SULTAN HAJIAHMEDBUX QUARESHI,MUMBAI vs. ACIT 17(3), MUMBAI

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ITA 3662/MUM/2015Status: DisposedITAT Mumbai27 July 2016AY 2010-113 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that a difference in stock valuation, especially when supported by a bonafide explanation and documentation, does not amount to concealment of income. Therefore, penalty under Section 271(1)(c) cannot be levied.

What were the facts?

The assessee, a builder, had a difference of opinion with the AO regarding the valuation of closing stock for a residential complex. The AO insisted on valuing the entire area, while the assessee restricted it to 30% due to incomplete floor area.

What were the issues?

Whether a difference in the valuation of closing stock, with a bonafide explanation, constitutes concealment of income warranting penalty under Section 271(1)(c).

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, MUMBAI

Before: SHRI R.C. SHARMA, AM & SHRI SANDEEP GOSAIN, JM

For Appellant: Shri M.P. Sharma, Shri Neil Philip
For Respondent: Shri Neil Philip

सुनवाई की तायीख / : 20/07/2016 Date of Hearing घोषणा की तायीख / : 27/07/2016 Date of Pronouncement आदेश / O R D E R Per R.C. SHARMA, A. M.: This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)- 32, Mumbai (‘CIT(A)’ for short) dated 07.05.2015 for the assessment year (A.Y.) 2010-11, in the matter of imposition of penalty u/s 271(1)(c) of the Act. 2. In this appeal assessee is aggrieved for imposition of penalty of Rs.64,100/- u/s 271(1)(c).

(A.Y. 2010-11) Shri Sultan Hajiahmedbux Qureshi vs. ACIT 3. Rival contentions have been heard and record perused. Facts in brief are that the assessee is a builder of residential complex. During the assessment proceedings for the assessment year 2010-11 there arose difference in opinion between the assessee and the assessing officer with regards to valuation of the closing stock. The assessing officer insisted that the closing stock should also be valued for the area of Flat No.1102 having area of 771 sq.Ft., however on further explanation submitted by the assessee it was agreed that the valuation will be restricted to the extent of 30% of the value as only floor area is completed. Thus on the revised calculations the sock was increased by Rs.207424/- in respect of the above dispute. For the addition so made the AO also levied penalty u/s 271(1)(c), which was confirmed by ld. CIT(A) and assessee is in further appeal before us.

4.

We have considered rival contentions and found that the assessee has submitted all necessary details including the letter of objection from the Municipal Authorities and thus the assessee has given bonafide explanation for not including the valuation for 771sq.ft. in closing stock. Under these circumstances there is no justification for levying of penalty u/s 271(1)(c). In view of the decision in case of CIT v/s Sadhu Singh and Sons (2012) 344 ITR 316 (P&H) High Court wherein it was held that finding the difference in valuation of sock does not amount to concealment of income and thus penalty u/s 271(1)(c) cannot be levied.

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