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TMI Blog2017 (6) TMI 516X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Penalty under section 271(1)(c) - sale of plot of land chargeable to tax under the head of capital gains or under the head of business income - Held that:- The issue in respect of the items of sale of land (development rights) to M/s Saytam Builders & sale of land (development rights) of M/s Brahma builders and an amount received as compensation from M/s Wagmare i.e. the surplus of ₹ 49,03,620/- is covered in favour of assessee by Hon’ble Bombay High Court decision in assessee’s own case for 2004-05. Respectfully following the same, we confirm the order CIT(A) deleting the penalty. In respect to the business expenses disallowance we are of the view that mere on confirmation of disallowance of expenses and that also on estimate basis, the penalty for concealment of income u/s 271(1)(c) of the Act cannot be levied and hence, we confirm the order of CIT(A) deleting the penalty. This appeal of revenue is dismissed. Revision u/s 263 - sale of land as business income as against the assessee’s claim accepted by AO as income chargeable as capital gains - Held that:- Admitted facts are that in this year the AO has discussed the facts while framing the assessment under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s appeal is against the order of CIT(A) in holding that the surplus sale of land taxable as capital gains. For this Revenue has raised following three grounds: - 1. On the facts and circumstances of the case, and in law, the Ld. CIT(A) erred in holding that the surplus on sale of land is taxable as capital gain in the assessee's hands, despite the fact that the assessee business consists of purchase and sale of land/buildings and that it is reasonable to infer that any transaction in a commodity which is in the normal line of business of the assessee constitutes a business transaction unless the contrary is proved by the assessee. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred inholding that the surplus on sale of land is taxable as capital gain in the assessee's hands, though the assessee has failed to discharge the onus cat on him by law to establish that the transaction in land which falls within the purview of the regular business of the assessee, was unrelated to the business of the assessee and that the land was held only as investment and not as stock-in-trade. 3. On the facts and in the circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of the assessee is allowed. 4. We also find that the CIT(A) has retreated the same position as the AO while giving appeal effect to the ITAT, only noted that the issue has been appealed by department before the Hon ble Bombay High Court under section 260A of the Act. This effect is deliberated by CIT(A) in his order vide Para 3.1 to 3.3 which reads as under: - 3.1 In this case the Hon'ble ITAT, Mumbai's order in this very assessment year is available wherein Hon'ble authority has decided that the income has to be assessed as capital gain despite the fact that same Hon'ble authority has decided in subsequent A.Yrs the income from sale of flat as business income. The relevant portion of the decision given in ITA No.5262/Mum/07 are reproduced from the order as under: '8.3 In respect to the remaining grounds, and the additional grounds filed by the assessee, the matter is liable to be set aside to the file of the AO because of the reason that the AO has not granted exemption ufs.54EC for the reason that the sale consideration was treated under the head 'business income'. Since we have allowed the issue that the sale consideration is liable f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n law, the Ld. CIT(A) erred in giving the finding that investment in installments have been made within six months from the date of receipt of installments of sale proceeds of capital assets ignoring the fact that transfer of capital asset took place on 07.05.2003 (vide sale deed df. 07.052003) being land sold to MIS. Brahma Builders for a consideration of 13.90 crore, whereas investment in NABARD Bonds was not made within six months from the date of transfer of capital asset i.e. on 07.05.2003. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to verify the authenticity of investment claimed to have been made in the NABARD Bond Inspite of the fact that investment was mode beyond six months from the date of transfer of asset dtd. 07.05.2003, as receipt of sale consideration in installments is not material for eligible exemption against capital gain and the date of transfer is relevant as provided u/s. 54EC of I.T. Act, 1961. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing The AC to verify the authenticity of investment claimed to have been made in the NABARD Bond, In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12,21,60,000 9. We further find that the CIT(A) has allowed the claim of the assessee in Para 4.4 by observing as under: - 4.4. I have gone through the same. The appellant has given the date of actual receipt of the fund and corresponding date of investment which are found to be much more than the total amount received ₹ 10,53,45,521/- being ₹ 12,21,60,000/- invested in NABARD bonds. The appellant has also stated that as the investment been within six months from the date of receipt of sales proceeds decision given in the case of Chanalal Sirsan vs. ITO, ITAT Calcutta is also applicable to him and hence exemption should be granted in toto as per the eligibility. I have gone through the submissions and I am of the view that the matter is covered in favour of the appellant on account of the fact that vestments in installments have been made within six months from the date of receipt of installments of sales proceeds of capital asset in the case of appellant. the upper limit of ₹ 50,00,000/- being applicable for the A.Y. 2007-08 only, the appellant is entitled to exemption. In view of this the A.O. is directed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal for the AY 2005-06 is against the order of CIT(A) deleting the penalty levied by AO under section 271(1)(c) of the Act for furnishing of inaccurate particulars of income in respect of on account of change of head of income from capital gains to business income and also disallowance of bogus expenses to the extent of 75% of estimate basis. For this Revenue has raised following 4 grounds: - 1. 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 Act amounting to ₹ 2,46,51,141/- without appreciating the fact that the assessee has submitted inaccurate particulars of income. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the claim of the assessee of long term capital gain and deduction u/s 54EC of the Act instead of business income on the sale of land is merely a change of head and hence no concealment of income. 3. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in holding that the confirmation of disallowance of bogus expenses to an extent of 75% of the claim of the assessee is an estimate without appre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, the AO started penalty proceedings by issuing show cause notices under section 275 (1A) read with section 271(1)(c) of the Act for furnishing of inaccurate particulars of income in respect to above income confirmed by Tribunal. 15. In regard to the subsistence of disallowance of disallowance at 25% of the Tribunal, the AO levied the penalty by observing in Para 7.1 which reads as under: - 7.1 25% of the disallowance on account of bogus purchases: - During the assessment proceedings, despite being specifically asked, the assessee could not produce the bills for purchases to the tune of ₹ 41,28,262/-. Moreover, none of the bills pertaining to the above amount were produced/ submitted even before the Ld. ClT(A) and Hon'ble ITAT. During the course of appellate proceedings, both the LcI. CIT(A) as well as Hon'ble [TAT has confirmed that, though the assessee did not have bills for the above amount, the existence of expenses, keeping in mind the nature of business, could not be ruled out. Accordingly, the Hon'ble ITAT enhanced the disallowance out of the above amount of ₹ 41,28,262/- from 50% {upheld by the Ld. CIT(A)} to 75%, thereby upholding a fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccurate particulars of its income chargeable to tax. Though the Hon'ble Supreme Court has, in a later judgement in the case of M/s. Dharmendra Textiles reversed the above ruling by holding that mens-rea is not a prerequisite for levy of penalty, the concealment penalty u/s.271(1)(c) of the Act for furnishing of inaccurate particulars in respect of income chargeable to tax, in this case is leviable as the assessee has not only furnished inaccurate particulars, but has done so with an intent of avoiding tax. 17. Aggrieved assessee preferred the appeal before CIT(A). The CIT(A) deleted the penalty after considering the submissions of the assessee and penalty order by observing in Para 3.1 and 3.2 as under: - 3.1 A reading of the penalty order thus makes it clear that for levying of penalty, the A.O has taken into account firstly 25% of disallowance of bogus purchases and then treating the Long Term Capital Gain declared by the appellant as business income and finally the compensation received of ₹ 49,03,620/- claimed as capital receipt as business income. All these additions have been consequent to the appeal effect of the second appellate\ order passed by the Hon& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Act, 1961 ( Act for short) is leviable upon the respondent assessee. The issue before the Tribunal was whether the profits arising on sale of plot of land is chargeable to tax under the head capital gains or under the head business income. The impugned order deleted the penalty as in quantum proceedings, the respondent assessee had succeeded and there was no quantum addition. Besides upholding the finding of the Commissioner of Income Tax (A) that there is no dispute the facts with regard to sale and purchase of land was not concealed by the respondent assessee and in any event in the fact of the case two view are possible, thus no penalty is possible. 3. The submission of the Revenue is that as this court has entertained its appeal from the order of the Tribunal in quantum proceedings, the appeal from the impugned order of the Tribunal with regard to penalty must also be entertained. No submission independent of the above submissions is made for admission of this appeal. 4. It is well settled that the penalty proceedings are independent and separate from quantum proceedings. Therefore, mere rejection of a claim in quantum proceedings would not ipso facto le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of law that for claiming any expenditure as genuine, the onus is always on the assessee to produce evidence to the satisfaction of the Assessing Officer that the expenditure is wholly and exclusive for the purposes of the business. In the instant case, we find, the assessee has failed to discharge the onus cast on it. Merely because the payments are made by account payee cheque, the same, in our opinion, cannot be accepted as genuine business expenditure in absence of supporting details to substantiate the genuineness of such expenditure. In the instant case, although it was stated by the Assessing Officer that cross verification may be provided before allowing the claim as genuine, we find the CIT(A) has not directed the assessee for such cross verification. We find the assessee has already expressed its inability to produce the missing bills/vouchers on the ground that the same are misplaced/not available. Under these circumstances, remanding the matter back to the file of the Assessing Officer also will not serve any purpose. Considering the totality of the facts of the case and considering the fact that relief of 50% granted by the CIT(A) appears on the higher size, restrict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,04,20,000/-. Accordingly, he worked out long term capital gain at ₹ 9,09,29,507/-. Subsequently, the CIT-22 Navi Mumbai required the assessee by issuing show cause notice under section 263 of the Act as to why the long term capital gain assessed by assessee at ₹ 9,09,29,507/- be assessed as business income. According to CIT, the assessment order framed under section 143(3) of the Act dated 29-12-2009 assessing the long term capital gain on development rights of the land is prejudicial to the interest of the Revenue so far as erroneous also. The CIT also noted that although ITAT order in assessee s own case for AY 2004-05 was in favour of assessee but Revenue has preferred the appeal against the same before Hon ble Bombay High Court and Revenue has not accepted the ITAT s order for AY 2004-05. For this CIT observed in Para 6 as under: - 6. The above contention of the assessee cannot be accepted. Though the order u/s. 143(3) was passed by the Assessing Officer, as is pointed out in the above reply, in keeping with the order of the Hon'ble ITAT for A.Y. 2004-05 which was in favour of the assessee was available with the Assessing Officer is nothing but mis-constru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of plots and sale of plots; therefore, the sale of plot is held on account of business activity. However, in the present case no such facts are available. In the present case, the plot was shown in the fixed asset and on one go the plot has sold by the assessee on the basis of as is where is condition . 8.2 The ratios of the decision in the case of Shanti Builders and in the case of Gas Property Developers discussed above are applicable on the facts of the present case. We further noted that the profit arising to the assessee is on account of appreciation of value of the plot and not on account of any construction activity. Therefore, in view of these facts and circumstances, we hold that the profit arising out of sale consideration on account of sale of plot is liable for capital gain and not under the business head. Accordingly, the ground of the assessee is allowed. 25. The CIT also observed that the assessment order framed for AY 2005-06 is in favour of department whereby the Tribunal in ITA No. 3980/Mum/2009 dated 13-10-2010 has held that the income on account of sale of land is to be assessed as business income. On this the learned Counsel for the assessee argue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not as per law and hence quashed. The appeal of the assessee is allowed. 28. The first issue in ITA No. 2955/Mum/2012 for the AY 2008-09 in assessee s appeal is against the order of CIT(A) confirming the disallowance of deduction under section 80IB of the Act being profit earned out of housing project. For this assessee has raised following grounds No. 3, 4 and 5: - 3. Under the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the disallowance of appellant s claim of deduction of ₹ 2,41,05,224/- claimed under section 80IB(1) of the income Tax Act, being profit earned out of its Housing Project at Pimpri. 4. Under the facts and circumstances of the case and in law the Ld. CIT(A) has erred in not appreciating the fact that the appellant had claimed deduction under section 80IB (10) only in respect of its completed housing project and not on any commercial area which was not completed. 5. Ld. CIT(A) has erred in Not appreciating the correct proposition of law laid down by the Hon ble Bombay High Court in case of Brahma Associates while disallowing the appellant s claim of deduction under section 80IB (10). 29. Brie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 801B with effect from 91.04.2005 allowing commercial area to the extent of 5% of the project was not in picture when appellant's project commenced on 03.05.2003. 7.2 In view of this I have gone through commencement certificate dated 03.05.2003 filed by appellant which is in form of annexure 'B' and also the completion certificate dated 31.03.2008 which is in form of annexure 'A'. It is noted from the same that the entire project called Pimpri Project consisted of buildings A-1, A-2, A-3, B-I, B-2, C-1, C-2 D. It is noted that residential buildings are shown in the completion certificate as eight in numbers and twelve shops however, the same does not reflect building 'D'. The appellant has explained that construction of building 'D' has not yet commenced and so not completed on 31.03.2008. It has also been informed that for building 'D' the appellant has not claimed 801B (10) rebate on the same. In support of the same the appellant has cited case law of Bhrama Associate vs. JCIT. -------------------------------------------------------------------- 7.4 As far as the issue if a project which is approved as residential cum co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding. Neither building D; here is new housing project. Here in the case of appellant the matter in the instant appeal is when the Pimpri Project consisting of buildings A-1, A-2, A-3, B-1, B-2, C-1, C-2 D which was approved as residential cum commercial project by commencement certificate dated 03.05.2003 and for which the completion certificate dated 31 .03.2008 clearly shows that only buildings A- 1, A-2, A-3, 8-1, 8-2, C-1 C-2 are completed by 31.03.2008 but not building 'D', the rebate u/s.801B(10) for the project can be given or not? After going through the case law of Varidana Properties vs. ACIT, I find that the case of appellant is not covered by the said decision and in fact is covered against him by Brahma Associates on this issue wherein Hon'ble Bombay High Court has clearly stated that the rebate u/s.801B(10) is on the profits derived from such approved project and not for the part project. It says that either the project is eligible or not eligible but in any case it cannot be the case that one part of the project is eligible and the other part is not eligible. In this case since the appellant has not contradicted the fact that construction of buildin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 5% of the total plot area and not more than 2000 sq.ft. Shri Shaikh, Site Supervisor also clarified that the building D is a fully commercial building. 31. We find that the project was sanctioned by the local authority on 03-05-2003 and at that time there was no restriction in respect of commercial area. The restrictions came in force from 01-04-2005 and hence, the provisions of commercial area are not applicable to the assessee company. The assessee company has completed seven buildings of housing project and obtained completion certificate from local authority as on 31-03-2008. Total no. of flats for which completion certificate obtained was for 164 residential flats. The remaining one building was not completed which was commercial block D and for which the assessee has not obtained the completion certificate. The assessee has completed seven buildings A-1, A-2, A-3, B-1, B-2, C-1 and C-2 for eligibility of deduction u/s 80IB(10) of the Act. Admittedly, the assessee has not submitted any plan for block D which is a commercial building and not completed and for which no deduction was claimed by the assessee. We find that this issue is answered by the Hon ble Bombay Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot of land or not. In these circumstances, construing the provisions of Section 80IB (10) by adding words to the statute is wholly unwarranted and such a construction which defeats the object with which the Section was enacted must be rejected. 28. Apart from the above, the Central Board of Direct Taxes (CBDT) by its letter dated 4th May 2001 addressed to the Maharashtra Chamber of Housing Industry has stated thus : The undersigned is directed to refer to your letter No.MCHI:RSA:m:388/19799/3 dated 1st January 2001 and to state that the additional housing project on existing housing project site can qualify as infrastructure facility under Section 10(23G) and 80IB (10) provided it is taken up by a separate undertaking, having separate books of accounts, so as to ensure that correct profits can be ascertained for the purpose of Section 80IB and also to identify receipts and repayments of long term finances under the provisions of Section 10(23G), separately financing arrangements and also, if it separately fulfills all other statutory conditions listed in Sections 10(23G) and 80(B(10). With regard to your query regarding the definition of Housing Project, it is clarified ..... X X X X Extracts X X X X X X X X Extracts X X X X
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