TMI Blog2017 (11) TMI 857X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee u/s 271(1)(c). Thus in the factual matrix of the case no penalty u/s 271(1)(c) is exigible in the instant case as the case of the assessee is duly covered by the ratio of decision of Hon’ble Supreme Court decision in the case of Reliance Petroproducts Private Ltd. (2010 (3) TMI 80 - SUPREME COURT). We, therefore, order deletion of the penalty levied by the AO u/s 271(1)(c) - Appeal of the assessee is allowed. - I.T.A. No. 5494/Mum/2017 - - - Dated:- 14-11-2017 - SHRI D.T GARASIA, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : Shri. R.B. Popat For The Revenue : Shri. Saurabh Kumar Rai ORDER PER RAMIT KOCHAR, Accountant Member This appeal, filed by the assessee, being ITA No. 5494/Mum/2017 for assessment year 2010-11, is directed against the appellate order dated 20-06-2017 passed by learned Commissioner of Income Tax (Appeals)-3, Mumbai (hereinafter called the CIT(A) ), for assessment year 2010-11, appellate proceedings had arisen before learned CIT(A) from the penalty order dated 27.09.2013 passed by learned Assessing Officer (hereinafter called the AO ) u/s 271 (1)(c) of the Income-tax Act, 1961 (hereinafter cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c). 7. Not filing an appeal against quantum order is not a reason to levy penalty on your appellant, as both proceedings are different and independent. 8. Order of the learned CIT Appeal confirming penalty on your appellant is totally unwarranted, as the expenses actually incurred during the previous year which was duly accounted, documented and supported by your appellant with an honest belief of allowability of expenses should not have been denied based on mercantile system of accounting followed which is not disputed by AO. Merely due to change in accounting policy of claiming plot development expenses actually incurred during previous year of unsold plot during the previous year instead deferred to year of sale of plot] on disallowance of such expenses penalty was levied, which is against law laid down by Hon. Supreme Court. 9. Kindly expedite the hearing for which we have no objection of whatsoever nature. 10. Your appellant crave leave to add, alter, amend or delete any or all of the grounds of appeal at any time. 3. The brief facts of the case are that the assessee firm is a land developer engaged in the business of purchase and sale of plots of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses attributed for the reason that the full FSI of the said Plot is sold and might be in future full FSI will be left for Selling and the expenses being absorbed than is not possible. c. During the year, in case of Pehlar, the plots sold had to changed to different sizes for which they were required to Merge into 1 Big Plot then De-Merge into 6 smaller Plots than sold. . d. Sir, the occurrence of unusual situation has been explained and also sufficient supporting have been given to prove it. e. Sir, if the Assessee responds to non-normal situation in such a way which seems appropriate to that situation what wrong is done? The question now is if in non-normal situation the accounting is varied whether it is justified or not and if not varied again than whether it is justified? f. Sir, we have already accepted, that had there been No such changes the variation of accounting would have warranted or done. g. Sir, it is very clear from all the above that there is no case for Penalty as neither there is any suppression, submission of incorrect details or any concealment of any sort. Sir, in support of our claim 1 hereby cite a Supreme Court J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed by the AO that assessee has not preferred an appeal against assessment order in quantum passed by the A.O u/s 143(3) which also reveals that it was a deliberate action on the part of the assessee to reduce income and consequently taxes. Thus, the AO observed that assessee s explanation in penalty proceedings u/s 271(1)(c) is not bonafide and claim of the assessee is found to be false and incorrect. The AO observed that the assessee has concealed its income to the tune of ₹ 27,16,400/- by debiting expenses related to the unsold plots to Profit and Loss Account instead of debiting the same to unsold stock which led to lower taxable income as well low payment of taxes to Revenue and hence the penalty was levied by the AO to the tune of ₹ 8,39,368/- being 100% of the taxes sought to be evaded u/s. 271(1)(c) of the Act , vide penalty order dated 27-09-2013 passed by the AO u/s 271(1)(c) of the 1961 Act. 4. The assessee carried the matter in appeal before the learned CIT-A who rejected the contentions of the assessee, vide appellate order dated 20-6-2017 passed by learned CIT(A) by holding as under:- Ground of appeals including additional grounds filed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indirect expenses by debiting the same to P L account instead of unsold stock which has occurred due to exceptional circumstances wherein the plots of land were merged and later demerged . It was submitted that it was not a case of false/ bogus claim of expenses and it could not be said that the said expenses were never incurred but the assessee claimed the said indirect expenses attributable to the unsold plot of land in the instant year under consideration instead of the year when the said plots would have been sold. It was submitted that in any case these were genuine expenses which would have been allowed albeit not in this year as claimed but in subsequent years when the plots stood sold. It was submitted that this has occurred mainly due to change of the accounting policy . The assessee relied upon decision of Hon ble Supreme Court in the case of Reliance Petroproducts Private limited(supra). It was submitted that books of accounts were not rejected by the AO . It was also submitted that the assessee accepted quantum assessment and no appeal was filed against the assessment order passed by the AO u/s 143(3). The Ld. DR on the other hand submitted that the assessee has not cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd also due to merger/ demerger of plots of land. This explanation did not found favour with the Revenue which led to the additions in the assessment as well penalty being levied u/s 271(1)(c) for furnishing of inaccurate particulars of income. Merely because a claim of expenses is made by the assessee which does not found favour with the Revenue is not sufficient to fasten liability of penalty u/s 271(1)(c) and ratio of decision of Hon ble Supreme Court in the case of Reliance Petroproducts Private Limited (2010) 189 taxman 322(SC) is clearly attracted in the instant case before us. In any case these indirect expenses incurred by the assessee attributable to unsold plots are genuine business expenses duly incurred by the assessee but the same were under a bonafide belief claimed by the assessee to be expenses of the impugned assessment year which were not allowed by the Revenue as these expenses as per version of Revenue were to be added to the cost of unsold plots of land to be allowed in the year when plots are actually sold as per accounting policy consistently followed by the assessee. In our considered view, the explanation offered by the assessee is a bonafide explanation as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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