TMI Blog2016 (8) TMI 902X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Aarsi Prasad For The Respondent : None ORDER Per Mahavir Singh, Judicial Member This appeal by the revenue is arising out of the order of the CIT(A) IX, Mumbai, in appeal No.CIT(A)-IX/9(1)(1)/I.T/24/2008-09 dated 27.04.2009. The only issue in this appeal of the revenue is against the order of the CIT(A) deleting the penalty of ₹ 1,50,00,000/- levied by the AO u/s. 271(1)(c) of the Act on the addition made by the AO of ₹ 3,48,03,446/- 2. Briefly stated facts are that the assessee company is engaged in the business of construction and real estate business. The assessment was completed u/s. 143(3) of the Act on a total income of ₹ 16,96,75,146/-. Subsequently, in quantum the CIT(A) vide her order No.CIT(A)/IX/9(1)(1)/IT-406/2005-06 dated 10.10.2006, allowed relief on account of receipt of ₹ 13,31,96,400/- and irrecoverable loan recovered ₹ 16.75 lacs. The AO after giving effect to the order of CIT(A) determined income at ₹ 3,48,03,446/-. The AO initiated penalty proceedings u/s. 271(1)(c) of the Act and after giving full effect to the order of the CIT(A) started penalty proceedings by issuing notice u/s. 274 r.w.s. 271( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erclaim made by the MHADA on the appellant. Besides this, it was also contended that full disclosure regarding the status of the project and the accounting policy adopted by the appellant were clearly reflected in the balance sheet, statement of income and the note forming part of the accounts. It is further stated that in respect of Oshiwara Project, the appellant has treated the same as complete during the year ended 31-03-2005 relevant to A.Y. 2005-06 and the profit of the said project amounting to ₹ 1,63,84,573/- has been offered as income in A.Y. 2005-06. It is also contended that the department had taxed 4% of the receipt of the income of the appellant from the year 1994-95 onwards based on the percentage of completion method, though, the appellant was following Project Completion Method. The Hon ble ITAT has duly confirmed the appellant s view in the earlier years. It is not in dispute that the said project was under litigation and that certain claims and counter claims were made by and against the appellant company and therefore as a prudent policy the appellant may be justified in deferring the decision of revenue recognition till the issue is settled. It is well set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eet and profit and loss account and on the basis of such details filed by the appellant the income could be estimated. Therefore considering the overall facts of the case and following the jurisdictional ITAT order in the case of VIP Industries (supra) I am of the considered view that the A.O. was not justified in levying penalty in this case, hence the same is deleted. Aggrieved against the deletion of penalty the revenue is now in appeal before the Tribunal. 3. We have heard the learned senior DR and have gone through the facts and circumstances of the case. We find from the facts of the case that the assessee has disclosed all material facts regarding the status of the projects and the assessee clearly reflected all the details of income and balances of Work-in-progress in the balance sheet, statement of income and notice forming part of accounts. The assessee has also filed all particulars of receipt and income / expenditure were disclosed in the computation of income. The assessee has continuously adopted the project completion method and the same has duly been confirmed by the ITAT in earlier years. The assessee was under bona fide belief that the method being adopte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the consent terms as under: - 5. IT is hereby agreed, declared and undertaken by the Respondents that they will not obstruct in any manner whatsoever the Petitioners on going/balance work of the said project (more particularly mentioned in paragraph No.1 above) either through its directors, agents, servants, employees, officers, contractors or anyone claiming through the Respondents In clause 6 of the consent terms, the parties agreed that all the materials lying on the site of the project would belong to MHADA and the assessee will have no claim against the same. In clause 7, it was provided that with the payment of the above stated amount by the petitioners to the Respondents, all the bills of Respondents, for the work under reference, shall be deemed to have been fully paid and cleared. According to clause 8 of the consent terms, in case any adverse claim or any other claim is raised by any third party in respect of the project, MHADA shall not be liable for the same. It is common ground that in accordance with the consent terms payment of ₹ 13,35,17,603/- was made to the assessee (subject to TDS) by MHADA on 04.08.2003 There is no dispute that the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee and MHADA which has worked itself out by the consent terms as on date. Further the Third Member also considered the debate or dispute vide para 14 as under: 14. The contention of the Department that because the PIL is at the instance of a third party who is not party to the contract which is between the assessee and MHADA and, therefore, the right of the assessee to appropriate the amount as its income does not get affected cannot, with respect, be accepted because even where the dispute is raised by a third party, if it has the potential of affecting the right of the recipient to appropriate the money as its income, income cannot be said to have accrued. In my humble opinion, it does not matter that the dispute is raised by a third party and what is to be seen is whether the dispute is real and substantial and has the potential to 'affect the right of the recipient of the money to appropriate the same as his income. In any case, in CIT vs. Sharda Sugar Industries Ltd. (supra), the assessee had collected the excess sugar price from Food Corporation of India. Subsequently, the Government of India enacted the Levy Sugar price Equalisation Fund Act, 1976, according to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year of refund the assessee can claim a deduction or not. The fundamental question to be addressed is whether the amount accrued to the assessee as its income. In my view, in view of the pending litigation treated by the Hon ble Bombay High Court as a PIL filed at the instance of the Housing Society, there is no indefeasible right of the assessee to the income. It is noteworthy that it is the purchasers of the flats in the project who are the real stakeholders in the transaction and the PIL has been filed by them. In view of the above order of the Third Member in assessee s own case, it is clear that the issue is highly debatable whether assessee s project is complete or not and this being the situation, we are of the view that the penalty is not leviable u/s. 271(1)(c) of the Act. Furthermore, the assessee has not furnished any inaccurate particulars of income for the reason that the assessee s view that the project was not complete due to the ongoing litigation, whereas the AO was of the view that the project was completed during the year under consideration. He has computed the income based on all the facts and figures available in the Finance Statements of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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