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2016 (9) TMI 1001 - ITAT PUNE

2016 (9) TMI 1001 - ITAT PUNE - TMI - Levy of penalty u/s. 271(1)(c) - eligible for deduction u/s. 80IB(10) - Held that:- It is a well settled law that where the issue is debatable, penalty cannot be levied. In the case of assessee the Tribunal has held the additional income declared by assessee on account of extra sale consideration to be assessed under the head ‘Income from other sources’. Whereas, there are decisions of the Tribunal where on-money declared during search was held to be busines .....

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ppeals by the assessee are directed against the order of Commissioner of Income Tax (Appeals)-I, Nashik for the assessment year 2008-09. In ITA No. 1848/PN/2014 the assessee has assailed the order of Commissioner of Income Tax (Appeals) dated 23-04-2014. The First Appellate Authority vide impugned order has dismissed the appeal of assessee against levy of penalty ₹ 1,95,248/- u/s. 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) as having become infructuous. ITA .....

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med. The assessee filed its return of income for the impugned assessment year on 05-08-2008 declaring total income as Nil. The assessee claimed deduction of ₹ 2,01,88,958/- u/s. 80IB(10) of the Act in the aforesaid return of income. Thereafter, the assessee filed revised return of income on 25-10-2008 declaring total income as Nil. However, in the revised return of income the assessee claimed deduction of ₹ 1,91,25,340/- u/s. 80IB(10) of the Act, after claiming set off of losses of e .....

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dition of ₹ 19,77,000/- under the head, Income from other sources . The assessee carried the matter in appeal before the Commissioner of Income Tax (Appeals) making two alternate submissions. In the first place, the assessee challenged the addition under the head, Income from other sources . The contention of the assessee was that the extra sale consideration received by the assessee is in respect of sale of flats in the project which is eligible for deduction u/s. 80IB(10) of the Act. The .....

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f Income Tax (Appeals), both the Department and the assessee carried the matter in appeal to the Tribunal in ITA No. 1135/PN/2011 and ITA No. 1051/PN/2011, respectively. The Tribunal vide order dated 25-02-2013 reversed the findings of Commissioner of Income Tax (Appeals) in reducing the addition to ₹ 6,50,828/-. The Tribunal restored the findings of Assessing Officer and enhanced the addition to ₹ 19,77,000/-. 2.2 In the meantime, after the order of Commissioner of Income Tax (Appea .....

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28/- to ₹ 19,77,000/-. The assessee filed appeal before the Commissioner of Income Tax (Appeals) on 05-04-2013 against the penalty order dated 21-03-2013. Subsequently, the Assessing Officer in giving effect to the order of Tribunal passed another order levying penalty of ₹ 6,10,893/- u/s. 271(1)(c) of the Act on 21-08-2013. The assessee filed appeal against the second order levying penalty u/s. 271(1)(c) before the Commissioner of Income Tax (Appeals) on 26-09-2013. 2.3 The Commissi .....

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the latter appeal of the assessee against the levy of penalty ₹ 6,10,893/- u/s. 271(1)(c), the Commissioner of Income Tax (Appeals) confirmed the levy of penalty on merits. Now, the assessee has filed appeal against both the orders of Commissioner of Income Tax (Appeals). ITA No. 1848/PN/2014 3. In appeal the assessee has assailed the order of Commissioner of Income Tax (Appeals)-I, Nashik dated 23-04-2014 on the ground that there cannot be two penalty orders for same offence for the same .....

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cer upholding the addition of ₹ 19,77,000/-. The order of Commissioner of Income Tax (Appeals) thus, merged with the order of Tribunal. The Assessing Officer again passed order on 21- 08-2013 levying penalty of ₹ 6,10,893/- u/s. 271(1)(c) in conformity with the order of Tribunal in quantum appeal. Since, the order of Commissioner of Income Tax (Appeals) merged with the order of Tribunal, the penalty levied by the Assessing Officer on the basis of order of Commissioner of Income Tax ( .....

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the assessee in ITA No. 1848/PN/2014 is allowed. 1849/PN/2014 4. Shri Sunil Pathak appearing on behalf of the assessee submitted that the assessee was eligible to claim deduction u/s. 80IB(10) on the income/gains of the housing project developed by the assessee. The amount of ₹ 19,77,000/- admitted by the assessee during the course of survey was on account of extra sales consideration for additional facilities provided by the assessee to the allottees. This fact has been acknowledged by t .....

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see carried the matter in appeal before the Commissioner of Income Tax (Appeals) against the findings of Assessing Officer for making addition under the head Income from other sources . The Commissioner of Income Tax (Appeals) upheld the findings of Assessing Officer in treating the extra sale consideration as Income from other sources . In second appeal the Tribunal confirmed the findings of authorities below. The ld. AR submitted that it is an undisputed fact that the undisclosed amount of  .....

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missioner of Income Tax reported as 164 TTJ 803 (Pune) and Ahmedabad Bench of the Tribunal in the case of Madhav Corporation Vs. ACIT in IT(SS)A Nos. 380 to 382/Ahd/2014 for assessment years 2006-07 to 2008-09 decided on 28-07-2015 reported as (2016) TaxCorp (LJ) 9904 (ITAT-Ahmedabad). 4.1 The ld. AR of the assessee submitted that additional income declared from the housing project, whether to be considered as Income from other sources or Income from business and eligible for deduction u/s. 80IB .....

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The ld. AR of the assessee pointed that in the assessment order while recording the satisfaction the Assessing Officer observed that penalty proceedings u/s. 271(1)(c) are separately initiated for concealing of income. However, while issuing notice u/s. 274 r.w.s. 271(1)(c) of the Act, the Assessing Officer has not striked of irrelevant parts of the stereotype notice and has issued notice for concealing the particulars of income or/and furnishing of inaccurate particulars of income. The ld. AR f .....

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appeal of the assessee. 5. Au contraire Shri R.K. Rastogy and Shri Sudhanshu Shekar representing the Department vehemently supported the order of Commissioner of Income Tax (Appeals) in confirming the levy of penalty u/s. 271(1)(c) of the Act. The ld. DR submitted that in quantum proceedings the Tribunal has nowhere held that the additional income declared by the assessee was towards extra sales consideration. The Tribunal and the authorities below had categorically held that the additional inco .....

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de by the ld. DR with respect to the issue raised by assessee in appeal before the Tribunal challenging the eligibility of additional amount declared for claiming deduction u/s. 80IB(10) of the Act. In support of his submissions the ld. AR referred to para 12 of the order of Tribunal in ITA No. 1135/PN/2011 and ITA No. 1051/PN/2011 (supra). The ld. AR submitted that the document found and seized during survey clearly shows that the additional income declared by the assessee is on account of extr .....

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and have perused the orders of the authorities below. We have also considered the decisions on which the ld. AR of the assessee has placed reliance. The addition of ₹ 19,77,000/- has been made in the income returned by the assessee on the basis of documents impounded during the course of survey and the statement of Shri Sachin Daptary, Managing Director of the assessee company recorded on 09-11-2009 and 10-11-2009 at the time of survey. A perusal of the assessment order shows that the Asse .....

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he Company and are not account for, is to be brought to tax in the instant assessment proceedings. Receipts in respect of the additional work executed by the Company is not as per the approved plan the same will not directly form part of the project. The said amount is therefore taxed as income of the Company under the head income from other sources . As assessee has concealed the amount of ₹ 19,77,000/- by not accounting for it/not disclosing the same in return of income filed, penalty pr .....

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e of Malpani Estates Vs. Assistant Commissioner of Income Tax (supra) has held onmoney received by the assessee and declared as additional income during the search action u/s. 132 as business income eligible for deduction u/s. 80IB(10). In the said case the assessee was engaged in construction business and was subject to search action u/s. 132 of the Act. In the course of search, one of the partners of the assessee firm in statement recorded u/s. 132(4) admitted certain undisclosed income in rel .....

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als) upheld the action of Assessing Officer. The assessee carried the matter in appeal to the Tribunal. The Tribunal reversed the findings of lower authorities and held the onmoney received by the assessee as business income , eligible for deduction u/s. 80IB(10) of the Act. The relevant extract of the findings of the Tribunal are as under : 11. In the course of search, in a statement deposed u/s 132(4) of the Act, assessee declared certain additional income pertaining to the housing project in .....

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detail of that on-money received is enumerated, viz. name of the customers, amount and the respective flat sold in the project. Even in the deposition made u/s 132(4) of the Act, the partner of the assessee firm made a yearwise detail of additional income declared on account of on-money received on sale of flats in the project. Accordingly, the impugned sum has been declared as unaccounted income from the housing project in question. In the return of income filed in response of notice issued u/ .....

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he stand of the assessee that such additional income was a business income of the assessee relating to the housing project, The Crest at Pimple Saudagar, Pune. However, as per the CIT(A), the income in question is assessable under the head income from other sources . Ostensibly, the CIT(A) has not agreed with the inference of the Assessing Officer that the impugned income does not fall under any heads of income u/s 14 of the Act because according to her such income is liable to be assessed under .....

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search; the deposition made by the assessee s partner during search u/s 132(4) of the Act; and, also the return of income filed in response to notice issued u/s 153A(1)(a) of the Act after the search, clearly show that the source of impugned additional income is the housing project, The Crest at Pimple Saudagar, Pune. The aforesaid material on record depicts that the impugned income is nothing but unaccounted money received by the assessee from customers on account of sale of flats of its housi .....

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able to be taxed as business income . 12. Now, coming to the point as to whether such business income qualifies to be eligible for deduction u/s 80IB(10) of the Act in the course of an assessment made u/s 153A(1)(b) of the Act. On this aspect, the learned Departmental Representative submitted that the assessment in cases of search action or requisition are made u/s 153A or 153C of the Act in order to assess undeclared incomes and such provisions are for the benefit of the Revenue and therefore a .....

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ndly, it is pointed out by the learned Departmental Representative that even if the claim was to be considered then it was not allowable because the requisite condition that the return of income has to be accompanied by the prescribed audit report has not been complied with by the assessee. On the basis of aforesaid reasons, the claim of the assessee has been opposed. 13. Sections 153A to 153C of the Act contain provisions relating to assessments to be made in cases where search is initiated u/s .....

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it is hereby declared that, - (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section. 14. In terms of the above referred clause (i) of the Explanation, it is evident that all the provisions of the Act shall apply to an assessment made u/s 153A of the Act save as otherwise provided in the said section, or in section 153B or section 153C of the Act. In the background of the expression al .....

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of the Act prescribes that in computing the total income of an assessee, there shall be allowed from his total income the deductions specified in Chapter VIA of the Act. The moot point is as to whether the aforestated position prevails in an assessment made u/s 153A(1)(b) or not? In our considered opinion, having regard to the expression all other provisions of this Act shall apply to the assessment made under this section in Explanation (i) of section 153A of the Act, it clearly implies that i .....

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plicable to an assessment made under sections 153A to 153C of the Act. In our considered opinion, the phraseology of section 153A r.w. Explanation (i) as noted above, does not support the premise arrived at by the CIT(A) and accordingly, the same is rejected. Therefore, assessee s claim for deduction u/s 80IB(10) of the Act even with regard to the enhanced income was well within the scope and ambit of an assessment u/s 153A(1)(b) of the Act and the Assessing Officer was obligated to consider the .....

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y addressing the objections of the assessee. It is not in dispute that the 'On Money' is relatable to business income only, and there is no finding of the Revenue Authorities that it is otherwise, once it has been disclosed pursuant to search in the hands of the assessee. The department is unable to dislodged the same by any cogent reasoning. In such situation, Revenue Authorities were not justified to ignore the same as far as assessee s claim of deduction u/s.80IB(10) in this regard is .....

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u/s. 132(4) of the Act during the course of search proceedings carried out. The return of income filed in pursuance of notice u/s. 153A is the return of income u/s. 139 of the Act only. The said books of accounts are duly audited and supported by the requisite audit report u/s. 80IB in form No. 10CCB dated 25/01/2012. It is an undisputed fact that the business activity of the firm is that of developing the housing projects under the name and style "Madhav Park (Nikol)" and there was no .....

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ards Ltd. [2009] 221 CTR 781 (Guj). Similar view has been taken by Hon ble Bombay High Court in case of C.I.T Vs. Sheth Developers (P) Ltd. [2012] 25 Taxmann.Com 123 (Bom). The assessee firm has already submitted special audited report u/s. 80IB of the Act (Form No. 10 CCB) wherein it is clearly stated that the assessee firm has no other business activities (i.e. other then developing a building housing projects as defined 80IB(10) of the Act). Accordingly, assessee is eligible to claim deductio .....

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where the issue is debatable, penalty cannot be levied. In the case of assessee the Tribunal has held the additional income declared by assessee on account of extra sale consideration to be assessed under the head Income from other sources . Whereas, there are decisions of the Tribunal where on-money declared during search was held to be business income and the assessee was allowed to claim benefit of deduction u/s. 80IB(10) on such income disclosed. In such circumstances no penalty can be levi .....

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