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M/s. Landmark Developers, R.B. Popat & Co. (Part) , Mumbai Versus JCIT Range-4, Thane

2017 (11) TMI 857 - ITAT MUMBAI

Penalty u/s. 271(1)(c) - indirect expenses claimed attributable to the unsold plot - Held that:- 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 ye .....

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accepted but this is not sufficient to fasten liability to penalty on the 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 .....

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sment 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 called the Act ). 2. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called the tribunal ) read as under:- 1. On the facts and in the circumstances of the case and in law, the Hon .....

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cial pronouncements: a. ₹ 27,16,400/- on account of cost of allocation [among plots of expenses actually incurred]. b. ₹ 46875/- Adhoc disallowances 3. Show-cause notice under section 274 to assessee was defective as it did not spell out specific grounds on which penalty was sought to be imposed, order imposing penalty was invalid and, consequently, penalty imposed is to be cancelled, we pray to set aside penalty order of Learned AO and consequently that also of CIT-Appeal on this co .....

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3 vide line no.11 to 16 have held that assessee has not preferred appeal against quantum also supports fact of debit of expenses was deliberated, leading to false claim hence he proceeded to levy penalty u/s 271 (1)(c), on this ground alone penalty order be set aside as making a claim under bonafide claim based on honest belief does not lead to concealment. 6. Mere making of claim of deduction of expenses which was ultimately found to be unsustainable would not by itself amount to furnishing of .....

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f 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 whatsoeve .....

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e by the AO to the tune of ₹ 27,16,400/- wherein assesses has debited indirect expenses to the P&L account with respect to the unsold plots in deviation of the existing accounting policy which indirect expenses ought to have been debited by the assessee to the unsold plots as per the accounting policy consistently followed by the assessee , which deviation in accounting policy led to the reduction of profits and consequently less taxes were paid by the assessee to the Revenue during th .....

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tice u/s 271(1)(c) r.w.s. 274 dated 25.03.2013 for furnishing of inaccurate particulars of income. The assessee during the course of penalty proceedings before the AO replied as under: Sir, The Penalty u/s 271 (1)(c) is levied if any person has "concealed" any facts or furnished inaccurate details . Sir, in the case under review the additions done by you are mainly expenses, although are legitimate expenses of the business of the Assessee, which were claimed on the Plots sold (unlike e .....

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se were as follows- a. During the Previous there were changes in Partnership. b. During the year one Plot at Sativali which was sold and the expenses 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 in .....

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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 Judgement the details of which are as follows: Sir, to substantiate our claim to drop penalty proceedings 1 would like to quote a case of Supreme Court Judgement of 2010 in the case o .....

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but nothing to do with the concealment of income or furnishing of inaccurate particulars of such income. It was claimed that mere disallowance of the claim in the assessment proceedings could not be the sole basis for levying penalty under section 271 (1)(c) of the Act. (ii) It is also rightly pointed out that in case of every Return where the claim made is not accepted by the A.O for any reasons the assessee will invite Penalty u/s 271 (1)(c) that is clearly NOT the intendment of the Legislatur .....

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. The A.O rejected the contentions of the assessee during penalty proceedings and observed that this is not a normal situation as to merger and demarger of plots and assessee was not required to change the accounting policies for claiming expenses. It was observed by the AO that these indirect expenses were related to unsold plots of land that were debited to P&L account to reduce the profits as the same ought to have been added by the assessee to unsold stock held as at the year end. It was .....

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gs 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 ev .....

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tion of ₹ 27,16,400/- on the ground that the expenses incurred were not pertaining to the plots sold during the year, but pertains to unsold plots, and the claim of aforesaid expenses have been claimed to reduce the current year profit, therefore, it tantamount to filing of inaccurate particulars of income. (iii) On the other hand, the AR of the appellant claim that the penalty imposed by the AO is not warranted as there is not concealment or filing inaccurate particulars of income on the .....

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, therefore, by claiming such expenses, the profit of the appellant in the year under consideration is reduced .b) The appellant has deliberately debited the expenses of unsold plots in the name of extra-ordinary situations. The appellant has also not filed an appeal against the addition which goes to show that, there is no difference of opinion as the claim of expenses is incorrect. It is a clear cut case of deliberate filing of inaccurate particulars to reduce the profit margin of the appellan .....

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e case are different. 5. The assessee carried the matter further by filing an appeal before the tribunal. The learned counsel for the assessee submitted before the tribunal that assessee is engaged in business of land development and the assessee has claimed 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 .....

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urred 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 challenged assessment order which attain .....

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land development. The assessee has claimed indirect expenses of ₹ 27,16,400/- attributable to the unsold plot by debiting the same to Profit and Loss account in deviation to the existing accounting policy followed by the assessee wherein as per existing accounting policy , these indirect expenses attributable to the unsold stock of plot of land ought to have been debited to the cost of unsold costs of plot as per accounting policy consistently followed by the assessee . This change in acc .....

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ned finality. It is not the case of the Revenue that false/bogus expenses were claimed by the assessee which were never incurred by the assessee but the case of the Revenue is that albeit the expenses are genuinely incurred for business but the same could not have been claimed as expenses in the year under consideration but should have been claimed in the year when the unsold plots of land stood sold which led to the lower taxes being paid in the year under consideration as the said indirect exp .....

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