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TMI Blog2019 (7) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... see. We do not find any active concealment of particulars of income by the assessee in the present case which is a precondition for imposing penalty under the said section. - ITA No. 3512/MUM/2016, ITA No. 979/MUM/2015 - - - Dated:- 30-5-2019 - Shri R.C. Sharma (AM) And Shri Ram Lal Negi (JM) For the Assessee : Shri Pradeep Sharma (AR) For the Revenue : Shri Saurabh Kumar Rai (DR) ORDER PER RAM LAL NEGI, JM These appeals have been filed by the assessee against the orders dated 16.12.2014 and 22.01.2016 passed by the Ld. Commissioners of Income Tax (Appeals)-14, Mumbai, for the assessment years 2010-2011 and 2011-12 respectively, whereby the Ld. CIT (A) has dismissed the appeals filed by the assessee against penalty orders passed u/s 271 (1) (c) of the Income Tax Act, 1961 (for short the Act ). Since, these appeals are connected and the issues involved in both the appeals are identical, these appeals were clubbed, heard together and are being disposed of by this common and consolidated order for the sake of convenience. ITA No. 3512/MUM/2016 (Assessment Year: 2011-2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereinafter referred as CIT (A ) has erred in confirming the order of learned assessing officer [hereinafter referred as AO ) levying penalty of ₹ 1,25,00,000/- U/s 271 (1) (c) of Income Tax Act, 1961 being 100% of the amount of addition of ₹ 3,61,94,979/-, which is 5% of Total Construction WIP, in the assessment order U/s 143 (3) of Income Tax Act, 1961. It is submitted that during the assessment proceedings, a Survey action has been carried by the Income Tax Department on the assessee Company s premises on 30.10.2012. During such survey, as there was a dispute regarding the accounting policy followed by the assessee Company with regard to the recognition of revenue on the construction contract, it was agreed by the Appellant that it will offer the Revenue on such construction contract by offering the income @ 5% on the incremental Construction Work-in-Progress on a year-on- year basis subject to condition that non levy of penalty on such declaration It is further submitted that the assessee Company has accepted the stand of the Department just to buy peace and accordingly agreed to offer the Revenue from such construction contract in each year base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hanical manner as the assessee has not produced any evidence to establish that there was a reasonable cause for not filing the appeal within the limitation period. The Ld. DR further submitted that since the assessee has failed to prove sufficient cause for condonation of delay in filing the present appeal, the prayer of the assessee is liable to be rejected. 8. We have heard the rival submissions and also gone through the material on record including the case relied upon by the parties. Sub-section 5 of section 253 of the Income Tax Act provides that the Tribunal may admit appeal or permit filing of memorandum of cross- objection of respondent after expiry of relevant period of limitation referred to in sub-section 3 and 4 section 253, if it is satisfied that there was sufficient cause for not presenting the appeal within the limitation period. Expression sufficient cause appearing in this section has also been used in section 5 of Indian Limitation Act, 1961. This expression has come for consideration before the Hon ble High Courts as well as before the Hon ble Supreme Court, and the Hon ble Courts are unanimous in observing that whenever such issue comes for con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee to argue the case of the assessee on merits. 10. Before us, the Ld. counsel for the assessee submitted that the assessee was awarded construction contract by the M/s Shree Ram Urban Infra Ltd. which is a holding company of the assessee and the assessee further awarded sub contract to M/s Raghuveer Urban Company Pvt. Ltd. (a group concern of the assessee). The Ld. counsel further submitted that as per prevailing practice in construction industries, the initial scope of work for raising the bill was at minimum 30% of the contract value. During the assessment year the assessee did not raise any bill as the work completed was below 30%. Accordingly, the assessee in its books of account had shown capital work in progress of ₹ 1,085,80,28,173/- and labour charges of ₹ 36,53,44,153/- paid to its sub contractor M/s Raghuveer Urban Infra Pvt. Ltd. The assessee during the financial year 2011-12 offered total taxable income of ₹ 9 crore approximately from construction project. The Ld. counsel further pointed out that as per the addendum to the first construction agreement entered between the assessee and Shree Ram Urban Ltd., the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince, the findings of the Ld. CIT (A) are based on the evidence on record and as per the provisions of law, there is no merit in the contention of the assessee. 12. We have heard the rival submissions and gone through the material on record in the light of the rival contentions. As pointed out by the Ld. counsel for the assessee during the search proceedings no incriminating documents or evidence was found hence no inventory was prepared. There was an oral discussion on the method of revenue recognition and after discussion a decision was taken by the company for amending the revenue recognition and to offer 5% of the CWIP from the A.Y. 2010-11 onwards to be shown as year wise income of the company. The formula adopted by the assessee resulted in substantial deduction of income for the A.Y. 20012-13 which had already been disclosed. Accordingly, assessee had to revise its return of income for the A.Y. 2012-13, which resulted refund of ₹ 1.24 crores. Further we find force in the contention of the assessee that the authorities below have wrongly held that the assessee has completed more than 30% of the work contract and the amount paid to sub contractor was the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On completion of 30% of the work, contractor shall be entitled to either 5% of total construction cost including overhead and other administrative expenses incurred by it or as mutually decided between the parties herein above and the developer shall reimburse the Contractor the said 5% as consideration or as mutually decided for such part within a period of 30 days of receipt of such invoice raised by the contractor. 14. The contents of the addendum to the contract supports the contention of the assessee that the assessee was entitled to raise the initial bill only after completion of 30% of the work awarded. During the course of survey, the assessee company agreed to offer revenue on such construction by offering the income @ 5% on incremental constriction work-in-progress on year on year basis subject to the condition that the revenue would not initiate penalty proceedings against the assessee. The assessee accepted the stand of the department to buy peace. Now the question arises whether the addition made under the aforesaid circumstances, penalty u/s 271 (1) (c) of the Act can be levied against the assessee? In order to answer this question it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not recorded any conclusive findings based on evidence to hold the assessee liable for concealing the particulars of its income. As per the ratio of law laid down by the Hon ble Supreme Court In the case of CIT vs. Reliance petroproducts Pvt.Ltd.322 ITR 158(SC), mere rejection of a claim made by the assessee does not ipso facto make the assessee liable for penalty u/s 271(1)(c) of the Act. 18. Hence, in our considered opinion since, the assessee has explained the circumstances under which the addition has been made, there is no reason to draw a conclusion that the explanation offered by the assessee is false. Further the assessee has established that the explanation offered is bona fide, therefore, there is no justification of imposing penalty under section 271(1)(c) of the Act. Hence, we allow the ground of appeal raised by the assessee on merits and set aside the impugned order passed by the Ld CIT(A). Accordingly, we direct the AO to delete the penalty. 19. So far as the additional ground raised by the assessee challenging the legality of notice issued u/s 274 of the Act is concerned, since we have allowed the appeal of the assessee on merits, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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