ASST CIT 9(2), MUMBAI V. KALYPTO RISK TECHNOLOGIES P. LTD, NAVI MUMBAI

ITA 2926/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8899 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 13-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S K SINGH
• Keywords: Wrong claim; Revised return; Revenue expenditure
• Section: 143(3)

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . .. . . .. . , ,, , ! ! ! ! , ' ' ' ' # $% # $% # $% # $% , ,, , & ! & ! & ! & ! ' ' ' ' BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO.2926/MUM./2011 ( &( ) '*) / ASSESSMENT YEAR : 200708 ) ASSTT. COMMISSIONER OF INCOME TAX RANGE9(2), AAYAKAR BHAVAN R.NO.218, 2 ND FLOOR 101, M.K. ROAD, MUMBAI 400 020 .. +, / APPELLANT ( V/S M/S. KALYPTO RISK TECHNOLOGIES P. LTD. 2 ND FLOOR, APEEJAY COMMERCIAL COMPLEX SEC17, VASHI, NAVI MUMBAI 400 703 .... -.+, / RESPONDENT !+ . / PERMANENT ACCOUNT NUMBER AAACY0839L &( )0 1 2 / ASSESSEE BY : MR. S.K. SINGH !' 1 2 / REVENUE BY : MR. ASHOK PATIL (' 1 / DATE OF HEARING 08.08.2012 $ 34* 1 / DATE OF ORDER 12.09.2012 $ $ $ $ / ORDER # $% # $% # $% # $% , ,, , & ! & ! & ! & ! 5 5 5 5 / PER AMIT SHUKLA, J.M. THE PRESENT APPEAL PREFERRED BY THE ASSESSEE, IS DI RECTED AGAINST THE IMPUGNED ORDER DATED 8 TH FEBRUARY 2011, PASSED BY THE LEARNED COMMISSIONER (APPEALS)XX, MUMBAI, FOR ASSESSMENT Y EAR 200708. THE SOLE GROUND RAISED BY THE REVENUE, READS AS FOLLOWS : M/S. KALYPTO RISK TECHNOLOGIES P. LTD. 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN CANCELLING THE PENALTY OF ` 54,27,440, IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271( 1)(C) OF THE ACT, OVERLOOKING THE FACT THAT THE ASSESSEE HAD FURNISHE D INACCURATE PARTICULARS OF INCOME INSOFAR AS CAPITAL EXPENDITUR E PERTAINING EMPLOYEE STOCK OPTIONS WAS CLAIMED TO BE REVENUE EX PENDITURE AND THAT THE ADDITION MADE IN THE QUANTUM ASSESSMENT HA D BEEN ACCEPTED BY THE ASSESSEE. 12. BRIEFLY STATED THE FACTS OF THE PRESENT CASE ARE TH AT THE ASSESSEE IS A COMPANY ENGAGED IN SOFTWARE DEVELOPMENT. INITIALLY, THE RETURN OF INCOME WAS FILED ON 25 TH OCTOBER 2007, SHOWING NIL INCOME AND, THEREAFTER, THE RETURN OF INCOME WAS REVISED AND LOSS OF ` 3,57,90,565, WAS DECLARED. IN THE COURSE OF SCRUTINY PROCEEDINGS UNDER SECTION 143(3) , THE ASSESSING OFFICER OBSERVED THAT IN THE REVISED COMPUTATION OF INCOME, THE ASSESSEE HAS DEDUCTED AN AMOUNT OF ` 1,61,24,290, ON ACCOUNT OF COMPENSATION BENEFIT OF ESOP. NO DETAILS, IN THIS REGARD, WERE FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER, WHILE MAKING THIS ADDITION, OBSERVED AND HELD AS UN DER:- 4.2 IT IS RELEVANT TO MENTION HERE THAT IF THE ESOP IS THROUGH ISSUE OF NEW SHARE, THEN IT IS AKIN TO SHARE SUBSCRIPTION AND IT WILL HAVE NO INCOME OR LOSS ELEMENT. IF EXISTING SHARE HOLDERS T RANSFER THE SHARES IN ESOP, THEN THE CAPITAL GAIN / LOSS IS TO BE TAXED I N THE HANDS OF TRANSFEROR AND IT WILL HAVE NO IMPACT ON THE COMPAN YS INCOME. THEREFORE, IN EITHER CASE, EXPENDITURE ON ESOP IS N OT ALLOWABLE. IN VIEW OF THE SAME, THE SUM OF ` 1,61,24,290, IS DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. PENALTY PROCEED INGS UNDER SECTION 271(1)(C) IS INITIATED FOR FURNISHING INACCURATE PA RTICULARS OF INCOME. 3. IN THE PENALTY PROCEEDINGS, THE ASSESSEE WAS REQUIR ED TO GIVE EXPLANATION AS TO WHY SUCH A CLAIM WAS MADE AS IT A MOUNTS TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. DESPITE SEVERAL O PPORTUNITIES, THE ASSESSEE COULD NOT FILE ANY EXPLANATION OR REPLY BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER, AFTER DISCUSSING THE FACTS OF TH E CASE, INVOKED THE PROVISIONS OF EXPLANATION-1 TO SECTION 271(1)(C) AN D HELD THAT THE ASSESSEE HAS NEITHER OFFERED ANY EXPLANATION AT THE TIME OF ASSESSMENT PROCEEDINGS NOR AT THE TIME OF PENALTY PROCEEDINGS. AFTER REFER RING TO SEVERAL DECISION, HE M/S. KALYPTO RISK TECHNOLOGIES P. LTD. 3 CAME TO THE CONCLUSION THAT THE ASSESSEE HAD DELIBE RATELY FILED INACCURATE PARTICULARS OF INCOME AND, THEREFORE, IN VIEW OF TH E PROVISIONS OF SECTION 271(1)(C) R/W EXPLANATION 1, LEVIED A MINIMUM PENAL TY OF ` 54,27,440. 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE T HE FIRST APPELLATE AUTHORITY, WHEREIN, IT WAS SUBMITTED BY THE ASSESSE E THAT IT IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF RISK BASE SOFTWARE AND I T HAD ISSUED ESOP SHARES TO ITS DIRECTORS AND EMPLOYEES. DURING THE ACCOUNTI NG YEAR 2005-06, IT ISSUED 12,17,500 SHARES @ ` 0.13 PER SHARE OF FACE VALUE O F ` 10, EACH AND FURTHER DURING THE ACCOUNTING YEAR 2006-07, IT HAD ISSUED 10,96,000, MORE SHARES AT THE SAME PRICE. THE DIFFERENCE BETWEEN TH E FACE VALUE AND THE ISSUE PRICE CAME TO ` 9.87 PER SHARE WHICH AGGREGAT ED TO ` 1,61,24,290, AND WAS ACCOUNTED FOR DEFERRED EXPENDITURE SPREAD OVER THE PERIOD OF THREE YEARS AND, ACCORDINGLY, 1/3 RD OF THE AMOUNT TO THE PROFIT & LOSS ACCOUNT IN THE CURRENT YEAR WAS DEBITED AND THE BALANCE WAS TO BE WRITTENOFF IN THE NEXT TWO YEARS. HOWEVER, AT THE TIME OF AUDIT, THE ASSESSEE WAS ADVISED THAT THE ENTIRE AMOUNT SHOULD HAVE BEEN WRITTENOFF IN T HE CURRENT YEAR AND, ACCORDINGLY, IT FILED REVISED RETURN OF INCOME CLAI MING THE DEDUCTION OF THE ENTIRE AMOUNT. HOWEVER, EVEN BEFORE THE COMMISSIONE R (APPEALS), NO EXPLANATION WAS GIVEN AS TO WHY THESE AMOUNTS WERE CLAIMED AS REVENUE EXPENDITURE. 5. THE COMMISSIONER (APPEALS), WITHOUT SEEKING ANY EXP LANATION AND THE REASONS AS TO WHAT WAS THE GROUND FOR MAKING SUCH A CLAIM, DELETED THE PENALTY FOLLOWING THE JUDGMENT OF CIT V/S RELIANCE PETROPRODUCTS PVT. LTD., [2010] 322 ITR 158 (SC) CIT V/S ATUL MOHAN BINDAL, [2009] 317 ITR 001 (SC) AND DELETED THE PENALTY. THE RELEVANT FINDINGS OF THE COMMISSIONER (APPEALS) FOR DELETING THE PENALTY IS AS FOLLOWS:- 4.2 IN THE INSTANT CASE, THE APPELLANT HAS NOT CONC EALED ANY INCOME. IT CLAIMED DEDUCTION FROM INCOME WHICH WAS HELD NOT ADMISSIBLE OR SUSTAINABLE IN LAW. THE PARTICULARS OF DEDUCTION WE RE NOT FOUND TO BE INACCURATE, INCORRECT OR FALSE AND ONLY THEIR DEDUC TION WAS SAID TO BE NOT PERMISSIBLE UNDER THE LAW. AS HELD IN THE CASE OF RELIANCE PETROPRODUCTS (SUPRA) A MERE MAKING OF THE CLAIM WH ICH IS NOT SUSTAINABLE IN LAW WILL NOT AMOUNT TO FURNISHING IN ACCURATE PARTICULARS M/S. KALYPTO RISK TECHNOLOGIES P. LTD. 4 OF INCOME. THE CONDITIONS PRESCRIBED IN SECTION 271 (1)(C) DO NOT EXIST IN THIS CASE. I, THEREFORE, CANCEL THE PENALTY IMPO SED OF ` 54,27,440. BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE TH E TRIBUNAL. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE, BEFORE US, SUBMITTED THAT THE ASSESSEE, AT THE TIME OF ASSESSMENT PROCEEDINGS , DID NOT OFFER ANY EXPLANATION OR THE REASON AS TO WHY THE AMOUNT OF ` 1,61,84,240, HAS BEEN CLAIMED AS REVENUE EXPENDITURE. MOREOVER, THERE IS NOTHING ON RECORD THAT THE ASSESSEE HAS GIVEN ANY KIND OF A NOTE IN THE RE VISED RETURN OF INCOME BEFORE MAKING SUCH A CLAIM. EVEN BEFORE THE ASSESSI NG OFFICER, DESPITE SEVERAL OPPORTUNITIES GIVEN, THE ASSESSEE HAS NOT F ILED ANY EXPLANATION REGARDING THIS CLAIM. HE FURTHER SUBMITTED THAT THE HON'BLE SUPREME COURTS JUDGMENT IN RELIANCE PETROPRODUCT P. LTD. (SUPRA) W ILL NOT BE APPLICABLE IN CASE OF ASSESSEE AS THIS IS A CASE OF WRONG CLAIM O F DEDUCTION AND NOTHING HAS BEEN SHOWN THAT THE ASSESSEE ACTED BONAFIDE WHI LE MAKING A CLAIM OF THIS NATURE. HE SUBMITTED THAT THE ASSESSEES CASE IS RATHER SQUARELY COVERED BY THE JUDGMENT OF HONBLE DELHI HIGH COURT IN CIT V/S ZOOM COMMUNICATION PVT. LTD., [2010] 327 ITR 510 (DEL.). 7. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSE SSEE HAS FILED DETAIL WRITTEN SUBMISSIONS ALONG WITH PAPER BOOK AN D HEAVILY RELIED ON THE SAME. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS, PERUSED THE FINDINGS OF THE ASSESSING OFFICER AS WELL AS OF THE COMMISSIONER (APPEALS) AND THE MATERIAL AVAILABLE ON RECORD. ON GOING THRO UGH THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE WE FIND THAT NONE OF THE SUBMISSIONS HAVE BEEN PLACED BEFORE THE AUTHORITIES BELOW. DESPITE S EVERAL OPPORTUNITIES GIVEN, THE ASSESSEE FAILED TO PROVIDE ANY EXPLANATI ON / SUBMISSIONS EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE COMMISSI ONER (APPEALS). THEREFORE, IN THE INTEREST OF JUSTICE, WE ARE OF TH E CONSIDERED OPINION THAT THE ENTIRE ISSUE SHOULD BE RESTORED TO THE FILE OF THE ASSESSING OFFICER WHO WILL CONSIDERED THESE SUBMISSIONS ALONG WITH THE DOCUMEN TS AND, ACCORDINGLY, M/S. KALYPTO RISK TECHNOLOGIES P. LTD. 5 DECIDE THE ISSUE OF LEVY OF PENALTY UNDER SECTION 2 71(1)(C) AFRESH AND IN ACCORDANCE WITH THE PROVISIONS OF LAW. NEEDLESS TO STATE HERE THAT THE ASSESSING OFFICER SHALL PROVIDE DUE AND EFFECTIVE O PPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE ORDER ACCORDINGLY. THUS, THE GR OUND RAISED BY THE REVENUE IS TREATED TO BE ALLOWED FOR STATISTICAL PU RPOSES. 9. 0 8 !' 1 91 :;< # !' = 1 >? @ 9. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR S TATISTICAL PURPOSES. $ 1 4* A B (8 12 TH SEPTEMBER 2012 4 1 @ ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH SEPTEMBER 2012 SD/- . .. . . .. . ! ! ! ! P.M. JAGTAP ACCOUNTANT MEMBER SD/- # # # # $% $% $% $% & ! & ! & ! & ! AMIT SHUKLA JUDICIAL MEMBER MUMBAI, B ( B ( B ( B ( DATED: 12 TH SEPTEMBER 2012 $ 1 -&#C DC* / COPY OF THE ORDER FORWARDED TO : (1) &( )0 / THE ASSESSEE; (2) !' / THE REVENUE; (3) E () / THE CIT(A); (4) E / THE CIT, MUMBAI CITY CONCERNED; (5) C'H -&&( , , / THE DR, ITAT, MUMBAI; (6) I) J / GUARD FILE. .C -& / TRUE COPY $( / BY ORDER - . KL / PRADEEP J. CHOWDHURY '0M &( K' / SR. PRIVATE SECRETARY : / > / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI