Modern Construction Co.P.Ltd.,, ... vs Department Of Income Tax

The ACIT (OSD)-1 Range- V/S Modern Construction Co. 4, Ahmedabad Pvt. Ltd. 5th Floor, H.K. House, Ashram Road, Ahmedabad (Appellant) (Respondent)

PAN: AAACM 5823E

Appellant by : Shri Dinesh Singh, Sr. D.R. Respondent by : Smt. Arati N. Shah.,A.R.

(आदे श)/ORDER

Date of hearing : 30-03-2015 Date of Pronouncement : 24 -04-2015

PER SHRI ANIL CHATURVEDI,A.M.

1. This appeal filed by the Revenue is against the order of CIT(A)-VIII, Ahmedabad dated 22.09.2011 for A.Y. 2003-04.

2. The relevant facts as culled out from the material on record are as under.

3. Assessee is a company stated to be engaged in the business of construction and engineering. Assessee filed its return of income for A.Y. 2003-04 declaring income of Rs. 47,150/-. The return of income was initially processed u/s. 143(1) of the Act. Subsequently, the case was re-opened by issuing notice u/s. 148 of the Act and thereafter the assessment was framed 2 ITA No 2874/AHD/2011 . A.Y. 2003-04 u/s. 143(3) r.w.s. 147 vide order dated 29.11.2006 and the total income was determined at Rs. 1,51,88,800/- by interalia denying the claim of deduction u/s. 80IA and also making addition on account of other disallowances. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who granted partial relief to the Assessee by directing the A.O to allow deduction u/s. 80IA but however upheld the action of A.O. to not to allow deduction u/s. 80IA on "other income" of Rs. 33,19,275/-. With respect to the disallowance of expenses made by A.O of Rs. 89,26,709/-, ld. CIT(A) confirmed the disallowance of only Rs. 2,90,984/- and deleted the addition of rest of the amount of Rs. 86,35,725/-. On the additions which were confirmed by CIT(A), A.O vide order dated 18.03.2010 levied penalty of Rs. 14,15,481/- u/s. 271(1)(c) of the Act on account of furnishing inaccurate particulars of income. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who vide order dated 22.09.2011 granted substantial relief to the Assessee by holding as under:-

4.5.I have considered the facts and submissions of the ld. A.R. carefully. It is seen that the A.O has levied the penalty in respect of the amount which has been finally confirmed by the ld. CIT(A) as referred to above. These additions pertained to disallowance of deduction u/s 80IA of the Act on interest and other income and unaccounted expenses. As regards levy of penalty in respect of disallowance confirmed by the Ld. CIT(A), I find force in the argument of the Ld. A.R that the Ld. CIT(A) has allowed the deduction to the appellant u/s 80IA in principle, however, he has held that same is not allowable in respect of receipt from interest and miscellaneous income. Further, the A.O while levying the penalty in respect of the disallowance out of deduction claimed u/s 80IA has not held that the appellant's claim for the same was false or fabricated. It has also not been pointed out that appellant did not file complete details with regard to claim for deduction u/s 80IA before the A.O. 4.6.............................

4.9 Further, if we test the facts of the case on the touchstone of the above referred three ingredients of Explanation 1 to sec.271(1)(c) of the Act also, we find that the disallowance made by the A.O. out of deduction u/s 80IA and confirmed by the Id. CIT(A) do not hit by any one of them.

4.10 The Ld. CIT(A) while confirming the disallowance out of deduction u/s 80IA has held that the receipts from interest, miscellaneous receipts and consultancy fees are required to be excluded from the income eligible for deduction under the section.

3 ITA No 2874/AHD/2011 . A.Y. 2003-04 However, while deciding so he has not held that the appellants claim for deduction itself is fabricated and false. Further, the A.O also in the penalty proceedings only levied the penalty in respect of the disallowance so confirmed by the ld.CIT(A). He has not brought on record any fact to show that the appellant's claim for deduction was false and it did not bring all the facts relating to such claim on record. 4.11 Therefore, in these circumstances the levy of penalty in respect of the disallowance out of deduction claimed u/s 80IA cannot be sustained. Hon'ble Rajasthan High Court in the case of Shiv Lal Tak vs. CIT reported in 251 ITR 373 has held that:

" The statute has clearly drawn a distinction between a deliberate false explanation furnished by the assessee and an explanation, which may not be false but is not accepted because the assessee was not able to substantiate it. While there is no relaxation in the rigour of the Explanation in raising a presumption against the assessee in the former case, in the latter class of cases, the statute itself relaxes its rigour by directing that where in respect of any amount, added or disallowed and any explanation is offered by such person which is not accepted because the assessee has failed to substantiate the same, but such explanation is bona fide and all the facts relating to the same and material to the computation of the total income have been disclosed by him, the Explanation shall not apply".

4.16 Therefore, in view of the above discussions and following the order of CIT(A)VIII for AY 02-03 dated 25-11-09, the penalty levied by the AO in respect of the disallowance out of claim for deduction u/s 80IA amounting to Rs. 35,60,666/- cannot be sustained. In view of this, the levy of penalty on such amount is hereby deleted. 4.17 So far as the levy of penalty on the amount of unexplained expenses of Rs. 2,90,984/- is concerned which has been confirmed by the Id. CIT(A), it is seen that the appellant has not discharged the onus cast upon it in terms of the Explanation 1 to section 271(1)(c) of the Act as referred to above. Further the appellant has failed to prove that the explanation filed by him in respect of such expenses was bonafide and all the facts relating to the same have been disclosed by him during the assessment proceedings or during the penalty proceedings before the A.O. Therefore, in these circumstances, the appellant has rightly been held guilty for concealing such particular of income by the A.O in terms of the provisions of sec. 271(1)(c) of the Act. In view of this, the levy of penalty on such amount is hereby confirmed.

4. Aggrieved by the aforesaid order of ld. CIT(A), Revenue is now in appeal before us and has raised the following grounds:-

1. The Ld. CIT(A) has erred in law and on facts in deleting the penalty u/s 271(l)(c) of Rs. 13,08,544/- out of Rs. 14,15,581, without appreciating the fact that the amount of addition on any issue about which the assessee is unable to offer any satisfactory explanation shall be deemed to represent the income in respect of which particulars have been concealed.

5. Before us, at the outset ld. A.R. submitted that the issue is covered in favour of Assessee by its own case for earlier years. She submitted that on identical 4 ITA No 2874/AHD/2011 . A.Y. 2003-04 facts in Assessee's own case for A.Y. 2002-03, the Revenue had preferred appeal before Hon'ble Tribunal. Hon'ble Tribunal while deciding the Revenue's appeal in ITA NO. 950/AHD/2010 order dated 29.11.2013 has confirmed the order of CIT(A) in deleting the penalty. She therefore submitted that since the facts in the year under appeal are identical that that of A.Y. 2002-03 and since the penalty has been deleted by the Hon'ble Tribunal in A.Y. 2002-03, the order of ld. CIT(A) be confirmed. She also placed on record the copy of the aforesaid decision. Ld. D.R. on the other hand supported the order of A.O

6. We have heard the rival submissions and perused the material on record. In the present case, A.O had levied penalty u/s. 271(1)(c) on the disallowance of claim deduction u/s. 80IA and also on unexplained expenses of Rs. 2,90,984/-, ld. CIT(A) deleted the penalty levied u/s. 80IA but upheld the penalty on unexplained expenses. CIT(A) while deleting the penalty has observed that the claim of the Assessee for deduction u/s. 80IA was not held to be fabricated or false and A.O has also not brought on record any fact to show that the Assessee's claim for deduction was false. We also find that in Assessee's own case for A.Y. 2002-03 in ITA No. 950/AHD/2010 against the deletion of penalty and on identical facts, Revenue had preferred appeal before Hon'ble Tribunal and the same was deleted by holding as under:-

8. This is an appeal filed by the Revenue against the order of learned CIT(A), dated 25.11.2009 and the only issue is that the learned CIT(A) has erred in deleting the penalty levied u/s. 271(l)(c) of Rs.34,63,5037-pertaining to the addition made u/s.80IA of IT Act.

9. While deleting the penalty, learned CIT(A) has held as under:

"4.5 I have considered the facts and submissions of the Ld. A.R carefully. It is I seen that the A.O has levied the penalty in respect of the amount which has been finally confirmed by the Ld. CIT(A) as referred to above. These additions pertained to disallowance of deduction u/s 801A of the Act on interest and other income and 5 ITA No 2874/AHD/2011 . A.Y. 2003-04 unaccounted expenses. As regards levy of penalty in respect of disallowance confirmed by the Ld. CIT(A), I find force in the argument of the Ld. A.R that the Ld. C1T(A) has allowed the deduction to the appellant u/s 80IA in principle, however, he has held that same is not allowable in respect of receipt from interest and miscellaneous income. Further, the A. O while levying the penalty in respect of the disallowance out of deduction claimed u/s 801A has not held that the appellant's claim for the same was false or fabricated. It has also not been pointed out that appellant did not file complete details with regard to claim for deduction u/s 80IA before the A.O. 4.6 Section 271(1 )(c) of the Act provides that if the Assessing Officer, in the course of the proceedings under the Act is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty a sum which shall not be less than but which shall not exceed three times the amount of tax sought to be evaded by reasons of the concealment of particulars of his income.

Explanation I to section states that where in respect of any facts material to the computation of total income of any person under this Act, such person fails to offer an explanation or offers an explanation which is found by the A.O. false or such person offer an explanation which he is not able to substantiate and fails to prove that such Explanation is bona fide and that all the facts relating to the same and material to the computation of the total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of Clause (c) of this Sub-section, be deemed to represent the income in respect of which particulars have been concealed. The effect of this Explanation is that if the necessary ingredients as stated herein are satisfied then the amount disallowed in computing total income shall for the purposes of Clause (c) of this section, be deemed to represent the income in respect of which particulars have been concealed. The necessary elements for attracting this Explanation are three fold: -

a) the person fails to offer his explanation, or

b) he offers the explanation which is found by the A.O. to be false, or

c) the person offers explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating the same have been disclosed by him.

4.7 If the case falls in any three of ingredients, then the deeming provision into play and the amount added or disallowed in computing the total income is considered as the income in respect of which particulars have been concealed for the purposes of Clause (c) of Section 271(1) and the penalty follows. If the assessee successfully comes out of the above three consequents then he cannot be to have concealed his particulars of income with reference to the amount added or disallowed in computation of total income......................

4.17 Therefore, in view of the above the penalty levied by the AO in respect of the disallowance out of claim for deduction u/s. 80IA amounting to Rs.34,63,530/- cannot be sustained. In view of this, the levy of penalty on such amount is hereby deleted."

10. Having heard the submission of both the sides and considering the totality of the facts and circumstances of the case, we are of the view that this is a case where a disallowance 6 ITA No 2874/AHD/2011 . A.Y. 2003-04 was made by the AO on the basis of the material facts already on record and the said disallowance has become a subject of controversy. Thus, we are of the considered opinion that learned CIT(A) has rightly deleted the penalty. We find no force in this ground of the Revenue; hence, the same is hereby rejected.

10. Before us, Revenue has not pointed out any distinguishing feature between the case of the Assessee for A.Y. 2002-03 and A.Y. 03-04 nor has brought any contrary binding decisions in its support. In view of the aforesaid facts, we find no reason to interfere with the order of ld. CIT(A) and thus this ground of Revenue is dismissed.

11. In the result, the appeal of Revenue is dismissed.

Order pronounced in Open Court on 24 - 04 - 2015.

Sd/- Sd/- (RAJPAL YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad. TRUE COPY Rajesh

Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) - 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File. By ORDER

Deputy/Asstt.Registrar ITAT,Ahmedabad