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TMI Blog2017 (11) TMI 1603X X X X Extracts X X X X X X X X Extracts X X X X ..... on would have been advantages to the assessee as in that case all the expenses could have been allowed. Considering all explanation of the assessee that the claim had been made under bonafide belief has to be accepted and it will not be appropriate to levy penalty under section 271(1)(c) in this case. Accordingly we set aside the order of CIT(A) and delete the penalty levied. SEE Chaitra Reality Ltd. v. DCIT [2011 (3) TMI 1746 - ITAT MUMBAI] - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... velopment Work-in- Progress account, while instead the same was added to the P&L Account which led to the disallowance of the said loss wherein addition of 14,44,31,840/- in the assessment order was made by the AO, to be allowed to be carried to Real Estate Development Work-in-Progress Account in an assessment framed u/s 143(3). Further, the AO observed that there was a claim of depreciation of ₹ 1,20,090/- in respect of the vehicles transferred from M/s. Hindoostan Spinning & Weaving Mills Ltd. as per the agreement which should have formed part of the Real Estate Development Work in Progress which was also added to the income by the A.O. in an assessment framed u/s 143(3). Further it was observed by the A.O that assessee has incurred expenses of ₹ 16,44,673/-, the detail of which are hereunder:- Printing & Stationery ₹ 33,062/- Bank Charges/Commission ₹ 85,627/- Electricity Charges ₹ 23,700/- Rates & Taxes ₹ 5,78,346/- Post & Courier Charges ₹ 76,455/- Security Charges ₹ 29,974/- Traveling Expenses ₹ 8,431/- Trusteeship Fees ₹ 54,000/- Sundry Expenses ₹ 68,296/- Interest on others ₹ 6,35,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned CIT(A). The A.O also relied upon the decision in group cases of the assessee company i.e. Chaitra Realty Ltd. - A.Y 2005-06, formed under the same scheme of BIFR, wherein the 200% of the tax sought to be evaded was levied as penalty by the AO, which was reduced to 100% by the learned CIT(A) during appellate proceedings in the case of Chaitra Realty Private Limited. The A.O levied the penalty u/s 271(1)(c) of ₹ 5,24,37,851/- being 100% of the tax sought to be evaded by the assessee, vide penalty order dated 08-03-2010 passed by the AO u/s 271(1)(c). 4.Aggrieved by the penalty order dated 08-03-2010 passed by the AO u/s 271(1)(c), the assessee carried the matter in appeal before the learned CIT(A), who rejected the contention of the assessee and upheld the penalty levied by the AO, vide appellate order dated 20-08-2013 passed by learned CIT(A). 5. Aggrieved by the appellate order dated 20-08-2013 passed by learned CIT(A), the assessee has come in appeal before the tribunal . At the outset Ld. Counsel for the assessee submitted that on the similar/identical facts, tribunal has deleted penalty in the case of Chaitra Reality Ltd. v. DCIT in ITA no. 2520/Mum/2010 for ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TD only in the year 2006. Moreover the decision of the special bench has been disputed before the High Court where the appeal is pending. Under such circumstances in our view it is possible to form a bonafide belief on the date of filing return of income i.e. on 31.10.2005 that the expenses could be allowed from year to year basis. The Learned AR has also submitted that the assessee had no other income even till today and therefore there was no advantage to the assessee in claiming expenses and declare losses from year to year as the losses could be carried forward only for a limited number of years. In such a situation claiming the expenses in the year of completion would have been advantages to the assessee as in that case all the expenses could have been allowed. Considering the entirety of facts and circumstances, in our view, explanation of the assessee that the claim had been made under bonafide belief has to be accepted and it will not be appropriate to levy penalty under section 271(1)(c) in this case. Accordingly we set aside the order of CIT(A) and delete the penalty levied." It is also brought to the notice of tribunal that on the similar grounds the tribunal has delet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tantiate the explanation but is able to prove that the explanation is bonafide and all necessary details have been submitted penalty under section 271(1)(c) cannot be levied. In this case there is no dispute that details of expenses had been given. The case of the assessee is that the claim had been made under the bonafide belief that such expenses were allowable from year to year basis. We also note that allowability of expenses such as interest etc on year to year basis or in the year of completion of project has been a debatable issue. There have been contrary decisions of the various benches of the tribunal. The special bench of the tribunal in case of Wall Street Construction Pvt. Ltd. Vs JCIT (supra) had rendered decision only vide order dated 22.9.2005 in which it was held that the interest has to be allowed in the year of completion of the project. The said decision it has been pointed out was published in the ITD only in the year 2006. Moreover the decision of the special bench has been disputed before the High Court where the appeal is pending. Under such circumstances in our view it is possible to form a bonafide belief on the date of filing return of income i.e. on 31.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Loss Account instead of carrying the same to Real Estate Work-in-Progress . The said audited accounts are placed in paper book/page 1-29. Our attention is also drawn to the audited financial statements for the F.Y 2004-05 as well as for the FY.2005-06 and it was submitted that assessee has rectified the said mistake in the audited account for F.Y 2005-06 by revising the accounts for FY 2004-05 wherein said expenses were carried to Work-in-Progress Real Estate Development under the head „current assets' wherein the revised audited Balance Sheet was signed on 21-08-2006 by Directors/Auditors and adopted by Shareholders on 29-09-2006 in Annual General Meeting, as the said expenses were incurred with respect to Mahalaxmi Property of M/s. Hindoostan Spinning & Weaving Mills Ltd. and since the project was not yet completed, the same was carried forward to the next year under the head „current assets'. It is also submitted that the assessee voluntarily revised its audited accounts vide revised Balance Sheet signed on 21-08-2006 which was adopted by Shareholders on 29-09-2006, while notice u/s 143(2) was only issued by Revenue on 28-10-2006 which is later than the suo motu re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icles(SPV) which are engaged in the business of real estate development entrusted with the task of re-construction of the company M/s. Hindoostan Spinning & Weaving Mills Ltd. as per the rehabilitation scheme dated 01.04.2004 sanctioned by Board of Industrial and Financial Reconstruction(BIFR). As per the scheme of the said arrangement approved by BIFR, Mahalaxmi Property of M/s. Hindoostan Spinning & Weaving Mills Ltd. has been assigned to the assessee for development and liabilities equivalent to the transferred value of the assets were also transferred to the assessee. The assessee is following Project Completion method but it has not completed the said project during the year under consideration, which project stood completed in the financial year 2012-13 in which the assessee has stated to have offered revenue as well income to tax. The assessee company however claimed in its profit and loss account an amount of ₹ 14,44,31,840/- pertaining to loss on sale of asset which was on account of loss on sales of chargeable area of land appropriated by the developers being lower than the allotted price under the scheme approved by BIFR and it was required to be carried to the Rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quantum assessment. The A.O levied the penalty u/s 271(1)(c) of ₹ 5,24,37,851/- being 100% of the tax sought to be evaded by the assessee, vide penalty order dated 08-03-2010 passed by the AO u/s 271(1)(c) which was later confirmed by learned CIT(A). The assessee has suo-motu voluntarily of its own revised its financial accounts for the financial year 2004-05 wherein the said losses were debited to Real Estate Development Work-in-Progress instead of Profit and loss account vide audited revised accounts for financial year 2005-06 which were signed by Directors and auditors on 21-08-2006 which were later approved by Shareholders in Annual General Meeting held on 29-09-2006. The AO issued first notice u/s 143(2) selecting assessee's case for scrutiny only on 28-10-2006 while the assessee revised its financial accounts prior to that on 21-08-2006. In any case it is not the case of Revenue that these are false/bogus claim of loss or some false expenses were claimed, the case of Revenue is that the assessee has claimed expenses and consequently business losses to be carried forward in the previous year relevant to the assessment year while the project was not completed in the previ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to day expenses in the profit and loss account. This has been disallowed by the AO on the ground that the expenditure could be claimed only in the year of completion. The disallowance had been accepted by the assessee. However the AO had also imposed penalty under section 271(1)(c) @ 200% of tax sought to be evaded which in appeal was reduced to 100% of tax sought to be evaded. The issue is whether on the facts of the case penalty under section 271(1)(c) can be levied. 6.1 A penalty under section 271(1)(c) is only a civil liability as held by the Hon'ble Supreme Court in case of Dharmendra Textiles and Processors (supra) and willful concealment is not required to be proved by the revenue. However each and every addition in the assessment cannot automatically lead to penalty under section 271(1)(c). A case for penalty has to be evaluated in terms of the Explanation 1 to section 271(1)(c) as per which in case of any addition made in assessment even if the assessee is not able to substantiate the explanation but is able to prove that the explanation is bonafide and all necessary details have been submitted penalty under section 271(1)(c) cannot be levied. In this case there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... implementation of the rehabilitation scheme dated 1.4.2004 sanctioned by the BIFR in the case of 'The Hindoostan Spinning & Weaving Mills Ltd.'. In the case of M/s. Chaitra Realty Ltd. also, similar additions were made and penalty was imposed u/s 271(1)(c) of the Act. In fact, in the impugned order passed by the Assessing Officer levying the penalty, a reference has also been made to the penalty imposed by him in the case of M/s. Chaitra Realty Ltd. In the case of M/s. Chaitra Realty Ltd. (supra), the Tribunal deleted the penalty by making the following discussion :- "6. We have perused the records and considered the rival contentions carefully. The assessee is a developer who was executing a property development project and method of accounting followed was project completion method. The assessee had however claimed expenses amounting to ₹ 33,11,617/- consisting interest of ₹ 25,22,797/- and other day to day expenses in the profit and loss account. This has been disallowed by the AO on the ground that the expenditure could be claimed only in the year of completion. The disallowance had been accepted by the assessee. However the AO had also imposed penalty under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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