DCIT, Chandigarh V. M/s Mobisoft Telesolutions (P) Ltd., Chandigarh

ITA 1087/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86198 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 08-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR AMA RVEER SINGH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NOS. 1087 & 1088/CHD/2014 ASSESSMENT YEARS: 2006-07 & 2008-09 THE DCIT VS. M/S MOBISOFT TELESOLUTIONS (P) LTD. CIRCLE 4(1) 2 ND FLOOR, TOWER C CHANDIGARH DLF BUILDING, IT PARK CHANDIGARH PAN NO.AAACI3573P (APPELLANT) (RESPONDENT) APPELLANT BY : DR. AMARVEER SINGH RESPONDENT BY : SHRI. ROHIT GOEL DATE OF HEARING : 19/02/2015 DATE OF PRONOUNCEMENT : 13/03/2015 ORDER PER T.R.SOOD, A.M. THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 22.09.2014 PASSED BY THE CIT(A), CHANDIGARH. 2. IN BOTH THE APPEALS REVENUE HAS RAISED THE IDENT ICAL GROUNDS WHICH ARE AS UNDER. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AN0D IN LAW, THE CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSE SSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE PENALTY AMOUNTING TO RS. 7.00 LAKH (RS. 14.00 LAKH FOR A.Y. 2008-09) LEVIED U/S 271(1) (C) FOR FILING OF WRONG PARTICULARS OF INCOME BY CLAIMING EXPENDITURE TERMED AS ROYALTY PAID TO ONE OF THE DIRECTORS UNDER THE CO LOURABLE DEVICE BUSINESS SALE AGREEMENT SIGNED BY THE BENEFICIARY DIRECTOR ON BEHALF OF BOTH PARTIES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS ES AND IN LAW, THE ORDER OF CIT(A) IS PERVERSE IN DELETING THE PENALTY AMOUNTING TO RS. 2 7.00 LAKH (RS. 14.00 LAKH FOR A.Y. 2008-09) LEVIED U/S 271(1)(C) ON THE AMOUNTS WHICH HAS BEEN HELD AS SHAM TRANSACTION BY THE LD CIT(A) IN QUANTUM OF APPEAL OF THE ASSESSE (I.E APPEAL NO. 452/08-09 DATED 18.03.2011 AND APPEAL NO. 452/10-11 DATED 16. 09.2011). 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING THE ASSESSMENT PROCEEDINGS IN ASSESSMENT YEAR 2006-07 ASSESSEE H AD CLAIMED A SUM OF RS. 20,31,774/- PAID AS ROYALTY TO DIRECTOR SHRI. TARO N MOHAN WHICH WAS HELD TO BE NOT AN ALLOWABLE EXPENDITURE. IN ASSESSMENT YEAR 2 008-09 SIMILARLY A SUM OF RS. 22,21,553/- AND A SUM OF RS. 19,20,077/- WHICH WAS CLAIMED AS ROYALTY WAS ALSO DISALLOWED. PENALTY PROCEEDING UNDER SECTION 271(1) (C) WERE ALSO INITIATED IN BOTH THE YEARS. IN RESPONSE TO THE SHOW CAUSE NOTIC E FOR LEVY OF PENALTY IT WAS SUBMITTED AS UNDER: THE ROYALTY PAYMENT WAS MADE TO DIRECTOR UNDER AGR EEMENT AFTER DEDUCTING TDS AND CLAIMED AS EXPENDITURE IN THE PROFIT AND LO SS ACCOUNT. THE IMPOSING OF PENALTY FOR THE ABOVE DISALLOWANCE IS NOT JUSTIFIED KEEPING IN VIEW THE DEFINITION OF THE SECTION 271. THE SECTION SAYS HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME. IN THE PRESENT CASE OF THE ASSESSEE COMPANY HAS PAI D THE ROYALTY UNDER AN AGREEMENT AND RIGHTLY CLAIMED IT AS EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER WAS OF THE OPINION THAT THIS IS NOT A ALLOWABLE EXPENSE AND ACCORDINGLY DISALLOWED IT. THERE ARE SEVERAL JUDGEMENT WHERE IT WAS HELD THAT MERE DISALLOWANCE OF CERTAIN EXPENSES WOULD NOT LEAD TO PENALTY. (DCIT VS EAGLE IRON & METAL INDUSTRIES LTD 11 ITR (TRIB) 384 (MUM) 2012). THE FACTS AND CI RCUMSTANCES OF THE CASE ARE SAME AS N THE CASE OF THE ASSESSEE COMPANY. IN THE PARTICULARS CASE THE EXPENSES ON ACCOUNT OF REPAIR MAINTENANCE WERE DISA LLOWED BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(APPEALS). BUT CIT(APPEALS) CONSIDERS THE APPEAL OF THE ASSESS EE REGARDING PENALTY AND OBSERVED THAT MERE DISALLOWANCE OF CERTAIL EXPENSES WOULD NOT AUTOMATICALLY LEAD TO PENALTY. RELIANCE WAS PLACED ON THE JUDGEME NT OF THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF CIT VS. AJ AIB SINGH & CO. (2002) 253 ITR 630 (P & H). THE TRIBUNAL HAS ALSO DISMISSED THE DE PARTMENT APPEAL IN THIS CASE. THERE ARE OTHER JUDGEMENTS OF SIMILAR NATURE I.E. C IT VS. MEHTA ENGINEERS LTD. 300 ITR 308 IN THIS CASE ALSO THE ASSESSEE PAID EDUCATI ON EXPENSES UNDER ON AGREEMENT AND CIT(APPEALS) RIGHTLY OBSERVED THAT IT IS NOT A CASE WHERE THE ASSESSEE HAD CLAIMED INTESTINALLY AND DELIBERATELY THE EXPENDITURE IN ORDER TO EVADE TAX LIABILITY. IN THE CASE OF THE ASSESSEE COMPANY ALSO THERE WAS NO INTENTION OF ANY EVASION OF TAX AS THE TAX LIABILITY OF THE DIRECTOR AFTER R ECEIVING THE ROYALTY FALLS INTO 30% SLAB. SO WHETHER COMPANY PAYS THE TAX OR THE DIRECT OR THE TOTAL TAX LIABILITY COMES THE SAME. 4. THE AO DID NOT FIND FORCE IN THESE SUBMISSIONS A ND LEVIED PENALTY OF RS. 7 LACS IN ASSESSMENT YEAR 2006-07 AND RS. 14 LACS IN ASSESSMENT YEAR 2008-09 UNDER SECTION 271(1)(C). 3 5. ON APPEAL THE LD. CIT(A) DELETED THESE PENALTIES BY HOLDING THAT IT WAS A MERE CASE OF DISALLOWANCE OF EXPENDITURE THEREFORE PENAL PROVISION WERE NOT ATTRACTED. FOR THIS PREPOSITION HE RELIED ON THE DE CISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN CASE OF CIT VS. AMTEK AUTO LT D., 352 ITR 394. 6. BEFORE US LD. DR STRONGLY RELIED ON THE ORDER OF AO. 7. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE S UBMITTED THAT ADDITION ITSELF HAS BEEN DELETED BY THE TRIBUNAL IN ITA NOS. 684 & 1206/CHD/2011, THEREFORE PENALTY WILL NOT SURVIVE. 8. AFTER CONSIDERING THE RIVAL SUBMISSION WE AGREE WITH THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. THE TRIBUNAL HAS DELE TED THE ADDITIONS ON ACCOUNT OF ROYALTY IN BOTH THE YEARS IN ITA NOS. 684 & 1206 /CHD/2011 THEREFORE PENALTY WILL NOT SURVIVE. ACCORDINGLY IN OUR OPINION THE LD . CIT(A) HAS CORRECTLY DELETED THE PENALTY. 9. IN THE RESULT APPEALS OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 13/03/2015 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 13/03/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR