TMI Blog2018 (3) TMI 1584X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 271(1)(c) - undisclosed being compensation from Chedda Housing - Held that:- Revenue is contending that it is only after when the assessee was cornered by revenue, the assessee came forward and made disclosure of income voluntarily being compensation from Chedda Housing which was earlier disclosed as an unsecured loan. It is very crucial to have correct facts on record and there has to be ad idem as to the findings of the authorities below so as to establish bonafide of the assessee or there need to be proper justification for arriving at contrary findings and it can not be left in the realm of speculation. It is also not on record as to under what circumstances, the said income was earned by the assessee and what made the assessee in not disclosing the said income. The assessee is claiming that the same to be an accountant mistake. This aspect also needs to be looked into to establish the bonafide of the assessee and whether the assessee is able to come out with reasonable explanations and justifications to come out of clutches of penalty provisions u/s 271(1)(c) of the 1961 Act. Thus this matter needed to be restored to the file of the AO for recording the entire factual matri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fy/ delete/ alter any/ all grounds of appeals. 3. The grounds of appeal raised by the assessee in the memo of appeal in ITA no. 5777/Mum/2013 for assessment year 2008-09 filed with the tribunal read as under:- 1. The Learned CIT (Appeals) has erred in by confirming the penalty levied by the learned assessing officer under section 271(1)(c) of the Income Tax Act,1961. The reasons assigned by him for doing the same are wrong and insufficient. Provision of the Act ought to have been properly construed before disallowing the same. Regards being had to the facts and circumstances of the case, the said provision ought not to have been applicable. 2. Order passed is bad in law and contrary to the provision of the Act. 3. Appellant leaves to add/ modify/ delete/ alter any/ all grounds of appeals. 4. First we shall take up appeal of the assessee in ITA no. 5776/Mum/2013 for AY 2005-06. The brief facts of the case are that the assessee is a builder developer and is proprietor of two concerns viz. M/s. Suvidha Developers M/s. S. V. Developer. The assessee had shown opening WIP of ₹ 1,86,56,185/-, purchases of ₹ 2,46,733/- closing WIP of ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed u/s 143(3) r. w. s. 263 of the 1961 Act. 5. Aggrieved by the assessment order dated 24. 12. 2009 passed by the AO u/s 143(3) r. w. s. 263 of the 1961 Act, the assessee filed first appeal before the learned CIT-A who upheld the decision of the AO that percentage completion method be applied and also estimated net profit @12. 68% on closing WIP of ₹ 1,63,74,535/- as against 40% applied by the AO by holding as under, vide appellate order dated 01-07-2013 :- 4. I have carefully considered the facts on record, submission of the appellant and the remand report of the AO. I find that the CIT-I, Thane, has an order u/s. 263 dated 18/03/2009. In the order u/s. 263, he observed that the appellant was not following correct method of accounting for the purposes of recognition of revenue as it was postponing the tax liability. Accordingly, relying upon various decisions of Courts/Tribunal, he had held that percentage completion method of accounting should be adopted for arriving at the correct profit. Accordingly, he directed the A. O. to adopt percentage completion method of accounting while framing fresh order after providing proper opportunities to the appellant and ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered for estimation of the profit for the year under consideration. With these findings, Ground Nos. 1 to 6 being related to the estimation of net profit stand disposed off, accordingly. 6. Aggrieved by the appellate orders dated 01-07-2013 passed by the learned CIT(A), the assessee filed an appeal before the tribunal . It is stated by ld. Counsel for the assessee before the Bench that the project was started in the year 1995 and since then the assessee is following project completion method which was accepted by Revenue . It was stated that the entire profit arising from this project was offered for taxation in AY 2008-09 and if this profit as estimated by learned CIT-A is brought to tax then in that case it will lead to double taxation of the same income which is not permissible . It was submitted that the project was completed in the financial year 2007-08 and assessee has voluntarily declared entire profit arising from this project in the AY 2008-09. The assessee also submitted that project completion method is one of the recognized methods of accounting. The assessee relied on the following case laws:- 1. CIT V/s DLF UNIVERSAL LTD. ITA N. 159 of 2010 (Del H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s it require verification of facts of several assessment years. It is claimed that the Revenue has consistently since 1995 accepted the project completion method in the case of assessee and it is only during the impugned assessment year vide proceedings conducted u/s 263 of the 1961 Act, it was proposed to deviate from the consistent stand taken by Revenue. The principles of res-judicata are not applicable to income-tax proceedings but consistency has to be maintained. At this stage we would like to reproduce here in under relevant extract of judgment of Hon ble Delhi High Court in the case of CIT v. Manish Buildwell Private Limited reported in (2011) 245 CTR 397(Del) as under: 6. Questions Nos. 2 and 3 are connected. They assail the decision of the Tribunal rendered in paragraph 20 of its order. An addition of ₹ 28,21,000/-was made by the assessing officer on the footing that the assessee was adopting the project completion method or the completed contract method, which was not proper and the profits of the business should be computed on the basis of the percentage completion method under which the profits of the development and construction business of the assessee get ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant nor any finding has been given that true and fair profits cannot be deduced following the said method of accounting. No evidence was found during the course of search to show that the books of account are not properly maintained by the appellant. The main thrust of the assessing officer in making the addition is that the assessee is deferring the payment of taxes. But this allegation of the assessing officer cannot be accepted as the assessee is consistently following a method of accounting which is well recognized in development business and has been accepted by the assessing officer also in the other group cases. Thus the addition is hereby deleted. 7. The aforesaid finding of the CIT (A) was approved by the Tribunal with the observation that the department has accepted the assessee's method of accounting namely, the project completion method and therefore there was no justification for adopting the percentage completion method for one year on selective basis. 8. It is well settled that the project completion method is one of the recognized methods of accounting. In CIT v. Hyundai Heavy Industries Co. Ltd. [2007] 291 ITR 482 / 161 Taxman 191 (S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of the taxes which are to be assessed annually under the Income Tax Act. Accounting Standards 7 (AS7) issued by the Institute of Chartered Accountants of India also recognize the position that in the case of construction contracts, the assessee can follow either the project completion method or the percentage completion method. In view of the judgments of the Supreme Court (Supra), the finding of the CIT (A), upheld by the Tribunal, does not give rise to any substantial question of law. Further, the Tribunal has also found that there was no justification on the part of the assessing officer to adopt the percentage completion method for one year (the year under appeal) on selective basis. This will distort the computation of the true profits and gains of the business. For these reasons, we are of the view that no substantial question of law arises. We, therefore, decline to admit question Nos. 2 and 3. We are of the considered view that this matter need to be restored to the file of the AO for verification whether the assessee has offered entire income arising from this project in AY 2008-09 when the project was stated by the assessee to be completed and also to verif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n as loan. Accordingly, the assessee offered the said compensation of ₹ 30,00,000/- as assessee s income for AY 2008-09 which resulted in a profit of ₹ 20,01,592/- in said proprietary concern M/s Suvidha Developers instead of loss of ₹ 9,98,408/-for the impugned assessment year under consideration before us. Penalty proceeding u/s. 271(1)(c) were initiated by the AO for assessee's act of furnishing inaccurate particulars of his income to the tune of ₹ 30. 00. 000/-, vide assessment order dated 31-12-2010 passed by the AO u/s 143(3) of the 1961 Act. Penalty proceedings were initiated by the AO u/s 271(1)(c) against the assessee for furnishing of inaccurate particulars of income to the tune of ₹ 30,00,000/- which duly found mentioned in the assessment order u/s 143(3) dated 31-12-2010 passed by the AO. 10. The AO initiated penalty proceedings u/s. 271(1)(c) for furnishing of inaccurate particulars of income which led to the levy of penalty of ₹ 10,19,700/- vide penalty order dated 27-06-2011 passed by the AO u/s 271(1)(c), as the assessee did not attended before the AO nor filed any explanation before the AO w. r. t. declaration of compensat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... falsely shown as loan only after service of notices under Section 143(2) and 142(1) requiring various details, the same cannot be said to be a voluntary Act on the part of appellant. Even in the cases of filing of revised return of income showing higher income due to restrain and fear and suspected concealment by the A. O., penalty is held to be imposable by the Hon'ble Court in the cases of Hakam Singh and others, 124 ITR 228 (All. ) and Radheshyam, 123 ITR 125 (All. ) 4.1 I have also gone through the case laws relied by the appellant and find that these case laws pertained to those circumstances where the surrender was made on the condition that no penalty would be leviable or the surrender was made to buy mental peace and avoid litigation. However, in the present case of appellant, those conditions are not satisfied, and in fact, the disclosure was made of a false claim at the time when the Assessing Officer required the assessee to explain the loans and creditors by filing confirmation etc. 4.2 In view of the above facts and circumstances of the case, therefore, I am of the considered view that appellant has concealed particulars of income by showing the compens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as loan in the books of account and the same was offered as an income during the course of assessment. These facts are emanating from the assessment order passed by the AO u/s 143(3). While on the other hand learned CIT(A) has recorded an altogether contrary finding that when the assessee was asked to file details of loans along with confirmations vide notices issued by the AO u/s 142(1) and 143(2) both dated 16-09-2010, the assessee being unable to submit loan confirmation and being cornered, offered the said amount of ₹ 30,00,000/- as income being compensation from Chedda Housing instead of being a loan as was disclosed earlier during survey u/s 133A on 05-09-2008 and return of income filed with the Revenue on 29-09-2008. These are altogether contrary findings of fact recorded by lower authorities and it is also not on record whether learned CIT(A) sought any remand report from the AO to arrive at this contrary findings of facts. The assessee is still maintaining that the assessee came forward with the said disclosure voluntarily without being cornered by Revenue while the Revenue is contending that it is only after when the assessee was cornered by revenue, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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