LGE & C Patel J.V., Mumbai v. The ACIT.,Vapi Circle,, Vapi

ITA 773/AHD/2010 | 2005-2006
Pronouncement Date: 16-04-2010 | Result: Allowed

Appeal Details

RSA Number 77320514 RSA 2010
Bench Ahmedabad
Appeal Number ITA 773/AHD/2010
Duration Of Justice 1 month(s) 4 day(s)
Appellant LGE & C Patel J.V., Mumbai
Respondent The ACIT.,Vapi Circle,, Vapi
Appeal Type Income Tax Appeal
Pronouncement Date 16-04-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 16-04-2010
Assessment Year 2005-2006
Appeal Filed On 12-03-2010
Judgment Text
ITA.772-773/AHD/2010-DCA. 1 IN THE INCOME_TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD BEFORE SHRI T. K. SHARMA AND SHRI D.C. AGRAWAL. I.T.A. NOS. 772 & 773 /AHD/2010. (ASSESSMENT YEARS: 2004-05 & 2005-06) LGE & C PATEL -J.V. C/O. PATEL ENGINEERING LTD. PATEL ESTATE ROAD JOGESHWARI (W) MUMBAI-400 102. VS ASSISTANT COMMISSIONER OF INCOME TAX VAPI CIRCLE VAPI. (APPELLANT) (RESPONDENT) PAN: AAALO387 J APPELLANT BY : SHRI A.C. SHAH CA RESPONDENT BY : SHRI RAJEEV AGARWAL CIT (DR). ( (( ( )/ )/)/ )/ ORDER PER SHRI T.K. SHARMA J.M . THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAINST ORDER OF THE LD. C.I.T.(A) FOR THE ASSESSMENT YEARS 2004-05 AND 2005 -06 AGAINST LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE I.T. ACT. ITA.NO.772/A/2010 (A.Y. 2004-05) 2. THE FACTS OF THE CASE DESCRIBED BY LD. CIT(A) A RE AS UNDER :- ITA.772-773/AHD/2010-DCA. 2 IN THIS CASE RETURN OF INCOME WAS FILED ON 1-11-20 04 DECLARING TOTAL; LOSS OF RS.(-) 94 09 975/- AND THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE I.T. ACT 1961 ON 31-01.2006 DETERMIN ING THE TOTAL INCOME AT RS.4 61 92 160/-. THE A.O. MADE ADDITIONS ON TWO ACCOUNTS I) RS.8 03 80 805/- BEING 7% OF TOTAL RECEIPTS OF R S.1 14 82 97 211/- WHICH WAS NOT SHOWN THIS YEAR AS RECEIPT AS PER THE AGREEMENT /MOU AND (II) RS.89 21 135/- BEING EXPENSES DISALLOWED F OR WANT OF PROOF. PENALTY PROCEEDINGS U/S. 271(1) (C) WERE INITIATED AND SHOW CAUSE NOTICE WAS ISSUED. ASSESSEE MADE THE SUBMISSION BEF ORE THE AO IN REPLY TO THE SHOW CAUSE NOTICE. HOWEVER A.O. WAS N OT SATISFIED WITH THE EXPLANATION GIVEN BY THE APPELLANT AT THE TIME OF PENALTY PROCEEDING. THE A.O. OBSERVED THAT THE APPELLANT HA D FURNISHED INACCURATE PARTICULARS WITH REGARD TO THE UNDER STA TEMENT OF RECEIPTS OF RS./8 03 80 805/- (7% OF THE TOTAL RECEIPTS) AND EX PENSES OF RS.89 21 135/- AND THEREFORE LEVIED PENALTY U/S. 2 71(1)(C ) OF RS.2 94 50 000/-. 3. THE LD. A.R. WAS OF THE VIEW THAT ONCE INCOME OF PEL FROM AOP HAS BEEN INCLUDED IN THE RETURN OF INCOME OF AOP TILL A .Y. 2003-04 AND THERE BEING NO CHANGE IN THE FACTS ASSESSEE DID NOT EXPLA IN WHY INCOME OF PEL HAS NOT BEEN INCLUDED AS THE INCOME OF JOINT VENTUR E IN THE RETURN OF INCOME FILED FOR A.Y. 2004-05 THEREBY BREAKING THE PRINCIP LES OF CONSISTENCY. ACCORDING TO A.O. ASSESSEE HAS NO WHERE DISPUTED TH E EXISTENCE OF AOP. FURTHER AGREEMENT DT. 2-9-02 IS AN INTERNAL ARRANG EMENT CLAIMED TO BE FOR COMMERCIAL CONSIDERATION BUT IT COULD NOT BE THE MA IN REASON FOR DEVIATING FROM THE PRINCIPLE OF CONSISTENCY. THE INTERNAL WOR K SHARING DOES NOT AFFECT ITA.772-773/AHD/2010-DCA. 3 THE INCOME AND TAXABILITY OF AOP. ACCORDINGLY AO H ELD THAT BY NOT INCLUDING THE INCOME EARNED BY PEL IN ITS INCOME TA X RETURN THE JOINT VENTURE HAS FURNISHED INACCURATE PARTICULARS OF INC OME FOR THE A.Y. 2004-05. THE AO FURTHER HELD THAT ASSESSEE HAS FAILED TO CLA RIFY HOW THE EXPENSES INCURRED BY LGE & C COULD BE THE BUSINESS EXPENDITU RE OF JOINT VENTURE WHEN COMPLETE WORK HAS BEEN CARRIED OUT BY PEL. IT ALSO ESTABLISHED FURNISHING OF INACCURATE PARTICULARS OF JOINT VENTU RE. HE ACCORDINGLY LEVIED THE MINIMUM PENALTY ON THE ADDITIONS PROPOSED BY HI M IN THE ASSESSMENT ORDER. THE MINIMUM PENALTY WAS WORKED OUT BY HIM AT RS.2 94 41 040/-. 4. THE LD. C.I.T. (A) CONFIRMED THE PENALTY BY OBSE RVING AS UNDER :- THE ONLY GROUND OF APPEAL RAISED BY THE APPELLANT RELATES TO LEVYING PENALTY OF RS.2 94 50 000/- U/S. 271(1)(C ) OF THE I.T. ACT. IN THIS CASE PATEL ENGG. LTD. AND LGE & C INDIAN ARM OF LGE & C KOREEA FORMED A JV FOR BIDDING THE TENDER FLOATED BY NHAI FOR SURAT MANOR NATIONAL HIGHWAY./ JV WAS ENTERED ON 4-10-1999. THE REAFTER THE TWO MEMBERS OF THE JV ENTERED INTO AN AGREEMENT ON 16.1 0.2000 VIDE WHICH THEY AGREED TO SHARE THE RECEIPTS IN THE RATI O OF 75% : 25% WHICH WAS AN INTERNAL AGREEMENT MADE BY THESE TWO P ARTIES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS SUBMITT ED BY THE APPELLANT THAT PEL TOOK OVER THE ENTIRE WORK FROM J V AND SUB- CONTRACTED THE SAME TO M/S. KNR CONSTRUCTION. AS PE R THE AGREEMENT WITH M/S./ KNR CONSTRUCTION DATED 7-9-2002 LGE & C AGREED TO BE A SLEEPING MEMBER WHO WAS NO LONGER INVOLVED ION THE ACTIVE EXECUTION OF THE ROAD PROJECT AND ALL RECEIPTS RECE IVED BY THE JV WOULD ITA.772-773/AHD/2010-DCA. 4 BE PASSED ON TO M/S. KNR CONSTRUCTION AFTER DEDUCTI NG 7% OF THE GROSS RECEIPTS. FROM THE RECORDS AVAILABLE IT WAS O BSERVED THAT THE INCOME OF PEL FROM AOP HAD BEEN INCLUDED IN THE RET URN OF INCOME OF AOP TILL THE A.Y. 2003-04. THERE WERE NO CHANGES IN THE FACTS OF THE CASE. THEREAFTER THE ASSESSEE HAD NOT JUSTIFIE D THAT WHY THE INCOME OF PEL FROM AOP HAD BEEN INCLUDED IN THE INC OME OF PEL IN ITS COMPANY RETURN OF INCOME RATHER THAN SHOWING AS THE INCOME OF AOP BREAKING THE PRINCIPAL OF CONSISTENCY. THE ASSE SSEE HAD NOWHERE DISPUTED THE EXISTENCE/STANDS OF AOP. IN THE ASSESS MENT ORDER THE SAME HAD BEEN NARRATED IN SEQUENCE. IN THE SUBMISSI ON BEFORE THE AO THE ASSESSEE HAD HEAVILY EMPHASIZED THAT REASON FOR DEVIATION FROM THE PRINCIPLE OF CONSISTENCY WAS THE ARRANGEMENT OF INTERNAL REVENUE SHARING ARISING OUT OF COMMERCIAL CONSIDERATION. TH E INTERNAL WORK SHARING DOES NOT AFFECT THE INCOME AND TAXABILITY O F AOP. THEREFORE IT WAS WELL ESTABLISHED THAT THE ASSESSEE HAD FURNI SHED INACCURATE PARTICULARS IN THE RETURN OF INCOME. FURTHER THE A SSAESSEE HAD FAILED TO CLARIFY THAT THE EXPENSES INCURRED FOR THE BUSIN ESS OF AOP AS THE COMPLETE WORK HAS BEEN CARRIED OUT BY PEL. IN THIS COUNT ALSO THE AO ESTABLISHED THE FURNISHING OF INACCURATE PARTICULAR S BY THE ASSESSEE AND HENCE PENALTY WAS LEVIED BY THE A.O. ON THE ASSESSE E. 5. BEFORE US THE LD .A.R. FOR THE ASSESSEE SUBMITTE D THAT ASSESSEE HAS NOT CONCEALED ANY FACTS OR NOT FILED INACCURATE PARTICU LARS BUT IT GENUINELY BELIEVED THAT NO REAL INCOME ACCRUED TO JOINT VENTU RE AS ENTIRE WORK WAS TRANSFERRED TO PEL BY VIRTUE OF AGREEMENT DT. 2-9-0 2 AND THEREFORE NO INCOME ARISING FROM THAT WORK COULD REALLY BELONGED TO JOINT VENTURE. THERE ITA.772-773/AHD/2010-DCA. 5 IS NO ALLEGATION THAT ANY MATERIAL PARTICULARS HAV E BEEN CONCEALED BY THE ASSESSEE OR ANY INACCURATE PARTICULARS HAVE BEEN FI LED. MERELY MAKING A CLAIM IN THE RETURN OF INCOME WOULD NOT AMOUNT TO C ONCEALMENT OF INCOME. THE LD. A.R. RELIED ON THE DECISION OF HONBLE SUPR EME COURT IN C.I.T. VS. RELIANCE PETRO PRODUCTS 322 ITR 158 (SC) THAT PENAL TY U/S. 271(1)(C ) CANNOT BE LEVIED MERELY ON THE GROUND OF UNSUSTAINA BLE CLAIMS MADE BY THE ASSESSEE. 6. THE LD. D.R. ON THE HAND RELIED ON THE ORDER OF AUTHORITIES BELOW. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE MATERIAL ON RECORDS IN OUR CONSIDERED VIEW THERE IS NO CASE FOR SUSTAINING THE PENALTY. BY OUR ORDER OF EVEN DATE IN RESPECT OF THE QUANTUM AD DITIONS WE HAVE HELD THAT AOP CEASED TO EXIST AFTER 2-9-2002.THERERFORE NO I NCOME COULD BE ASSESSED IN THE HANDS OF AOP. THEREFORE TRIBUNAL DELETED TH E ADDITION MADE BY THE AO IN RESPECT OF 7% OF CONTRACT RECEIPTS. THE ADDIT ION AMOUNTED TO RS.8 03 80 805/- AND ALSO DID NOT ALLOW THE CLAIM O F THE ASSESSEE IN RESPECT OF EXPENDITURE OF RS.89 21 135/- CLAIMED TO HAVE BE EN INCURRED BY LGE & C AND TRANSFERRED TO JOINT VENTURE AS AOP. FOR THE D ETAILED REASONS GIVEN IN THE QUANTUM ORDER NEITHER THE ACTION OF THE A.O. I N TAXING 7% OF THE RECEIPTS NOR THE CLAIM OF THE ASSESSEE FOR EXPENSES WAS UPHE LD. ONCE THE ADDITION OF RS.8.03 CRORES WAS NOT UPHELD NO PENALTY U/S. 271(1 ) (C ) COULD BE LEVIED. WE DERIVE SUPPORT FROM THE DECISION IN ACIT VS. VIP INDUSTRIES (2009) 122 TTJ-29 (MUM). THIS VIEW HAS BEEN FURTHER SUPPORTED BY THE DECISION OF VARIOUS COURTS AS UNDER :- ITA.772-773/AHD/2010-DCA. 6 1. PRABHAT OIL TRADERS V. I.T.O. (NO.3.) (1996) 218 IT R 2. CITY DRY FISH COMPANY VS. C.I.T. (1999) 238 ITR-63 (A.P.H.C.) 3. C.I.T. VS. MOHD. BUS SOKAT ALI (2004) 265 ITR-326 ( RAJ. H.C.) 4. C.I.T. VS. BENGAL JUTE MILLS CO. LTD. (1988) 174 IT R-402 (CAL. H.C.) 5. C.I.T. VS. SHISHPAL (2002) 255 ITR-187 (RAJ. H.C.) 6. C.I.T. VS. SANJIV KUMAR (2008) 300 ITR-348 (P & H H .C.) FURTHER HONBLE SUPREME COURT IN CIT VS. RELIANCE P ETRO PRODUCTS 322 ITR-158 (SC) HELD THAT DISALLOWING CLAIM COULD NOT BE A CASE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. IT IS HELD THAT FOR FURNISHING INACCURATE PARTICULARS INFORMATION GIVEN IN THE RETURN SHOULD BE INCORRECT OR INACCURATE. THE WORDS INACCURATE PARTICULARS MEAN THAT THE DETAILS SUPPLIED IN THE RETURN ARE NO T ACCURATE OR CORRECT OR FALSE OR ARE ERRONEOUS. IN ABSENCE OF FINDING BY TH E AO THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN OF INCOME WA S ERRONEOUS OR FALSE THERE WAS NO QUESTION OF INVITING PENALTY U/S. 271(1)(C ) . THE ARGUMENT OF THE LD. DR THAT SUBMITTING INCORRECT CLAIM FOR EXPENDITURE WOULD AMOUNT TO GIVING INACCURATE PARTICULARS OF SUCH INCOME IS NOT CORREC T. MAKING INCORRECT CLAIM WOULD NOT TANTAMOUNT IN LAW TO FURNISHING INACCURAT E PARTICULARS. IF THIS VIEW IS ALLOWED TO SUCCEED THEN IN SUCH OTHER CASE WHERE CLAIM IS NOT ACCEPTED THE ASSESSEE WILL INVITE PENALTY U/S. 271(1)(C ) WHICH IS CLEARLY NOT INTENDED BY THE LEGISLATURE. IN THIS REGARD IT WOULD BE MOST AP PROPRIATE TO REFER TO FOLLOWING PART OF THE JUDGEMENT IN RELIANCE PETRO P RODUCTS (SUPRA). IN THE PRESENT CASE ALSO ASSESSEE HAS MADE CLAIM OF EXPEN SES WHICH IS NOT ALLOWED IN THE HANDS OF JOINT VENTURE ON THE GROUND THAT AO P CEASED TO EXIST. THIS ITA.772-773/AHD/2010-DCA. 7 WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULAR S OF INCOME OR CONCEALING ANY INCOME. ASSESSEE HAS TAKEN A LEGAL VIEW THAT ON CE BY VIRTUE OF AGREEMENT DT.2-9-02 ENTIRE INCOME IS GENERATED ONLY TO PEL AND NO REAL INCOME IS GENERATED TO JOINT VENTURE THEREFORE 7% OF THE RECEIPTS FROM NHAI COULD NOT BE ASSESSED IN THE HANDS OF JOINT VE NTURE BUT LGE & C IS LOOKING AFTER THE COMPLETION OF FORMALITIES WITH NH AI. THEREFORE EXPENDITURE INCURRED BY IT ON SUCH FORMALITIES WOUL D BELONG TO JOINT VENTURE. THIS VIEW HAS NOT BEEN UPHELD IN THE QUANTUM PROCEE DINGS BY THE TRIBUNAL VIDE OUR ORDER OF EVEN DATE FOR THE REASONS THAT O NCE VOLITION ON THE PART OF LGE & C IN EARNING INCOME WITH PEL CEASED TO EXIST IT COULD NOT BE SAID THAT ANY AOP WOULD STILL CONTINUE TO BE IN EXISTENC E. FURTHER SUCH EXPENDITURE WAS NOT INCURRED BY LGE & C FOR EARNING ANY INCOME FOR ITSELF. THUS THE CLAIM OF THE JOINT VENTURE FOR ALLOWING T HIS EXPENDITURE WAS NOT ACCEPTED BY THE TRIBUNAL. BUT ON REJECTION OF THE C LAIM OF THE ASSESSEE JOINT VENTURE COULD NOT INVITE PENALTY U/S. 271(1)(C ) AS HELD BY HONBLE SUPREME COURT IN RELIANCE PETRO PRODUCTS CASE (SUPRA). 8. AS A RESULT PENALTY SO LEVIED BY THE AO AND CON FIRMED BY THE LD. CIT(A) IS CANCELLED. APPEAL OF THE ASSESSEE IS ALL OWED. ITA.773/AHD/2010 (A./Y.2005-06) . 9. THE FACTS OF THE PRESENT CASE ARE SIMILAR AS IN THE ASSESSMENT YEAR 2004-05. FOLLOWING OUR REASONING IN THE ASSESSMENT YEAR 2004-05 WE CANCEL THE PENALTY LEVIED BY THE AO AND CONFIRMED B Y THE CIT (A) THIS YEAR ALSO. ITA.772-773/AHD/2010-DCA. 8 10. AS A RESULT BOTH THE APPEALS FILED BY THE ASSES SEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 16 /04 /2010. SD/- SD/- (D. C. AGRAWAL) (T.K . SHARMA) ACCOUNTANT MEMBER. JUDICIAL MEM BER. AHMEDABAD. DATED: 16 /04 /2010. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT AHMEDABAD.