ITO, NEW DELHI vs. M/S. PENTHEA BUILDERS & DEVELOPERS PVT. LTD., NEW DELHI

Date of Hearing : 08-08-2016 Date of Order : 05-09-2016 ORDER PER H.S. SIDHU, JM

Revenue has filed the appeal against the Order dated 21.1.2014 passed by the Ld. Commissioner of Income Tax (Appeals)-XVII, New Delhi pertaining to assessment year 2007-08 on the following ground:-

1. That on the facts and circumstances of the case and in law the Ld. CIT(A) erred in deleting the penalty u/s. 271(1)(c)

amounting Rs. 31,43,826/- imposed by the AO holding that there is no furnishing of inaccurate particulars of income or deliberate attempt to conceal income by the assessee ignoring the fact that the genuineness of expenditure claimed by the assesee cannot be established.

3. The Appellant craves to be allowed to add any fresh ground of appeal

and / or delete or amend any of the grounds of appeal.

2. The facts narrated by the Revenue Authorities are not disputed by both the parties, therefore, the same are not repeated here for the sake of convenience.

We find that Ld. CIT(A) has elaborately adjudicated the issue vide para no. 6.4 to 6.14 vide his order dated 21.1.2014. The relevant paras no. 6.4 to 6.14 are reproduced as under:-

“6.4. In appellate proceedings, the appellant stated that the appellant has actually purchased land during the year and made payments to the consolidator M/s Vikram Electric Equipment (P) Ltd. The genuine nature of the payment is not in doubt. The debatable issue is whether disallowance uls 40(a)(ia) could be made for not deducting tax u/s 194H/194C. The appellant has enclosed copies of the decisions of the Hon'ble ITAT in its group cases wherein it was held that provisions of 194H or 194C were not applicable .

6.5. The appellant states that a bonafide claim of deduction has been disallowed. The appellant had furnished all relevant facts and details on record and had not concealed any facts. The facts and details furnished by the appellant were not found to be bogus or false by any authority. No inaccurate particulars had been submitted by the appellant.

6.6. Further, in none of the cases quoted which were group concerns of the appellant, it was held by the Ld. CIT(A) or the Hon'ble ITAT that the payment to the consolidator was not a genuine payment. The only issue in all the cases was whether provisions of section 40(a)(ia) of the Act would be applicable.

6.7. In the case of ITO vs. Finian Estates the AO had disallowed the amount paid by the appellant out of purchases and reduced it 3 from the closing stock. The amount had been paid to M/s Vikram Electric Equipment (P) Ltd. M/s Vikram Electric Equipment (P) Ltd. was a consolidator to acquire and consolidate land holdings. The Hon'ble ITAT stated the amount was duly reflected in the purchases and closing stock. Further that provisions of section 40(a)(ia) would not be apply as no deduction was claimed in the P&L A/c.

6.8. In the case of Zanobi Builders &. Constructions (P) Ltd. vs. ITO, payments were made to MIs Vikram Electric Equipment (P) Ltd. The Hon'ble ITAT stated that no disallowance uls 40(a)(ia) was called for, for not deducting TDS uls 194 or 194H.

6.9. The intention to quote these cases. at this juncture is to show that M/s Vikram Electric Equipment (P) Ltd. is an existing entity and works as a consolidator. In no case the genuineness of the transactions with MIs Vikram Electric Equipment (P) Ltd. has been doubted. In all related concerns MIs Vikram Electric Equipment (P) Ltd. is the consolidator to whom payments were made on a regular basis and the payments have never been considered as non genuine expenditure. In view thereof, the findings of the Hon' ble ITAT establish that M/s Vikram Electric Equipment (P) Ltd. is a genuine existing entity. Further, that TDS on payments made to MIs Vikram Electric Equipment (P) Ltd. is not required to be deducted.

6.10. I shall now consider whether penalty uls 271(1)(c) is leviable on the additions made in this year treating payment to M/s Vikram Electric Equipment (P) Ltd. as non genuine and disallowing the payment made for not deducting TDS.

6.11. In the matter of penalty, it is seen that the appellant had furnished all particulars in respect of income earned and expenditure incurred. The AO had also not stated that the particulars furnished were inaccurate or there was an attempt to furnish inaccurate particulars.

6.12. The bonafides of the appellant can be seen from the fact that all details were furnished. The action of the appellant is not deliberate or for concealment of income. There was no concealment of material facts. There was no intention of the appellant to conceal income and evade tax and mislead the revenue.

6.13. The Hon'ble Supreme Court of India in K. P. Madhusudan vs. CIT (2011) 118 TAXMAN 324 (SC) held that in the circumstances stated in the Explanation, if the appellant's failure to return his correct income was not due to fraud or neglect, he shall be not deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof and consequently be liable to be penalty provided by that section. In view of the above, the onus is on the appellant to prove that there was no fraud or neglect in filing correct income, which the appellant has proved.

6.14. The Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts (P) Ltd. observed that making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. The appellant had given an explanation, which is bonafide. There is no furnishing of inaccurate particulars of income or deliberate attempt to conceal income. The penalty of Rs.31,48,826/- is therefore deleted. The grounds of appeal are ruled in favour of the appellant.”

5.1 Even otherwise, we note that Hon’ble High Court of Delhi in Revenue’s Appeal being ITA 270/2015 in assessee’s own case title as Pr. CIT-7 vs. Penthea Builders and Developers Pvt. Ltd. vide order dated 5.11.2015 has upheld the order of the ITAT and dismissed the Appeal filed by the Revenue while dealing the similar and identical addition. The relevant portion is reproduced as under:-

“16. Having considered at length the submissions of learned counsel for the Revenue, the pleadings and the documents not only in the case of PBDPL but also in the case of Finian, the Court is unale to find any distinction between the two cases as far as the clauses in the MOU between the parties and VEEPL or the payment made the latter pursuant thereto. Again, with the Revenue having accepted the decision of the ITAT in the case of Finian, and with the Revenue being unable to bring out any distinguishing feature as far as the case of PBDPL, the Court sees no reason why it should interfere with the impugned order of the ITAT.

5.2 Keeping in view of the facts and circumstances of the case, we find that Ld. CIT(A) by relying upon the Hon’ble Supreme Court of India decision in the case of CIT vs. Reliance Petroproducts (P) Ltd. has observed that the assessee had given an explanation, which is bonafide. There is no furnishing of inaccurate particulars of income or deliberate attempt to conceal income, hence, he rightly deleted the penalty in dispute. Even otherwise, we note that on similar addition, the Hon’ble High Court of Delhi in Revenue’s Appeal being ITA 270/2015 in assessee’s own case title as Pr. CIT-7 vs. Penthea Builders and Developers Pvt. Ltd. vide order dated 5.11.2015 has upheld the order of the ITAT and dismissed the Appeal filed by the Revenue while dealing the similar and identical addition, hence, the penalty in dispute will not survive. In view of the above, we uphold the order of the Ld. CIT(A) and dismiss the Appeal filed by the Revenue.

Order pronounced in the Open Court on 05/09/2016.