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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, Honble & SHRI ARJUN LAL SAINI, Honble
सुनवाई की तारीख/ Date of hearing: 02.11.2020 उ�घोषणा क� तार�ख/Pronouncement on: 06.11.2020 आदेश /O R D E R
PER PAWAN SINGH, JM:
This appeal by the Assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals), Valsad dated 02.12.2015, which in turn arise from the penalty order levied under section 271(1)(c) for the Assessment Year (AY) 2010-11. The assessee raised the following grounds of appeal as under: The Learned CIT(A) has erred in law and facts to confirm levy of penalty
1. without framing charge that there is furnishing of inaccurate particulars or concealment of income.
2. The Learned CIT(A) has erred in law and facts to confirm that the penalty on income of Rs.8,59,500/- cannot be levied on refusal of bonafide claim Mayur Construction Ltd. Vs. ACIT, Valsad/ A.Y. 2010-11 u/s 80IB(10) as there is no furnishing of inaccurate particulars or concealment of income.
3. The Learned CIT(A) has erred in law and facts to confirm that the penalty on income of Rs.15,61,500/- cannot be levied on sales shown in F.Y. 2010- 11 but treated by A.O. in F.Y. 2009-10 on different stand as there is no furnishing of inaccurate particulars or concealment of income.
4. The Learned CIT(A) has erred in law and facts to confirm levy of penalty of Rs.11,22,133/- u/s.271(1)(c).
Your Appellant leaves the right to amend, add, or alter the grounds at the time of regular hearing.”
Brief facts of the case are that the assessee is a partnership firm engaged in the business of construction of development of properties. The assessee filed its Return of Income for A.Y. 2010- 11 on 27.09.2010 declaring income of Rs.1.08 crores. In the computation of income the assessee claimed deduction under section 80IB(10) of Rs.24,66,080/-.
3. A survey under section 133A was carried out at the business premises of assessee on 10.11.2009. During survey certain incriminating material in the form of loose papers containing details of “on money” of Rs.24,21,000/- received by assessee on account of sale of plots, were recovered. During the assessment, the Assessing Officer (AO) noted that out of the so-called ‘on money’ of Rs.24,21,000/-, the assessee has accounted only Rs.8,59,500/- in the Profit and Loss Account for the year under Mayur Construction Ltd. Vs. ACIT, Valsad/ A.Y. 2010-11 consideration and remaining amount of Rs.15,61,500/- was shown as advance in the Balance Sheet as on 31.03.2010 and was allegedly offered to tax in subsequent year i.e. A.Y. 2011-12. The AO was of the view that assessee has wrongly claimed deduction of ‘on money’ receipts under section 80IB(10). The AO issued show- cause notice, how the “on money” receipt is claimed as deduction under section 80IB(10).
The assessee filed its reply and contended that assessee has no other source of income and that “on money” relates to business of receipt and eligible for deduction u/s.80IB(10) of the Act. The contention of assessee was not accepted by the AO by taking view that said money was not shown in the sale consideration in the sale deeds of the flats sold by assessee and the said ‘on money’ be taxed as “Income from other sources” and accordingly deduction under section 80IB(10) on such ‘on money’ of Rs.8,59,500/- was denied. The AO also brought the remaining amount of Rs.15,61,500/- to tax in the year under consideration ( AY-2010- 11). The AO while passing assessment order initiated penalty proceedings under section 271(1)(c) of the Act.
5. On appeal before the ld. CIT (A), the action of AO was affirmed. On receipt of order from ld. CIT(A) in quantum assessment, the AO passed penalty order under section 271(1)(c) of the Act dated 09.01.2015. Before passing the penalty order AO issued show- Mayur Construction Ltd. Vs. ACIT, Valsad/ A.Y. 2010-11 cause notice under section 274 read with section 271(1)(c). In reply to the show-cause notice, the assessee submitted that assessee has not made any incorrect claim and no inaccurate particulars were furnished. Mere making a claim which is not sustainable in law itself will not account to furnishing inaccurate particulars regarding the income of the assessee. The contention of the assessee was not accepted by the AO. The AO noted that 100% of tax sought to be evaded on the the additions made by AO is Rs.7,48,089/-. The AO levied penalty @ 150% of tax sought to be evaded. Thus, the AO worked out penalty of Rs.11,22,133/-.
6. On further appeal before the ld. CIT(A), the order of penalty was upheld. Thus, further aggrieved, the assessee has filed present appeal before this Tribunal.
7. The appeal came up for hearing on 01.09.2020. The Learned Authorised Representative (AR) of the assessee sent an application through e-mail stating therein that quantum appeal being is still pending for disposal before the Tribunal. It was further stated that the quantum appeal has been transferred from Ahmedabad Bench to Surat Bench of ITAT, but no notice of hearing has been received so far and that the quantum appeal may be clubbed with the present appeal. On the application of assessee, we directed the registry (bench clerk) to find out the status of quantum appeal in ITA No.1577/Ahd/2014 Mayur Construction Ltd. Vs. ACIT, Valsad/ A.Y. 2010-11 and club the quantum appeal with this appeal and adjourned the for hearing for 02.11.2020.
On the direction of Bench, Bench Clerk made a requisition to Ahmedabad Bench of Tribunal vide his letter dated 11.09.2020 to find out the status of ITA No. 1577/Ahd/2014. In response to requisition of Bench Clerk, the registry of Ahmedabad Tribunal sent the original file of to Surat Bench of Tribunal. On perusal of record of ITA No.1577/Ahd/2014, we find that quantum appeal of assessee was heard on 13.02.2017 and order was pronounced on 29.06.2017. In the order dated 29.06.2017, the assessee was granted full relief, thereby allowing deduction under section 80IB(10) of the Act and deleting the addition of Rs.15,61,500/-.
9. When this appeal was taken up for hearing on 02.11.2020, we find that ld.AR of the assessee again sent an application through e-mail for seeking adjournment on the ground that quantum appeal is still pending. It is further stated in the application that no notice of hearing in quantum appeal had been received so far. However, to our surprise the application was moved by same learned counsel who appeared before Ahmedabad Bench of Tribunal and argued the case of the assessee, wherein the assessee was granted full relief claimed in quantum assessment. In the aforesaid circumstances, we do not find any reason for adjourning the case Mayur Construction Ltd. Vs. ACIT, Valsad/ A.Y. 2010-11 again and again and no reason left to accept the request for clubbing the appeal. Accordingly, the adjournment application of assessee was rejected. Since none appeared on behalf of the assessee 02.11.2020, therefore, we left no option except to decide the appeal on basis of material available on record with the assistance of learned Departmental Representative (DR) for the Revenue.
10. The Ld. DR for the Revenue submits that penalty proceedings are separate and independent. The learned DR defended the order of lower authorities. However, on confronting the fact that additions/disallowance on the basis of which the penalty was initiated has been deleted by Co-ordinate Bench of Tribunal, the ld. DR submits that Bench may take decision in accordance with the Law.
11. We have noted that in the quantum assessment, the assessee filed appeal before the Tribunal and raised following grounds of appeal as under:
1. The learned Commissioner of Income Tax (Appeal) has erred in law and in facts to confirm addition of Rs.15,61,500/- as income being the sales effected in F.Y. 2010-11 and also erred to assess it under the head income from other sources.
2. The learned Commissioner of Income Tax(Appeal) has erred in law and in facts to confirm the assessment of the income of Rs.8,59,500/- being on money under the head income from other sources as against business income.
Mayur Construction Ltd. Vs. ACIT, Valsad/ A.Y. 2010-11
3. The learned Commissioner of Income Tax(Appeal) has erred in law and in facts to not allowing deduction u/s.80IB(10) for on money of Rs.8,59,500/-
4. The learned Commissioner of Income Tax(Appeal) has erred in law and in facts to not allowing deduction u/s.80IB(10) for on money of Rs.15,61,500/-
5. The appellant craves leave to add, amend, alter or delete any or all the above grounds of appeal
.”
12. The Coordinate bench of Tribunal after considering the contention of both the parties passed the following order. “7. We have heard the rival contention and perused the records placed before us. From going through the grounds of appeals, we observe that following three issues needs adjudication.
1. Whether “On money” is taxable as business income or income from other sources.
2. Whether "On money" of Rs.15,61,500/- pertaining to flat sold during financial year 2010-2011 are to be taxed in the year of receipt i.e financial year 2009-2010.
Whether deduction u/s.80IB(10) of the Act is allowable on the "on money" 8. We observe that assessee is in the business of construction of flats since financial year 2001-02 and project named "Adinath" was completed long back. During the course of survey u/s,133A of the Act certain loose papers showing details of "On money" receipts towards five flats were found and following amount of "On money" was received thereon.
Sr.No. Flat No. On money Year of sale deed and amount transfer of possession 1. A-1/102 7,02,000/- F.Y. 2010-11 2. B-701 3,33,000/- F.Y. 2009-10 3. B-707 5,26,500/- F.Y. 2009-10 4. B-703 5,26,500/- F.Y. 2010-11 5. B-401 3,33,000/- F.Y. 2010-11 Total 24,21,000/- 7 Mayur Construction Ltd. Vs. ACIT, Valsad/ A.Y. 2010-11
9. We further notice that “On money” Rs.8,59,500/- has been as counted as revenue in financial year 2009-10 and Rs.15,61,500/- has been accounted for as revenue in financial year 2010-11.
Taking up first issue as to whether "On money" is to be offered for revenue in the year of receipt of the "On money" or year in which the possession is handed over and sale deed is registered. We find that this issue is squarely covered by the decision of the Co-ordinate Bench in the case of DCIT Vs Ohm Developers (supra) Co-ordinate Bench has followed the judgment of jurisdictional High Court in the case of CITvs. MotilalC.Patel and Co. reportedat 173 ITR 666 (Guj.) and held that the amount of "on money" is to be accounted for in the year when sale deed is executed by observing as follows: 5.4. In the case in hand, the admitted position is that during the course of search, certain documents were seized. On the basis of the documents, the AO observed that the total price related to the sale of flats was Rs.7,88,02,178/- against the documented price of Rs.2,48,38,289/-. The AO observed that on the statement taken on oath of Shri Shantilal Patel admitted that the receipts contain net profit of Rs. 2,29,20,847/-. Before the AO, the explanation of the assessee was that substantial amount of the sale consideration was pending for collection. Before the AO, in response to the notice issued, the assessee submitted that total sale consideration is Rs. 1,39,88,777/- only rather than Rs. 7,53,83,326/- as entered in the assessee's working (Rs. 7,88,02,178/-) is the total receipt as per annexure B-2/25 and B- 02/26. The assessee objected to the addition on the ground that even though the sale consideration of the project was received, the income has not accrued as sale deed has not been signed or possession in respect of flats has not been handed over. The assessee relied on the judgements of Hon 'ble Gujarat High Court in the case(s) of CIT vs. Asha Land Corporation (133 ITR 55)[Guj], CAT vs. Shah Doshi& Co. (133 ITR 23)[Guj.J, ChdambaramChettiar v.v. C1T (4 ITR 309)[Mad.] and Kunjemat& Sons vs. CIT (9 ITR 359)[All./. The AO in para-10 of the assessment order computed the total undisclosed income for the block period at Rs.2,61,78,438/-. However, the AO opted to adopt the undisclosed income on the basis of the statement on oath of one Shri Sunil H.Desai being higher of the two figures. The contention of the assessee is that the entire receipts have been disclosed and declared in the income-tax return in the subsequent years. It is the contention of the assessee that against the total sale consideration adopted by the AO at Rs.7,88,02,178/-, the assessee had disclosed the sale consideration at Rs.8,68,55,671/- and the taxes on such income has Mayur Construction Ltd. Vs. ACIT, Valsad/ A.Y. 2010-11 been paid. Therefore, the assessee cannot be subjected to double taxation.
The undisputed facts emerged from the above discussion is that the assessee is engaged in the business of construction. The assessee has been showing the flats in question as stock-in-trade, therefore in view of the decision of the Coordinate Bench rendered in the case of ITO vs. Shri Siddharth S.Patel in &1853/Ahd/2003(supra). The provisions of section 2(47) would not be applicable. The assessee has disclosed the 'on money' in the return of income in the year in which the sale-deed was executed. The Revenue has not rebutted this contention. Therefore, in the light of the judgement of Hon'ble Gujarat Hi ah Court rendered in the case of CAT vs. MotilalC.Patel and Co. reported at 173 ITR 666 (Guj.J, such amount can be subjected to tax when sale-deed is actually executed. Since the Hon'ble Gujarat High Court has held that the amount would become for the assessment year in which the sale transaction is completed. In the case in hand, it is not disputed that sale-deeds were executed in the year subsequent to the year under appeal. Therefore, in view of the binding precedent, we are of the considered view that the authorities below were not justified in taxing the amount including 'on money' during the year under appeal. Further, the assessee has submitted that it has offered for tax the amount including 'on money' in the year whenever sale-deed was executed. This fact is also not controverted by the Revenue by placing any contrary material on record. Therefore, the AO is hereby directed to verify whether the assessee has offered for taxing the amount as its income in the year when the sale-deed was executed. If it is found that the assessee has offered the amount in the year in which the sale-deed was executed, then the AO would delete the addition made in this year. We are conscious of the fact that this Tribunal had taken a contrary view, since now the decision of the Coordinate Bench in the case of ITO vs. Shri Siddharth S.Patel in ITA Nos. 1852& 1853/Ahd/2003 is brought to our notice and no distinguishing fact is pointed out by the ld.Sr. D.R. In the light of the above discussion, the appeal of the assessee (in the case of M/s. Ohm Developers) is allowed for statistical purposes in the terms as indicated hereinabove.
11. From perusal of above decision of Co-ordinate Bench we find that in the case of assessee where there is no evidence put forth by the Revenue that there is any other source of income or receipts by the assessee other than from sale of flats at "Adinath" project. We therefore respectfully following the decision of Co- ordinate Bench in the case of DCIT Vs Ohm Developers (supra) are of the view that assessee has rightly accounted for the "On money" receipts of Rs.8,59,500/- 9 Mayur Construction Ltd. Vs. ACIT, Valsad/ A.Y. 2010-11 on sale of two flats sold during the assessment year 2010-11 (financial year 2009-10) and the remaining amount of Rs. 15,61,500/- in subsequent assessment year 2011-12. This issue is decided in favour of assessee.
As far as the issue as to whether the amount of "On money" is to be taxed as business income or income from other sources. We observe that the loose paper found during the course of survey were sufficient piece of evidence that "On money" was received towards sale of flats. Ld. AOs contented that "On money" amount has not been included in the total value of sales construction shown in the registered sale deed. We find that assessee has disclosed the amount as business receipt and details of purchasers of the flats were provided in the sale deed. Revenue had no estopple to call the information from the purchasers about the “On money" paid by them, which however has not been taken by the Revenue authorities in the case before us. In these circumstances we are of the considered opinion that "On money" received on account of sale of flats is a part of business income only and cannot be taxed as income from other sources. Accordingly this issue is also decided in favour of the assesse.
13. Now we take up last issue about the eligibility of claim of deduction u/s. 80IB(10) of the Act on the "On money". We find that project named "Adinath" was completed in financial year 2001-2002. I n preceding years also assesse has claimed and has been allowed the deduction u/s 80IB(10) of the Act by the Revenue authorities. There is not dispute about fulfillment of conditions by the project completed by the assesse provided in section 80IB(10) of the Act.
14.As far as eligibility of "On money" for deduction u/s,80IB(10) of the Act is concerned, we find that Co-ordinate Bench in the case of M/s.Nilka nth Develpers Vs ITO (supra) has dealt the issue of allowability of deduction u/s.80IB(10) of the Act on the "On money" in detailed by observing as follows:
We have heard the rival submissions and perused the orders of the lower authorities and material available on record. In the instant case, we find that the Assessing Officer observed in respect of activities of the assessee during the year under consideration as follows:- "3. The assessee is a partnership firm, engaged in the activity of developing and building housing projects approved by the local authority. The assessee-firm commenced its residential project in FY 2009-10 called Nilkanth Heights, Block A, B & C at Dumbhal, Sural. During the year under consideration the assessee has not completed the said project but booked receipt from sale of flats during the year for which sale documents have been executed and shown net profit at Rs. 78,870/- after claiming deduction 80IB of the Act. "
Mayur Construction Ltd. Vs. ACIT, Valsad/ A.Y. 2010-11 A survey operation u/s 133A of the Act was conducted on 8. 27.08.2009. During the course of survey, loose documents marked as "BF-44" was found. During the course of survey, the assessee explained that in the file there are expense vouchers alongwith receipts of amounts received which is already recorded in the books of accounts. Besides, the amounts recorded in page Nos. 59-60, were not accounted in the books of accounts which represents income besides regular income of the business. In these facts, the assessee disclosed additional income of the business at Rs. 1,25,00,000/- in addition to the income already recorded in the books of accounts.
During the course of survey, the assessee further stated that it would not claim deduction u/s.80IB(10) in respect of the said additional income. However, in the Return of Income filed by the assessee, the assessee claimed deduction u/s 80IB(10) of the Act in respect of the said additional income of Rs.1,25,00,000/- also. The Assessing Officer did not allow deduction u/s 80IB(10) in respect of this additional income of Rs.1,25,00,000/- on the ground that the assessee could not give details of the receipts of Rs.1,25,00,000/- and could not give evidence to show that the same was in respect of business of the assessee.
10. On appeal, the CIT(A) confirmed the addition made by the Assessing Officer. He observed that the assessee, during the survey, admitted unrecorded receipts in the regular books of accounts. Had the Department not conducted survey u/s 133A at the business premises of the assessee firm and detected the undisclosed income, the assessee would not have disclosed these receipts to the Department. The assessee has included these undisclosed receipts in the total turnover and consequently in its net profit and claimed deduction u/s 80IB(10) of the Act. Thus, no tax has been paid by the assessee on the income which he was forced to disclose due to the action/detection by the Department during the survey proceedings. According to the CTT(A), the intention of the legislature is to give incentive to honest assessees to comply with the provisions of the Act and disclose the true and correct income voluntarily and not to defaulters/evaders of income-tax. Therefore, the assessee has wrongly claimed the benefit of deduction u/s 8OIB(10) of the Act. He, therefore, held that the Assessing Officer has correctly assessed the additional income of Rs. 1,25,00,000/- disclosed by the assessee during the course of survey as income from other sources.
Before us, the AR of the assessee claimed that, details of Rs. 1,25,00,000/- was noted in the loose paper found during the course of survey and the same was treated as income of the assessee only on the basis of the said document. During the course of survey, the assessee explained that the same represents an additional income of the business of the assessee which was accepted by the survey officials. As the assessee's 11 Mayur Construction Ltd. Vs. ACIT, Valsad/ A.Y. 2010-11 business was solely of 'Nilkanth Heights, Block A, B & C at Dumbhal, Surat Project', it was not open to the Department to not allow statutorily allowable deduction after accepting the same as additional income of the said business. The AR of the assessee has relied upon following decisions:-
Order of Hon'ble Gujarat High Court in the case of CIT vs. (i) Mhaskar General Hospital (Guj), in Tax Appeal No. 1474 of 2009, order dated 09.08.2011; CIT v. Simian Paper & Boards Ltd., (2009) 314 TTR 119; (ii) ITAT, Ahmedabad Bench order dated 19.11.2010 in the case of AC (iii) IT v. M/s. Virat Gems passed in & 3756/Ahd/2008. ITAT, Ahmedabad Bench order dated 21.09.2012 in the case of (iv) CIT v. M/s. Shree Padmavati Developers passed in ITA No.268/Ahd/2010. ITAT; Rajkot Bench order dated 15.12.1999 in the case of ACIT v. (v) Prabhudas S. Parekh passed in ITA No. 1408/Ahd/1993.
12. We find that this Bench of the Tribunal in the case of CIT v. M/s. Shree Padmavati Developers (supra) has held as under:-
"7. We have heard both the sides. We have also perused the impugned statement of Mr.MahendraKataria recorded on 27/28.12.2006. In reply to a question, it was categorically stated, quote " (i)Rs.50,000/- sales proceeds of flat not recorded in books. " Unquote. Consequent thereupon, the said amount ofRs.50 lacs was duly disclosed in the Profit & Loss account drawn on 31.3.2007. In the case of the CIT vs. Suman Paper and Board Ltd. [2009/314 ITR 119 (Guj.) an observation has been made that manufacturing and sale of Board paper and craft paper happened to be the only source of income of the assessee, therefore the amount disclosed consequence upon the search partakes the character of business income and eligible for the deduction u/s.80IB/80IA.of the I T. Act. In the present case, the assessee has admitted that the impugned amount was part of the sale consideration received in cash at the time of booking of flats and, therefore, the amount had direct and proximate connection with the normal business of construction activity, hence eligible for the deduction u/s.80IB(10) of the IT. Act. Because of the factual as also legal aspect of the case, we hereby confirm the finding of Learned CIT(Appeals) and dismiss this ground of the Revenue. "
13. In the instant case, we find that it is not in dispute that the only business of the assessee was of developing and building of housing project styled "Nilkanth Heights Project". No material has been brought before us to show that the assessee was engaged in any 12 Mayur Construction Ltd. Vs. ACIT, Valsad/ A.Y. 2010-11 other activity. Further, during the course of survey, the assessee has categorically staled that the amounts mentioned in loose documents marked as "BF-44" represents additional income of the said business. Only on the basis of this declaration of the assessee, the income of the assessee of Rs. 1,25,00,000/- was accepted by the survey officials in the hands of the assessee and was assessed in the hands of the assessee. Further, we find that as per provisions of Section 80IB, deduction is allowable in respect of income derived from the eligible housing project. In the instant case, it is not in dispute that the business of the assessee of developing and building residential project in the name and style of “Nilkanth Heights Project” was eligible housing project u/s 80IB of the Act. Therefore, in view of the facts and circumstances of the case, statutorily allowable deduction to the assessee cannot be denied. We, therefore, allow the ground of appeal
of the assessee.
15. As far as the case relied upon by Learned Departmental Representative in the case of ACIT Vs VrajDevelper is concerned we find that facts are not similar to that we are dealing in, so much so that, in this case assessee had not even identified the customer from whom such unaccounted receipt i.e "On money" was received which could have helped to ascertain the proported existence of obligation to return the "On money". Due to lack of this details, Coordinate Bench decided that the unaccounted money is to be taxed in the year of receipts itself. Whereas the facts of the appeal, we are dealing in are different as all details relating to specific flats were provided and were even found by Revenue authorities during the course of survey. The "On money" which was offered to revenue in subsequent assessment year were shown as liability as "advance for sale of flat" Due to these variation of facts Revenue will be unable to get any benefit out of this decision.
We therefore in the given facts and circumstances of the case and respectfully following the decisions of Co-ordinate Bench and in the case of Nilkanth Developers Vs ITO (supra) are of the view that as the " Adinath" project was eligible for housing project u/s.80IB(10) of the Act and there is no other business carried on by the assessee, it deduction u/s.80IB(10) of the Act has been rightly claimed on the “On money”. This issue is also decided in favour of assessee.
In the result, appeal of the assessee is allowed.” 13 Mayur Construction Ltd. Vs. ACIT, Valsad/ A.Y. 2010-11
Considering the fact that the additions on the basis of which the penalty was initiated and levied by the AO has been deleted by Co- ordinate Bench of Tribunal in quantum assessment, thus, in our considered view, the penalty order would not survive. Hence, the grounds of appeal raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 06-11-2020.