DCIT, New Delhi V. M/s. Tel-Abridge International Ltd, New Delhi

ITA 1142/DEL/2009

• Counselvise Citation: 114220114 RSA 2009
• Duration Of Justice: 2 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 17-10-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 26-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R R KUMAR
• Assessee Lawyers: AJAY WADHWA
• Keywords: Wrong claim; Difference of opinion; Bonafide mistake; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `H : NEW DELHI) BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER ITA NO.1142/DEL./2009 (ASSESSMENT YEAR : 2003-04) DCIT, CIRCLE 16(1), VS. M/S TEL ABRIDGE INTERNATI ONAL LTD. NEW DELHI. E-42/2, OKHLA INDUSTRIAL, PHASE-II, NEW DELHI. (PAN/GIR NO.AABCT6879Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AJAY WADHWA, ADV. REVENUE BY : SHRI B.R.R. KUMAR, SR. DR ORDER PER A.D. JAIN: JM THIS IS DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 2003-04, CHALLENGING THE ACTION OF THE CIT(A) IN DELETING THE PENALTY OF RS.384757/ - IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE I.T. ACT, 1961. 2. THE FACTS ARE THAT VIDE ASSESSMENT ORDER DATED 6 .3.06, A LOSS OF RS.909712/- WAS DETERMINED AGAINST THE RETURNED LOSS OF RS.1956670/ - SHOWN IN THE RETURN FILED ON 02.12.2003. THE ASSESSEE COMPANY HAD DEBITED FILIN G FEE PAID TO REGISTRAR OF COMPANIES (ROC) AMOUNTING TO RS.980500/- AND STAMP DUTY PAID OF RS.66458/-. THE ASSESSING OFFICER, HOWEVER, DID NOT ALLOW THESE TWO CLAIMS OF EXPENDITURE. IT WAS HELD THAT THE ASSESSEE HAD NOT OFFERED ANY EXPLANATION AS TO WHY THE SAID TWO ITEMS OF EXPENDITURE WERE TO BE TREATED AS REVENUE EXPENDITURE. 3. IN THE PENALTY ORDER, IT WAS HELD THAT THE ASSES SEE HAD MADE A FALSE CLAIM OF DISALLOWABLE EXPENSES, SINCE THE HONBLE SUPREME CO URT HAD HELD IN THE CASE OF M/S BROOKE BOND (INDIA) LTD. VS. CIT, 225 I.T.R. 798 ( SC), THAT THE TWO ITEMS OF EXPENDITURE WERE CAPITAL IN NATURE; AND THAT THE AS SESSEE HAD UNDERSTATED ITS PROFIT AND HAD FURNISHED INACCURATE PARTICULARS OF ITS INCOME. TH E ASSESSING OFFICER LEVIED PENALTY OF RS.384757/-. I.T.A. NO.1142/DEL./2009 (A.Y. : 2003-04) 2 4. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE PENALTY, BRINGING THE DEPARTMENT IN APPEAL BEFORE US. 5. CHALLENGING THE IMPUGNED ORDER, THE LD. DR HAS C ONTENDED THAT THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY RIGHTLY LEVIED BY THE ASSESSING OFFICER; THAT IT IS APPARENT ON RECORD THAT THE ASSESSEE HAD MADE A WRONG CLAIM WIT H REGARD TO THE TWO ITEMS OF ALLEGED EXPENDITURE; THAT UNDENIABLY, NO EXPLANATION WAS OF FERED; THAT IT WAS IN THESE FACTS AND CIRCUMSTANCES THAT THE PENALTY WAS LEVIED; THAT THE EXPENSES ARE SQUARELY COVERED UNDER THE PROVISIONS OF SECTION 35D OF THE I.T. ACT, 1961 ; THAT THE COMPANY WAS INCORPORATED ON 23.5.2002; THAT ASSESSMENT YEAR 2002-03 WAS THE FIR ST YEAR OF ITS BUSINESS; THAT THE BUSINESS WAS STARTED ON 1.2.2003; THAT THE CLAIM WA S A PRIMA FACIE UNTENABLE CLAIM; AND THAT THEREFORE, THE ORDER OF THE CIT(A) BE CANCELLE D AND THE PENALTY ORDER BE REVIVED BY ALLOWING THE DEPARTMENTS APPEAL. RELIANCE HAS BEE N PLACED ON ZOOM COMMUNICATIONS, 199 TAXMAN 179 (DEL.) AND BERGER PAINTS LTD. VS. CIT, 292 I.T.R. 658 (DEL.). 6. CONTINUING WITH HIS ARGUMENTS, THE LD. DR HAS CO NTENDED THAT THE ASSESSEE CANNOT SEEK SHELTER UNDER THE PRETEXT PROFERRED, ID EST, T HAT THERE WAS A LEGITIMATE OMISSION; THAT A COMPANY IS ENTIRELY RESPONSIBLE FOR THE OMISSIONS A ND COMMISSIONS OF ITS LEGAL ADVISERS AND CAS; AND THAT AS AVAILABLE FROM THE COPY OF FOR M NO.3CD, AS APPEARING AT PAGES 14- 22 OF THE ASSESSEES PAPER BOOK (APB, FOR SHORT) , THERE WAS A DEDUCTION OF RS.89,400/- U/S 35D OF THE ACT AND SO, THE ASSESSEE COMPANY WAS IN FULL KNOWLEDGE OF THE ACTUAL STATE OF AFFAIRS. RELIANCE WAS PLACED ON CIT VS. GURBACHAN LAL, 250 I.T.R. 157 (DEL.) AND ACIT, CENTRAL CIR.29 VS. SUPREME INDUSTRIES LT D., 28 SOT 19 (MUM.). THE LD. DR HAS CONTENDED THAT THE CLAIM MADE WAS PATENTLY INCO RRECT AND SO, THE PENALTY WAS RIGHTLY LEVIED ON THE ASSESSEE. 7. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, HAS STRONGLY SUPPORTED THE IMPUGNED ORDER. IT HAS BEEN SUBMITTED THAT THE CLA IM OF THE ASSESSEE WAS BONA FIDE AND MISTAKE, IF ANY, WAS A BONAFIDE MISTAKE; THAT MERE OMISSION IN THE RETURN OF INCOME, TO CLAIM AN ITEM OF EXPENDITURE DOES NOT AMOUNT TO FUR NISHING OF INACCURATE PARTICULARS OF INCOME, IN THE ABSENCE OF ANY EVIDENCE TO PROVE THA T THE OMISSION WAS ATTRIBUTABLE TO THE ASSESSEES INTENTION TO AVOID TAX LIABILITY; THAT J UST BECAUSE THERE IS A DIFFERENCE OF OPINION REGARDING THE ALLOWANCE OR OTHERWISE OF SOME EXPEND ITURE BETWEEN THE ASSESSEE AND THE I.T.A. NO.1142/DEL./2009 (A.Y. : 2003-04) 3 ASSESSING OFFICER, IT DOES NOT LEAD TO THE CONCLUSI ON THAT THE INTENTION OF THE ASSESSEE WAS TO CONCEAL INCOME; THAT MERELY BECAUSE THE CLAIM OF THE ASSESSEE FOR DEDUCTION HAS BEEN REJECTED, CONCEALMENT OF INCOME CANNOT BE ATTRIBUTE D TO THE ASSESSEE; THAT THE ASSESSEE HAD OFFERED A BONAFIDE EXPLANATION WHICH WAS NOT FO UND TO BE FALSE; THAT PERTINENTLY, THE ASSESSING OFFICER DID NOT CONSIDER THE SAID EXPLANA TION WHILE LEVYING THE PENALTY; THAT THE ASSESSEE HAD FURNISHED ALL THE NECESSARY PARTICULAR S WITH REGARD TO THE CLAIM MADE; THAT A DUE EXPLANATION WAS FILED FOR THE EXPENDITURE CLAIM ED; THAT APROPOS THE AUTHORIZED CAPITAL RAISED FOR AUGMENTING WORKING CAPITAL RESOURCES, FI LING FEE WAS PAID TO THE ROC AND DEBITED TO THE P&L A/C; THAT THE ENTIRE EXPENDITURE WAS SHOWN IN THE RETURN OF INCOME; THAT THE ASSESSEE NURTURED A BONA FIDE BELIEF THAT THE EXPENDITURE WAS ALLOWABLE; THAT THERE WAS NO REASON FOR THE ASSESSEE TO BELIEVE THAT THE EXPENDITURE WAS CAPITAL IN NATURE; THAT IT WAS THUS THAT THE ASSESSEE RIGHTLY TOOK THE EXPENDI TURE TO BE A REVENUE EXPENDITURE; THAT DISALLOWANCE OF SUCH EXPENDITURE IS NOT ENVISIONED BY ANY PROVISION OF LAW; THAT THE ISSUE OF NATURE OF SUCH EXPENDITURE HAS BEEN THE SUBJECT MATTER OF LONG DRAWN FIERCELY FOUGHT LITIGATION; THAT EVEN THE AUDITORS GAVE NO INDICATI ON IN THIS REGARD; THAT THE ASSESSEE IS NOT A PERSON INSTRUCTED IN LAW, NOR IS IT EXPECTED OF A NY ONE TO KNOW THE ENTIRE LAW; THAT MOREOVER, NOTHING HAS BEEN BROUGHT ON RECORD TO SHO W THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF ITS INCOME; AND THAT THER EFORE, THERE BEING NO MERIT IN THE APPEAL FILED BY THE DEPARTMENT, THE SAME BE ORDERED TO BE DISMISSED. THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE ON CERTAIN CASE LAWS W HICH WE SHALL PRESENTLY DISCUSS. 8. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL ON RECORD. THE ASSESSEE LIMITED COMPANY WAS INCORPORATED ON 23.5.2002. IT STARTED ITS BUSINESS OF DEVELOPING CALL CENTERS AND OTHER INFORMATION TECHNOLOGY RELAT ED SERVICES IN INDIA AND ABROAD, ON 1.2.2003. DURING THE YEAR UNDER CONSIDERATION, THE AUTHORIZED CAPITAL OF THE ASSESSEE WAS SOUGHT TO BE INCREASED, SO AS TO RAISE MONEY FOR WO RKING CAPITAL THROUGH ISSUE OF EQUITY SHARES. A FILING FEE OF RS.10,46,918/- WAS PAID FO R SUCH INCREASE IN AUTHORIZED CAPITAL. THIS WAS DEBITED TO THE P&L A/C UNDER THE HEAD MIS CELLANEOUS EXPENSES HEADS FILING FEE AND WITH SUB-STAMP DUTY. THIS AMOUNT WAS DIS ALLOWED BY THE ASSESSING OFFICER ON THE BASIS OF THE DECISION DATED 27.02.1997 OF THE H ONBLE SUPREME COURT IN M/S BROOKE BOND (INDIA) LTD. (SUPRA). THUS, IT IS CLEAR THAT THE CLAIM WAS MADE AFTER THE DELIVERY OF THE AFORESAID BINDING DECISION. THE PENALTY UNDER CONSIDERATION WAS IMPOSED, HOLDING I.T.A. NO.1142/DEL./2009 (A.Y. : 2003-04) 4 THAT THERE HAD BEEN UNDERSTATEMENT OF PROFIT BY THE ASSESSEE, BY FURNISHING OF INACCURATE PARTICULARS OF ITS INCOME TO THE EXTENT OF RS.10,46 ,918/-. IT WAS OBSERVED THAT BY MAKING A FALSE CLAIM OF DISALLOWABLE EXPENSES, THE ASSESSE E HAD COMMITTED A CONSCIOUS CONCEALMENT BY CLAIMING THE EXPENSES TO BE REVENUE EXPENSES, PARTICULARLY WHEN THE HONBLE SUPREME COURT IN M/S BROOKE BOND (INDIA) L TD. (SUPRA) HAS HELD SUCH EXPENSES TO BE CAPITAL EXPENSES. 9. WE FIND THAT THERE HAS BEEN NO SUPPRESSION OF FA CTS ON BEHALF OF THE ASSESSEE. FURTHER, ON THE QUERY OF THE ASSESSING OFFICER, THE ASSESSEE OFFERED A DETAILED EXPLANATION VIDE LETTER DATED 31.8.06, AS NOTED BY THE CIT(A) A T PAGE 4, PARA 14 OF THE IMPUGNED ORDER. A COPY THEREOF IS TO BE FOUND AT PAGES 7-11 OF THE APB. IT WOULD BE APPROPRIATE TO REPRODUCE HEREUNDER THE RELEVANT PORTION OF THE SAID REPLY: 2. NOT FURNISHED INACCURATE PARTICULARS (A) AN EXPENDITURE WHICH IS THE PART OF P/L A/C WAS ADDED BACK TO COMPUTATION OF INCOME FOR THE PURPOSE OF TAX CALCULATIONS, CANNOT BE SAID THAT IT WAS A INDULGED IN POSITIVE CONCEALMENT OF INCOME OR FURNI SHING INACCURATE PARTICULARS OF INCOME. SINCE THE EXPENDITURE INCUR RED ON FILING FEES FOR INCREASE IN AUTHORISED CAPITAL WAS A CAPITAL EXPEND ITURE AND ADDED BACK TO INCOME, IN COMPUTATION. IN THE CASE OF CIT VS. IND IAN METAL & FERRO ALLOYS LTD., 117 ITR 378 (ORI) THERE MAY BE PARTICULARS AS PER ITS BOOKS OF ACCOUNT IF IT HAS BEEN MAINTAINED THEM, OR ANY OTHE R BASIS UPON WHICH IT HAS ARRIVED AT THE RETURNED FIGURE OF INCOME. ANY INACCURACY MADE IN SUCH BOOKS OF ACCOUNT OR OTHERWISE WHICH RESULTS IN KEEPING OF OR HIDING A PORTION OF ITS INCOME IS PUNISHABLE AS FURNISHING I NACCURATE PARTICULARS OF ITS INCOME. (B) THIS WAS AN INADVERTENT MISTAKE MADE BY THE ASS ESSEE AND NOT IN THE KNOWLEDGE THAT THE EXPENDITURE, WHICH WAS ACTUALLY INCURRED IN THE COURSE OF BUSINESS, IS CAPITAL IN NATURE, CANNOT BE SAID THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME. . 3. EXPLANATION U/S 271(1)(C) - BONA FIDE CLAIM (A) PROVISIONS U/S 271(1)(C) EXPLANATION 1 WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT - I.T.A. NO.1142/DEL./2009 (A.Y. : 2003-04) 5 (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFER S AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (A) OR COMMISSIONER), TO BE FALSE OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE (AND FAILS TO PROVE THAT SUCH EXPLANAT ION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM), THEN THE MOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESU LT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEM ED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED . (B) THE ASSESSEES ACT WAS BONAFIDE AND ALL THE FACTS R ELATING TO IT WERE APPARENTLY DISCLOSED IN THE PROFIT AND LOSS ACCOUNT AND ALSO F URNISHED BEFORE THE LD. ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEED INGS. THERE WAS NO WILLFUL NEGLIGENCE ON THE PART OF ASSESSEE.. 10. THE ASSESSEE, IN ITS AFORESAID REPLY, PLACED RE LIANCE ON NUMEROUS JUDGMENTS. IN THE PENALTY ORDER, HOWEVER, THE ASSESSING OFFICER H AS NOT EVEN AS MUCH AS MADE MENTION OF THE SAID REPLY FILED BY THE ASSESSEE. THIS, DESP ITE THE FACT THAT THE COPY OF THE REPLY DATED 31.8.06 FILED BEFORE US BEARS A STAMP OF THE OFFICE OF ACIT, CIRCLE 16(1), NEW DELHI, PROVING THE FACT OF THIS REPLY HAVING INDEED BEEN FILED BEFORE HIM. ON THE CONTRARY, BY WAY OF THE LAST SENTENCE OF THE SECOND PARA ON THE FIRST PAGE OF THE PENALTY ORDER, THE OFFICER HAS OBSERVED THAT: THAT THE ASS ESSEE, HOWEVER, HAS NOT PREFERRED ANY OBJECTION TO THE PROPOSED LEVY OF PENALTY. THIS H AS BEEN REPEATED IN THE LAST PARA ON THE FIRST PAGE OF THE PENALTY ORDER, SAYING THAT HOWEV ER THE ASSESSEE HAS PREFERRED NO OBJECTION TO THE LEVY OF PROPOSED PENALTY. 11. FIRST OF ALL, THEREFORE, THE PENALTY ORDER WAS PASSED WITHOUT TAKING INTO CONSIDERATION, MUCH LESS ADJUDICATING UPON, THE AFO RESAID REPLY DATED 31.8.2006 FILED BY THE ASSESSEE AND THE OBSERVATIONS OF THE LD. CIT(A) IN THIS REGARD HAVE NOT BEEN REBUTTED BEFORE US. AN ORDER PASSED IN OBLIVION OF, OR WITHO UT CONSIDERING, THE PLEADINGS BROUGHT ON RECORD, AMOUNTS TO AN ORDER PASSED WITHOUT APPLI CATION OF MIND AND SUCH AN ORDER IS A NON EST ORDER LACKING LEGAL VALIDITY AND FORCE. THE PENALTY ORDER, HENCE, WAS A RESULT OF COMPLETE NON-READING OF THE PLEADINGS BY WAY OF THE ASSESSEES REPLY AND WAS I.T.A. NO.1142/DEL./2009 (A.Y. : 2003-04) 6 UNSUSTAINABLE IN THE EYE OF THE LAW, ON THIS VERY S CORE. THE LD.CIT(A) HAS, IT IS SEEN, APPROPRIATELY APPRECIATED THE SAID LEGAL POSITION A ND THE ORDER UNDER APPEAL IS WELL VERSED IN THIS REGARD. THE SAME IS, THEREFORE, UPHELD. 12. SINCE THE PENALTY ORDER HAS BEEN FOUND TO BE IN VALID ON THE AFORESAID PRELIMINARY SCORE, NOTHING ELSE REMAINS AND THE MERITS ARE THUS NOT BEING GONE INTO. 13. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 06.01.2012. SD/- SD/- (K.G. BANSAL) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, JANUARY 06, 2012 SKB COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-VI, NEW DELHI 5.CIT(ITAT), NEW DELHI. AR/ITAT