Deputy Commissioner of Income tax, Bangalore V. M/s e-cosmos India P Ltd, Bangalore

ITA 1298/BANG/2014

• Counselvise Citation: 129821114 RSA 2014
• Duration Of Justice: 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 18-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 21-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR SHANKAR PRASAD K JT
• Assessee Lawyers: RAJ KUMAR SHANBHOGUE
• Keywords: Reasonable cause; Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NO.1298/BANG/2014 ASSESSMENT YEAR : 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(3), BANGALORE. VS. M/S. E-COSMOS INDIA PVT. LTD., GOLDEN ENCLAVE, A1 TOWER, 7 TH FLOOR, OLD AIRPORT ROAD, BANGALORE 560 017. PAN : AABCE 3269K APPELLANT RESPONDENT CO NO.36/BANG/2015 [IN ITA NO.1298/BANG/2014] ASSESSMENT YEAR : 2009-10 M/S. E-COSMOS INDIA PVT. LTD., GOLDEN ENCLAVE, A1 TOWER, 7 TH FLOOR, OLD AIRPORT ROAD, BANGALORE 560 017. PAN : AABCE 3269K VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(3), BANGALORE. APPELLANT RESPONDENT REVENUE BY : DR. SHANKAR PRASAD K., JT. CIT(DR) ASSESSEE BY : SHRI RAJ KUMAR SHANBHOGUE, CA DATE OF HEARING : 18.06.2015 DATE OF PRONOUNCEMENT : 29.06.2015 ITA NO.1298/BANG/2014 & CO 36/BANG/2015 PAGE 2 OF 8 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER ITA NO. 1298/B/2014 IS AN APPEAL BY THE REVENUE A GAINST THE ORDER DATED 30.6.2014 OF THE CIT(APPEALS)-I, BANGALORE RE LATING TO ASSESSMENT YEAR 2009-10. IN THIS APPEAL, THE REVENUE HAS CH ALLENGED THE ORDER OF CIT(APPEALS), WHEREBY HE CANCELLED THE ORDER OF THE ASSESSING OFFICER IMPOSING PENALTY U/S. 271(1)(C) OF THE ACT. 2. PENALTY U/S. 271(1)(C) OF THE ACT WAS IMPOSED BY THE ASSESSING OFFICER UNDER THE FOLLOWING FACTS. THE ASSESSEE IS A COMPANY, ENGAGED IN THE BUSINESS OF COMPUTER SOFTWARE DEVELOPMENT. TH E ASSESSEE FILED ITS RETURN OF INCOME FOR THE A.Y. 2009-10 BELATEDLY ON 18.10.2010. IN THE RETURN OF INCOME SO FILED, THE ASSESSEE CLAIMED DED UCTION U/S. 10A OF THE ACT IN RESPECT OF PROFITS DERIVED FROM EXPORT OF CO MPUTER SOFTWARE. U/S. 10A(1A) PROVISO, NO DEDUCTION U/S. 10A WILL BE ALLO WED TO THE ASSESSEE, WHO DOES NOT FURNISH RETURN OF INCOME ON OR BEFORE THE DUE DATE SPECIFIED U/S. 139(1) OF THE ACT. 3. THE AO NOTICED THAT THE ASSESSEE HAD CLAIMED DED UCTION U/S. 10A OF THE ACT AT RS.61,16,242. RELYING ON THE PROVISIONS OF PROVISO TO SECTION 10A(1A) AND ALSO FOR THE REASON THAT FROM 56F IN TH E PRESCRIBED PROFORMA WHICH IS NECESSARY FOR CLAIMING DEDUCTION U/S. 10A HAD NOT BEEN FILED BY THE ASSESSEE, DEDUCTION U/S. 10A WAS DISALLOWED BY THE AO. THE AO ALSO ITA NO.1298/BANG/2014 & CO 36/BANG/2015 PAGE 3 OF 8 NOTICED THAT IN THE P&L ACCOUNT, ADMINISTRATIVE SEL LING AND OTHER EXPENSES DEBITED BY THE ASSESSEE WERE A SUM OF RS.3,66,31,71 5. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE DIRECTOR OF THE COMPANY APPEARED BEFORE THE AO. HE WAS ASKED TO PRODUCE BILLS AND VOUCHERS IN SUPPORT OF EXPENSES SO DEBITED. THE DIRECTOR COULD NOT PRODUCE BILLS O R VOUCHERS. THE AO THEREFORE DISALLOWED A SUM OF RS. 10 LAKHS OUT OF E XPENSES DEBITED IN THE P&L ACCOUNT. 4. IN RESPECT OF DISALLOWANCE OF DEDUCTION U/S. 10A OF THE ACT AND DISALLOWANCE OF RS.10 LAKHS OF ADMINISTRATIVE SELLI NG AND OTHER EXPENSES, THE AO INITIATED PENALTY PROCEEDINGS AGAINST THE AS SESSEE AND BY AN ORDER DATED 28.6.2012 CAME TO THE CONCLUSION THAT THE ASS ESSEE HAD FILED INACCURATE PARTICULARS OF INCOME AND CONCEALED PART ICULARS OF INCOME AND IMPOSED PENALTY EQUAL TO 100% TAX SOUGHT TO BE EVAD ED. 5. BEFORE THE CIT(APPEALS), THE ASSESSEE FIRSTLY SU BMITTED THE REASON WHY THE RETURN OF INCOME WAS NOT FILED ON OR BEFORE THE DUE DATE U/S. 139(1) OF THE ACT. THE ASSESSEE HAD EXPLAINED BEFORE THE CIT(A) IN AN AFFIDAVIT THAT THE ASSESSEE FACED SEVERAL ODDS DUE TO CRASH I N THE BUSINESS FOLLOWING ECONOMIC MELTDOWN IN THE USA WHERE ITS BUSINESS WAS CONCENTRATED, LEADING TO ATTRITION IN EMPLOYMENT IN THE ASSESSEE S OFFICE IN BANGALORE DUE TO DESERTION OF EMPLOYEES SEEKING BETTER OPPORTUNIT IES ELSEWHERE. THERE WAS A DEATH IN THE FAMILY OF PRINCIPAL OFFICER AND HE COULD NOT ATTEND THE WORK SEVERAL DAYS LEADING TO FINANCE & ACCOUNTANCY SECTIONS NOT BEING ITA NO.1298/BANG/2014 & CO 36/BANG/2015 PAGE 4 OF 8 PROPERLY LOOKED AFTER. THE DIRECTOR OF THE ASSESSE E HAD TO LOOK FOR A SUITABLE AUDITOR/COUNSEL TO ENABLE REPRESENTATION B EFORE THE INCOME-TAX AUTHORITIES. 6. THE ASSESSEE ALSO EXPLAINED THAT THE DENIAL OF D EDUCTION U/S. 10A WAS OWING TO TECHNICAL LAPSE AND THERE COULD BE NO DOUBT THAT ASSESSEE WAS ENGAGED IN THE BUSINESS OF COMPUTER SOFTWARE AN D HAD BROUGHT IN TO THE COUNTRY FOREIGN EXCHANGE FROM SUCH EXPORT. THE ASSESSEE SUBMITTED THAT IT HAD DISCLOSED FACTS IN ITS RETURN OF INCOME AND THERE COULD BE NO COMPLAINT OF ANY CONCEALMENT OF PARTICULARS OF INCO ME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 7. WITH REGARD TO DISALLOWANCE OF RS.10 LAKHS OUT O F ADMINISTRATIVE SELLING AND OTHER EXPENSES, THE ASSESSEE POINTED OU T THAT DISALLOWANCE WAS MADE BY THE AO PURELY ON ESTIMATE BASIS AND THE RE WAS NOTHING ON RECORD TO SUGGEST THAT THE ASSESSEE CLAIMED BOGUS O R EXCESSIVE OR PERSONAL EXPENSES. THE ASSESSEE SUBMITTED THAT THE RE CANNOT BE ANY ADVERSE INFERENCE ON THIS COUNT ALSO. 8. THE ASSESSEE PLACE RELIANCE ON THE DECISION OF T HE HONBLE SUPREME COURT IN THE CASE OF CIT V. RELIANCE PETRO PRODUCTS LTD., 322 ITR 158 (SC) WHEREIN IT WAS HELD THAT CLAIMING A DEDUCTION WHIC H IS DISALLOWED WILL NOT NECESSARILY LEAD TO CONCEALMENT OF PARTICU LARS OF INCOME, WHEN ALL FACTS ARE DISCLOSED AND THE CLAIM IS MADE FOR DEDUC TION. IT WAS HELD THAT IT WAS UPTO THE AUTHORITIES TO ACCEPT OR REJECT THE CL AIM FOR DEDUCTION. MERELY ITA NO.1298/BANG/2014 & CO 36/BANG/2015 PAGE 5 OF 8 BECAUSE THE DEDUCTION CLAIMED IS NOT ACCEPTED, WILL NOT BY ITSELF ATTRACT IMPOSITION OF PENALTY U/S. 271(1(C) OF THE ACT. 9. THE CIT(APPEALS) ON A CONSIDERATION OF THE AFORE SAID FACTS, FIRSTLY CAME TO THE CONCLUSION THAT THERE WAS A REASONABLE CAUSE FOR THE ASSESSEE IN FILING ITS RETURN OF INCOME BELATEDLY. THE CIT( A) ALSO HELD THAT DISALLOWANCE OF DEDUCTION U/S. 10A WAS MADE PURELY ON TECHNICAL GROUNDS AND THERE WAS NO NON-DISCLOSURE OR INACCURATE PARTI CULARS OF INCOME FURNISHED BY THE ASSESSEE. THE CIT(A) ALSO HELD TH AT ADHOC DISALLOWANCE OF RS.10 LAKHS OUT OF ADMINISTRATIVE SELLING AND OT HER EXPENSES WERE MADE ONLY FOR NON-PRODUCTION OF BILLS & VOUCHERS AND THE RE IS NO MATERIAL ON RECORD TO SHOW THAT THE EXPENSES DISALLOWED WERE BO GUS OR PERSONAL IN NATURE. THE CIT(A) THEREFORE WAS OF THE VIEW THAT THE ASSESSEE CANNOT BE SAID TO BE GUILTY OF HAVING FURNISHED INACCURATE PA RTICULARS OF INCOME OR HAVING CONCEALED THE PARTICULARS OF INCOME. PENALT Y IMPOSED WAS CANCELLED BY THE CIT(A). 10. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE REV ENUE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 11. THE LD. DR REITERATED THE STAND OF THE REVENUE AS CONTAINED IN THE GROUNDS OF APPEAL FILED BEFORE THE TRIBUNAL. ACCOR DING TO THE REVENUE, CONDUCT OF THE ASSESSEE WAS CONTUMACIOUS. THE ASSE SSEE WAS GUILTY OF NON CO-OPERATION IN THE COURSE OF ASSESSMENT PROCEE DINGS. THE ASSESSEE, ITA NO.1298/BANG/2014 & CO 36/BANG/2015 PAGE 6 OF 8 ACCORDING TO THE REVENUE, FURNISHED INACCURATE PART ICULARS BY WRONG CLAIM OF DEDUCTION U/S. 10A OF THE ACT. 12. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A) AND RELIED ON HIS ORDER. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN O UR VIEW, THERE IS NO MERIT IN THE APPEAL FILED BY THE REVENUE. THE COND UCT OF THE ASSESSEE IN FILING RETURN OF INCOME BELATEDLY IS SUFFICIENTLY E XPLAINED BEFORE THE CIT(A). PERUSAL OF THE ORDERS OF THE AO WHILE CONCLUDING AS SESSMENT U/S.143(3) OF THE ACT SHOWS THAT IT WAS ONLY THE DIRECTOR WHO ATT ENDED PROCEEDINGS OF ASSESSMENT BEFORE THE AO. IN OUR VIEW, THE EXPLANA TION SO OFFERED BY THE ASSESSEE DESERVES TO BE ACCEPTED. IN THIS REGARD, THE CIT(A) HAS ALSO NOTICED THE FACT THAT THE IT INDUSTRY WAS UNDERGOIN G A RECESSION PHASE AT THE RELEVANT POINT OF TIME. THE COMPLAINT THAT THE RE WAS NON-COOPERATIVE ATTITUDE ON THE PART OF THE ASSESSEE IS ALSO NOT TR UE. THE NON-COOPERATIVE ATTITUDE IS CITED BY THE REVENUE IN THE CONTEXT OF ASSESSEE NOT HAVING FURNISHED ANY REPLY TO THE SHOW CAUSE NOTICE ISSUED U/S. 274 OF THE ACT BEFORE IMPOSING PENALTY U/S. 271(1(C) OF THE ACT. IN OUR VIEW, THIS CANNOT BE THE BASIS TO IMPOSE PENALTY AS THE PENALTY IS WI TH REFERENCE TO CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME WITH REFERENCE TO THE ORIGINAL ASSESSMENT PROCEEDINGS. 14. AS FAR AS THE COMPLAINT OF THE REVENUE THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS BY MAKING WRONG CLAIM OF DED UCTION U/S. 10A OF THE ITA NO.1298/BANG/2014 & CO 36/BANG/2015 PAGE 7 OF 8 ACT IS CONCERNED, WE FIND THAT THIS IS NOT THE BASI S ON WHICH DEDUCTION U/S. 10A WAS DENIED TO THE ASSESSEE. AS RIGHTLY CONTEND ED BY THE ASSESSEE, DEDUCTION U/S. 10A WAS DENIED ONLY FOR TECHNICAL RE ASONS VIZ., RETURN OF INCOME NOT HAVING BEEN FILED ON OR BEFORE THE DUE D ATE U/S. 139(1) OF THE ACT. IN OUR VIEW, THEREFORE, THE CONTENTIONS PUT F ORTH BY THE REVENUE BEFORE US IS UNSUSTAINABLE. IN OUR VIEW, THE CIT(A) HAS R IGHTLY COME TO THE CONCLUSION THAT MERE MAKING OF A CLAIM FOR DEDUCTIO N U/S. 10A WHICH IS NOT ALLOWED, CANNOT LEAD TO THE CONCLUSION THAT ASSESSE E IS GUILTY OF HAVING FURNISHED INACCURATE PARTICULARS OF INCOME OR HAVIN G CONCEALED PARTICULARS OF INCOME. THE CIT(A) HAS RIGHTLY PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA) . 15. EVEN WITH REGARD TO ADHOC DISALLOWANCE OF ADMIN ISTRATIVE SELLING AND OTHER EXPENSES OF RS.10 LAKHS, DISALLOWANCE HAS BEE N MADE ONLY FOR WANT OF BILLS & VOUCHERS. THERE IS NOTHING ON RECORD TO SUGGEST THAT THE EXPENDITURE DISALLOWED WAS BOGUS, EXCESSIVE OR PERS ONAL IN NATURE. IN LIGHT OF THE CIRCUMSTANCES EXPLAINED BY THE ASSESSEE WITH REGARD TO AFFAIRS OF ITS BUSINESS HAVING SUFFERED SETBACK, WE ARE OF THE VIE W THAT NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE ASSESSEE IN RESP ECT OF DISALLOWANCE OF RS.10 LAKHS. 16. FOR THE ABOVE REASONS, WE ARE OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE CIT(APPEALS) AND THE APPEAL BY THE REVENUE DESERVES TO BE DISMISSED. ITA NO.1298/BANG/2014 & CO 36/BANG/2015 PAGE 8 OF 8 17. THE ASSESSEE HAS FILED THE CROSS OBJECTION PURE LY SUPPORTIVELY OF THE ORDER OF THE CIT(APPEALS) CANCELLING THE PENALT Y U/S. 271(1(C) OF THE ACT. IN VIEW OF THE DISMISSAL OF THE REVENUES APP EAL, WE ARE OF THE VIEW THAT THE CROSS OBJECTIONS DOES NOT DESERVE ANY ADJU DICATION AND THE SAME IS DISMISSED AS SUCH. 18. IN THE RESULT, THE APPEAL BY THE REVENUE AND TH E CO BY THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF JUNE, 2015. SD/- SD/- ( ABRAHAM P. GEORGE ) ( N.V. VASU DEVAN ) ACCOUNTANT MEMBER JUDICIAL M EMBER BANGALORE, DATED, THE 29 TH JUNE, 2015. /D S/ COPY TO: 1. REVENUE 2. ASSESSEE 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.