GILTEDGE INOTECH SERVICES P. LTD, MUMBAI V. DCIT CIR 8(1), MUMBAI

ITA 1906/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8206 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 09-07-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 10-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M MURLI
• Keywords: Capital asset; Depreciation; Business expenditure; Wrong claim; Difference of opinion; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO. 2060/MUM/2007 ASSESSMENT YEAR 2003-2004 ITA NO. 3950/MUM/2009 ASSESSMENT YEAR 2004-2005 ITA NO. 1906/MUM/2010 ASSESSMENT YEAR 2003-2004 M/S. GILTEDGE INFOTECH SERVICES P. LTD. 2 ND & 3 RD FLOOR, BHAJANLAL COMPLEX, SHETH BHAJANLAL MARG, DAULAT NAGAR, BORIVALI (E), MUMBAI-400 066 PAN NO: AAACG 4096 M VS. THE DCIT-8(1), R. NO. 210/262, AAYAKAR BHAWAN, M. K. ROAD, MUMBAI-400 020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIPUL JOSHI & SHRI SAMEER DALAL REVENUE BY : SHRI M. MURLI DATE OF HEARING : 09.07.2012 DATE OF PRONOUNCEMENT : 01.08.2012 O R D E R PER RAJENDRA, A.M. THREE APPEALS HAVE BEEN FILED BY THE ASSESSEE-COMPA NY AGAINST THE ORDERS OF THE CIT-8, MUMBAI. AS THE ISSUES INVOLVED IN ALL T HE THREE APPEALS ARE INTER- CONNECTED, SO, WE WOULD LIKE TO PASS A COMMON ORDER . FIRST TWO APPEALS ARE ABOUT DISALLOWANCES MADE BY THE AO, WHERE AS LAST ONE IS ABOUT PENALTY LEVIED U/S. 271(1)(C) OF THE INCOME-TAX ACT, 1961(ACT). FOLLOWING ARE THE GROUNDS OF APPEAL IN THE QUANTUM APPEALS FILED FOR AY 2003-04 AND 2004-05. ITA NO. 2060/MUM/2007 ITA NO. 3950/MUM/2009 ITA NO. 1906/MUM/2010 M/S. GILTEDGE INFOTECH SERVICES P. LTD. 2 ITA NO. 2060/MUM/2007 A Y. 2003-04 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED COMMISSIONER OF INCOME TAX (A)-VIII, MUMBAI HAS ERRED IN LAW IN HOL DING THAT THE EXPENDITURE OF RS.5,55,768/- INCURRED ON REPLACEMENT AND MAINTENAN CE OF COMPUTER SOFTWARE RESULTED IN CREATION OF A SOFTWARE AND IS THEREFORE IS CAPITAL EXPENDITURE AS AGAINST REVENUE EXPENDITURE CLAIMED BY THE APPELLANT COMPAN Y. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE TEAMED COMMISSIONER OF INCOME TAX (A)- VIII, MUMBAI HAS ERRED IN LAW IN HO LDING THAT EXPENSES OF RS.2,00,000/- OUT OF TOTAL BUSINESS PROMOTION EXPEN SES OF RS.3,56,050/- INCURRED BY THE APPELLANT AS PERSONAL EXPENSES. 3.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (A)- VIII, MUMBAI HAS ERRED IN LAW IN HO LDING EXPENSES OF RS.3,80,391/- OUT OF TOTAL FOREIGN TRAVEL EXPENSES OF RS.12,88,93 4/- AS INCURRED FOR NON-BUSINESS PURPOSES. THE APPELLANT CRAVES LEAVE TO AMEND, ALTER, CHANGE, MODIFY AND/OR ADD TO THE ABOVE GROUND OF APPEAL. ITA NO. 3950/MUM/2009 A Y 2004-05 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LEARNED COMMISSIONER OF INCOME TAX (A)-VIII, MUMBAI HAS ERRED IN LAW IN HOL DING THAT THE EXPENDITURE OF RS.4,29,072/- INCURRED ON REPLACEMENT AND MAINTENAN CE OF COMPUTER SOFTWARE RESULTED IN CREATION OF A SOFTWARE AND IS THEREFORE IS CAPITAL EXPENDITURE AS AGAINST REVENUE EXPENDITURE CLAIMED BY THE APPELLANT COMPAN Y. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE TEAMED COMMISSIONER OF INCOME TAX (A)- VIII, MUMBAI HAS ERRED IN LAW IN HO LDING THAT EXPENSES OF RS.2,48,264/- BEING 100% OF BUSINESS PROMOTION EXPE NSES INCURRED BY THE APPELLANT AS NON BUSINESS EXPENSES. 3.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (A)- VIII, MUMBAI HAS ERRED IN CONFIRMIN G DISALLOWANCE OF INTEREST EXPENSES OF RS.42,612/-U/S.36(1)(III)OF THE INCOME TAX ACT,1961 ON THE GROUND THAT THE SAID INTEREST IS ATTRIBUTABLE ON THE CAPITAL AS SETS NOT PUT TO USE FOR BUSINESS PURPOSES. THE APPELLANT CRAVES LEAVE TO AMEND, ALTER, CHANGE, MODIFY AND/OR ADD TO THE ABOVE GROUND OF APPEAL. IN THE PENALTY APPEAL FILED FOR AY 2004-05FOLLOWING GROUNDS WERE RAISED- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (A)-VIII, MUMBAI HAS ERRED IN LAW IN CON FIRMING THE PENALTY LEVIED OF RS.3,56,270/- U/S.271(1)(C) BY THE AO. THE APPELLANT CRAVES LEAVE TO AMEND, ALTER, CHANGE, MODIFY AND/OR ADD TO THE ABOVE GROUND OF APPEAL. ITA NO. 2060/MUM/2007 ITA NO. 3950/MUM/2009 ITA NO. 1906/MUM/2010 M/S. GILTEDGE INFOTECH SERVICES P. LTD. 3 ITA NO. 2060/MUM/2007 A Y. 2003-04 2. ASSESSEE COMPANY IS INVOLVED IN THE BUSINESS OF DAT A PROCESSING AND MEDICAL TRANSCRIPTION (I.E. BPO JOB). IT FILED RETURN OF I NCOME FOR THE AY 2003-04 ON 27.11.2003 DECLARING LOSS OF RS.32.55 LAKHS. ASSESSMENT WAS F INALISED DETERMINING THE TOTAL LOSS AT RS. 20.66 LAKHS. 3. FIRST GROUND OF APPEAL IS ABOUT THE DISALLOWANCE AM OUNTING TO RS.5.55 LAKHS INCURRED ON REPLACEMENT AND MAINTENANCE OF COMPUTER SOFTWARE. 3.1. DURING THE ASSESSMENT PROCEEDINGS ASSESSING OFFICER (AO) NOTICED THAT THE ASSESSEE HAD INCURRED AN EXPENDITURE OF RS.5,55,768 /- TOWARDS REPLACEMENT AND MAINTENANCE OF COMPUTER SOFTWARE. ON INQUIRY,ASSES SEE SUBMITTED THAT ACQUIRED SOFTWARE WAS SHELF SOFTWARE THAT NEEDED UPGRADATION EVERY YE AR. HOWEVER, AO WAS OF THE OPINION THAT EXPENDITURE INCURRED FOR THE PURPOSES OF SOFTW ARE WAS OF CAPITAL NATURE. HE ALLOWED DEPRECIATION FOR THE PERIOD OF 6 MONTHS @30% AND CA PITALISED THE BALANCE AMOUNT. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,FAA HEL D THAT PAYMENT WAS MADE FOR CREATION OF SOFTWARE AND NOT FOR ANY CONSULTANCY. HE UPHELD THE ADDITION MADE BY THE AO. 3.2. BEFORE US, AUTHORISED REPRESENTATIVE (AR) SUBMITTE D THAT THE SOFTWARE PURCHASED BY THE ASSESSEE WAS TO COMPLY WITH THE DIRECTIONS O F REGULATORY AUTHORITY OF USA. HE REFERRED TO PAGE NOS. 51, 60, 100, 112 AND 122 OF T HE PAPER BOOK AND SUBMITTED THAT WHOLE OF THE EXPENDITURE WAS ALLOWABLE U/S.37 OF THE ACT. ALTERNATIVELY, IT WAS SUBMITTED THAT THE ISSUE SHOULD BE DECIDED IN THE LIGHT OF THE CASE OF AMWAY INDIA ENTERPRISES (301 ITR (A.T.)1) DR RELIED UPON THE ORDERS OF THE AO AND TH E FAA. 3.3 . AFTER HEARING THE RIVAL SUBMISSIONS AND MATERI AL AVAILABLE WE ARE OF THE OPINION THAT THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO. THE ASSESSEE IS DIRECTED TO FURNISH ALL THE DETAILS ABOUT EXPENDITU RE INCURRED UNDER THE HEAD SOFTWARE EXPENDITURE AND AO SHOULD DECIDE THE ISSUE TAKING INTO CONSIDERATION THE JUDGMENT OF AMWAY INDIA ENTERPRISES (SUPRA). GROUND NO. 1 IS ALLOWED PARTLY. 4. THE SECOND GROUND OF APPEAL IS ABOUT DISALLOWANCE OF EXPENSES AMOUNTING TO RS.2.34 LAKHS INCURRED BY THE ASSESSEE UNDER THE HE AD BUSINESS PROMOTION EXPENSES. WHILE SCRUTINISING THE CASE IT WAS NOTICED BY THE A O THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.3,56,450/- FOR BUSINESS PROMOTION. A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE TO FURNISH THE LEDGER EXTRACTS, BILLS AND BUSINESS PURPOSE FOR INCURRING THE SAID EXPENDITURE. AFTER CONSIDERING REPLY OF THE A PPELLANT-COMPANY, AO HELD THAT NATURE OF EXPENDITURE INDICATED THAT SAID EXPENDITU RE HAD HARDLY ANYTHING TO DO WITH THE BUSINESS OF THE ASSESSEE, THAT EXPENDITURE INCU RRED INCLUDED PAYMENTS MADE TO HOTELS AND RESTAURANTS. HE FOUND THAT PAYMENTS MADE FOR PETROL AND CARS OF DIRECTORS, PURCHASE OF LIQUOR, PURCHASE OF MENS CLOTHES WERE ALSO PART OF THE EXPENDITURE CLAIMED UNDER THE HEAD BUSINESS PROMOTION. CONSIDE RING THEM PURELY OF PERSONAL NATURE, HE MADE AN ADDITION OF RS.2,34,778/-. ASSE SSEE PREFERRED AN APPEAL BEFORE THE FAA. HE HELD THAT THE ASSESSEE HAD FAILED TO SUBSTA NTIATE ITS CLAIM THAT THE EXPENDITURE ITA NO. 2060/MUM/2007 ITA NO. 3950/MUM/2009 ITA NO. 1906/MUM/2010 M/S. GILTEDGE INFOTECH SERVICES P. LTD. 4 WAS WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. HOWEVER, HE ALLOWED PARTIAL RELIEF TO THE ASSESSEE AND ADDITION WAS REDUCED TO RS.2 LA KHS. 4.1. BEFORE US, AR SUBMITTED THAT PERSONAL EXPENDITURE WERE NOT CLAIMED UNDER THE HEAD BUSINESS PROMOTION, THAT ALL PAYMENTS WERE THR OUGH CREDIT CARDS. HE FURTHER STATED THAT PAYMENTS MADE TOWARDS SETTLING THE HOSP ITAL BILLS WERE NOT PART OF THE EXPENDITURE UNDER CONSIDERATION, THAT EMPLOYEES OF THE ASSESSEE COMPANY HAD TO ENTERTAIN FOREIGN CLIENTS IN HOTELS, THAT AO HAD NO T PROPERLY SCRUTINISED THE DETAILS FILED BY THE ASSESSEE-COMPANY. IN THIS REGARD HE R EFERRED TO PAGE NO. 63 OF PB-I AND PG. NO. 116 AND 131 OF PB-II.DR SUBMITTED THAT THE ASSESSEE HAD FAILED TO ESTABLISH BUSINESS EXPENDIENCY OF THE SAID EXPENDITURE. 4.2. AFTER HEARING THE RIVAL SUBMISSIONS AND PERU SING THE MATERIAL BEFORE US, WE ARE OF THE OPINION THAT DISALLOWANCE MADE BY THE AO AND REDUCED BY THE FAA CANNOT BE ENDORSED FULLY. IT IS A FACT THAT EXPENDITURE W AS INCURRED THROUGH CREDIT CARDS AND DETAILS WERE AVAILABLE WITH AO. BUT, IT IS ALSO A FACT THAT PERSONAL EXPENDITURE TOO IS PART OF THE SAID EXPENDITURE. IN THE INTEREST OF J USTICE WE RESTORE THE MATTER TO THE AO. THE ASSESSEE IS DIRECTED TO FILE THE DETAILS OF PER SONAL/BUSINESS EXPENDITURE BEFORE THE AO, SO THAT HE CAN TAKE A JUDICIOUS DECISION IN THI S REGARD. GROUND NO. 2 IS PARTLY ALLOWED. 5. THE LAST GROUND OF APPEAL FOR THE AY 2003-04 IS AB OUT DISALLOWANCE MADE BY THE AO, ON ACCOUNT OF FOREIGN TRAVEL EXPENSES. AO, AFTER OBTAINING DETAILS OF FOREIGN TRAVEL EXPENDITURE, HELD THAT EXPENDITURE INCURRED WAS NOT WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. HE FURTHER HELD THAT THE EXPENSE S INCURRED ON FOREIGN TRAVEL OF THE SPOUSE OF THE DIRECTOR WAS HIS PERSONAL EXPENSE. HE DISALLOWED 50% OF THE EXPENDITURE(RS.4,07,020/-)ON FOREIGN TOUR UNDERTAKE N JOINTLY BY THE DIRECTOR AND HIS FAMILY MEMBERS. HE ALSO DISALLOWED HUNDRED PERCENT OF THE EXPENDITURE FOR TRIP TO BANGKOK AND SINGAPORE. IN THE APPELLATE PROCEEDING S, FAA UPHELD THE ORDER OF THE AO. HE HELD THAT THE ASSESSEE FAILED TO DISCHARGE HIS ONUS TO ESTABLISH THE NEXUS BETWEEN THE EXPENDITURE INCURRED AND THE BUSINESS C ARRIED OUT. 5.1. BEFORE US, AR SUBMITTED THAT WIVES OF THE DIRECTORS WERE EMPLOYEES OF THE ASSESSEE COMPANY, THAT SINGAPORE TRIP WAS NOT A PLE ASURE TRIP, THAT VISIT TO SINGAPORE WAS FOR PROCURING SUITABLE SOFTWARE. HE SUBMITTED SOME PAPERS WITH REGARD TO THE CLAIM MADE. WE FIND THAT THOUGH THE PAPER (PG.126- 28) MAY BE HELPFUL IN DECIDING THE ISSUE, YET SAME WERE NOT AVAILABLE TO THE LOWER AUTHORITIES. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT MATTER SHOULD BE RESTORE D BACK TO THE AO. ASSESSEE IS DIRECTED TO PRODUCE THESE DOCUMENTS BEFORE THE AO. GROUND NO.3 IS PARTLY ALLOWED. ITA NO. 3950/MUM/2009 A Y 2004-05 6. OUT OF THREE GROUNDS OF APPEAL FILED BY THE APPELLA NT COMPANY FOR THE YEAR UNDER CONSIDERATION, GROUND NOS. 1 AND 2 ARE SIMILA R TO THE GROUNDS FILED FOR THE ITA NO. 2060/MUM/2007 ITA NO. 3950/MUM/2009 ITA NO. 1906/MUM/2010 M/S. GILTEDGE INFOTECH SERVICES P. LTD. 5 EARLIER ASSESSMENT YEAR-THE ONLY DIFFERENCE IS THAT IN THE YEAR UNDER CONSIDERATION FAA UPHELD 100% DISALLOWANCE MADE BY THE AO UNDER T HE HEAD BUSINESS PROMOTION EXPENSES.AR AND DR MADE THE SAME SUBMISSION THAT WE RE MADE FOR THE EARLIER ASSESSMENT YEAR. 6.1. FOLLOWING THE ORDER FOR THE EARLIER ASSESSMENT YEAR ,WE RESTORE BOTH THE GROUNDS TO THE AO. THE ASSESSEE IS DIRECTED TO FUR NISH ALL THE DETAILS ABOUT EXPENDITURE INCURRED UNDER THE HEADS SOFTWARE EXPE NDITURE AND BUSINESS PROMOTION EXPENSES. AO SHOULD DECIDE THE ISSUES TAKING IN TO CONSIDERATION THE EVIDENCES PRODUCED BY THE ASSESSEE. GROUND NO. 1 AND 2 ARE PARTLY ALLOWED IN FAVOUR OF THE ASSESSEE. 7. LAST GROUND OF APPEAL IS WITH REGARD TO CONFIRMATIO N OF DISALLOWANCE OF INTEREST EXPENSES BY THE FAA U/S 36(1)(III)OF THE A CT ON THE GROUND THAT THE SAID INTEREST IS ATTRIBUTABLE ON THE CAPITAL ASSETS NOT PUT TO USE FOR BUSINESS PURPOSES. DURING THE ASSESSMENT PROCEEDINGS AO NOTICED THAT T HE ASSESSEE HAD SHOWN CAPITAL WORK IN PROGRESS OF RS.3,55,100/-. AO WAS OF THE O PINION THAT THE ASSESSEE WAS NOT ELIGIBLE TO CLAIM EXPENDITURE INCURRED UNDER THE HE AD INTEREST PAID BECAUSE THE ASSETS WERE NOT PUT TO USE. ACCORDINGLY, A SHOW CAUSE NOT ICE WAS ISSUED TO EXPLAIN WHY INTEREST PAID ON CAPITAL ADVANCE AND WORK IN PROGRE SS SHOULD NOT BE DISALLOWED AND ADDED BACK TO THE TOTAL INCOME AS PER THE PROVISION S OF SECTION 36(1)(III) OF THE ACT. AFTER CONSIDERING THE REPLY OF THE APPELLANT, THE A O DISALLOWED INTEREST OF RS. 42,612/-. AO HELD THAT THE ASSESSEE HAD FAILED TO F URNISH A SEPARATE CASH FLOW STATEMENT WHICH COULD CONVINCINGLY PROVE THAT THE F UNDS UTILISED FOR CAPITAL WORK IN PROGRESS WAS NOT OUT OF BORROWED FUNDS. 7.1 . IN THE APPELLATE PROCEEDINGS FAA UPHELD THE DECIS ION OF THE AO STATING THAT EXPENDITURE WAS INCURRED FOR THE ASSETS THAT WERE N EVER USED FOR BUSINESS PURPOSES DURING THE YEAR UNDER CONSIDERATION. BEFORE US, AR SUBMITTED THAT THE ASSESSEE HAD ACQUIRED A GENSET FOR THE AY UNDER APPEAL, THAT THE GENSET WAS NOT INSTALLED BEFORE 31.03.2004, THAT PAYMENT TO THE SUPPLIER OF THE GEN SET MADE FROM THE INTERNAL FUNDINGS, THAT NO ADDITIONAL LOAN / FUNDS WERE BORR OWED FOR THE SAME. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE AO. THERE IS NO FINDING ABOUT AVAILABILITY OF ASSESSEE S OWN FUNDS/NON-BORROWING OF ADDITIONAL FUNDS BY THE ASSESSEE IN THE ORDER OF TH E AO. WE ARE OF THE OPINION THAT THE MATTER NEEDS TO BE REFERRED TO THE AO FOR DECIDING THE ISSUE AFRESH. GROUND NO. 3 IS ALLOWED IN PART, IN FAVOUR OF THE A SSESSEE. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE FO R THE AYS. 2003-04 AND 2004-05 STAND PARTLY ALLOWED. ITA NO. 2060/MUM/2007 ITA NO. 3950/MUM/2009 ITA NO. 1906/MUM/2010 M/S. GILTEDGE INFOTECH SERVICES P. LTD. 6 ITA/1906/MUM/2010 9. NOW,WE WOULD LIKE TO TAKE UP THE APPEAL WITH REGARD TO THE PENALTY ORDER FOR THE AY 2003-04. 10. WHILE DECIDING THE APPEAL FILED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERAION FAA CONFIRMED FOLLOWING ADDITIONS/ DISALLOWANCES M ADE BY THE AO - 1.SOFTWARE EXPENSES RS.3,89,03 9/- 2.BUSINESS PROMOTION EXPENSES RS.2,00 ,000/- 3.FOREIGN TRAVEL EXPENSES- RS.3,80,391/- AS PER THE AO ASSESSEE HAD FURNISHED INACCURATE PAR TICULARS. HE ISSUED A NOTICE U/S.274 R.W.S. 271(1)(C) OF THE ACT TO THE A SSESSEE. AFTER CONSIDERING THE REPLY FILED BY ASSESSEE AO HELD THAT IN THE CASE UNDER CO NSIDERATION CLAUSE B OF EXPLANATION 1 WAS APPLICABLE, THAT ASSESSEE HAD FAI LED TO SUBSTANTIATE EXPLANATION IN RESPECT OF THE ADDITIONS/DISALLOWANCES CONFIRMED BY THE FAA, THAT ASSESSEE HAD MADE WRONG CLAIMS ON ACCOUNT OF SOFTWARE EXPENSES, BUSIN ESS PROMOTION EXPENSES AND FOREIGN TRAVEL EXPENSES. HE IMPOSED PENALTY AMOUNTI NG TO RS. 3,56,270/- U/S.271(1)(C) EXPL. 1 OF THE ACT. ASSESSEE-COMPANY FILED AN APPEAL BEFORE FAA. HE HE LD THAT ASSESSEE HAD FAILED TO SUBMIT ANY EVIDENCE BEFORE THE AO OR HIM TO SUPPOR T ITS CLAIMS, THAT ASSESSEE HAD CLAIMED PATENTLY WRONG DEDUCTIONS, THAT THE ASSESSE E HAD NOT DISCLOSED ALL THE FACTS RELEVANT FOR COMPUTATION OF INCOME. HE UPHELD THE ORDER PASSED BY THE AO. 10.1. BEFORE US, AR SUBMITTED THAT AUDITED ACCOUNTS WERE SUBMITTED BY THE ASSESSEE, THAT ALL THE DETAILS CALLED FOR BY THE AO WAS SUBMI TTED DURING ASSESSMENT PROCEEDINGS, THAT PENALTY HAS BEEN LEVIED WITH REGARD TO DEBATAB LE ISSUES, THAT DENIAL OF CLAIM BY AO OR CONFIRMATION OF SOME ADDITION DO NOT INVITE P ENALTY. DR SUBMITTED THAT WRONG CLAIMS WERE MADE BY THE ASSESSEE, THAT PENALTY WAS RIGHTLY LEVIED/CONFIRMED BY THE AO AND THE FAA RESPECTIVELY. HE RELIED UPON THE CA SES OF ZOOM COMMUNICATION(327ITR510). 10.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE HAVE ALREADY RESTORED VARIOUS GROUNDS RAISED BY THE ASSESSEE TO THE FILE OF THE A O WHILE DISPOSING THE APPEAL FOR AY 2003-04.AS THE ADDITIONS/DISALLOWANCES HAVE BEEN RE MITTED TO THE AO SO, WE ARE OF THE OPINION THAT PENALTY FOR FILING INACCURATE PART ICULARS OR CONCEALING PARTICULARS OF INCOME CANNOT BE IMPOSED. AS FAR AS SOFTWARE EXPEN SES ARE CONCERNED AO HAS ALLOWED DEPRECIATION FOR THE SOFTWARE. INSTEAD OF TREATING IT A REVENUE EXPENDITURE HE TREATED IT CAPITAL EXPENDITURE. IN OUR OPINION IT I S A DEBATABLE ISSUE AND PENALTY U/S. 271(1)(C) SHOULD NOT BE IMPOSED IN SUCH CIRCUMSTANC ES. SIMILARLY, THERE IS DIFFERENCE OF OPINION BETWEEN THE AO AND THE ASSESSEE ABOUT AL LOWABILITY OF EXPENDITURE ON TWO OTHER ACCOUNTS. WE ARE OF THE OPINION THAT EVEN IF AN ADDITION IS UPHELD IN APPELLATE PROCEEDINGS PENALTY CANNOT BE IMPOSED AUTOMATICALLY . ITA NO. 2060/MUM/2007 ITA NO. 3950/MUM/2009 ITA NO. 1906/MUM/2010 M/S. GILTEDGE INFOTECH SERVICES P. LTD. 7 WE HAVE CONSIDERED THE FACTS OF THE CASE OF ZOOM CO MMUNICATION. IN THAT MATTER A CLAIM PROHIBITED BY THE ACT WAS MADE. SIMILAR WAS T HE CASE OF OTHER DISALLOWANCE. CONSIDERING THE PARTICULAR FACTS OF THE CASE HONBL E DELHI HC HAS HELD THAT PENALTY IMPOSED WAS AS PER LAW.IT WAS HELD BY THE HONBLE C OURT. SO LONG AS THE ASSESSEE HAS NOT CONCEALED ANY MATE RIAL FACT OR THE FACTUAL INFORMATION GIVEN BY HIM HAS NOT BEEN FOUND TO BE I NCORRECT, HE WILL NOT BE LIABLE TO IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF TH E INCOME-TAX ACT, 1961,EVEN IF THE CLAIM MADE BY HIM IS UNSUSTAINABLE IN LAW ,PROVIDED THAT HE EITHER SUBSTANTIATES THE EXPLANATION OFFERED BY HIM OR THE EXPLANATION, EVEN IF NOT SUBSTANTIATED, IS FOUND TO BE BONA FIDE. IF THE EXPLANATION IS NEITHER SUBSTANTIA TED NOR SHOWN TO BE BONA FIDE, EXPLANATION 1 TO SECTION 271(1)(C) WOULD COME INTO PLAY AND THE ASSESSEE WILL BE LIABLE FOR THE PRESCRIBED PENALTY. IN OUR OPINION CLAIMS MADE BY THE ASSESSEE ARE NOT COVERED BY THE PRINCIPLES ENUMERATED BY THE ABOVE DECISION OF THE HONBLE HIG H COURT OF DELHI. IN OUR HUMBLE OPINION THAT A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REG ARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FU RNISHING INACCURATE PARTICULARS. RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE SC D ELIVERED IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (321ITR158) WE DELETE THE P ENALTY IMPOSED BY THE AO AND UPHELD BY THE FAA. APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST AUGUST, 2012 SD/- (VIJAY PAL RAO) JUDICIAL MEMBER SD/- (RAJENDRA) ACCOUNTANT MEMBER MUMBAI, DATED 1 ST AUGUST, 2012 ROSHANI ITA NO. 2060/MUM/2007 ITA NO. 3950/MUM/2009 ITA NO. 1906/MUM/2010 M/S. GILTEDGE INFOTECH SERVICES P. LTD. 8 COPY TO: 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI