ASHISH GANDHI BUILDERS,MUMBAI vs. ITO WD 10(2)(3), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद�य राजे�� के अनुसार PER RAJENDRA, AM- लेखा सद�य राजे�� के अनुसार लेखा सद�य राजे�� के अनुसार लेखा सद�य राजे�� के अनुसार Challenging the orders dt.04.07.2011 of CIT(A)-21,Mumbai, the Assessee, has filed following grounds of appeal: “1(a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in dismissing the Appellant's appeal on the ground of procedural delay in filing the appeal before him within the prescribed time limit. 1(b) The ld.CIT(A) further erred in dismissing the said appeal on procedural ground without affording an opportunity to the Appellant to substantiate the Appellant's explanation then given before the ld.CIT(A) to the effect that the filing of Appeal before him was considerably delayed "on account of the death of the Accountant" as the said accountant was in exclusive employment in the Appellant' for a long period of 35 years and also that the Appellant is in a position to produce the copy of the said accountant's "death certificate". 2.On the facts and in the circumstances of the case and in law, the ld. Commissioner of Income tax(Appeals) erred in confirming the order u/s. 271(1)(c) on merits levying a penalty of Rs.10,87,011/- in spite of the valid submissions made by the appellant on the issue.

3. Your appellant craves leave to add, alter, modify or vary any grounds of appeal.” Brief Facts: The assessee had filed its return of income on 31.10.2002 declaring loss at Rs.22.86 lakhs,which was processed u/s.143(1)of the Act.After re-opening the assessment u/s.147 of the Act,the AO completed the re-assessment on 25.02.2008 determining the income of the assessee at Rs.47.86 lakhs. As per the AO,the assessee was following Project Completion Method(PCM),that it had debited the construction to Work in Progress(WIP),that possession of the project being developed at Vashi had been handed over to the occupants in the AY.2002-03,that the Municipal Corporation had issued certificate in the same year.Accordingly,the AO held that the project had completed in AY.2002-03,that the advances had to be taxed as income of the assessee for that year after reducing the WIP and brought forward losses.Finally,he assessed the income of the assessee at Rs.47.86 lakhs.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA),who partly allowed the appeal.He held that WIP figure should be taken at Rs.10.14 crores in place of Rs.9.77 crores adopted by the AO.As per 1 Ashish Gandhi Builders & Developers-633711.AY.02-03 his directions,income of the assessee was revised to Rs.30.44 lakhs. 2.During the assessment proceedings,the assessee was asked as to why the penalty proceedings u/s. 271(1)(c)should not be levied.In its reply the assessee stated that difference of income was due the re-computation of WIP by the AO.After considering the submissions of the assessee,the AO held that the assessee was following PCM,that the profit earned out of its activities was liable for taxation as per the system followed by it,that it used to reflect yearwise figure of WIP in the statement of accounts of each AY.,that the correct profit was arrived at only after proceedings were initiated u/s.147 of the Act.Invoking the provisions of section 271(1)(c)Expl.4(a)of the Act,he levied a penalty of Rs.10.87 lakhs for concealing the income and furnishing inaccurate particulars. 3.Penalty order was challenged before the FAA.In the penalty proceedings the assessee stated that there was delay in filing appeal,that same was attributable to the death of the Accountant,that all the papers were lying with him.The,FAA held that the assessee had not produced any documentary evidence that delay was actually result of the death of the accountant,that it was not a reasonable cause for filing appeal late by six months,that appeal was liable to be dismissed because of delay. Without prejudice to dismissal of appeal on account of delay,the FAA deliberated upon the merits of the case.He observed that the assets of the assessee were shown as plots of land in the balance sheet,that the assessee had informed the AO during the assessment proceedings for the AY. 2005-06 that copies of occupation certificates were filed for all the projects of Navi Mumbai, that as per the assessee OC for Kandivili Project was obtained by the flat owners themselves from the municipal authorities.The FAA found that in the statement recorded during the course of survey the secretary of the society stated that they had been residing in the said building since June,2001,that the AO had brought to the notice of the assessee the OC had been issued on 20.02 1998 for Navi Mumbai project,that OC for Kandivili Project was obtained before the end of the AY.under appeal,that all the properties were certified to be fit for occupation by the Municipal Authorities.The FAA further held that while filing return of income it had claimed that the projects were in the stage of WIP and that same were incomplete,that flats in the said projects were already occupied,that the assessee was required to offer income in respect of such projects in the AY. under consideration,that it was aware that the Municipal authorities had issued completion certificate(CC)in respect of those properties,that it was also aware that purchasers had taken possession of the flats,that there was no reason for the assessee to claim that projects were incomplete,that WIP details showed that after 31.03.2002 the assessee incurred little expenses,that details of expenses incurred after that date did not support the claim of the assessee that without incurring such expenses the projects could not have been said to have been completed,that it had in its return claimed that the project were incomplete,that it had filed inaccurate particulars of income,that during the assessment or penalty proceedings it did not file any bonafide explanation,that the assessee case of Reliance Petroproducts Pvt.Ltd.(322ITR158), relied upon by the assessee was of no help to it.Finally,he upheld the penalty order of the AO. 4.During the course of hearing before us,the Authorised Representative(AR) contended that assessee had disclosed all necessary facts, that he had not hidden anything while filing the return, that there was difference of opinion between the AO and the assessee , that it was following a particular method of accounting, he relied upon the case of Reliance Petro Products(322 ITR 158),Girish Devchand Rajani(33 taxmann.com174) and Narang International Hotels Pvt. Ltd. (22 taxmann.com 147).Departmental Representative(DR) 2 Ashish Gandhi Builders & Developers-633711.AY.02-03 supported the order of the FAA. 5.We have heard the rival submissions and perused the material.We find that the assessee had filed the death certificate of the accountant and we hold that there was a reasonable cause for not filing the appeal in time.We find that the FAA had dismissed the appeal not only because it was filed lat,but he had deliberated upon the issue on merits also.Therefore,in our opinion,the issue of delay in filing return is academic in nature. Coming to the merits of the penalty orders,it is found that the AO had re-calculated the WIP and had taxed it in the year under appeal,that the FAA had partly allowed the appeal in quantum proceedings,that the assessee had not disputed that the OC and the CC were issued by the municipal authorities with regard to the projects completed by it,that it was aware that the tenants had occupied the flats.In spite of these facts,it was claiming that work was going on, i.e.the projects were incomplete and that the income was not taxable in that year.Each accounting year is a different unit and income arising, accruing or received in a particular year has to be offered for taxation in that particular year unless and unless there exits some reasonable cause for deferring the same to other year/(s).In the case before us,the assessee has not proved,during the assessment and appellate proceedings,that the income had not accrued to it-even after receiving the OC and CC.It had to produce documentary evidence that even after getting the certificates the projects remained incomplete and it had to incur substantial expenditure for completing them.We do not find any such exercise was done by it.Therefore, if the AO and the FAA held that the assessee had completed the projects in the year under appeal and had not offered the corresponding income in the year in which it should have been offered,then they were not unjustified.While deciding the concealment penalty cases what is to be considered is the explanation filed by the assessee in response to the notice issued by the AO for levying penalty. During the course of survey proceedings and enquiries made by the Department, it was found that the projects undertaken by the assessee had already completed and were occupied by the purchasers. In these circumstances in absence of any contrary evidence it could not be said that projects were in the stage of work in progress.it is a fact that the assessee was following method of project completion. The FAA has given categorical finding of fact that after 31.3.2002 very little expenses was incurred by the assessee for completing the so called projects and that it had incorrectly claimed in the return of income that the projects were incomplete. Here we would also like to discuss the cases relied upon by the assessee.In the case of Reliance Petroproducts Pvt.Ltd.(supra)the court has held that no information,given in the return,was found to be incorrect or inaccurate, that the case of the AO was that submitting an incorrect claim in law amounted in furnishing inaccurate particulars, that the interpretation adopted by the AO was not as per law.The Hon’ble court had held that making an incorrect claim in law did not tantamount to furnishing of inaccurate particulars In the case before us, the facts are totally different-the survey proceedings,as stated earlier,brought certain facts and it was found that the assessee had not offered the income that was to be offered for the year under appeal.Therefore,in our opinion,the case relied upon by the assessee is of no help.In case of Girish Devchand Rajani (supra),it was found that the assessee had revised the return after the death of his brother who was looking after the business.The Hon’ble Court had held that it was not the case of the revenue that the assessee filed revised return as some inaccurate particulars of income were detected by the AO during the course of assessment.In our opinion facts of the case of Girish Devchand Rajani have not relevance to the case before us. In the case of Narang International Hotels(supra),it was found that the assessee had made payments in terms of a consent decree on earlier occasions, as per the order of the High 3