IN INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND I.T.A. No.572/M/2015 (Assessment Year: 2006-2007) HEERA PANNA CHS LTD, Income Tax Officer Bhulabhai Desai Road, Haji Ali, 16(2)(1), Vs. Mumbai 400 026. Mumbai PAN : AACFH7760C (Appellant) .. (Respondent) Appellant by : None Respondent by : Shri Sujit Bangar Date of Hearing : 27.07.2016 Date of Pronouncement : 26 .09.2016 ORDER PER D. KARUNAKARA RAO, AM: This appeal filed by assessee on 27.1.2015 is against order of CIT (A)-27, Mumbai dated 25.9.2014 for assessment year 2006-07. In this appeal, assessee raised following grounds which read as under:- 1. On facts and circumstances of case and in law, Ld CIT (A) erred in partly confirming penalty under provisions of section 271(1)(c) of Act. 2. On facts and in circumstances of case and in law, Ld CIT (A) failed to appreciate that claim of appellant was bonafide and not having any malafide intention to defraud revenue. 3. Ld CIT (A) ought to have appreciated that there was no concealment of any income or particulars in any manner within meaning of provisions of section 27(1)(c) of Act. 4. Without prejudice, on facts and circumstances of case, Ld CIT (A) failed to appreciate that claim was bonafide and debatable. 2. Briefly stated relevant facts of case are that assessee is Co-operative Housing Society (CHS) and filed return of income declaring total income of Rs. 68,784/-. AO completed assessment u/s 143(3) of Act after making addition of Rs. 15 lakhs and assessed income was determined at Rs. 19,61,280/-. In assessment, AO noticed that assessee received Rs. 15 lakhs from one M/s. Deesha Leasecon Pvt Ltd (Deesha). assessee allowed Deesha to erect scaffolding for display against receipt of Rs. 15 lakhs. Rs. 1 lakh was received towards advertisement rights @ Rs. 15,000/- per month. In addition, assessee also received Rs. 14 lakhs for meeting incidental expenditure @ Rs. 7 lakhs per month. assessee offered said Rs. 1 lakh as income of assessee under head income from other sources . Assessee accounted for same as miscellaneous receipts . Regarding Rs. 14 lakhs, assessee accounted for same in books of accounts as reimbursements under maintenance account and same was not offered to tax. CIT (A) confirmed addition and matter went to Tribunal vide ITA No.3758/M/2011, dated 15.3.2013, wherein Tribunal confirmed addition. Subsequently, AO levied penalty and said amount of Rs. 15 lakhs and Rs. 5,01,230/- was demand raised. In penalty proceedings, assessee submitted that M/s. Deesha was given right to display banner of 80 X 120 size on scaffolding erected for holding of display. amount of Rs. 14 lakhs was paid for meeting repairs and white wash of building. lease period is 2 months. M/s. Deesha made above payment to maintain said scaffolding, round clock security watch and ward, access charges, storage charges etc. Assessee submitted that these are amounts incurred by assessee which were reimbursed by M/s. Deesha and therefore, said reimbursements do not constitute income of assessee. Assessee claimed to have spent Rs. 2,64,000/- for erection of scaffolding; Rs. 10,58,629/- towards painting two layers of painting on society building and Rs. 77,370/- being cost of material and other accessories. AO also perused two agreements ie one for sum of Rs. 1 lakh and other for sum of Rs. 14 lakhs and noticed that said agreements constitute self serving document to suite assessee s attempt to not to disclose Rs. 14 lakhs for taxation. On perusal of said agreements, AO noticed that said second agreement does not refer area of building before painting and came to conclusion that painting of entire building was not borne within facts. AO further reasoned that M/s. Deesha never agreed to reimburse expenditure incurred for painting of entire building. As per AO, two agreements were prepared to suite assessee s plan to conceal particulars of income and they constitute sham agreement. Therefore, AO levied penalty of Rs. 5,01,230/- was levied relatable to addition of Rs. 15 lakhs. 3. During first appellate proceedings, assessee reiterated above reasons and also filed written submissions which are extracted in para 2.3.1 of CIT (A) s order. Referring to finding of Tribunal on quantum additions, CIT (A) extracted relevant paras of Tribunal s order in para 2.4.3 of his order. Referring to paras 6 to 8 of order of Tribunal, CIT (A) highlighted fact that assessee paid sum of Rs. 3,75,360/- to BMC towards advertising fees. It is not noticed when said amount was paid to BMC how assessee can collect Rs. 1 lakh as rent from M/s. Deesha. However, reasoning that claim of reimbursement is not proper, CIT (A) mentioned that M/s. Deesha has no reason to bear expenditure on painting of entire building, which is life of not less than two years when M/s. Deesha s lease period is only for 2 months. He also underlined that finding of Tribunal on commission, where Tribunal held as under:- affairs are so arranged that cost to be incurred by society for their regular maintenance was borne by said company and receipts were bifurcated into two agreements. 4. Tribunal also noted that maintenance of scaffolding and relate structures are part and parcel of regular maintenance and therefore, incurring of expenditure on painting, watch and ward etc has no relevance on advertisement. Therefore, these cannot be allowed u/s 37(1) or section 57 of Act. Tribunal dismissed alternative contentions also. Relying on various decisions discussed in para 2.4.14 to 2.4.20, CIT (A) confirmed penalty levied u/s 271(1)(c) of Act relatable to addition of Rs. 14 lakhs. penalty relatable to sum of Rs. 1 lakh, which was already offered by assessee in return of income was deleted. Aggrieved with same, assessee is in appeal before Tribunal. 5. During proceedings before Tribunal, none appeared to represent assessee s case. With help of Ld DR, I proceed to adjudicate this appeal on merits. It is case of assessee that issue relating to levy of penalty on sum of Rs. 14 lakhs which was disclosed in return of income under maintenance account but same was not offered to tax on ground of reimbursements. Without prejudice, assessee also raised argument that said amount was received from nominal member ie M/s. Deesha. As per Ld Counsel for assessee, such persons are also covered by principle of mutuality and therefore, Rs. 14 lakhs is not taxable at all. It is submission of assessee that Rs. 14 lakhs was received by assessee towards specific performance ie maintenance, to meet cost of erection of scaffolding, watch and ward and other charges. With regard to amount disclosed in maintenance account, it is submission of assessee that there is no penalty with regard to disclosure of particulars and on this ground alone, penalty should not be sustained. As per record available before Tribunal, assessee could not justify why entire building has to be painted at cost of M/s. Deesha s expenditure without offering said receipts to tax. No evidence is brought forth on record / before me as specific expenditure incurred for advertisements of company by M/s. Deesha. There is no relevant material to demonstrate as to why fees to BMC amounting to Rs. 3,75,360/- was paid when rental income received by assessee is only Rs. 50,000/-. 6. On other hand, Ld DR for Revenue relied heavily on order of ITAT, CIT (A) and AO for facts and legal propositions. 7. After hearing Ld DR and on perusal of orders of Revenue Authorities as well as relevant material placed on record, I find, it is undisputed fact that assessee received said amount of Rs. 14 lakhs from M/s. Deesha and same was spent towards painting of entire building spending sum of Rs. 10,58,629/-. Some of amount was spent for erecting scaffolding for bearing display boards. It is claim of assessee that these amounts constitute reimbursements by M/s. Deesha and reimbursements are outside scope of chargeability to tax. These arguments were dismissed by Tribunal in quantum proceedings and Tribunal held that assessee resorted to create agreement for self-serving and assessee arrange itself affairs to not to bring said receipts of Rs. 14 lakhs to tax. In light of above, I examined various issues and find that they are unsustainable with reference to documents on one side and conduct of assessee on other. As noticed by Tribunal in its order (supra), I am unable to understand as to how Rs. 1 lakh was received towards bimonthly rent when BMC fees itself is exceeded sum of Rs. 3.75 lakhs (rounded off). Further, I am unable to appreciate fact of M/s. Deesha reimbursed expenditure on painting of entire building amounting to more than Rs. 10.5 lakhs when scaffolding for display of advertisement is only in area of 80 X 120 sq ft. I am absolutely convinced on fact that affairs are not well so far as accounting of amount of Rs. 14 lakhs is concerned. Assessee is not forthcoming with all facts in this regard. Therefore, I am of opinion that second agreement constitutes self-serving document . judgment in case of Reliance Petro Products Ltd ( 322 ITR 158) (SC) will not help assessee as facts are entirely different. We have also perused contents of paras 2.4.20 and 2.4.21 of CIT (A) s order and find they are relevant. Considering importance of said paras for sake of completeness of this order, same are extracted as under:- 2.4.20. In view of above factual and legal analysis, I do not find any infirmity in action of Ld AO and accordingly, confirm act of imposition of penalty by Ld AO especially keeping in view following case laws:- i) Sharma Alloys (I) Ltd (2013) 37 Taxmann.com 51 (Mad.) penalty leviable for deliberate deception of claim. In garb of bona fide claim assessee cannot escape levy of penalty. object behind enactment of section 271(1)(c) read with Explanations indicates that this section has been enacted to provide for remedy for loss of revenue. ii) Salim Akhtar vs. ACIT (2013) Taxmann.com 608 (Mum) (Trib) whether on facts, revenue authorities rightly recorded transactions in question to be device, and loss , thus, was self inflicted in order to reduce assessee s taxable income held yes penalty confirmed. 2.4.21. However, I am in agreement with without prejudice ground taken by appellant that penalty should not have been levied on Rs. 1 lakh which was duly offered for taxation in return of income. In facts of case, computation of penalty had to be made on additional income Rs. 14 lakhs and not Rs. 15 lakhs as made by AO and therefore, to that extent penalty imposed needs to be reworked. Accordingly, whereas ground nos. 2, 3, 5 and 6 are dismissed. Ground no.4 is allowed. Consequently, ground no.1 is partly allowed as regards quantum of penalty. 8. Considering above, I am of opinion, order of CIT (A) in confirming penalty relatable to Rs. 14 lakhs is fair and reasonable and it does not call for any interference. Accordingly, grounds raised by assessee are dismissed. 9. In result, appeal of assessee is dismissed. Order pronounced in open court on 26th September, 2016. Sd/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER Mumbai; 26.09.2016 .OKK , Sr. PS Copy of Order forwarded to : 1. Appellant 2.The Respondent. 3. CIT(A)- 4.CIT 5.DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER, (Dy./Asstt. Registrar) , ITAT, Mumbai Heera Panna Chs Ltd. v. Income-tax Officer-16(2)(1), Mumbai