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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM
Assessee by: Shri Virag H. Shah Department by: Smt. Pooja Swaroop सुनवाई क� तार�ख / Date of Hearing: 22.04.2016 घोषणा क� तार�ख /Date of Pronouncement: 20.07.2016 आदेश / O R D E R PER AMARJIT SINGH, JM:
The revenue has challenged the order dated 04.12.2012 passed by the Commissioner Of Income Tax (Appeals) 35, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2006-07 wherein the penalty imposed by the Assessing Officer u/s.271(1)(c) of the Act has been ordered to be deleted.
ITA No.1897/Mum/13 A.Y.2006-07
The Revenue has raised the following grounds of appeal:-
“(i). On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the penalty u/s.271(1)(c) of the I.T.Act, 1961, without appreciating the fact that the assessee is following percentage completion method and the project was substantially completed in A.Y.2006-07 and addition of Rs.75,36,434/- made by the Assessing Officer in the income of the assessee has been confirmed by ITAT in appeal against the order of CIT(A)- 35, Mumbai. (ii) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in holding that assessee’s amounting treatment has not caused any loss to the revenue in absolute terms but only a deferment in payment of taxes, since the basis for additions were also litigious with differing views of the appellate authorities without appreciating the fact that in Income tax proceedings each year is looked as an independent assessment ignoring the facts that the Hon’ble ITAT has confirmed the addition to the income of the assessee and there is clear case of filing inaccurate particulars of income and concealment of income against the assessee. (iii) The appellant prays that the order of Ld. CIT(A) on the above grounds be set aside and that of the AO be restored.”
The brief facts of the case are that the assessee filed its return of income declaring total income to the tune of Rs.19,44,606/- on 30.10.2006. The return was processed and thereafter the case was selected for scrutiny. Notice u/s.143(2) and 142(1) of the Income Tax Act, 1961( in short “the Act”) were issued and served upon the ITA No.1897/Mum/13 A.Y.2006-07 assessee. The assessee is a firm carrying on the business of construction of building and land development. During the year under consideration, the assessee has shown construction activities in project called Deep Niketan at Malad (W). During the year under assessment, it was found that the assessee has taken the occupation certificate from the relevant authorities, therefore, the Assessing Officer has treated the work as completed but the assessee has filed the work in progress method. Therefore by giving an opportunity of being heard and treating the completion of the project, the profit of the assessee was worked out to the tune of Rs.94,81,040/-. Thereafter, the Assessing Officer initiated the penalty which was ordered to be deleted by the CIT(A) by virtue of order dated 04.12.2012. Feeling aggrieved the revenue has filed the present appeal before us.
Issue No. 1. 2&3
We have heard the arguments advanced by the learned representative of the parties and have gone through the record. The revenue has taken the plea that the CIT(A) has wrongly deleted the penalty by virtue of order dated 04.12.2012. The learned representative of the department has argued that the assessee has shown the work in progress method while filing his return but the work and the project had been completed as the assessee had taken the work completion certificate from the concerned authority, therefore, the assessee concealed the income and also furnished the inaccurate
ITA No.1897/Mum/13 A.Y.2006-07 particulars to evade the tax therefore, the Assessing Officer has rightly imposed the penalty but the CIT(A) has wrongly deleted the said penalty, therefore order dated 04.12.2012 is wrong against law and facts and is liable to be set aside. 4.1 Learned representative of the department has argued that the Income Tax Appellate Tribunal has confirmed the finding of the Assessing Officer in in assessee’s own case, therefore in the said circumstances the Assessing Officer has rightly levied the penalty which has wrongly been deleted by the CIT(A) by virtue of order dated 04.12.2012 in question. On the other hand the learned representative of the assessee has argued that the assessee was adopting the work completion method on the percentage basis therefore the assessee has rightly furnished his return because the work was pending. However, the work completion certificate has taken but there was not concealment of income nor inaccurate particulars were furnished, therefore the CIT(A) has rightly deleted the penalty in question and has also placed reliance on the law settled in [2002] 120 taxman 676 (Guj) in Commissioner of Income Tax Vs. Manilal Tarachand and [2010] 189 taxman 322 (SC) Supreme Court of India in Commissioner of Income Tax, Ahmedabad Vs. Reliance Petroproducts (P.) Ltd. and [2003] 133 taxman 320 (Raj.), High Court of Rajasthan, Jaipur Bench in Commissioner of Income Tax Vs. Harshvardhan Chemicals & Minerals Ltd.
ITA No.1897/Mum/13 A.Y.2006-07
By giving the careful thoughts to the contention raised by the Ld. Representative of the parties and perusing the record, it came into notice that the assessee was following the project completion method on percentage basis from the preceding years. No doubt project completion certificate has been taken by the assessee but certain work yet to be concluded. The assessee has taken the following defense:- a) The appellant firm has filed its Return of Income in a timely manner and furnished the fullest of particulars demanded by the AO during the assessment proceedings. b) The appellant firm has consistently followed Percentage Completion Method of accounting and has offered income for tax on an estimate basis on the increase of WIP, irrespective of the fact whether any sales have been executed or not. In impugned A.Y.2006-07, a substantial amount of Rs.19.44 lacs is offered for tax and thus it is not a premeditated attempt to conceal its income. c) The project is completed in the next year and the entire balance profit from the project is admitted for the income-tax purposes in the Return of Income for A.Y.2007-08 and diligently paid the taxes thereon.
ITA No.1897/Mum/13 A.Y.2006-07 d) The Occupancy Certificate dated 18.02.2006 was not a final proof of completion but a conditional approval subject to fulfillment of certain stipulations mentioned therein. e) Project related expenses were incurred in the subsequent year relevant to A.Y.2007-08 – Material were purchased upto May’ 2006, Contract work was carried upto August’ 2006, payment for security services was made till November’ 2006 and water and electric charges were paid upto February’ 2007. f) 3 flats and 3 shops were unsold as on 31.03.2006, which were sold for Rs.54.24 lacs in the subsequent year relevant to A.Y.2007-08. g) Reliance is placed on AS – 9 “Revenue Recognition” and AS- 2 “Valuation of Inventories” and how its principles validate the accounting treatment adopted by the appellate firm. h) In absence of furnishing full and accurate particulars of income, CIT(A) – 35 would not have rendered a positive ruling in favour of the appellant firm. i) Subsequent overruling by the ITAT, Mumbai, indicates that the impugned claim is contentious and based on of ITA No.1897/Mum/13 A.Y.2006-07 legal precedents, no penalty u/s. 271(1)(c) can be imposed on debatable additions.”
While at the time of examination of record in pursuance of notice issued by the Assessing Officer u/s.133(6) of the Act, the necessary documents were produced, and occupancy certificate had also been furnished. The assessee was following the percentage completion method from the last preceding years and the said method has been adopted by the Assessing Officer regularly. The order of the Assessing Officer on quantum was reversed by the CIT(A), subsequently on filing the appeal by the revenue, the order of the Assessing Officer was upheld by the Income Tax Appellate Tribunal by virtue of order dated 04.12.2012, Therefore the Tribunal was of the view that the project was completed substantially. However,Tribunal nowhere accepted this view that the project has been completed wholly. The assessee has furnished the tax details on the basis of the relevant record. Nothing came into the notice that the assessee concealed the income and furnished the inaccurate particulars to evade the tax. In view of law settled in [2002] 120 taxman 676 (Guj) in Commissioner of Income Tax Vs. Manilal Tarachand and [2010] 189 taxman 322 (SC) Supreme Court of India in Commissioner of Income Tax, Ahmedabad Vs. Reliance Petroproducts (P.) Ltd. and [2003] 133 taxman 320 (Raj.), High Court of Rajasthan, Jaipur Bench in Commissioner of Income Tax Vs.
ITA No.1897/Mum/13 A.Y.2006-07 Harshvardhan Chemicals & Minerals Ltd. we are of the view that the CIT(A) has rightly deleted the penalty by virtue of order dated 04.12.2012. Finding no ground to interfere with at this appellate stage, we inclined to dismiss the appeal of the revenue.
In the result, the appeal filed by the revenue is hereby 7. dismissed.
Order pronounced in the open court on 20th July, 2016.