SHREECHAND BUILDERS P. LTD,MUMBAI vs. ITO 9(3)(1), MUMBAI

आदेश / O R D E R

Per Sandeep Gosain, Judicial Member:

2. First of all we are taking appeal filed in & 1982/Mum/14 as the issues raised in these two appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed of by this consolidated order.

(AY 2008-09) 3. First of all we take up assessee’s appeal in (AY 2008-09) on the grounds mentioned herein below:- 1. On the facts and in the circumstances of the case and in law, the proceeding initiated by issuance of notice u/s 148 of the Act is invalid and bad in law.

2 On the facts and in the circumstances of 1e case and in law, the order passed u/s 143(3) r.w.s. 147 of the Act is invalid and bad in law.

4. On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in confirming the action of the A.O. in disallowing deduction u/s 801B of the Act.

5. On the facts and in the circumstances of the case and in law, the learned C.I.T. (A) erred in enhancing the assessment and that too without appreciating the facts and circumstances of the case fully and properly.

The appellant craves leave to add, alter, amend or delete any or all of the grounds of appeal at any time.

Against the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) examined the conditions of section 80IB(10) independently and after dismissed the appeal of the assessee. Book profit and tax liability u/s 115JB was also enhanced.

Against the order of Ld. CIT(A), assessee preferred appeal before us on the grounds mentioned herein above.

Ground No. 1& 2

Ground No. 3

Ground No. 4

As far as ground „A‟ is concerned, it was submitted that Ld. CIT(A) had denied the exemption by holding that the the Project was not completed before 31.03.2008: The Ld. CIT(A) stated that the appellant failed to submit the completion certificate from the municipal corporation. The completion certificate obtained from the "Architect" was not conclusive. And hence, it was recorded that the condition of completion of project within the given time frame under the law was not satisfied.

On this ground, Ld. AR submitted that the Municipal Corporation had issued the "Project Completion Certificate" on 25.02.2014 wherein the municipal corporation had clearly mentioned that the project was completed during the year 2007- 08. Meaning thereby, the Municipal Corporation had certified that the project was completed on or before 31.03.2008.

Ld. AR also relied upon the decision of jurisdictional ITAT in the case of ITO vs. Neeta Enterprise in wherein it was held that the condition of furnishing of completion certificate was inserted in the statues w.e.f. 01.04.2005 and hence the same was not applicable to the projects which were approved and commenced before 01.04.2005.

Apart from above Ld. AR also submitted that even otherwise, the assessee had completed the project before 31.03.2008 and able to obtain the completion certificate, therefore dis-allowance on this condition made by the Ld. CIT(A) also becomes redundant.

As far as ground „B‟ is concerned, it was submitted that Ld. CIT(A) had wrongly stated that the plot area was not more than 1 acre and hence the condition was not satisfied to that extent.

In this respect, Ld. AR submitted that the assessee had developed the project on the total plot area of 4162.60 Sq. Meter, i.e. equal to 1.02860 Acre [1 Sq. Meter = 0.000247 Acre] which includes free built up area of 3619.64 Sq. Meterand garden area / amenities of 542.96 Sq. Meters, i.e. 0.89443 Acre of free built up area and 0.134168 Acre of garden / amenities.

Ld. AR also relied upon the decision of Hon’ble jurisdictional High Court in the case of CIT vs. Vandana Properties reported in 353 ITR 36, wherein it was held that the size of plot of land was not relevant if other conditions stands fulfilled by the assessee and hence dis-allowance on this condition made by the Ld. CIT(A) was redundant at-least for the "Bombay Jurisdiction".

Apart from that, Ld. AR in order to support his contentions, relied upon the following judgments:-

(10) deduction was intended to give benefit only to the undertakings who construct housing projects on those few plots. Therefore, it is clear that on a plot of land having minimum area of one acre, there can be any number of housing projects and so long as those housing projects are approved by the local authority and fulfill the conditions set out under Section 801B (10), the deduction thereunder cannot be denied to all those housing projects. Section 8016 (10) while specifying the size of the plot of land, does not specify the size or the number of housing projects that are required to be undertaken on a plot having minimum area of one acre. As a result. significance of the size of the plot of land is lost and therefore, the assessee subject to fulfilling other conditions becomes entitled to Section 801B (10) deduction on construction of a housing project on a Plot having area of one acre, irrespective of the fact that there exist other housing projects or not. In these circumstances, the decision of the Tribunal in rejecting the contention of the Revenue regarding the size of the plot cannot be faulted.

Ground No. 5 & 6 14. Since both the grounds raised by the assessee are inter connected and inter related and relates to challenging the order of Ld. CIT(A) in enhancing the assessment and determining the tax liability u/s 115JB of the Act, therefore we thought it fit to dispose of the same by this common order.

Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the assessee in its detailed order. The operative portion of the order of Ld. CIT(A) is contained in para no. 11 of its order and the same is reproduced below:-

11 Tax Liability u/s 115JB (Enhancement

During the course of appellate proceedings, It is observed that the appellant has filed its return of income for A Y 2008-09 declaring total income of Rs. NIL after claiming deduction u/s 80IB(10) of Z.51,40,622/-. Tax on theabove total income of Rs. NIL was calculated and paid for. No book profit u/s 115JB and tax thereon have been calculated. It Is further seen that no discussion in respect of book profit has been taken place in the assessment order as well.

Therefore, vide this letter nO. CIT(A)20/Notice/2011- 12 dated 08.11.2011, the appellant was show caused as under:-

2. It is observed that you have filed your return of income for AY 2008-09 declaring total income at NIL after, claiming deduction u/ 801B(10) at Rs.51,40,622/-. It is further seen that you have computed book profit u/s.115JB at Rs. NIL, therefore, no tax liability thereon has not been determined. It is further seen that in the assessment order u/s 143(3) dated 27.12.10 deduction claimed u/s 80IB(10) has been disallowed however, no discussion has taken place in respect of book profit u/s 115JB and tax thereon.

11.1 In response to the above, appellant vide its letter dated 20.02.12 accepted that book profit remained to be calculated. In view of the admission by the appellant, I calculated book profit as under:-

Book Profit u/s.115JB: Profit as per Profit & Loss Account Rs. 51,40,622 Tax liability u/s 115JB (10.30% of Rs. 5669933) Rs. 5,29,484.

11.2 The above calculation shall come into effect when the tax liability under normal provision is less than the abovetaxliability. Penalty u/s 271(1)(c) of the Act is initiated for the failure to compute tax liability u/s 115JB on its own while filing the return of income.

After having gone through the orders passed by revenue authorities, we find that assessee could not rebut the contentions contained in the order of Ld. CIT(A). Moreover, no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings recorded by the PCIT. Moreover, there are no reasons for us to deviate from the findings recorded by the Ld. PCIT. Therefore, we are of the considered view that the findings recorded by the Ld. CIT (A) are judicious and are well reasoned. Accordingly, we uphold the same. Resultantly, these grounds raised by the assessee stands dismissed.

ITA No. 1982/Mum/2014 (AY 2008-09) 17. Now we take up assessee’s appeal filed in for AY 2008-09. Since, we have already decided the similar grounds of appeal in AY 2008-09 on merits. Therefore, following our own decision in ITA No. 1984/Mum/14, we apply the same findings in the present appeal in order to maintain judicial consistency which is applicable mutatis mutandis.

I.T.A. No. 1983/Mum/2014 (AY 2008-09) 19. Now we take up assessee’s appeal in (AY 2008-09), which has been filed against the order of levy of penalty on the grounds mentioned herein below:- 1. On the facts and in the circumstances of the case and in law, the penalty order passed u/s 271(1)(c) of I.T. Act is invalid and bad in law.

2 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in levying a penalty of Rs. 5,84,300/- u/s 271(1)(c) of I.T. Act and that too without appreciating fully and properly the facts of the case.

3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in levying a penalty of Rs. 5,84,300/- u/s 271(1)(c) of I.T. Act although there has been neither any concealment nor furnishing of inaccurate particulars of income.

The appellant craves leave to add, alter, amend or delete any or all of the grounds of appeal.

Against the order of Ld. CIT(A), assessee preferred appeal before us on the grounds mentioned herein above.

Ground No. 1to 3.

Shyama A. Bijapurkar, (Del HC) and CIT vrs. Smt Rita Malhotra 154 ITR 550 (Del). It was also submitted by Ld. AR that there was no ‘concealment of income’ by the assessee as assessee itself offered income for taxation. The penalty u/s 271(1)(c) of I.T. Act can be levied if appellant either ‘concealing income’ or furnishing ‘inaccurate particulars of income’. As per the provision, the penalty cannot be levied on ‘estimate addition’ and the proceedings u/s 271(1)(c) of I.T. Act are quasi-criminal in nature. It was submitted that addition made in the book profit are itself wrong as only such items which are specifically mentioned in the explanation to section 115JB need to be excluded or included, as the case is, and nothing more can be brought in. Since the addition itself is invalid, therefore penalty on the same cannot be levied. It was further submitted that the ‘concealment of income’ had its repercussions only when assessment was done under the normal procedure. If the assessment as per the normal procedure was not acted upon and it was the deemed income assessed u/s 115JB which became the basis of assessment, the concealment had no role to play and was totally irrelevant as the concealment does not lead to tax evasion at all. In this respect, Ld. AR relied upon the following judgments:- i) CIT vrs. Nalwa Sons Investment Ltd. (Appeal No. 18564/2011 [sc]) ii) ITO Vrs. Software Element India Pvt. Ltd. (ITA No. 551/Mum/12-ITAT) iii) Ruchi Strips & Alloys Ltd. Vrs. DCIT (ITA No. 6940/Mum/2008) iv ) CIT Vrs. Central Warehousing Corporation (ITA No. 999/2011 & 1091/2011)

Ld. AR also relied upon Circular No. 25/2015 dated 31st December 2015, wherein it was held that the case prior to AY 2017-18, the penalty u/s 271(1)(c) of the I.T. Act cannot be levied where additions /disallowances made under normal provisions of the I.T. Act, but tax levied under MAT provisions u/s 115JB.

of penalty u/s 271(1)(c) of the Act, will depend on the nature of adjustment.

Apart from above, we also drawn strength from the order passed by the Coordinate Bench of Hon’ble ITAT in wherein it has been held as under:- 16. The assessee had furnished all the particulars regarding the book profits along with the return and had not concealed anything which is required for computation of the Book Profits. No information filed by the assessee was inaccurate as the Book Profits finally determined is on the basis of figures available in the printed Accounts. Thus the mistake of the assessee in not computing the Book Profits is an inadvertent error. The assessee filing the audited Balance Sheet and P&L account has giving all the particulars for determining the Book profits u/s 115JB. In the circumstances, we accept the explanation of the assessee that failure to compute the book profits is only an inadvertent omission and all the material necessary for computing the same has been filed with the return. In the light of the decision of the Apex Court in the case of Reliance Petroproducts Pvt. Ltd. (supra), we uphold the order of the Ld. CIT(A).

As per the facts of the present case, the assessee had not suppressed its real book profit. The assessee has calculated the profit on sale of asset as per block of asset method, which has been prescribed under the Income Tax Act and approved by Central Government. Even otherwise mistake in computation of book profit cannot be liable for penalty u/s 271(1)(c) as the tax issues are very complicated and therefore ‘human mistake’ cannot be liable for penalty. On this proposition, we draw strength from the decision of Hon’ble Supreme Court in the case of Price Water house Cooper Pvt. Ld. Vrs. CIT (2012) 25 taxman.com 400 (SC), CIT Vrs. Compro Technologies Pvt. Ltd. (2015) 55 taxmann.com 180 (Del). The assessee had presented all the relevant facts and circumstances. Moreover AO could not bring on record any fresh material to point out any concealment on the part of assessee. The concealment of income has its repercussion only when assessment was done under the normal procedure. If assessment as per the normal procedure was not acted upon and it was the deemed income assessed u/s 115JB which became the basis of the assessment, then the concealment had no role to play as the concealment did not lead to tax evasion. On this proposition, we draw strength from the decision of Hon’ble Supreme Court in the case of i) CIT vrs. Nalwa Sons Investment Ltd. (Appeal No. 18564/2011 [sc]), ii) ITO Vrs. Software Element India Pvt. Ltd. (ITA No. 551/Mum/12- ITAT), iii) Ruchi Strips & Alloys Ltd. Vrs. DCIT (ITA No. 6940/Mum/2008) and iv ) CIT Vrs. Central Warehousing Corporation (ITA No. 999/2011 & 1091/2011) Therefore, considering the interest of justice and in view of the facts of the present case as well as aforesaid legal proposition, we do not find it to be a case of ‘concealment of income’ or furnishing of ‘inaccurate particulars of income’, and thus not fit for levy of penalty. Therefore, penalty levied by the AO is directed to be deleted. Resultantly, these grounds raised by the assessee are allowed.

ITA No. 1985/Mum/2014 (AY 2008-09) 28. Now we take up assessee filed in for AY 2008-09. Since, we have already decided the similar grounds of appeal in ITA No. 1983/Mum/2014 for AY 2008-09 on merits. Therefore, following our own decision in ITA No. 1983/Mum/14, we apply the same findings in the present appeal in order to maintain judicial consistency which is applicable mutatis mutandis. Resultantly, the appeal filed by the assessee stands allowed.