/S 115JB OF THE ACT. THE AUDITOR HAD DETERMINED THE BOOK PROFIT AT RS.1,52,18,852/-. AS NOTICED EARLIER THE ASSESSEE HAD DECLARED BOOK PROFIT OF RS .8,49,857/- IN THE RETURN OF INCOME. ACCORDINGLY, THE A.O. COMPUTED T HE BOOK PROFIT AT RS.1,52,18,852/- AS REPORTED IN AUDIT REPORT. SINC E THE BOOK PROFIT WAS MORE THAN THE AMOUNT OF TOTAL INCOME COMPUTED U NDER NORMAL PROVISIONS OF THE ACT, THE ASSESSING OFFICER ADOPTE D THE BOOK PROFIT AS TOTAL INCOME OF THE ASSESSEE. SINCE THE ASSESSEE H AD DECLARED BOOK PROFIT AT LESSER FIGURE, THE A.O. MENTIONED IN THE ASSESSMENT ORDER THAT HE IS INITIATING PENALTY PROCEEDINGS U/S 271(1 )(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THERE AFTER HE ISSUED A NOTICE U/S 271(1)(C) OF THE ACT WHEREIN HE DID NOT STRIKE DOWN INAPPLICABLE PORTION. 3. IN THE PENALTY PROCEEDINGS, THE ASSESSEE SUBMITT ED THAT THE MISTAKE WAS COMMITTED INADVERTENTLY WHILE PREPARING RETURN OF INCOME. IT WAS ALSO SUBMITTED THAT THE ADDITION HA S BEEN MADE ONLY IN THE BOOK PROFIT COMPUTED U/S 115JB OF THE ACT AN D HENCE THERE IS NO LOSS OF REVENUE. THE A.O. DID NOT ACCEPT THE EX PLANATIONS GIVEN BY THE ASSESSEE. HE TOOK THE VIEW THAT THE ASSESSE E HAS INTENTIONALLY CONCEALED INCOME/FURNISHED INACCURATE PARTICULARS O F INCOME. THE A.O. ALSO EXPRESSED THE VIEW THAT THE ASSESSEE HAD THE BENEFIT OF AUDIT REPORT OBTAINED IN FORM NO.29B OF THE ACT WHI LE FILING RETURN OF INCOME. HE NOTICED THAT THE AUDIT REPORT WAS OBTAI NED ON 3.9.2011 AND THE RETURN OF INCOME WAS FILED ON 30.9.2011. A CCORDINGLY, HE TOOK THE VIEW THAT IT CANNOT BE A CASE OF MERE OMIS SION TO OFFER INCOME. HE ALSO EXPRESSED THE VIEW THAT THIS SUPPR ESSION OF INCOME HAS ARISEN ON ACCOUNT OF SELECTION OF THE CASE ON S CRUTINY. ITA NO.878/BANG/2019 M/S. VANSHEE BUILDERS & DEVELOPERS PVT. LTD., BENGA LURU PAGE 3 OF 7 ACCORDINGLY, THE A.O. HELD THAT THE PENALTY IS LEVI ABLE U/S 271(1)(C) OF THE ACT. ACCORDINGLY, LEVIED MINIMUM PENALTY OF RS .28,63,812/- U/S 271(1)(C) OF THE ACT. 4. THE LD. A.R. INITIALLY ADVANCED HIS ARGUMENTS ON VARIOUS LEGAL GROUNDS. ON MERITS, THE LD. A.R. SUBMITTED THAT TH E PROFIT BEFORE TAX DECLARED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOU NT PLACED AT PAGE 52 OF THE PAPER BOOK WAS RS.1,52,18,851/-. THE ABO VE SAID FIGURE INCLUDED RENTAL RECEIPT OF RS.3,44,64,027/- AND COR RESPONDING EXPENSES. IN THE RETURN OF INCOME, THE PROFIT AND LOSS ACCOUNT FIGURES ARE REQUIRED TO BE ENTERED AT PART A P & L. IN THIS PART, THE DATA/DETAILS OF PROFIT AND LOSS ACCOUNT ARE REQ UIRED TO BE ENTERED AS IT IS. THE COMPUTATION OF INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY IS REQUIRED TO BE FILLED IN AT SCHE DULE HP AND THE COMPUTATION OF INCOME UNDER THE HEAD INCOME FROM BU SINESS IS REQUIRED TO BE FILLED IN AT SCHEDULE BP. THE BIF URCATION OF PROFIT AND LOSS ACCOUNT FIGURES INTO VARIOUS HEADS OF INCOME I S REQUIRED TO BE CARRIED OUT IN THE ABOVE SAID SCHEDULES. 5. THE LD A.R SUBMITTED THAT THE PERSON WHO FIL LED THE RETURN OF INCOME HAS ERRONEOUSLY FILLED UP THE DETAILS RELATI NG TO INCOME FROM BUSINESS IN THE PROFIT AND LOSS ACCOUNT AT PART A P & L. HENCE THE PROFIT BEFORE TAX AMOUNT WAS ERRONEOUSLY REPO RTED AT RS.8,49,857/- AT ITEM 43 IN PART A P&L, INSTEAD OF THE CORRECT AMOUNT OF RS.1,52,18,851/-. 6. THE LD A.R FURTHER SUBMITTED THAT THE COMPUTATIO N OF BOOK PROFIT U/S 115JB IS TO BE REPORTED IN SCHEDULE MAT . THE SOFTWARE AUTOMATICALLY ADOPTS THE PROFIT BEFORE TAX AMOUNT SHOWN IN ITEM 43 IN PART-A P&L. ACCORDINGLY, THE SOFTWARE AL SO ADOPTED THE FIGURE OF RS.8,49,857/- AS NET PROFIT FIGURE AND AC CORDINGLY, THE BOOK PROFIT WAS ALSO ARRIVED AT THE SAME FIGURE. ITA NO.878/BANG/2019 M/S. VANSHEE BUILDERS & DEVELOPERS PVT. LTD., BENGA LURU PAGE 4 OF 7 7. THE LD A.R SUBMITTED THAT THE RETURN OF INCOME W AS FILED ON 30-09-2011. AS PER THE PROVISIONS OF SEC.115JB, TH E ASSESSEE HAS ALSO OBTAINED AN AUDIT REPORT IN FORM NO.29B ON 03- 09-2011 ITSELF. THE AUDITOR HAS CORRECTLY REPORTED THE BOOK PROFIT FIGURE AT RS.1,52,18,852/-. THE AUDITED PROFIT AND LOSS ACCO UNT ALSO DISCLOSES THE VERY SAME FIGURE. ACCORDINGLY, THE LD A.R SUBM ITTED THAT THE ASSESSEE HAS CORRECTLY DISCLOSED THE BOOK PROFIT AM OUNT IN ALL OTHER DOCUMENTS. THERE WAS UNDER REPORTING OF BOOK PROFI T IN THE RETURN OF INCOME AND IT HAS OCCURRED DUE TO ERRONEOUS FILL ING OF THE RETURN OF INCOME. ACCORDINGLY, HE SUBMITTED THAT THE MIST AKE OR ERROR REPRESENTS BONAFIDE MISTAKE AND IT HAS HAPPENED INA DVERTENTLY. THE LD A.R PLACED HIS RELIANCE ON THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPE RS P LTD VS. CIT (2012)(348 ITR 306) AND SUBMITTED THAT THE PENALTY SHOULD NOT BE LEVIED FOR ERRONEOUS CLERICAL MISTAKES. 8. THE LD D.R, ON THE CONTRARY, SUBMITTED THAT THE ASSESSEE HAS OBTAINED AUDIT REPORT IN FORM NO.29B ON 03-09-2011 ITSELF AND THE AUDITOR HAS COMPUTED THE BOOK PROFIT U/S 115JB OF T HE ACT AT RS.1,52,18,852/-. HOWEVER, IN THE RETURN OF INCOME FILED ON 30-09- 2011, THE BOOK PROFIT FIGURE WAS REPORTED AT RS.8,4 9,857/- DESPITE THE AVAILABILITY OF THE AUDIT REPORT. THE ASSESSEE DID NOT TAKE EFFORT TO RECTIFY THE SO-CALLED MISTAKE ALSO. THE FACT OF UNDER REPORTING HAS SURFACED ONLY BECAUSE THE RETURN OF INCOME WAS TAKE N UP FOR SCRUTINY. ACCORDINGLY, HE SUBMITTED THAT THERE WAS DELIBERATE ATTEMPT TO UNDER REPORT THE BOOK PROFIT, WHICH CONS TITUTED THE TOTAL INCOME OF THE ASSESSEE. ACCORDINGLY, HE SUBMITTED T HAT THE PENALTY WAS RIGHTLY CONFIRMED BY LD CIT(A). WITH REGARD TO THE VARIOUS LEGAL CONTENTIONS, THE LD D.R PLACED HIS RELIANCE ON THE DECISION RENDERED BY LD CIT(A), WHO HAD REJECTED ALL THE LEGAL CONTEN TIONS BY A SPEAKING ORDER. ITA NO.878/BANG/2019 M/S. VANSHEE BUILDERS & DEVELOPERS PVT. LTD., BENGA LURU PAGE 5 OF 7 9. WE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. WE NOTICE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND ACCORDINGLY, ITS ACCOUNTS WERE AUDITED UNDER COMPANIES ACT. THE AUD ITED PROFIT AND LOSS ACCOUNT DISCLOSED NET PROFIT BEFORE TAX AT RS. 1,52,18,851/-. THE AUDIT REPORT OBTAINED IN FORM NO.29B U/S 115JB OF T HE ACT ALSO DISCLOSES THE NET PROFIT AT RS.1,52,18,851/- AND TH E BOOK PROFIT ALSO ARRIVED AT THE VERY SAME FIGURE. THE ASSESSEE HAS FURNISHED A COPY OF RETURN OF INCOME, WHICH IS FILLED UP BY USING SO FTWARE. IT IS KNOWN TO EVERYONE THAT THE RETURN OF INCOME IS UPLOADED E LECTRONICALLY BY USING SOFTWARE. IF THE DATA/DETAILS ARE ENTERED CO RRECTLY, THEN THE FEATURES OF SOFTWARE PICKS UP THE RELEVANT DATA FRO M THE DETAILS AND ACCORDINGLY FILL UP VARIOUS SCHEDULES. 10. IN THE RETURN OF INCOME, IN PART A-P&L , THE DATA RELATING TO PROFIT AND LOSS ACCOUNT ARE REQUIRED TO BE FILLED I N. A PERUSAL OF THE DETAILS FILLED THEREIN WOULD SHOW THAT THE ASSESSEE HAS FILLED IN BUSINESS INCOME DETAILS THEREIN, INSTEAD OF FILLING UP THE DETAILS OF PROFIT AND LOSS ACCOUNT. THIS MISTAKE HAD THE CASC ADING EFFECT AND THE SOFTWARE HAS PICKED UP THE ERRONEOUS FIGURES FO R COMPUTING BOOK PROFIT U/S 115JB OF THE ACT IN SCHEDULE MAT. IT IS THE SUBMISSION OF THE ASSESSEE THAT THE BOOK PROFIT COMPUTATION ES CAPED THE ATTENTION, SINCE THE TAX WAS PAID AS PER NORMAL COM PUTATION OF TOTAL INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDING S ONLY, THE MISTAKE WAS REALISED BECAUSE THE BOOK PROFIT TURNED OUT TO BE MORE THAN THE TOTAL INCOME COMPUTED UNDER NORMAL PROVISI ONS OF THE ACT. ACCORDINGLY, IT WAS SUBMITTED THAT THE MISTAKE HAS OCCURRED DUE TO ERRONEOUS FEEDING OF DATA WHILE FILLING UP RETURN O F INCOME. 11. WE FIND MERITS IN THE SUBMISSION OF THE ASS ESSEE. FROM THE FOREGOING DISCUSSIONS, IT CAN BE NOTICED THAT INCOR RECT COMPUTATION OF BOOK PROFIT HAS HAPPENED DUE TO ERRONEOUS FILLIN G UP OF DATA IN THE RETURN OF INCOME. IN OUR VIEW, THE SAME IS A BONA FIDE AND ITA NO.878/BANG/2019 M/S. VANSHEE BUILDERS & DEVELOPERS PVT. LTD., BENGA LURU PAGE 6 OF 7 INADVERTENT ERROR. IN THE CASE OF PRICE WATERHOUSE COOPERS P LTD (SUPRA), THE HONBLE SUPREME COURT CONSIDERED THE V ALIDITY OF PENALTY LEVIED ON BONA FIDE MISTAKES AND IT WAS HELD AS UND ER:- 17. HAVING HEARD LEARNED COUNSEL FOR THE PARTIES, WE A RE OF THE VIEW THAT THE FACTS OF THE CASE ARE RATHER PECULIAR AND SOMEW HAT UNIQUE. THE ASSESSEE IS UNDOUBTEDLY A REPUTED FIRM AND HAS GREAT EXPERTI SE AVAILABLE WITH IT. NOTWITHSTANDING THIS, IT IS POSSIBLE THAT EVEN THE ASSESSEE COULD MAKE A 'SILLY' MISTAKE AND, INDEED THIS HAS BEEN ACKNOWLEDGED BOTH BY THE TRIBUNAL AS WELL AS BY THE HIGH COURT 18. THE FACT THAT THE TAX AUDIT REPORT WAS FILED ALONG WITH THE RETURN AND THAT IT UNEQUIVOCALLY STATED THAT THE PROVISION FOR PAYMENT WAS NOT ALLOWABLE UNDER SECTION 40A(7) OF THE ACT INDICATES THAT THE ASSESSEE MADE A COMPUTATION ERROR IN ITS RETURN OF INCOME. APART FR OM THE FACT THAT THE ASSESSEE DID NOT NOTICE THE ERROR, IT WAS NOT EVEN NOTICED EVEN BY THE ASSESSING OFFICER WHO FRAMED THE ASSESSMENT ORDER. IN THAT SENSE, EVEN THE ASSESSING OFFICER SEEMS TO HAVE MADE A MISTAKE IN O VERLOOKING THE CONTENTS OF THE TAX AUDIT REPORT. 19. THE CONTENTS OF THE TAX AUDIT REPORT SUGGEST THAT THERE IS NO QUESTION OF THE ASSESSEE CONCEALING ITS INCOME. THERE IS ALSO N O QUESTION OF THE ASSESSEE FURNISHING ANY INACCURATE PARTICULARS. IT APPEARS T O US THAT ALL THAT HAS HAPPENED IN THE PRESENT CASE IS THAT THROUGH A BONA FIDE AND INADVERTENT ERROR, THE ASSESSEE WHILE SUBMITTING ITS RETURN, FA ILED TO ADD THE PROVISION FOR GRATUITY TO ITS TOTAL INCOME. THIS CAN ONLY BE DESC RIBED AS A HUMAN ERROR WHICH WE ARE ALL PRONE TO MAKE. THE CALIBRE AND EXP ERTISE OF THE ASSESSEE HAS LITTLE OR NOTHING TO DO WITH THE INADVERTENT ER ROR. THAT THE ASSESSEE SHOULD HAVE BEEN CAREFUL CANNOT BE DOUBTED, BUT THE ABSENC E OF DUE CARE, IN A CASE SUCH AS THE PRESENT DOES NOT MEAN THAT THE ASSESSED IS GUILTY OF EITHER FURNISHING INACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. 20. WE ARE OF THE OPINION, GIVEN THE PECULIAR FACTS OF THIS CASE, THAT THE IMPOSITION OF PENALTY ON THE ASSESSEE IS NOT JUSTIF IED. WE ARE SATISFIED THAT THE ASSESSEE HAD COMMITTED AN INADVERTENT AND BONA FIDE ERROR AND HAD NOT INTENDED TO OR ATTEMPTED TO EITHER CONCEAL ITS INCO ME OR FURNISH INACCURATE PARTICULARS. IN OUR VIEW, THE DECISION OF HONBLE SUPREME COURT WOULD COME TO THE HELP OF THE ASSESSEE IN THE FACTS AND CIRCUMSTA NCES OF THE CASE. ACCORDINGLY, WE HOLD THAT THE IMPOSITION OF PENALTY ON THE ASSESSEE IS NOT JUSTIFIED. 12. THE ASSESSEE HAS RAISED MANY LEGAL CONTENT IONS BEFORE US. SINCE WE HAVE DELETED PENALTY ON MERITS, WE DO NOT FIND IT NECESSARY TO ADDRESS THOSE LEGAL CONTENTIONS. ITA NO.878/BANG/2019 M/S. VANSHEE BUILDERS & DEVELOPERS PVT. LTD., BENGA LURU PAGE 7 OF 7 13. IN VIEW OF THE FOREGOING DISCUSSIONS, WE SE T ASIDE THE ORDER PASSED BY LD CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT FOR THE YEAR UNDER CONSIDERATI ON. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST OCT, 2020 SD/- (GEORGE GEORGE K. ) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 21 ST OCT, 2020. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.