Income Tax Appellate Tribunal - Mumbai
S.N. Shah Family Trust, Mumbai vs Department Of Income Tax on 4 October, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
"E" BENCH: MUMBAI
BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND
SHRI R.K. PANDA, ACCOUNTANT MEMBER
ITA No.2572/Mum/2007
(Assessment year: 2003-04)
Income Tax Officer-
8(2)-2,
Room no.212/216A,
2nd Floor, Aayakar Bhavan,
M.K. Road
Mumbai -400 020 .......... Appellant
Vs
M/s. S.N. Shah Family Trust,
M/s. Poonam Corporation, 219,
Shyam Kamal, 'C', Agarwal Market,
Vile Parle (E),
Mumbai -400 057 ........ Respondent
PAN :AAAAS 0175 K
Appellant by : Shri G.P. Trivedi
Respondent by : Shri Vijay C. Mehta /
Mrs. Harsha Parmar
Date of Hearing : 04.10.2011
Date of Pronouncement: 28.10.2011
ORDER
PER R.S. PADVEKAR, JM:
In this appeal the revenue has challenged the impugned order of the Ld. CIT (A)-21 Mumbai dated 23.01.2007 for the A.Y. 2003-04 deleting the penalty levied by the A.O. u/s.271(1)(c) of the Act. The revenue has taken the following effective grounds:-
"i. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in deleting the penalty of ` 18,46,849/- levied u/s.271(1)(c) of the I.T. Act, 1961.
2 M/s. S.N. Shah Family Trust ITA 2572/M/2007 ii. The ld. CIT (A) erred in holding that since the assessee had voluntarily surrendered its claim u/s.80IB to avoid litigation, there was no criminal intention of concealment or deliberately furnishing inaccurate particulars that is 'mens rea'.
iii. The ld. CIT (A) failed to appreciate that the claim was withdrawn by the assessee only after the AO detected that the conditions laid down for allowance of the deduction u/s.80IB were not justified, and hence not allowable. iv. The ld. CIT (A) further failed to appreciate that the assessee consciously tried to give colour to a claim, otherwise not allowable, to look and appear as allowable which proved the 'mens rea' to evade tax."
2. The facts which are revealed from the record as under. The assessee is an AOP engaged in the business of civil construction and as a Developer and carries on its business activity under the name and style of M/s. Poonam Corporation. The assessee had undertaken a building project at Lokhandwala Complex, Oshiwara, Andheri (W) Mumbai. As noted by the A.O. the said project was consisting of six buildings viz A, B, C, D, E & F. The assessee completed buildings A & B partly and completed the construction of buildings D, E & F. So far as building C is concerned, the assessee has aborted construction of the said building due to Costal Zone Regulations (CZR). The assessee filed the return of income for the A.Y. 2003-04 claimed the deduction u/s.80IB(10) of the Act of ` 59,49,677/-. The return filed by the assessee was processed u/s.143(1) of the Act and there was no regular scrutiny assessment u/s.143(3). But, subsequently, the A.O. issued the notice u/s.148 and finally the assessment was completed by declining the claim of the assessee u/s.80IB(10). It appears that the A.O. carried out certain enquires by deputing his Inspector to physically inspect the project to find out the sizes of the flats, area of each flat and also area covered by the commercial-shopping. The A.O. 3 M/s. S.N. Shah Family Trust ITA 2572/M/2007 also called for the documents like commencement certificate, IOD, Architect Certificate, copies of the agreements etc from assesse. The A.O. had reservation for allowing the deduction u/s.80IB(10), as in his opinion, the assessee was not fulfilling the conditions laid down in sec.80IB(10) of the Act for the following reasons:
"(i) There should have been one project on one plot of land, but there are actually two plots of lands. While D, E & F wings have been built on plot No.116, A & B wings are under construction on plot No.115. The two plots have separate survey Number, separate property cards and separate municipality demarcation.
(ii) Size of the plot of land should have minimum area of one acre, but in this case each plot is about half an acre only.
Even the actual consumable area of both the plots together after excluding reserved area is less than one acre.
(iii) Residential units of the project should have a maximum built up area of 1000 sq.feet but in the three wings (D, E &F) that have been completed, more than 50% of the flats are having built up of more than 1000 sq.ft.
(iv) Investigation further revealed that the assessee is constructing commercial establishment in the 'B' Building, the total area of which is far more than 5% of the total project, thereby violating the prescribed limit u/s. 80IB(10)"
3. As per the physical inspection of the project carried out by the Inspector, it was noticed that the flats, more particularly, in 'D' and 'F' Wings, had built-up area in excess of 1000 sq.fts. It was noticed by the A.O. that the assessee executed two different agreements with the Members of the same family like husband-wife, father-mother etc., but, in fact, both flats were used as a single residential unit. He also issued some summons to the some of the flat owners as noted by him and they told that they have not made any modifications or alterations after purchasing their flats. The A.O., therefore, sought the explanation of the assessee why the deduction u/s.80IB(10) should not be denied. It appears that after lot of deliberations with the A.O. 4 M/s. S.N. Shah Family Trust ITA 2572/M/2007 the assessee gave the letter withdrawing the claim of deduction u/s.80IB(10) and the reasons given by the assessee, which are reproduced in his letter dated 24.02.2006 addressed to the A.O. are as under:-
"13. The written submission of the assessee was found to be absolutely unacceptable and therefore to prove beyond doubt that the project has clearly violated the norms of section 81IS(1) of the I.T. Act, the assessee was offered anopportunity for a joint inspection of the project in the presence of their architect and Departmental engineer. However, the assessee has come forward with a letter dated 24.02.2006 in which it has given up its stand by surrendering its claim of deduction u/s.80IB(10) and has admitted that the project is not likely to be entitled for such deductions. The letter addressed by Shri S.N. Shah, Managing Trustee of the assessee is reproduced below: "This refers to our ongoing assessment wherein we have claimed deduction of ` 59,49,677/- u/s.80IB(10) in respect of profits from residential housing project at Versova, Andheri.
In the course of assessment, from time to time, we have furnished our detailed explanations on how we quality for deduction. Reference maybe made to our letters dt. 15.01.2006 & 14.02.2006 wherein we have duly explained our compliances, till date, with various conditions of the section. We believe that we are entitled to the said deduction.
The undersigned, Mr. S.N. Shah , Managing Trustee of the assessee trust, I am the person who has been in know of the project. I had sever paralytic stroke on 23rd day of October, 2003. I am aged 75. My mobility has been greatly reduced. I have developed diabetic and blood pressure. There are also complications developed relating to kidney. I 5 M/s. S.N. Shah Family Trust ITA 2572/M/2007 have also been advised stress free life. Due to combined affect of my age couple with paralytic stroked and other health complications, there are all possibilities of my being immobile or slow in foreseeable future. I have now been told that the recently introduce amendment requiring completion of housing project by 31.3.2008 may be made applicable to us by tax department and litigation may unnecessarily arise in future on retrospective basis once we succeed in current years. Also, due to Coastal Zone Regulation we are unable to proceed for further construction over foundation work already one up. While relaxation in the regulations is expected, due to my sickness and immobility, it is quite possible and probable that it may not be possible to complete the project by 31.3.2006 - though, in normal circumstances, this would have been certainly possible if Coastal Regulation is relaxed. Considering all this, with a view to buy peace, with a view to keep me any my family free from tension and with a view to avoid any litigation of any nature which can arise, we have deemed it fit to withdraw the claim for deduction made by us in computation of total income. Revised return is being filed herewith. Tax and interest payable consequent upon revise will be paid up by 28th February, 2006.
Since the offer is under the circumstances explained herein, we take it that there can and there would be no penal action initiated by you."
14. It is interesting to observe from the contents of the afore-sated letter that the assessee has given up its claim of deduction u/s.80IB(10), not on the ground that its housing project has violated the conditions / norms prescribed u/s.80IB(10) of I.T. Act, but on the ground that it is not possible for them to complete the project by the 6 M/s. S.N. Shah Family Trust ITA 2572/M/2007 deadline of 31.03.2008 prescribed under the section due to certain Coastal Zone Regulations. Instead of surrendering its rights on the basis of violations already pointed out, has chosen to surrender under apprehension that the project will not be completed before the target under the section. Thus the assessee has made it clear that it has no further arguments to offer in its defence."
4. The A.O. completed the assessment by disallowing the entire claim of the assesse under sec. 80IB(10) of the Act. In this background, the A.O. initiated the penalty proceedings u/s.271(1)(c) of the Act and levied the penalty of ` 18,46,849/- vide order dated 21.08.2006. The assessee challenged the penalty order before the Ld. CIT (A) and the Ld. CIT (A) deleted the penalty by giving the following reasons:-
"10. I have gone through the written submissions made and the arguments before me of the A.R. and has found force in it. The learned A.R. has explained in detail each issue raised by the assessing officer. I have also gone through the copy of the plan approved by the BMC and F.S.I. granted by the BMC for the project and the audit report in form 10CCB filed along with the return of income. On the basis of these facts / records, it can be seen that the claim of deduction u/s.80I(B) was a bonafide claim made by the appellant. However, due to his inability to complete the Project, within the given time frame as required under the section for allowability of claim u/s.80IB, he has withdrawn the claim by filing revised return in order to buy peace of mind and to avoid litigation. Various judicial pronouncements show that the fact of owning up income would not by itself attract the provisions of section 271(1)(c).
7 M/s. S.N. Shah Family Trust ITA 2572/M/2007
11. It is also well settled that merely because an amount is owned as income, there can be no presumption that the assessee earned income or concealed the income or has an intention of concealing the income. In any case the appellant has withdrawn the claim because later on he realized that the project can not be completed on account of coastal zone regulations and not because of the objections raised by the AO.
12. In his written submission the appellant has placed reliance on various judicial pronouncement. In the case of K. Deedar Ahmed V. ITO (97 ITD 240) it was held by Hon'ble Income Tax Appellate Tribunal, Hyderabad bench as under:
"No doubt mere filing of revised return will not automatically protect an assessee from levy of penalty but, in a given case, where an assessee comes forward with clean breast though after dictation, and fil les returns of income offering additional income and expresses remorse for his past conduct unhesistantly, the Assessing Officer may have to exercise the discretion in favour of such assessee as otherwise the expression 'may' in section 271(1)(c) remains a dead letter if it is understood that in a case of admitted concealment, penalty is automatic."
13. Reliance was also placed on the decision of the Hon'ble Rajasthan High Court in the case of J.P. Sharma Sons v. CIT (151 ITR 333) where in it was observed that-
"If the ITO, as a result of investigation made by him during the assessment proceedings, discovers that 8 M/s. S.N. Shah Family Trust ITA 2572/M/2007 inaccurate particulars have been supplied by the assessee or there is omission to supply the correct particulars on his part and the revised return is filed by the assessee after such a discovery is made by the ITO, then, of course, in such circumstances, the filing of the revised return cannot remove the effect of contumacious conduct on the part of the assessee while filing the original return and penalty is leviable in such a case. However, as observed by Their Lordship of the Madras High Court in Ramdas Pharmacy's case (77 ITR 276), the entirety of circumstances must be taken into consideration and the conduct of the assessee from the inception to the conclusion of the assessment proceedings must be viewed, in order to find out whether a criminal intention of conscious concealment of true particulars of income of deliberately furnishing inaccurate particulars by the assessee has been established."
14. In view of above findings, I am of the opinion that the three issues on the basis of which deduction u/s.80IB(10) was to be disallowed are legal issues involving interpretation of the section. The appellant has interpreted the section from his legal point view as against the view taken by the A.O. In such cases it cannot be said that the assessee has concealed any income or has furnished inaccurate particulars of income. Looking to the facts and circumstances of the case that the appellant has voluntarily surrendered his claim in order to avoid litigation, there is no criminal intention of conscious concealment or deliberately furnishing of inaccurate particulars by the appellant that is 'mens rea'. Therefore the penalty of ` 18,46,849/- under section 271(1)(c) of the Act levied by the A.O. is deleted."
9 M/s. S.N. Shah Family Trust ITA 2572/M/2007
5. Now, the revenue is in appeal before us.
6. We have heard the rival submissions of the parties and perused the records. The Ld. D.R. vehemently submits that the assessee himself has admitted that the deduction claim u/s.80IB(10) was wrongly claimed. He submits that the assessee was fully aware of the factual position that the plots on which the project was implemented was having the size of less than 1 acre. He submits that the assessee cleverly split out the flats in such a way that the built-up area would be below 1,000 sq.ft. but, in fact, it was the only flat sold to the members of the same family and used the said units as one residential unit. The Ld. D.R. relied on the following decision:-
CIT vs. Zoom Communication P. Ltd. -91 Taxman 179
7. Per contra, the Ld. Counsel vehemently argues that the claim made by the assessee was a bona fide claim and the deduction was based on the interpretation of sec. 80IB(10). The Ld. Counsel took us through the assessment order, more particularly, objection raised by the A.O. for disallowing the deduction to the assessee. He submits that though the City Survey numbers are different, but in fact, subsequently both the plots were consolidated by the order of the Collector and only one city survey no. i.e. 1/48/06 was retained and the city survey no.1/48/07 was deleted. He submits that as per the approved plan of the competent authority, BMC, the units were having a built-up area of less than 1,000 sq.ft. The Ld. Counsel relied on the decision of the following precedents:-
i) Telebuild Construction (P.) Ltd. vs. ACIT -13 SOT 218 (Mum)
ii) Haware Engineers & Builders P. Ltd. vs. ACIT (Mum)
-46 SOT 27 (Mum) URO
8. We find that the assessee claimed the deduction u/s.80IB(10), which was based on the audit report in form no.10CCB. The A.O. had 10 M/s. S.N. Shah Family Trust ITA 2572/M/2007 objection on the plot of the land as the said plots were having two different Survey nos. 115 & 116. As per the plan on record, we find that total area of the plot is 4,161 sq.mtrs. We, further find that both the plots were adjacent to each other having the City survey no.1/48/6 (Area 2081.7 sq.mtrs) and 1/48/7 (Area 2075.3 sq. mtrs.) and both the plots were subsequently consolidated. The effect of the consolidation order is given subsequently, but as per the approved lay-out, both the flats were shown as a single plot and same has been approved by the BMC. Merely because the City Survey nos. are different otherwise the plots are adjoining to each other then it cannot be said that the plots were totally different having distance between the two.
9. Now, let us deal with the an other objection of the A.O. that the assessee has completed the building project in such a way that two units/flats can be sold to members of the same family like husband- wife, father-mother and same can be combined as a one residential unit. Now, this issue has been considered by the co-ordinate Bench in the case of Emgeen Holdings P. Ltd. vs. Dy. CIT Mumbai 47 SOT 98 and it is held that the amendment introduced to sec. 80IB(10) w.e.f. 1.04.2010 is prospective in nature and deduction u/s.80IB(10) cannot be denied merely because end-user by buying more than one unit on the name of the different family members has made one larger residential unit. The assessment year before us is 2003-04, hence, the amendment made to sec.80IB(10) that if by virtue of putting the restriction on the allotment of the residential unit by insertion of clauses (e) & (f) of Explanation below 80IB(10) is only applicable on the assessment year 2010-11. So far as argument of the Ld. D.R. that the assessee suo motu withdrew the claim of deduction as it was wrong claim, in our humble opinion the said argument is not correct as per the record before us. The A.O. has reproduced the letter dated 24.02.2006, it is stated in the said letter that the assessee who is managing trusty is 75 years of age and was suffering from paralytic 11 M/s. S.N. Shah Family Trust ITA 2572/M/2007 stroke and thus due to his sickness and immobility as well as CZR, it is very difficult to complete the entire project and to buy peace he is withdrawing the claim. As per the facts on record, we find that the claim of the assessee cannot be said to be a wrong though it has withdrew. On the perusal of the record, in our opinion, the assessee's claim was based on the interpretation of sec. 80IB(10). Moreover, some of the objections of the A.O. for allowing the claim of the assessee are contrary to the decisions of the Tribunal. Nothing is there on record to suggest that the assessee consciously made the wrong claim. From the letter given to the A.O., we find that due to the serious health problems the assessee withdrew the claim and nowhere it is stated that the assessee withdrew the claims because the same were wrong one. After giving our anxious consideration to the entirety of facts, we are of the opinion that this is not a case where it can be said that the assessee has concealed the particulars of income or filed inaccurate particulars of income. We find no reason to interfere with the order of Ld. CIT (A) and accordingly the same is confirmed.
10. In the result, revenue's appeal is dismissed.
Order pronounced in the open court on this day of 28th October 2011.
Sd/- Sd/-
(R.K. PANDA) (R.S. PADVEKAR)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 28th October 2011
Copy to:-
1) The Appellant.
2) The Respondent.
3) The CIT (A) -21, Mumbai.
4) The CIT-City-21, Mumbai.
5) The D.R. "E" Bench, Mumbai.
By Order
/ / True Copy / /
Asstt. Registrar
I.T.A.T., Mumbai
*Chavan
12 M/s. S.N. Shah Family Trust
ITA 2572/M/2007
Sr.N. Concerned
Episode of an order Date Initials
1 Draft dictated on 04.10.2011 Sr.PS
2 Draft placed before author 18.10.2011 Sr.PS
3 Draft proposed & placed before the second Member JM/AM
4 Draft discussed/approved by Second Member JM/AM
5 Approved Draft comes to the Sr.PS/PS Sr.PS/PS
6 Kept for pronouncement on Sr.PS/PS
7 File sent to the Bench Clerk Sr.PS/PS
8 Date on which file goes to the Head Clerk
9 Date of dispatch of Order