M/S TRIVIKRAM REAL ESTATE DEVELOPER & CONSULTANTS PVT. LTD.,MOHALI vs. ITO, W-6(1), MOHALI

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ITA 1698/CHANDI/2017Status: DisposedITAT Chandigarh28 November 2018AY 2012-135 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee consistently followed a method of accounting where sale proceeds were recognized only after the completion of the entire project on a plot. The AO merely shifted profits between years without any change in total taxable income, and the assessee's offer of income in the subsequent year was genuine. Therefore, no concealment of income was established.

What were the facts?

The assessee, a real estate developer, filed a NIL income return for AY 2012-13. The AO completed the assessment by adding Rs. 26,85,915/- on the grounds that the assessee failed to account for sale consideration of flats sold during the year, following a completed construction method. The assessee recognized sale proceeds as advances and added expenses to work-in-progress.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable when the assessee consistently follows a method of accounting and the AO merely shifts income to a different year without loss to revenue.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

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Income Tax Appellate Tribunal, CHANDIGARH BENCH “B”, CHANDIGARH

For Appellant: Shri. Jaspal Sharma
For Respondent: Smt. Chandrakanta
Hearing: 03/10/2018Pronounced: 28/11/2018

आदेश/Order

PER DR. B.R.R. KUMAR, A.M:

The present appeal has been filed by the Assessee against the order of the Ld. CIT(A)-2, Gurgaon dt. 04/08/2017.

2.

In the present appeal Assessee has raised following grounds:

1.

The impugned order is erroneous in law and void abinitio as the Ld.CIT(Appeals) has erred in having confirmed the order of the AO which is illegal and bad in the eyes of law in the absence of satisfaction by the AO specifying the charge for initiation of penalty u/s 271(l)(c). 2. On the facts and circumstances of the case the Ld.CIT(Appeals) has erred in having upheld the penalty of Rs.8,29,950/- imposed by the Ld.AO u/s 271(l)(c) of the Income Tax Act. 3. On the facts and circumstances of the case the Ld.CIT(Appeals) has erred in having confirmed the penalty for the reason that the assessee has not filed appeal against addition made u/s 143(3) nor has made any fresh submissions or clarifications during the appellate proceedings. 4. On the facts and circumstances of the case the Ld.CIT(Appeals) has erred in having confirmed the penalty imposed by the AO holding that the assessee has concealed his income by wrongful interpretation and calculation of the sale proceeds from flats.

3.

Brief facts taken from the submissions of the assessee and the records

available are that the assessee company was engaged in the business of real

estate development. For the asstt.year 2012-13, the assessee filed return showing

NIL income. The assessment was completed at an income of Rs.26,85,915/-

making the addition on the ground that the assessee failed to account for the

sale consideration of flats sold by assessee during the year under consideration.

It was submitted that the assessee follows completed construction method. The

assessee constructed four floors each on plot no.44,Sh Shreshta Vihar, New Delhi

and Plot no.113,Sarita Vihar, New Delhi. During the year the assessee sold three

floors built on plot no.44 and also sold two floors on plot no.113. Sale proceeds of

these floors sold, had been treated as advances from customers in the books for

the year under consideration and all the direct as well as indirect expenses were

added to the cost of work in progress at the end of the year. This was done on

the ground that the assessee follows the completed construction method as

sale of all the floors/flats built on single plot, was not made in the year under

consideration.

4.

The assessee accounts for the sale of all the floors in its books of accounts

only when sale of all the floors on a common plot, was completed. It was

submitted that this was followed because no separate account for the cost of

the construction of each floor built on a single plot, was kept by the assessee

and as such unless the sale of all the floors built on a single plot, was completed,

it was not possible for the assessee to ascertain the cost of construction of each

floor and the income earned thereon. This was the method of accounting which

was regularly and consistently followed by the assessee.

5.

From the details of floors sold it is evident that second floor built on plot

no.44, could not be sold during the year under consideration and it was sold

during subsequent year. Similarly the second and third floors on plot no.113,

were sold during the subsequent year. The entire sale proceeds from all the

floors built on plot no.44 and 113, was accounted for in the subsequent year

when second floor on plot no.44 and second & third floor on plot 113, were sold

and the income arising out of sale of all the floors on both the plots, was

accounted for in the subsequent year i.e. AY.2013-14.

6.

During the course of assessment proceedings, the AO directed the

assessee to prepare a Profit & Loss account by taking sale consideration at Rs.

1,87,00,000/- of the floors sold by the assessee during the year under

consideration and as such the assessee submitted the Profit & loss account

declaring net profit at Rs.26,85,915/- on sale consideration at Rs.1,87,00,000/- as

desired by the AO which has been accepted by the Revenue.

7.

As the assessee already submitted its return on 22.09.2013 for the

subsequent year i.e. AY 2013-14 declaring total income at Rs.97,91,276/- on total

sale consideration of all the floors/flats on both the above said plots at

Rs.7,13,00,000/- , the assessee revised its return on 25.03.2015 for the Asstt. year

2013-14 declaring net profit at Rs. 71,36,150/- 0n total turnover at Rs.6,51,00,000/.-

excluding turnover declared for the AY2012-13. The assessment for the AY 2013-

14 has been completed on 30.03.2016 accepting turnover and net profit

declared as per revised return.

8.

The Assessing Officer levied penalty under section 271(1) (c) on the

income declared by the Assessee of Rs. 26,85,910/-(Rounded Up) for the current

year. The penalty was confirmed by the Ld. CIT(A) holding as under:

I have given careful consideration to the facts of the case, arguments put by the assessee and the reasons for levy of penalty as given by the Assessing Officer in the penalty order. I agree with the arguments brought out by the Assessing Officer, that the appellant has concealed his income by wrongful interpretation and calculation of the sale receipts from flats. It is seen that the assessee has not filed appeal against the addition made under section 143(3) nor has made any fresh submissions or clarifications during the appeal proceedings controverting the arguments made by the Assessing Officer, in the penalty order. I therefore, see no merit in interfering with the penalty levied by Assessing Officer under section 271(1)(c).

9.

Before us, the Ld. AR argued that the assessee recognized total sale

consideration of all the floors built on plot no.44 and 113 during the subsequent

year i.e. AY 2013-14 as per method of accounting regularly followed by the

assessee. The Balance sheet and Profit & loss account, for the subsequent year,

was completed on 01.09.2013 and original return declaring profit on sale

consideration of all the floors, was submitted on 22.09.2013 even before

selection of case under CASS for the AY 2012-13(year under consideration) vide

notice u/s 143(2) issued on 24.09.2013. Therefore there is no concealment of

particulars of income on the part of assessee as all the particulars were before

the Ld.AO. No penalty can be levied in view of Reliance Petro 322 ITR 158(SC).

He further argued that the Project Completion method is recognized method

and there is no loss of revenue as tax rates are same in both the years in the

case of company. (299 ITR l(SC), 311 ITR 289(P&H). He relied on the proposition

that the addition is made merely by non acceptance of method of accounting

followed by the assessee. No penalty can be levied. (247 ITR 696) (P&H) and also

on the proposition that the penalty cannot be imposed merely because

assessee accepted the asstt.order. (359 ITR 565(Kar), 152 ITD 871 (ITAT Agra).

10.

Ld. DR on the other hand argued that the assessee has offer income for

the current year for taxation only after finding the facts by the Assessing Officer

and hence penalty has been directly levied.

11.

We have heard the arguments of both the parties and perused the

material on record. In the instant case the assessee has originally declared the

entire transactions after completion of the project before the Revenue

Authorities. The Assessing Officer has merely shifted the profits from one year to

the other year without any change in the total taxable income over the period

of two years. The method of accounting was regularly followed by the assessee

and continuously and we find there was no change in the method of

accounting which is disadvantageous to the Revenue. The jurisdictional High

Court in the case of CIT Vs. National Mining Company (311 ITR 289 ) held that in

the event of change of accounting method the offer made by the assessee

was genuine and bonafide and no penalty can be leviable which is squarely

applicable to the facts of the instant case. Similarly in the case of CIT Vs. Bhoj Raj

& Co. (247 ITR 693) the Hon’ble Court held that no penalty is leviable in the case

where the Assessing Officer has rejected the method of accounting being

followed by the assessee and brought certain amount to taxation. In the case of

CIT Vs. JH Parabia (Transport) Pvt. Ltd. the Hon’ble High Court of Gujarat (284 ITR

361) held that on the bonafides of the assessee could not be doubted the

assessee cannot be visited with penalty of concealment under section

271(1)(c). Since in the instant case also the assessee has declared the income in

the subsequent year after complete sale of all the floors and emanating from

the facts of the records that no case of concealment of income or furnishing of

inaccurate particulars of income could be said to have been established.

Hence, we hereby delete the penalty levied by the Assessing Officer under

section 271(1)(c) of the Income Tax Act,1961.

12.

In the result, appeal of the Assessee is allowed.

Order pronounced in the open Court.

Sd/- Sd/- संजय गग� डा. बी.आर.आर, कुमार, (SANJAY GARG ) ( DR. B.R.R. KUMAR, AM) �या�यक सद�य/ Judicial Member लेखा सद�य/ Accountant Member AG Date: 28/11/2018 आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to :

1.

The Appellant, 2.The Respondent, 3. The CIT, 4. The CIT(A), 5. DR, ITAT, CHANDIGARH, 6. Guard File

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