2015 (9) TMI 1517 - AT - Income Tax

Penalty u/s 271(1)(c) - accrual of income - year of assessment - difference of income due the re-computation of WIP - delay in filing appeal - Held that - We find that the assessee had filed the death certificate of the accountant and we hold that there was a reasonable cause for not filing the appeal in time. We find that the FAA had dismissed the appeal not only because it was filed lat but he had deliberated upon the issue on merits also. Therefore in our opinion the issue of delay in filing return is academic in nature. Coming to the merits as found that the AO had re-calculated the WIP and had taxed it in the year under appeal. The assessee has not proved during the assessment and appellate proceedings that the income had not accrued to it-even after receiving the OC and CC. It had to produce documentary evidence that even after getting the certificates the projects remained incomplete and it had to incur substantial expenditure for completing them. We do not find any such exercise was done by it. Therefore if the AO and the FAA held that the assessee had completed the projects in the year under appeal and had not offered the corresponding income in the year in which it should have been offered then they were not unjustified. While deciding the concealment penalty cases what is to be considered is the explanation filed by the assessee in response to the notice issued by the AO for levying penalty. During the course of survey proceedings and enquiries made by the Department it was found that the projects undertaken by the assessee had already completed and were occupied by the purchasers. Thus in absence of any contrary evidence it could not be said that projects were in the stage of work in progress it is a fact that the assessee was following method of project completion. The FAA has given categorical finding of fact that after 31.3.2002 very little expenses was incurred by the assessee for completing the so called projects and that it had incorrectly claimed in the return of income that the projects were incomplete. - Decided against assessee.

Summary

Issues involved:
1. Delay in filing appeal before CIT(A)
2. Validity of penalty u/s. 271(1)(c)

Issue 1: Delay in filing appeal before CIT(A)
The assessee challenged the dismissal of the appeal by CIT(A) based on procedural delay in filing the appeal within the prescribed time limit. The grounds of appeal included the explanation for the delay due to the death of the Accountant who had been in the exclusive employment of the assessee for 35 years. The FAA dismissed the appeal citing the delay as the reason and questioned the lack of documentary evidence supporting the delay due to the accountant's death. The FAA also examined the merits of the case, focusing on the completion of projects, possession by occupants, and discrepancies in the income declaration. The FAA found that the projects were completed, possession was taken by purchasers, and the income was not accurately declared. Despite relying on legal cases for defense, the FAA upheld the penalty order of the AO.

Issue 2: Validity of penalty u/s. 271(1)(c)
The penalty proceedings were initiated based on the AO's re-calculation of Work in Progress (WIP) and the subsequent taxation of income. The AO concluded that the income was concealed and inaccurate particulars were furnished, leading to the penalty under section 271(1)(c) Expl.4(a) of the Act. The FAA upheld the penalty order, emphasizing the completion of projects, possession by tenants, and the lack of evidence supporting the claim of incomplete projects. The ITAT Mumbai considered the arguments presented by the Authorized Representative (AR) and the Departmental Representative (DR). The ITAT found a reasonable cause for the delay in filing the appeal and deemed the issue of delay as academic. The ITAT further analyzed the completion of projects, income declaration, and reliance on legal cases by the assessee. Ultimately, the ITAT confirmed the FAA's order and dismissed the appeal filed by the assessee.

In conclusion, the ITAT Mumbai upheld the penalty under section 271(1)(c) and dismissed the appeal, emphasizing the completion of projects, possession by occupants, and the accurate declaration of income as crucial factors in determining the validity of the penalty. The delay in filing the appeal was considered academic, and the ITAT focused on the merits of the case to uphold the penalty order.