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TMI Blog2018 (5) TMI 1015X X X X Extracts X X X X X X X X Extracts X X X X ..... rgree Knits Ltd (2013 (4) TMI 154 - BOMBAY HIGH COURT) the Hon’ble Jurisdictional High Court has held that where there was a bonafide mistake on the part of the assessee, the imposition of penalty is not warranted where the Revenue does not dispute the same. - Decided in favour of assessee. - ITA No.4450/M/2016 - - - Dated:- 14-5-2018 - SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER For The Assessee : Shri Shailesh Parmar, A.R. For The Revenue : Shri M.C. Omi Ningshen, D.R. ORDER Per Rajesh Kumar, Accountant Member: The present appeal has been preferred by the Revenue against the order dated 15.03.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return of income on 29.09.11 showing the loss of ₹ 1,76,68,864/-. The assessment was framed under section 143(3) of the Act assessing the total income at ₹ 3,91,840/- by making addition under various heads, including current year loss, disallowance of depreciation on motor car, unexplained cash credit under section 68 of the Act for which penalty proceedings were initiated. The AO noticed that the assessee has offered sales of ₹ 57,80,000/- under percentage completion method whereas claimed expenditure amounting to ₹ 2,35,45,609/- resulting into loss of ₹ 1,76,68,864/-. The assessee s opening WIP was ₹ 6,29,16,145/- and during the year the assessee incurred further expenses of ₹ 2,11,25,483/- ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I have also gone through the decisions relied on by the AC and the Id.AR. With regard to excess claim of expenditure on the basis of percentage completion method, I'm of the opinion that the mistake of not restricting the expenditure to 20% is a bonaf ide mistake as i t happened by a wrong claim made by the char tered accountant/auditor in finalising the return of income. When the appellant has offered the income at 20% of the sale during the year it should have claimed only 20% of the expenditure relatable to that income. However, the auditors whi le prepar ing the returns have claimed hundred percent of expenses shown in P L account instead of claiming 20% in propor tion to the income disclosed. Even though the appel lant cannot be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee itself filed the revised computation of income on the basis of which the assessment was framed by the AO. The Ld. Counsel submitted that there is no disallowance of expenses but the AO has done only the restriction of claim of apportionment of cost out of the WIP which has resulted into carrying forward of higher corresponding cost of WIP to the subsequent year. The Ld. A.R. submitted that the whole exercise of the Revenue is tax neutral as it has resulted into restricting the cost of construction in the current year and corresponding higher cost of WIP would be carried forward and claimed in the subsequent year. Thus there is no loss to the revenue even if the cost had not been restricted in the current year. Moreover, the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is following percentage completion method and being in the business of construction and development of real estate. During the year assessee was developing the project Kothari Heights. The assessee offered sales of ₹ 57,80,000/- as per project completion method and claimed expenses to the tune of ₹ 2,35,45,609/- resulting into a loss of ₹ 1,76,68,864/-. The assessee s WIP was ₹ 6,29,16,145/- which was further increased by ₹ 2,11,25,483/- on account of incurring expenses thus the aggregate of the WIP became ₹ 8,40,41,628/-. Out of the said WIP the assessee claimed cost of construction in the current year to the tune of ₹ 2,35,45,609/-. This has resulted into the excess claim of cost of construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has claimed expenditure which was not accepted or was acceptable to the Revenue by itself would not attract the penalty under section 271(1)(c) of the Act. In the case of CIT vs Somany Evergree Knits Ltd (supra) the Hon ble Jurisdictional High Court has held that where there was a bonafide mistake on the part of the assessee, the imposition of penalty is not warranted where the Revenue does not dispute the same. In view of the said facts and the ratio laid down by various courts, we are of the view that the order of first appellate authority deleting the penalty is well reasoned and correct and there is no need to interfere in the same. Accordingly, we dismiss the appeal of the Revenue by upholding the order of the Ld. CIT(A). Order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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