Software AG Chennai Development Center India Pvt. Ltd., CHENNAI V. ACIT, CHENNAI

ITA 1122/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9147 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 26-05-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 12-05-2015
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Keywords: Wrong claim; Ignorance of law
• Section: 143(3); 142(1); 154

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 1 122/MDS/2015 / ASSESSMENT YEAR :20 1 0 - 11 M/S. SOFTWARE AG CHENNAI DEVELOPMENT CENTER INDIA PVT. LTD., VBC SOLITAIRE, 4 TH FLOOR, NEW NO. 47 & 49, BAZULLAH ROAD, T. NAGAR, CHENNAI 600 0 17 . [PAN: A A B C R4228 H ] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX , COMPANY CIRCLE VI (3), NO. 121, MAHATMA GANDHI ROAD, NUNGAMBAKKAM, CHENNAI 600 0 34 . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI S.P. CHIDAMBARAM, ADVOCATE / RESPONDENT BY : SHRI A. B . KOLI , J CIT / DATE OF HEARING : 2 6 . 0 5 .201 6 / DATE OF P RONOUNCEMENT : 10 . 0 6 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH I S APPEAL FILE D BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 15 , CHENNAI , DATED 27 . 02 .20 1 5 RELEVANT TO THE ASSESSMENT YEAR 20 1 0 - 11. THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF ASSESSEE IS WITH REGARD TO CONFIRMATION OF PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT]. I.T.A. NO . 1122 /M/ 15 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF DEVELOPING, DISTRIBUTING AND MARKETING COMPUTER SOFTWARE AND FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010 - 11 ON 27.09.2010 ADMITTING TOTAL INCOME OF .6,16,360/ - . THE CASE OF THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS TAKEN UP FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT DATED 05.09.2011 WAS ISSUED AND SERVED ON THE ASSESSEE. AS THERE WAS CHANGE IN INCUMBENT, ANOTHER NOTICE UNDER SECTION 142(1) R.W.S. 129 OF THE ACT DATED 03.07.20912 WAS ALSO ISSUED TO THE ASSESSEE. IN RESPONSE TO THE ABOVE NOTICES, THE ASSESSEE HAS F ILED DETAILS BEFORE THE ASSESSING OFFICER. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS CLAIMED EXEMPTION UNDER SECTION 10A OF THE ACT. THUS, THE ASSESSEE WAS ASKED TO PRODUCE AUDIT REPORT IN FORM 56F W HICH IS MANDATORY FOR CLAIMING EXEMPTION UNDER SECTION 10A OF THE ACT BY THE COMPANIES. THE ASSESSEE WAS ALSO ASKED TO EXPLAIN THE REASON FOR NAME CHANGE FROM INFRAVIO SOFTWARE TECHNOLOGIES PRIVATE LIMITED TO M/S. SOFTWARE AG CHENNAI DEVELOPMENT CENTER IN DIA PVT. LTD. REGARDING REASON FOR CHANGE OF NAME OF THE COMPANY, THE ASSESSEE VIDE ITS LETTER DATED 20.12.2012 HAS STATED THAT SOFTWARE AG GERMANY ACQUIRED THE COMPANY OF INFRAVIO WORLDWIDE FROM INFRAVIO INC USA. FOR BRANDING MANAGEMENT DECIDED TO CHANGE THE NAME. WITH REGARD TO FORM 56F, THE ASSESSEE VIDE ITS LETTER DATED 11.01.2013 ADMITTED THAT IT HAD WRONGLY CLAIMED EXEMPTION UNDER SECTION 10A SINCE IT AS ASSUMED ASSESSMENT YEAR 2009 - 10 AS FINANCIAL YEAR 2009 - 10 AND THE TEN YEARS WHICH IS I.T.A. NO . 1122 /M/ 15 3 ELIGIBLE FOR CLAIM EXEMPTION UNDER SECTION 10A HAS ALREADY EXPIRED WITH THE ASSESSMENT YEAR 2009 - 10. TO RECTIFY THE ERROR, THE ASSESSEE HAS FILED A RECTIFICATION PETITION ALONG WITH REVISED COMPUTATION OF TOTAL INCOME. SINCE ASSESSMENT PROCEEDINGS WERE NOT COMPLETED W HEN THE LETTER WAS FILED, THE ASSESSING OFFICER HAS OBSERVED THAT RECTIFICATION UNDER SECTION 154 OF THE ACT DOES NOT ARISE. THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED ON A TOTAL INCOME OF .1,15,68,940/ - AFTER MAKING VARIOUS DISALLOWANCE S. 3. SUBSEQUENTLY PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WERE INITIATED AGAINST THE ASSESSEE. IN THE PENALTY ORDER, THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE WHO WAS FILING ITS RETURN WITH COMPANY CIRCLE II, CHENNAI TILL ASSE SSMENT YEAR 2009 - 10 HAS STARTED FILING RETURNS WITH THE CIRCLE (COMPANY CIRCLE VI(3), CHENNAI) FROM THE ASSESSMENT YEAR 2010 - 11 ONWARDS, AS A RESULT OF NAME CHANGE. THE ASSESSEE, INSPITE OF COMPLETION OF TEN YEARS TAX - HOLIDAY OF CLAIMING OF EXEMPTION UNDER SECTION 10A OF THE ACT, CONTINUED TO CLAIM THE EXEMPTION IN THIS CIRCLE ALSO FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. ON VERIFICATION OF RECORDS, THE ASSESSING OFFICER HAS FURTHER OBSERVED THAT THE ASSESSEE HAS ALSO CLAIMED EXEMPTION FOR THE ASSESSMEN T YEARS 2011 - 12 AND 2012 - 13. THEREFORE, HE OPINED THAT THIS MISTAKE OF CLAIMING OF EXEMPTION UNDER SECTION 10A OF THE ACT WAS NOT DUE TO INADVERTENCE. THOUGH THE ASSESSEE CLAIMS THAT THE ERROR WAS UNINTENTIONAL AND THERE IS NO WILFUL DEFAULT OR CONCEALMENT BY THE COMPANY, THE ASSESSING OFFICER COULD NOT ACCEPT THE ARGUMENT OF THE I.T.A. NO . 1122 /M/ 15 4 ASSESSEE SINCE THE ASSESSEE NEVER TOOK ANY STEPS TO OBTAIN THE AUDIT REPORT IN FORM 56F BEFORE CLAIMING THE EXEMPTION FROM THE ASSESSMENT YEAR 2010 - 11 ONWARDS, WHICH IS MANDATORY R EQUIREMENT FOR CLAIMING THE EXEMPTION. THE EXPLANATION THAT WAS GIVEN IS AFTER THE DETECTION OF THE ERRONEOUS CLAIM OF DEDUCTION AND HENCE IS SURELY AN AFTERTHOUGHT OF THE ASSESSEE. THE ASSESSEE HAS COME FORWARD WITH THIS DISCLOSURE ONLY SUBSEQUENT TO THE SCRUTINY PROCEEDINGS, OTHERWISE, THE TRUE FACTS WOULD HAVE GONE UNNOTICED. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, THE ASSESSING OFFICER HAS OBSERVED THAT THE ABOVE FACTS ESTABLISHED BEYOND DOUBT THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME I NTENTIONALLY AND DELIBERATELY WHILE FORCING A HARMFUL EFFECT ON THE INCOME TAX DEPARTMENT. THEREFORE, THE MENS REA OR THE GUILTY CONDUCT IS EXPLICIT WITHOUT ANY AMBIGUITY IN THE EVENTS AND ACTIONS AS STATED ABOVE AND THE INFERENCE DRAWN BY THE ASSESSEE FRO M THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT V. RELIANCE PETRO PRODUCTS P. LTD. [2010] 322 ITR 133 IS INAPPLICABLE TO THE CASE OF THE ASSESSEE. ACCORDINGLY, THE ASSESSING OFFICER LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND THE Q UANTUM OF PENALTY CORRESPONDING TO THE MALA FIDE ATTEMPT IS RESTRICTED TO THE AMOUNT OF DEDUCTION UNDER SECTION 10A OF THE ACT WHICH GOT TREATED AS INCOME BY THE ASSESSEE ON THE DISALLOWANCE. IN VIEW OF THE BOGUS CLAIM OF THE ASSESSEE, THE ASSESSING OFFICE R LEVIED MINIMUM PENALTY AT .38,00,000/ - . I.T.A. NO . 1122 /M/ 15 5 4. ON APPEAL, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND FACTS OF THE CASE, THE LD. CIT(A) CONFIRMED THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 5. ON BEING AGGRIEVED, THE ASSESSEE IS I N APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE HAS STRONGLY CONTENDED THAT THE LEVY OF PENALTY IS NOT AUTOMATIC AND MANDATORY AND PRAYED THAT THE PENALTY LEVIED BY THE ASSESSING OFFICER SHOULD BE DELETED. HE ALSO RELIED ON THE DECISION IN T HE CASE OF ACIT V. GRANT ORGANICS (P) LTD. [2012] 24 TAXMANN.COM 20 (PANAJI). 6. PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW AND RELIED ON THE DECISION IN THE CASE OF CIT V. HCIL KALINDEE ARSSPL [2013] 37 TAXMANN.COM 347 (D ELHI). 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS AN ADMITTED FACT THAT TO CLAIM EXEMPTION UNDER SECTION 10A OF THE ACT, FILING OF AUDIT REPORT IN FORM 56F IS MANDATORY. DURING TH E COURSE OF SCRUTINY ASSESSMENT, WHEN THE ASSESSING OFFICER HAS NOTICED THAT THE ASSESSEE HAS CLAIMED EXEMPTION UNDER SECTION 10A OF THE ACT, THE ASSESSEE WAS ASKED TO FILE FORM 56F. HOWEVER, THE ASSESSEE COULD NOT FILE FORM 56F BECAUSE THE ASSESSEE HAS AL READY COMPLETED TEN YEARS OF TAX - HOLIDAY OF CLAIMING OF EXEMPTION UNDER SECTION 10A OF THE ACT BY ASSESSMENT YEAR 2009 - 10. HOWEVER, THE CONTENTION OF THE ASSESSEE IS THAT IT HAS I.T.A. NO . 1122 /M/ 15 6 ASSUMED THE ASSESSMENT YEAR 2009 - 10 AS FINANCIAL YEAR 2009 - 10 AND CLAIMED THE DEDUCTION FOR THE ASSESSMENT YEAR 2010 - 11. IF IT IS SO, AS TO HOW THE ASSESSEE HAS CLAIMED THE EXEMPTION UNDER SECTION 10A OF THE ACT FOR THE ASSESSMENT YEARS 2011 - 12 AND 2012 - 13. THEREFORE, IT IS QUITE EVIDENT THAT THE ASSESSEE HAS MADE A WRONG CLAIM BY F URNISHING INACCURATE PARTICULARS AND CONCEALMENT OF INCOME. IF WE CONSIDER THE ASSESSEE HAS INADVERTENTLY MADE THE CLAIM WITHOUT ANY WRONG INTENTION, THE ASSESSEE SHOULD NOT HAVE CONTINUED TO CLAIM THE EXEMPTION UNDER SECTION 10A OF THE ACT SOON AFTER CHAN GE OF NAME OF THE ASSESSEE COMPANY AND THEREBY CHANGE OF FILING OF RETURN OF INCOME FROM COMPANY CIRCLE II, CHENNAI TILL ASSESSMENT YEAR 2009 - 10 TO COMPANY CIRCLE VI(3), CHENNAI FROM ASSESSMENT YEAR S 2010 - 11 , 2011 - 12 AND 2012 - 13. ONLY AFTER DETECTION DURIN G THE COURSE OF SCRUTINY PROCEEDINGS , WHEN THE ASSESSEE WAS ASKED TO FILE AUDIT REPORT IN FORM 56F AND THE ASSESSEE COULD NOT FILE THE SAME BEFORE THE ASSESSING OFFICER SINCE TEN YEARS TAX - HOLIDAY HAS BEEN EXHAUSTED IN ASSESSMENT YEAR 2009 - 10 ITSELF , THE A SSESSEE HAS NO OTHER ALTERNATE BUT TO CAME FORWARD WITH AN EXPLANATION THAT IT WAS UNINTENTIONAL AND THERE IS NO WILFUL DEFAULT OR CONCEALMENT OF PARTICULARS OF INCOME. THE ABOVE EXPLANATION OF THE ASSESSEE CANNOT BE ACCEPTED SINCE IF THE ASSESSEE HAS NO MALA FIDE INTENTION, IT SHOULD NOT HAVE MADE CLAIM FOR SUBSEQUENT ASSESSMENT YEARS. THE CASE LAW RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE IN THE CASE OF ACIT V. GRAND ORGANICS (P) LTD. HAS NO APPLICATION SINCE IN THAT CASE THE ASSESSEE HAS NOT MADE SUCH CLAIM WITH MALA FIDE INTENTION IN TH E CONSECUTIVE I.T.A. NO . 1122 /M/ 15 7 ASSESSMENT YEARS. IGNORANCE OF LAW IS NOT AN EXCUSE. UNDER THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER HAS RIGHTLY LEVIED PENALTY FOR THE MALA FIDE INTENTION OF CLAIMING EXEMPTION UNDER SECTION 10A OF THE ACT NOT ONLY IN THE ASSESSMENT YEAR UNDER CONSIDERATION BUT ALSO IN SUBSEQUENT YEARS, WHICH IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THUS, THE ORDER PASSED BY THE LD. CIT(A) IS CONFIRMED AND THE GROUND RAISED BY TH E ASSESSEE IS DISMISSED. 8 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED . ORDER PRONOUNCED ON THE 10 TH JUNE , 201 6 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 10 . 0 6 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.