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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’: NEW DELHI
Before: SMT. DIVA SINGH & SHRI ANADEE NATH MISSHRA
This appeal by Revenue is filed against the order of Learned Commissioner of Income Tax (Appeals)-27, New Delhi, [“Ld. CIT(A)”, for short] dated 11.03.2016 for Assessment Year 2009-10. The grounds of appeal are as under:
“1. The Ld. Commissioner of Income Tax (Appeals) has erred in law and on the facts in deleting the penalty u/s 271(1)(c) of the I.T. Act 1961 of Rs. 1,27,50,670/- imposed by the AO.
ITA No.-3225/Del/2016. Indirapuram Habitat Centre Private Limited.
2. The Ld. Commissioner of Income Tax (Appeal) has erred in law and on the facts in ignoring the fact that the Ld. CIT(A) has confirmed the addition of Rs. 3,75,13,010/- made by AO in assessment order dated 21.12.2011.
3. The Ld. Commissioner of Income Tax (Appeal) has erred in law and on the facts in stating / deciding on issues like the assessee is a developer and not contractor without appreciating the fact that this issue has already been decided by the earlier CIT(A) and this issue is not open for adjudication at CIT(A) level again. 4. That the Ld. CIT(A) has erred on facts and on law in ignoring the fact that the companies which have provided unsecured loan don’t have the capacity. 5. (a) The order of the CIT(Appeals) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, alter or amend any / all of the grounds of appeal before or during the course of the hearing of the appeal.”
(2) The Assessment order dated 21.12.2011, U/s 143(3) of the Income Tax Act, 1961 (“I.T. Act”, for short) was passed wherein an addition of 3,75,13,010/- was made under Percentage Completion Method, by applying Accounting Standard - 7 (“AS-7”, for short).
This addition was confirmed by Ld. CIT(A). Thereafter, penalty U/s 271(1)(c) was levied by the Assessing Officer (“AO”, for short) vide order dated 21.03.2014, amounting to Rs. 1,27,50,670/- which was @ 100% of tax sought to be evaded, in respect of the aforesaid addition of Rs. 3,75,13,010/-. Vide impugned order dated 11.03.2016 of Ld. CIT(A), this penalty was deleted. The relevant portion of the order of Ld. CIT(A) is reproduced as under:
“5. I have considered the appellant’s contentions, carefully gone through the order of the ACIT, Central Circle-09 and deliberated on the case laws referred by the AR of the appellant during the course of the hearing before me. 5.1 The addition made by AO is based on AS-7 which is applicable on construction contractors and not on real estate developers. Page 2 of 6
ITA No.-3225/Del/2016. Indirapuram Habitat Centre Private Limited.
5.2 Further, the addition is made on estimated basis and penalty proceedings u/s 271(1)(c) initiated imposing the penalty of Rs. 1,27,50,670,00/-. As the income has been estimated under deeming provisions, there is not merit imposing the penalty. In view of the fact that the appellant is consistently following the principles AS-9, there cannot be a standalone year where principles AS-7 could be applied. Hence, in view of the facts and the case laws the penalty under section 271(1)(c) of Rs. 1,27,50,670/- deserves to be deleted. The ground raised in appeal is allowed.”
(2.1) The present appeal before Income Tax Appellate Tribunal (“ITAT”, for short) has been filed by Revenue against the aforesaid order dated 11.03.2016 wherein the Ld. CIT(A) deleted the penalty. At the time of hearing before use, the Learned Authorized Representative (“AR”, for short) submitted that vide order dated 27.09.2016, ITAT has deleted the aforesaid quantum addition of Rs. 3,75,13,010/- in ITA No. 2416/Del/2013.
He also filed a copy of the aforesaid order dated 27.09.2016 in ITA No. 2416/Del/2013.
The relevant portion of the order of ITAT is reproduced as under:
“4. After hearing rival contentions we find that the assessee is a real estate developer and not a contractor as held by the Ld.CIT(A). The Assessing Officer (A.O.) in both the Assessment Years (A.Y.) has accepted the claim of the assessee that it is in the construction business. On these facts we respectfully follow the decision of the Mumbai Bench of the ITAT in the case of Haware Constructions P. Ltd. vs. ITO (2011) 64 DTR 251, wherein it is held as follows.
“There is no dispute to the fact that the assessee company is engaged in the business of construction and builders and during the A.Y. 2004- 05 the project completion method followed by the assessee has been accepted. The submission of the counsel for the assessee that the Revenue has not taken any remedial measure u/s 263 or 147 of the Income Tax Act, 1961 (the Act), for the A.Y. 2004-05 and 2006-07 even after the order of the AO and CIT(A) for A.Y. 2005-06 could not be controverted by the Departmental Representative. The AO, during the asst. yr. 2006- 07 has also accepted, the project completion method followed by the assessee and has not disturbed, the income by making any estimated income on the work-in-progress. There is also merit in the submission of the counsel for the assessee that the assessee has Declared huge income in the subsequent year after completion of the Page 3 of 6
ITA No.-3225/Del/2016. Indirapuram Habitat Centre Private Limited. said project as against meagre income estimated by the AO. The project completion method is an accepted method of accounting for builders. The assessee is regularly following this method of accounting which has been accepted by the AO in the preceding as well as in the subsequent assessment year. Further the AS-7 as discussed by the AO and the CIT(A) is applicable only for contractors engaged, in the civil construction business and the same does not apply to builders/developers. It is an established legal proposition that an assessee can follow any recognized method of accounting and the condition is that the same method has to be followed consistently. Since the assessee in the instant case was regularly following the project completion method and has offered the income in the year of completion of project, there is no sound as to why the same should be rejected and percentage completion method be followed. Awdesh Builders vs. ITO (2010) 37 SOT 122 (Mumbai) Prestige Estate Projects (P) Ltd. vs. Dy. CIT (2010) 129 TTJ (Bang) 680: (2010) 33, DTR (Bang) (Trib) 514 followed.”
Respectfully following the same we hold that A.S.-7 does not apply to the facts of the case. Hence the system of accounting followed by the assessee consistently over the years has to be upheld.”
(2.1.1) The Ld. AR of the assessee submitted that the penalty levied U/s 271(1)(c) of I.T. Act should be deleted too, as the corresponding quantum addition has already been deleted by ITAT. The Ld. AR also relied on synopsis, relevant portion of which is reproduced below:
“1. This is an appeal filed by the Revenue against the order dated 11.03.2016 passed by the Ld. CIT(A) for the A/Y 2009-10.
In this case the assessee had filed an appeal before the ITAT being aggrieved by the order of CIT(A) against the quantum additions. The ITAT vide its order dated 27.09.2016 passed in had allowed the appeal in favour of assessee.
The Tribunal vide its order dated 27.09.2016 had deleted the additions made by Assessing Officer and sustained by Ld. CIT(A). The copy of the tribunal order is attached herewith for your ready reference and perusal.
The very basis of imposition of penalty has been deleted by the tribunal, hence there cannot be any case for levy of penalty for concealment of income and therefore, the order of the CIT(A) does not suffer from any infirmity.” Page 4 of 6
ITA No.-3225/Del/2016. Indirapuram Habitat Centre Private Limited.
(2.2) On the other side, the Ld. Sr. Departmental Representative (“DR”, for short) appearing for Revenue relied on the orders of the authorities below.
(3) We have heard both sides patiently and we have also carefully perused the materials available on record. We are of the view that penalty U/s 271(1)(c) I.T. Act of Rs. 1,27,50,670/- levied by AO, and already deleted by the Ld. CIT(A); has no legs to stand when the corresponding additions made by the AO have already been deleted by ITAT vide its aforesaid order dated 27.09.2016. When the quantum addition does not survive, the penalty levied U/s 271(1)(c) of I.T. Act on the corresponding quantum addition also cannot survive. We take support from judicial precedent in the case of K.C.
Builders vs. ACIT 135 Taxman 461 (SC), in which the Hon’ble Apex Court held that where the additions made in the Assessment Order, on the basis of which penalty for concealment was levied, are deleted, there remains no basis at all for levying the penalty for concealment, and therefore, in such a case, no such penalty can survive and the same is liable to be cancelled. In view of the foregoing, appeal filed by Revenue is hereby dismissed.
(4) Decision of the Bench, dismissing the appeal was orally pronounced in Open Court on 05/03/2019 after conclusion of hearing. This written order is pronounced in the Open Court on 06/03/2019.