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TMI Blog2016 (4) TMI 998X X X X Extracts X X X X X X X X Extracts X X X X ..... law, Ld. CIT(A) was correct in deleting penalty of Rs. 28,92,183/- levied u/s 271(1)(c) on account of allocation of common expenses towards projects eligible for deduction u/s 80IB(10) of the IT Act, 1961 without appreciating the fact that expenses of eligible project have been booked into non eligible projects resulting in reduction of taxable income. 2. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) was correct in deleting penalty of Rs. 1,39,6571/- levied u/s 271(1)(c) on account of disallowance of reduction of 10% claimed on stock-in-trade without appreciating the fact that assessee has without any reason reduced the value of inventories by 10 % every year and thereby reducing taxable income. 3. Facts in brief are that the assessee filed its return of income on 31.10.2001 declaring total income at Rs. 1,49,46,426/-. The assessee is engaged in the business of Real Estate development and slum rehabilitation. The case of the assessee was selected for scrutiny and statutory notices under section 143(2) r.w.s 153A were issued and served upon the assessee. The assessment was completed vide order dated 27.2.2004 u/s 143(3) of the Act at Rs. 2,44,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO rejected the contention of the assessee and initiated penalty proceedings. Accordingly, the AO imposed the penalty of Rs. 30,31,840/- being 100% of the tax sought to be evaded under section 271(1)( c) of the Act for both the additions for furnishing inaccurate particulars of income and suppressing the income by rejecting the submissions of the assessee and holding that the assessee had tried to manipulate profits by maneovering the expenses in such a manner so that non-taxable income u/s 80IB (10) would go up and the taxable income from non 80IB(10) came down and thus manipulated the books of account to avoid tax liability. Similarly, the AO held that the reduction of 10% in stock-in-trade which was alleged to be with a view to comply with the correct accounting and taxation principles was baseless. The assessee preferred the appeal before the ld. CIT(A), who deleted the penalty by holding as under : "5. I have considered the submissions of the appellant, order of the AO and facts of the case carefully. It is noticed that in the quantum appeal, the appellant had claimed deduction u/s 80IB(10) and 80IA(4) of the IT Act. During the assessment proceedings, the disallowance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble High Court in CIT v. Indian Metals & Ferro Alloys Ltd. has held that "the word "conceal" is derived from the Latin word "concolare" which implies "to hide". Webster's New International Dictionary equates its meaning to "hide" or "withdraw" from observation; to cover or keep from sight; to prevent the discover of; to withhold knowledge of". The offence of concealment is thus a direct attempt to hide an item of income or a portion thereof from the knowledge of income-tax authorities". The Hon'ble Pune Tribunal has held in Kanbay Software India Pvt. Ltd. that the expression "concealment of income" has not been defined in the Act, but the natural meanings of the expression "concealment" are to keep from being seen, found, observed, or discovered". It would therefore follow that the expression concealment of income, in its natural sense and grammatical meaning, implies an income is being hidden, camouflaged or covered up so as cannot be seen, found, observed or discovered. The expression "inaccurate" refers to "not in conformity with the fact or truth" and that is the meaning which, in our considered view, is relevant in the context of "furnishing of inaccurate par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards those projects which were not covered by the said provisions. The assessee had been manipulating its accounts thereby suppressing the taxable income from non 80IB(10) projects and inflating the income of those projects to which the provisions of section 80IB(10) were applicable and accordingly , the claimed deduction. The ld. DR further submitted that during the course of assessment proceedings, the assessee, in reply to the query raised by the AO submitted the details of expenses of Rs. 10,34,31,192/- which were to be allocable to various projects covered by the provisions of section 80IB(10) from the AY-2001-02 to 2007-08 out of total expenses debited and charged to the profit and loss account during all these years of Rs. 3,41,69,510/-. Similarly the assessee reduced its stock-in-trade (building) at the rate of 10% on the ground that the value of the building depreciated by wear and tear which is a general phenomena under bonafide belief whereas the AO observed that such deduction was claimed with malafide intention to reduced the income as real estate the prices of land and building were spiriling with the passage of time. In view of these facts, the ld. DR finally sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return of income and audited accounts. The assessee in support of his contentions relied on the decisions of the Hon'ble Apex Court in the case of CIT vs. Reliance Petroproducts (Supreme Court). (2010)322 ITR 158 (SC) and the decision in the case of Commissioner Of Income-Tax Vs Indian Metals And Ferro Alloys( 1995) 211 ITR 35 Orissa. Finally, the ld.AR submitted that since all the facts relating to non-allocation of expenses were duly stated and disclosed and were inconformity with the stand of the assessee accepted by the revenue and also as per the various accounting Standards. In respect of reduction in stock in trade to the extent of 10% was revenue neutral as ultimately upon selling the stock in trade the true profits would be accounted automatically which proved the genuineness of assessee's claim and thus no penal action u/s 271(1)( c ) was called for. The ld. AR, therefore, prayed that the order of ld. CIT(A) be confirmed. 6. We have considered the rival contentions and perused the material on records available before us. We find that the assessee was following the system of accounting of not allocating the common expenses including general administrative expenses, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said stock in trade, the higher profit would be automatically accounted for and would be accruing to the assessee by claiming lower value of stock in trade. In the case of Reliance Petro products (supra), it has been held that mere making the claim which is not sustainable in law, itself would not amount to furnishing of inaccurate particulars of income, therefore, following the ratio laid down by the Hon'ble Apex Court in the case of Reliance Petro products (supra) we uphold the order of CIT(A) deleting the penalty levied by the AO by dismissing the appeal of the revenue. The AO is directed accordingly. I.T.A. No.5356 to 5360/Mum/2012(AYs : 2002-03 to 2005-06) 7. We have already decided a similar issue under identical facts in ITA No 5355/Mum/2012 assessment year 2001-02 and therefore our decisions in ITA No 5355/Mum/2012 AY 2001-02 would mutatis mutandis apply to these appeals as well and accordingly the order of CIT(A) is confirmed and upheld. 8. In result the appeals of the revenue are dismissed. Order pronounced in the open court on 15th Mar, 2016 CORRIGENDUM The Tribunal has passed order in these appeals on 15.3.2016 and in the said order following mistakes have been c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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