Abjal Ali Sha v. ACIT-19(3), Mumbai
[Citation -2016-LL-0916-30]

Citation 2016-LL-0916-30
Appellant Name Abjal Ali Sha
Respondent Name ACIT-19(3), Mumbai
Court ITAT-Mumbai
Relevant Act Income-tax
Date of Order 16/09/2016
Assessment Year 2009-10
Judgment View Judgment
Keyword Tags mercantile system of accounting • long term capital loss • sales tax liability • outstanding service • proprietary concern • interior decoration • sale consideration • capital account • profit on sale • receipt basis • sale of flat
Bot Summary: PAN No.AACPS0354F Assessee by Shri Ajay R. Singh Department by Shri A.B. Koli Date of Hearing 25.8.2016 Date of Pronouncement 16.9.2016 ORDER Per B.R. Baskaran :- The appeal filed by the assessee is directed against the order dated 19.11.2013 passed by ld CIT(A)-30, Mumbai confirming the penalty of Rs.10.00 lakhs levied by the AO u./s 271(1)(c) of the Act for AY 2009-10. With regard to the Long term capital loss, the assessee admitted that the sale consideration was wrongly adopted while working out Long term capital gains, i.e., the cost of another flat owned by the assessee was adopted by inadvertence instead of adopting the sale consideration as per the conveyance deed. The Ld A.R submitted that the assessee was holding bonafide belief with regard to the disallowance of service tax liability u/s 43B of the Act and the mistake was committed by inadvertence with regard to the computation of long term capital loss. A perusal of Capital account of the assessee as appearing in his proprietary concern named M/s Afjal Furnitures, which is placed at page 7 of the paper book, would show that the assessee has shown the Profit on sale of Flat at Rs.27,60,663/-, meaning thereby, the assessee has recorded actual sales consideration of flat in his books of account. With regard to the non-disallowance of Service tax payable amount as required u/s 43B of the Act, the assessee has submitted that he has paid a sum of Rs.23,46,621/- before the due date for filing return of income. The 4 Mr. Abjal Ali Sha assessee has further submitted that the assessee has accounted the service tax liability as per mercantile system of accounting , where as the payment is required to be made on cash basis upon collection of billed amount from the debtors as per the Service tax Act. 271(1)(c) of the Act would come to the help of the assessee, since the assessee has furnished explanations which were not found to be false and further the assessee has also furnished all the relevant details to the AO. The assessee has otherwise recorded all the details in his books of account without concealing anything.


IN INCOME TAX APPELLATE TRIBUNAL Bench, Mumbai Before Shri B.R. Baskaran (AM) & Shri Sanjay Garg (JM) I.T.A. No. 1020/Mum/2014 (Assessment Year 2009-10) Mr. Abjal Ali Sha ACIT-19(3) 39, Kherwadi Road Vs. Room No. 305 Off Jain Mandir 3 r d Floor Bandra East Pirmal Chambers Mumbai-400 051. Lalbaug, Parel Mumbai-400 012. (Appellant) (Respondent) PAN No.AACPS0354F Assessee by Shri Ajay R. Singh Department by Shri A.B. Koli Date of Hearing 25.8.2016 Date of Pronouncement 16.9.2016 ORDER Per B.R. Baskaran (AM) :- appeal filed by assessee is directed against order dated 19.11.2013 passed by ld CIT(A)-30, Mumbai confirming penalty of Rs.10.00 lakhs levied by AO u./s 271(1)(c) of Act for AY 2009-10. 2. facts relating to issue are set out in brief. assessee is engaged in business of interior decoration, furniture manufacture and air tickets booking. He filed his return of income declaring total income of Rs.61,18,560/-. AO noticed from Balance Sheet of assessee that sum of Rs.35,37,287/- was shown as outstanding Service tax liability. It was noticed that assessee did not make any disallowance u/s 43B of Act. Further assessee had also declared Long term capital loss on sale of flat. Hence AO called for relevant details in respect of both issues cited above. assessee submitted that, out of outstanding sales tax liability of 2 Mr. Abjal Ali Sha Rs.35,39,043/-, sum of Rs.23,46,621/- has been paid before due date for filing return of income and accordingly balance amount disallowable u/s 43B was worked out at Rs.11,92,422/-. With regard to Long term capital loss, assessee admitted that sale consideration was wrongly adopted while working out Long term capital gains, i.e., cost of another flat owned by assessee was adopted by inadvertence instead of adopting sale consideration as per conveyance deed. Accordingly assessee filed revised computation of income increasing total income to Rs.98,38,330/-. AO completed assessment by accepting revised workings. 3. Subsequently AO initiated penalty proceedings u/s 271(1)(c) of Act. Before AO submitted that service tax liability arises on receipt basis , i.e., it shall become payable only upon receipt of bill amount from concerned debtor. assessee submitted that he was under bonafide belief that disallowance u/s 43B of Act may not be required to be made, if concerned bill amount was not received. assessee submitted that disallowance is required to be made only at amount of Rs.1,84,117/-, if above said principle is followed. With regard to mistake committed in adopting wrong amount as Sales consideration , assessee submitted that he owned two flats and accountant has, by inadvertence, adopted Cost value of another flat as sale consideration. Accordingly it was pleaded that benefit of Explanation 1 be given to assessee. AO was not convinced with explanations of assessee and accordingly levied penalty of Rs.10.00 lakhs u/s 271(1)(c) of Act. 4. Before Ld CIT(A), assessee did not appear and hence Ld CIT(A) confirmed penalty by upholding view taken by AO. 3 Mr. Abjal Ali Sha 5. Ld A.R submitted that assessee was holding bonafide belief with regard to disallowance of service tax liability u/s 43B of Act and mistake was committed by inadvertence with regard to computation of long term capital loss. He submitted that assessee has otherwise recorded actual sales consideration in books of accounts. He submitted that assessee has furnished revised computation of income by correcting mistakes before finalization of assessment. On contrary, Ld D.R submitted that issue may be set aside to file of Ld CIT(A), since Ld CIT(A) has passed ex-parte order. Ld D.R further submitted that assessee has come out with correct figure of total income only after receipt of notice from AO. 6. We have heard rival contentions and perused record. Since Ld CIT(A) has also decided issues on merits, we are of view that we may dispose of this appeal after hearing parties. Hence we reject plea of Ld D.R to set aside matter to file of Ld CIT(A). perusal of Capital account of assessee as appearing in his proprietary concern named M/s Afjal Furnitures, which is placed at page 7 of paper book, would show that assessee has shown Profit on sale of Flat at Rs.27,60,663/-, meaning thereby, assessee has recorded actual sales consideration of flat in his books of account. Thus, there is merit in submission of assessee that sale consideration was adopted wrongly by inadvertence, while computing total income. Thus, we notice that mistake has occurred only in Statement of Computation of Total income and there is no concealment of particulars or furnishing of inaccurate particulars in books of accounts maintained by assessee. With regard to non-disallowance of Service tax payable amount as required u/s 43B of Act, assessee has submitted that he has paid sum of Rs.23,46,621/- before due date for filing return of income. 4 Mr. Abjal Ali Sha assessee has further submitted that assessee has accounted service tax liability as per mercantile system of accounting , where as payment is required to be made on cash basis upon collection of billed amount from debtors as per Service tax Act. Accordingly, it was submitted that assessee was under bonafide belief that there is no requirement to make any disallowance u/s 43B of Act, since liability has not arisen as per Service Tax Act. 7. We are of view that explanation of assessee with regard to Service tax liability is also bonafide one. Thus, we notice that explanations furnished by assessee have not been found to be false. Even though AO has taken view that assessee has corrected these mistakes upon receipt of notice only, yet we are of view that Explanation 1 to sec. 271(1)(c) of Act would come to help of assessee, since assessee has furnished explanations which were not found to be false and further assessee has also furnished all relevant details to AO. assessee has otherwise recorded all details in his books of account without concealing anything. Accordingly, we are of view that there is no justification on part of Ld CIT(A) in confirming penalty levied by AO. 8. In view of above, we set aside order passed by Ld CIT(A) and direct AO to delete penalty levied u/s 271(1)(c) of Act for year under consideration. 9. In result, appeal filed by assessee is allowed. Order has been pronounced in Court on 16.9.2016 Sd/- Sd/- (SANJAY GARG) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated : 16/9/2016 5 Mr. Abjal Ali Sha Copy of Order forwarded to : 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard File. BY ORDER, //True Copy// (Dy./Asstt. Registrar) PS ITAT, Mumbai Abjal Ali Sha v. ACIT-19(3), Mumbai
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