DCIT, Gurgaon V. M/s. Telesonic Network Ltd., Gurgaon

ITA 2554/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1076 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 28-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law; Revenue expenditure; Capital expenditure
• Section: 271(1)(c); 201; 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE MS. SUSHMA CHOWLA, VICE PRESIDENT DR. B. R. R. KUMAR, ACCOUNTANT MEMBER ITA NO. 2554/DEL/2017 : ASSTT. YEAR : 201 0-11 DCIT CIRCLE -4 (1) GURGAON VS M/S TELESONIC NETWORK LTD. (KNOWN AS M/S ALCATEL LUCENT NETWORK MANAGEMENT SERVICES INDIA), C-WING, AIRTEL CENTRE, PLOT NO. 16, UDYOG VIHAR , PHASE IV, GURGAON (APPELLANT) (RESPONDENT) PAN NO. AAHCA8010G ASSESSEE BY : NONE REVENUE BY : SH. H. K. CHOUDHARY, CIT DR DATE OF HEAR ING: 27 .01 .20 DATE OF PRONOUNCEMENT: 14 .0 5 .20 20 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE A GAINST THE ORDERS OF THE LD. CIT(A)-2, GURGAON DATED 17.02 .2017. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENU E: 1.THE LD. CIT(A) HAS ERRED IN GRANTING THE RELIEF TO THE ASSESSEE AND DELETED THE PENALTY U/S 271 (1)(C) OF THE INCOME TAX ACT, 1961 OF RS. 1,10,09,192/- IN SPITE OF THE FACT THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS BY CLAIMING PROVISIONS OF F INES & PENALTIES IN ITS ITR AND CONCEALED THE INCOME TO THAT EXTENT. 2. THE LD. CIT(A) HAS ERRED IN GRANTING THE RELIEF TO THE ASSESSEE AND DELETED THE PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 OF RS. 1,10,09,192/- IN SPITE OF THE FACT THAT THE ASSESSEE HAS GONE AGAINS T ITA NO. 2554/DEL/2017 TELESONIC NETWORK LTD. 2 THE SETTLED LAW AS LAID DOWN IN THE CASE OF SREE SAJJAN MILLS LTD. VS. CIT [1985/56I TR 585(SC)] AND INDIAN MOLASSES CO. LTD. VS CIT 37 ITR 66 (SC), AND HAS TREATED A CONTINGENT LIABILITY AS DEDUCTIBLE, W HICH CLEARLY AMOUNTS TO FURNISHING OF INACCURATE PARTICU LARS OF INCOME, AS THIS LED TO SUPPRESSION OF RETURNED INCOME. 3. THE ASSESSMENT IN THIS CASE HAS BEEN COMPLETED B Y MAKING THE FOLLOWING: DISALLOWANCE OF THE PROVISION FOR FINE AND PENALTY DEBITED BY THE ASSESSEE TO P&L A/C AND TREATING THE SAME AS CONTINGENT LIABILITY. REIMBURSEMENT OF MOBILE SETS GIVEN TO EMPLOYEES WAS CONSIDERED AS CAPITAL EXPENDITURE WHICH WAS TREATED AS REVENUE EXPENDITURE BY THE ASSESSEE. ONE TIME TRANSACTION CHARGE PAID TO IBM ON SIGNING OF AGREEMENT TREATED AS REVENUE EXPENDITURE BY THE ASS ESSEE HAS BEEN TREATED AS CAPITAL EXPENDITURE. 4. THE ASSESSING OFFICER MADE SIMILAR OBSERVATION W HILE INITIATING PENALTY ON CONCLUSION OF THE DISCUSSION UNDER EACH ITEM. THE RELEVANT PORTION OF THE OBSERVATION OF TH E ASSESSING OFFICER WHILE INITIATING THE PENALTY ON ALL THE THR EE ITEMS IS AS UNDER: I AM SATISFIED THAT THE ASSESSEE HAS CONCEALED/FURNISHED INACCURATE PARTICULARS OF HIS INCOME AND FURNISHED INACCURATE PARTICULAR OF HIS INCOME FOR THE AY 2010-11. ACCORD INGLY, PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ARE BEING INIT IATED SEPARATELY. 5. WE HAVE GONE THROUGH THE RECORD BEFORE US. WE HA VE GONE THROUGH THE FACTS OF THE CASE AND FIND THAT THE ASSESSING O FFICER HAS NOT MADE IT CLEAR UNDER WHICH LIMB OF THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT, ITA NO. 2554/DEL/2017 TELESONIC NETWORK LTD. 3 THE PENALTY IS BEING LEVIED. THERE IS GLARING DISCR EPANCY BETWEEN INITIATION OF THE PENALTY AND LEVY OF PENALTY. THIS IS A JURIS DICTIONAL ISSUE ARISING OUT OF THE PENALTY ORDER BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE HEAVILY RELIE D ON THE JUDGMENT OF SUNDARAM FINANCE LTD. VS CIT (2018) 403 ITR 407 (MADRAS) AND ARGUED THAT THE HONBLE HIGH COURT HELD THAT WHERE NOTICE DID NOT SHOW THE NATURE OF DEFAULT, IT WAS A QUESTION OF FACT. T HE ASSESSEE HAS UNDERSTOOD PURPORT AND IMPORT OF THE NOTICE, HENCE, NO PREJUDICE WAS CAUSED TO THE ASSESSEE. 7. THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SAHARA INDIA LIFE INSURANCE COMPANY LTD. IN ITA NO. 426/2019 DATED 02.08.2019 WHEREIN THE HONBLE HIGH COURT HELD AS U NDER: 21 THE RESPONDENT HAD CHALLENGED THE UPHOLDING OF THE PENALTY IMPOSED UNDER SECTION 271(1) (C) OF THE ACT, WHICH WAS ACCEPTED BY THE ITAT. IT FOLLOWED THE DECISION OF THE KARNATAKA HIGH COURT IN CIT V. MANJUNATHA COTTON & GINNING FACTORY 359 ITR 565 (KAR) AND OBSERVED THAT THE NOTICE ISSUED BY THE AO WOULD BE BAD IN LAW IF IT DID NOT SPECIFY WHICH LIMB OF SECTION 271(1)(C) THE PEN ALTY PROCEEDINGS HAD BEEN INITIATED UNDER I.E. WHETHER FOR CONCEALME NT OF PARTICULARS OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE KARNATAKA HIGH COURT HAD FOLLOWED THE ABOVE JUDGMEN T IN THE SUBSEQUENT ORDER IN COMMISSIONER OF INCOME TAX V. S SAS EMERALD MEADOWS (2016) 73 TAXMAN.COM 241 (KAR), THE APPEAL AGAINST WHICH WAS DISMISSED BY THE SUPREME COURT OF INDIA IN SLP NO. 11485 OF 2016 BY ORDER DATED 5TH AUGUST, 2016. 22. ON THIS ISSUE AGAIN THIS COURT IS UNABLE TO FIN D ANY ERROR HAVING BEEN COMMITTED BY THE ITAT. NO SUBSTANTIAL QUESTION OF LAW ARISES. 8. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE SUPRE ME COURT IN THE CASE OF SSAS EMERALD MEADOWS (CC NO.11485/2016). 9. HENCE, RESPECTFULLY FOLLOWING THE JUDGMENT OF TH E HONBLE JURISDICTIONAL HIGH COURT, WE HEREBY HOLD THAT THE PENALTY LEVIED BY THE ASSESSING OFFICER CANNOT BE HELD TO BE LEGALLY VALI D IN THE EYES OF LAW. ITA NO. 2554/DEL/2017 TELESONIC NETWORK LTD. 4 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/05/2020. SD/- SD/- (SUSHMA CHOWLA) (DR. B. R. R. KUMAR) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 14/05/2020 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR