ITA NO. 1719/Del/2012
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "E", NEW DELHI
BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER
AND
SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
I.T.A. No. 1719/DEL/2012
A.Y. : 2003-04
Mr. Harmail Singh, vs. INCOME TAX OFFICER,
D-68, Paryavaran Complex, WARD 24(3),
IGNOU Road, NEW DELHI
New Delhi
(PAN: AQIPS9848L)
(APPELLANT) (RESPONDENT)
Assessee by : Sh. Rajesh Arora, CA
Department by : Sh. Tarun Seem, DR
ORDER
PER U.B.S. BEDI : JM
This appeal by the Assessee is directed against the order of the
Ld. Commissioner of Income Tax (Appeals-XI), New Delhi dated
2.2.2012 pertaining to assessment year 2003-04, whereby the
order of the Ld. CIT(A) in confirming the penalty imposed by the AO
u/s. 271(1)(c) of the Income Tax Act, 1961 has been challenged.
1.1 The original grounds of appeal challenge was with regard to
imposing of penalty by the Ld. CIT(A) whereas in revised ground
the challenge is with reference to sustaining of penalty by the Ld.
CIT(A), which has been allowed. So objection of the Department in
this regard gets overruled.
2. Brief facts of the case are that the assessee is engaged in
construction activities and filed return for the relevant assessment
year on 16.10.2003 declaring an income of Rs. 75,980/-. A survey
u/s. 133A of the Act was conducted at the premises of the assessee
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on 25.11.2003 and case was selected for scrutiny. When notice u/s.
143(2) of the Act was issued, the assessee filed its revised return
declaring total income of Rs. 1,79,090/- which was assessed at Rs.
11,40,200/- as against revised income of Rs. 1,79,090/- after making
addition of Rs. 9,16,000/-. This assessed income also includes
disallowance of certain business expenses claimed in the profit and
loss account the detailed of which are as under:-
Salary : Rs. 54,000
Conveyance & Telephone : Rs. 55,800/-
Renovation and repair of flats on : Rs. 48,500/-
Account of demolition by MCD. Total 1,58,300/-
: Rs. 1,58,300/-
2.1 Aggrieved by this order of the Assessing Officer, assessee
challenged such disallowances by preferring an appeal but Ld.
CIT(A) confirmed such addition as made by the Assessing Officer and
further assessee preferred appeal before ITAT. However, in the
meantime, Assessing Officer completed the already initiated
proceedings u/s. 271(1)(c) and imposed penalty @100% of the tax
sought to be evaded. The assessee challenged such action before
Ld. CIT(A) but without any success.
2.2 Still aggrieved, assessee has preferred further appeal and
while reiterating the submissions as made before lower authorities,
it was strongly pleaded that there was no occasion for the
Assessing Officer to levy such penalty and Ld. CIT(A) was also
unjustified in confirming the same, when all necessary proofs and
documents were furnished to establish that no malafide was
involved in this case as the flat was sold for Rs. 4,95,000/- and
balance amount spent on renovation of the property and if for some
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reason, addition has been made, it cannot be sole criteria for
imposition of the penalty. Ld. AR further submitted as under:-
"1. The AO levied penalty u/s. 271(1)(c) of Rs.
3,02,749/- on the income of Rs. 9,61,110/- allegedly
sought to be evaded alleging that the assessee has
not given any explanation or documentary evidence
for the net profit shown during the year and that the
assessee was not reflecting the full sale
consideration received by him. That the assessee
had deliberately and intentionally omitted the facts
in order to hide the actual sale value of flats in
question and hide the facts with regard to cost of
construction involved.
However, it is neither a case of failure of
assessee to submit the explanation nor it is a case
where the explanation submitted was not bonafide.
The dispute is not on the declaration of receipts and
expenses. It is on account of difference of opinion
with regard to allocation of cost of construction.
Profit from Sale of Flat at A-104, Paryavaran
Complex of Rs. 9,90,081/- (Penalty imposed on Rs.
9,61,110)
1.1 The assessee, an illiterate small time worker filed
his return without a supporting P&L account. Survey
u/s 133A was conducted and the assessee revised
the return of a total income of Rs.1,79,086/ - along
with the receipts and expenses in the P&L account
in response to letter dated 27.1.2005. That the
assessee declared in the said P&L account, receipt
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ITA NO. 1719/Del/2012
of Rs. 14,50,000/- for the properly in question and
the se is not disputed by the Ld. A.O in calculating
the alleged profits of Rs. 9,90,081/-. Hence, the
allegation that the assessee was not reflecting full
sale consideration is not warranted and completely
unjustified.
1.2 That the First Floor of flat at A - 104, Paryavaran
Complex, was sold to the buyers, Mrs. Janki Rawat
and Mr. Gopal Singh Rawat, for sale consideration
of Rs. 4,95,000/-, and further a amount of Rs.
9,55,000/- was received by the assessee from them
for the purpose of renovation. That the same is
reflected as Rs. 14,50,000/- (Rs. 4,95,000 + Rs.
9,55,000) in the P&L a/c filed before the AO.
Henceforth, there was no omission of facts as to the
value of flat as alleged by the AO.
1.3 That the total cost (excluding commission) of the
Flat at A - 104, Paryavaran Complex comes to Rs.
16,23,677/- as per the impounded material. The
assessee allocated Rs. 12,61,554/- towards the cost
of First Floor at A -104, Paryavaran Complex since
renovation was done on the said floor upon buyers'
instruction and the area of the floor was larger than
other floors. The AO computed the cost of
construction of the 1st floor by allocating the cost
equally to all the floors whereas the assessee
allocated the same according to the area of floors
and taking the effect of renovation into account.
Thus, the difference in cost of· construction is
account of difference in opinion between the
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ITA NO. 1719/Del/2012
assessee and the A.O. The allocation of cost made
by the assessee was indeed a bonafide one.
1.4 That the AO has allocated the cost of construction
equally among Ground Floor, First Floor, Second
Floor and Third Floor. The A.O has erred on the fact
that the Ground Floor was already existing and in
possession of the assessee. It was thus not subject
to any construction. The documents in support
thereof in the form of telephone bills were placed on
record before the A.O. The allocation of cost of
construction made by the A.O was thus made on
presumption and surmises.
1.5 That the documentary evidence that buyer had paid
Rs.4,95,000/- as sales consideration and thereafter,
Rs. 9,55,000/- for the purpose of renovation of the
flat were placed on record. The confirmation of
buyer was also placed before the CIT(A) during the
quantum proceedings. u/r 46A. That, the glaring
fact was never confirmed or rebutted by the
department. The addition was confirmed without
any rebuttal by the department, and without
proving as to how the submission of the assessee
was erroneous.
1.6 That since the loan amount of Rs. 9,55,000/- was
sanctioned on 27.02.2003 as evident from the GIC
Offer Letter and Disbursement letter and received
after the date of sale of the First Floor i.e.
03.12.2003 there was no question of passing any
"on money" as alleged in the quantum proceedings.
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ITA NO. 1719/Del/2012
That such an allegation was only on presumptive
basis and cannot defy the facts on record that the
flat had been sold much earlier than date when
amount of Rs. 9,55,000/- was received.
1.7 That since the property at A -104, Paryavaran
Complex was built in different segments over the
period of time, to assessee also had option to
calculate the profits using "completion method."
The addition in question was confirmed following
the method on yearly basis. Following completion
method, the profit per flat comes out to
Rs.1,73,341, whereas the assessee has declared a
profit of Rs. 1,88,446/-.
1.8 That the assessee substantiated three alternate
calculations to show that no income beyond the
stated income was earned during the year under
consideration.
1.9 That the revenue did not accept the explanation of
the assessee but brought nothing on record to
prove that the explanation was false or incorrect.
1.10 That for levy of penalty, totality of circumstance and
facts needs to be considered. Neither has the total
cost incurred nor the total amount received by the
assessee been disputed. The difference is merely on
account of difference of opinion with regard to
allocation of cost.
1.11 That merely because the assessee's explanation
was not agreed with for the purpose of making
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ITA NO. 1719/Del/2012
additions, the same does not automatically attract
penalty thereupon.
1.12 Various judicial pronouncements have clarified
when the assessee's explanation is not fantastic or
fanciful, but the same has not been accepted during
the quantum proceedings, it cannot be held that
penalty is attracted on the same.
1.13 Explanation of the assessee for the purpose of
avoidance of penalty must be an acceptable
explanation; it should not be fantastic or fanciful
one. Once the initial burden is discharged, the
assessee would be out of the mischief unless further
evidence is adduced. CIT v. Mussadilal Ram
Bharose, (1987) 60 CTR (SC) relied on.
1.14 If an assessee offers an explanation, which is not
found to be false, he can save himself . from
penalty even if he were not able to substantiate his
case as long as the explanation of the assessee is
bonafide and as long as he places all the relevant
facts material to computation of his total income
irrespective of the fact that the same explanation
was not accepted for the purpose of assessment.
ACIT vs. Malhotra Mukesh Satpal (2008) 113 TTI 401
(Hon'ble ITAT, Pune Bench)
1.15 The explanation of the assessee has nowhere been
alleged to be false or short. Neither is it alleged to
be not bonafide. Therefore, penalty ought not to be
levied on the assessee, even if the additions have
been confirmed in quantum proceedings. Thus, the
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ITA NO. 1719/Del/2012
penalty levied on the same is unjustified, and
should be deleted."
3. Ld. DR in his written submissions firstly challenged the
wording of the ground raised which has since been revised by the
assessee and the same has been accepted by the Bench as
mentioned in para 1.1 of this order while overruling the objection of
the Department.
4. Now coming to the merits of the case, Ld. DR while
reproducing the conclusions of the order of the ITAT and the
quantum appeal has further submitted that the situation with
reference to adducing the evidence to dispel the conclusion of the
contumacious conduct on the part of the assessee as remained
unchanged during the penalty proceedings. Ld. CIT(A) has
confirmed the penalty and since assessee has failed to present any
evidence why penalty for concealment of income levied by the AO
and the confirmed by the CIT(A) should be deleted. It was pleaded
for confirmation of the impugned order.
5. We have heard both the sides and considered the material on
record and we find that in view of the facts and circumstances of the
case and material on record, assessee is found to have made out
the case in light of the decisions relied upon and incorporated in the
Snap-Shot of the arguments filed by the AR of the assessee and
mentioned in para 2.2 of our order. Considering the plea raised in
light of the case laws relied upon and discussed, we are of the view
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that this case is not fit for imposition of penalty as none of the
ingredients incorporated in the relevant provisions have been
fulfilled by the AO before arriving at the conclusion to impose the
penalty. Therefore, accepting the appeal of the assessee we direct
to delete the penalty imposed by the AO and confirmed by the Ld.
CIT(A).
6. In the result, the Appeal filed by the Assessee stands allowed.
Order pronounced in the Open Court on 16/7/2014.
Sd/- Sd/-
YAHYA]
[SHAMIM YAHYA] BEDI]
[U.B.S. BEDI]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date 16/7/2014
"SRBHATNAGAR"
Copy forwarded to: -
1. Appellant -
2. Respondent -
3. CIT
4. CIT (A)
5. DR, ITAT
TRUE COPY
By Order,
Assistant Registrar,
ITAT, Delhi Benches
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