2019 (9) TMI 1014 - HC - Income Tax

Penalty u/s 271(1)(c) - whether failure to disclose income by the Assessee when the project is complete would not amount to furnishing inaccurate particulars of income thereby resulting in concealment of the income by the Assessee ? - case of Assessee throughout that it was under a bonafide belief that the method adopted by it was recognized method for computing income for construction business i.e. project completion method - HELD THAT - It appears that the project was a subject matter of litigation before this Court. There was a dispute between the Respondent and Chandivali Residents Association and also between the Respondent and Maharashtra Housing and Area Development Authority. There were claims and counter-claims made against the Respondent and the Respondent took a stand that it would be appropriate to defer the decision of revenue recognition till the issue is settled. In fact, in quantum proceedings, when the dispute had come before the Tribunal, there was difference of opinion between the members and third member had to resolve the dispute as to when the project is said to be completed for revenue recognition. This itself would support the case of the Respondent that it was under a bonafide belief that the project would be completed only after the dispute is resolved. Thus, it is not a case of furnishing inaccurate particulars of income to justify invocation of Section 271(1)(c) - no substantial question of law

Summary

Issues:
Challenge to order under Section 260A of the Income Tax Act, 1961 regarding penalty deletion by the Commissioner of Income Tax (Appeals).

Analysis:
The appeal was filed by the Appellant - Revenue challenging the order of the Income Tax Appellate Tribunal that dismissed the appeal against the penalty deletion by the Commissioner of Income Tax (Appeals). The substantial question of law raised was whether the failure to disclose income by the Assessee upon project completion constituted furnishing inaccurate particulars of income leading to concealment. The Respondent - Assessee, a construction and real estate company, had its assessment for the Assessment Year 2004-05 completed with total income of ?16,96,75,146. Relief was granted on certain amounts by the Commissioner of Income Tax (Appeals), resulting in a revised income determination by the Assessing Officer. Penalty proceedings were initiated under Section 271(1)(c) of the Act, and a penalty of ?1,50,00,000 was imposed for furnishing inaccurate particulars of income. The Commissioner (Appeals) and the Tribunal both held that the Respondent's stand was bonafide, and the penalty was not justified.

The Respondent consistently maintained that its actions were based on a bonafide belief that the method used for income computation, the project completion method, was legitimate for construction business. The Respondent was involved in litigation with Chandivali Residents Association and Maharashtra Housing and Area Development Authority regarding the project, leading to a decision to defer revenue recognition until the disputes were resolved. The Tribunal had to intervene in quantum proceedings due to conflicting opinions on when the project should be considered complete for revenue recognition. This supported the Respondent's claim of acting in good faith, indicating that there was no intention to furnish inaccurate particulars of income under Section 271(1)(c) of the Act.

Given the consistent findings of fact by the Commissioner (Appeals) and the Tribunal, which were not deemed to be perverse or illegal, the Tribunal's decision was upheld without interference. Consequently, the issue raised in the appeal was deemed not to give rise to any substantial question of law, leading to the dismissal of the appeal.