SURESH KUMAR GOPILAL NICHANI,CHENNAI vs DCIT, CHENNAI

Income Tax Appellate Tribunal, ‘ D’ BENCH : CHENNAI

Before: SHRI GEORGE MATHAN & SHRI S.JAYARAMAN

आदेश / O R D E R

PER GEORGE MATHAN, JUDICIAL MEMBER

This is an appeal filed by the assessee against the order of Commissioner of Income-tax (Appeals)-2, Chennai in dated 30.11.2016 for the assessment year 2012-13 confirming the levy of penalty u/s.271(1)(c) of the Act made by ld. Assessing Officer.

Mr.V.S.Jayakumar represented on behalf of the Assessee and 2.

Mrs.Sumanthy Venkatraman represented on behalf of the Revenue.

It was submitted by ld.A.R that assessee is an individual, who has sold an immovable property for a consideration of `12 crores.

It was a submission that when the return was filed by assessee for the impugned assessment year, assessee claimed deduction u/s.54 of the Act to an extent of `1.5 crores. It was a submission that the assessee had paid an amount of `1.5 crores to M/s.Indiland SEZ Projects (Bangalore) Pvt. Ltd., in which the assessee was a Director, for the purpose of construction of and handing over a residential house in the land at Bangalore belonging to the assessee’s wife. It was a submission that necessary agreements have been entered into with M/s.Indiland SEZ Projects (Bangalore) Pvt. Ltd. However, on account of certain Government clearances have not been obtained, M/s.Indiland SEZ Projects (Bangalore) Pvt. Ltd., was unable to do the construction of the residential house for the assessee. It was submitted that even today, the proceedings for getting clearance from the Government for the purpose of construction of the house is still in process. It was a submission that as construction of a residential house has not been done, the ld. Assessing Officer had disallowed the assessee’s claim of deduction u/s.54 of the Act. It was a submission that in the course of assessment proceedings also, the assessee had given a letter dated 02.02.2015 wherein assessee had mentioned that the construction has not yet been done by M/s.Indiland SEZ Projects (Bangalore) Pvt. Ltd., and consequently, the claim of deduction u/s.54 would have to be withdrawn. It was a further submission that assessee had provided all the evidences required in respect of its claim of deduction u/s.54 of the Act. It was a submission that the assessee had made the payment to M/s.Indiland SEZ Projects (Bangalore) Pvt. Ltd., for the construction of the residential house and the problems for obtaining Government’s sanction had also been mentioned to the ld. Assessing Officer. However, as there was delay in getting sanction from the Government, M/s.Indiland SEZ Projects (Bangalore) Pvt. Ltd., was unable to initiate the construction much less complete it. It was a submission that on account of surrendering the claim of deduction u/s.54 of the Act, the ld. Assessing Officer had initiated penalty proceedings u/s.271(1)(c) of the Act and the ld. Assessing Officer had also not considered the explanation provided by the assessee. It was a submission that ld. Assessing Officer had levied penalty u/s.271(1)(c) of the Act. It was pleaded by ld.A.R that there was no concealment of income, nor furnishing of inaccurate particulars and none of the explanations given by the assessee were found to be false. It was the prayer that the penalty levied by the ld. Assessing Officer and confirmed by the Ld.CIT(A) was liable to be deleted.

In reply, the ld.D.R vehemently supported the orders of ld. Assessing Officer and the Ld.CIT(A). The ld.D.R submitted that even the Tribunal has confirmed the disallowance of exemption claimed u/s.54 of the Act. It was a submission that the fact clearly shows furnishing of inaccurate particulars on which the penalty had been rightly levied. It was a submission that assessee with complete knowledge and with intention has suppressed his income by making the wrong claim u/s.54 of the Act. It was a submission that orders of the ld. Assessing Officer and the Ld.CIT(A) confirming the penalty levied u/s.271(1)(c) of the Act was liable to be sustained.

We have considered the rival submissions and perused the materials available on record. A perusal of the assessment order in the present case clearly shows that in respect of claiming deduction u/s.54 of the Act, assessee has provided all the details. In fact, the claim of deduction u/s.54 of the Act has been denied mainly on the ground that the construction has not been done and M/s.Indiland SEZ Projects (Bangalore) Pvt. Ltd. has used the money given by the assessee for making investments in ‘Futures and Options’. However, what is peculiar in this case that even though the ld. Assessing Officer has questioned the morality of M/s.Indiland SEZ Projects (Bangalore)

Pvt. Ltd., misusing the funds provided by the assessee for the construction of a residential house, the ld. Assessing Officer is not disputing the agreement entered into by the assessee with M/s.Indiland SEZ Projects (Bangalore) Pvt. Ltd. M/s.Indiland SEZ Projects (Bangalore) Pvt. Ltd., has also given a letter confirming the entire contract sum of `1.5 crores for the purpose of construction of a residential house. True, the Tribunal has upheld the disallowance of deduction claimed u/s.54 of the Act in the case of assessee. However, the Tribunal has upheld the disallowance only on the ground that there is no construction of residential house that has been done, even as on the date of hearing of quantum appeal, being in the year 2018. The fact in the present case clearly shows that there is no concealment on facts and non-construction of the residential house is not on account of the failure on the part of the assessee per se, but on account of the failure on the part of the contractor to construct a residential house.

Even though the assessee is one of the Directors of the said contract company, we cannot draw a conclusion that the assessee has concealed his income or furnished inaccurate particulars to his income, in so far as the construction could not be got done on account of the non-availability of the necessary government approval which are pending. In fact, none of the explanations given by the assessee have been found to be false, but to the contrary, they have all been found to be true. This being so, as it is noticed that the assessee has provided plausible explanation and such explanation as provided by the assessee has not been found to be false on any count, we are of the view that penalty levied in the present case is not exigible, and consequently, we cancel the penalty levied by the ld. Assessing Officer and confirmed by the Ld.CIT(A) u/s.271(1)(c) of the Act

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court after conclusion of hearing on 23rd May, 2018, at Chennai.

SURESH KUMAR GOPILAL NICHANI,CHENNAI vs. DCIT, CHENNAI