CLIQUE DEVELOPMENTS LTD, MUMBAI V. ITO 9(1)(2), MUMBAI

ITA 3561/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7575 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 16-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABI RAMA KARTIKIYEN
• Keywords: Wrong claim; Revenue expenditure; Capital expenditure; Set aside
• Section: 271(1)(c)

Judgement Text

P A G E | 1 ITA NO. 3561/MUM/2017 A.Y. 2010 - 11 CLIQUE DEVELOPMENT LTD. VS. ITO - 9(1)(2) IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO. 3561 /MUM/2017 (ASSESSMENT YEAR: 2010 - 11 ) CLIQUE DEVELOPMENT LTD. 602, SHREENATH APARTMENT, LIBERTY GARDEN CROSS ROAD NO.3 ADJACENT TO MEHTA INUSTRIAL ESTATE, MALAD (WEST), MUMBAI 400064 VS. ITO - 9(1)(2) ROOM NO. 226, 2 ND FLOOR, AAYAKAR BHAVAN, MARINE LINES, M.K. ROAD, MUMBAI 400 020 PAN AAACC2252M (APPELLANT) (RESPONDENT) APPELLANT BY: NONE RESPONDENT BY: SHRI ABI RAMA KARTIKIYEN, D.R DATE OF HEARING: 04 .04 .2019 DATE OF PRONOUNCEMENT: 1 0 .04.2019 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 20, MUMBAI, DATED 12.04.2016, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT I.T ACT), DATED 30 .09.2013. THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAS RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT(A) ERRED IN UPHOLDING PENALTY OF RS. 1,75,000/ - LEVIED BY THE ASSESSING OFFICER, STATING THAT CONTENTION OF APPELLANT FOR NON LEVY OF PENALTY IS NOT ACCEPTABLE. P A G E | 2 ITA NO. 3561/MUM/2017 A.Y. 2010 - 11 CLIQUE DEVELOPMENT LTD. VS. ITO - 9(1)(2) 2. THE APPELLANT HEREBY PRAY FOR YOUR DIRECTIONS, FOR DELETING THE SAID PENALTY AND CANCELLATION OF RELATED DEMAND NOTICE. 3. THE APPELLANT CRAVES THE INDULGENCE OF ADDING OR ALTERING THE GROUNDS BEFORE OR AT THE TIME OF HEARING. 2. BRIEFLY STATED, THE ASSESSEE COMPANY HAD FILED ITS RETURN OF INCOME DECLARING LOSS OF RS.18,61,198/ - ON 13.10.2018. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND ITS INCOME WAS ASSESSED , VIDE ORDER PASSED UNDER SEC.143(3), DATED 14.03.2013 AT A LOSS OF RS.2,96,260/ - . THE A.O WHILE FRAMING THE ASSESSMENT OBSERVED THAT THE ASSESSEE HAD CLAIMED STAMP DUTY AND REGISTRATION FEES OF RS.5,60,000/ - INCURRED IN CONNECTION WITH INCREASE IN THE AUTHORIZED SHARE CAPITAL FROM RS.1.6 CRORES TO RS.9.6 CRORE AS A REVENUE EXPENDITURE. THE A.O BEING OF THE VIEW THAT AS THE EXPENSES INCURRED FOR INCREASING THE AUTHORIZED SHARE CAPITAL WAS TOWARDS EXP A N D ING THE CAPITAL BASE OF THE ASSESSEE COMPANY AN D THUS IN THE NATURE OF A CAPITAL EXPEND ITURE , THEREFORE, BACKED BY SUCH CONVICTION CALLED UPON THE ASSESSEE TO JUSTIFY THE CLAIM OF THE SAME AS A REVENUE EXPENDITURE. THE EXPLANATION OF THE ASSESSEE THAT THE EXPENSES INCURRED FOR INCREASING THE AUTHORIZED SHARE CAPITAL WER E IN THE NATURE OF A REVENUE EXPENDITURE ALLOWABLE UNDER SEC.36(1) OF THE I.T ACT, HOWEVER DID NOT FIND FAVOUR WITH THE A.O. IN FACT, THE AO HELD A CONVICTION THAT AS THE SAID EXPENSES WERE INCURRED IN CONNECTION WITH ENHANCEMENT OF THE CAPITAL BASE OF THE ASSESSEE COMPANY , THEREFORE, THE SAME WERE CLEARLY IN THE NATURE OF A CAPITAL EXPENDITURE. IN THE BACKDROP OF HIS AFORESAID OBSERVATIONS THE A.O DISALLOWED THE AFORESAID CLAIM OF EXPENDITURE ON ACCOUNT OF STAMP DUTY AND REGISTRATION FE ES OF RS. 5,60,000/ - AND ADDED BACK THE SAME TO THE TOTAL INCOME OF THE ASSESSEE . 3. THE A.O WHILE CULMINATING THE ASSESSMENT ALSO INITIATED PENALTY PROCEEDINGS UND ER SEC.271(1)(C) FOR FURNISHING OF I NACCURATE P A G E | 3 ITA NO. 3561/MUM/2017 A.Y. 2010 - 11 CLIQUE DEVELOPMENT LTD. VS. ITO - 9(1)(2) PARTICULARS OF INCOME BY THE ASSESSEE IN CONTEXT OF THE AFORESAID DISALLOWANCE OF STAMP DUT Y AND REGISTRATION FEES. THE REPLY FILED BY THE ASSESSEE TO IMPRESS UPON THE A.O THAT NO PENALTY UNDER SEC.271(1)(C) WAS LIABLE TO BE IMPOSED IN ITS HANDS , DID NOT FIND FAVOUR WITH HIM. THE A.O BEING OF THE VIEW THAT THE ASSESSEE HAD RAISED AN EX - FACIE WRONG CLAIM IMPOSED A PENALTY OF RS.1,75,000/ - UNDER SEC.271(1)(C) . 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). HOWEVER, THE CIT(A) AFTER DELIBERATING ON THE CONTENTIONS ADVANCED BY THE ASSESSEE WAS NOT PERSUADED TO SUBSCRIBE TO THE SAME AND DISMISSED THE APPEAL. 5. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT( A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE TOOK US THROUGH THE FACTS OF THE CASE WHICH HAD LED TO IMPOSITION OF PENALTY UNDER SEC.271(1)(C) IN THE HANDS OF THE ASSESSEE. IT WAS SUBMIT TED BY THE LD. A.R THAT THE A.O HAD SADDLED THE ASSESSEE WITH PENALTY UNDER SEC.271(1)(C), ONLY FOR THE REASON THAT ITS CLAIM OF DEDUCTION OF THE FEES PAID FOR INCREASE IN THE AUTHORISED SHARE CAPITAL WAS DECLINED BY THE A.O AND HELD TO BE A CAPITAL EXPEN DITURE. IT WAS AVERRED BY THE LD. A.R THAT NOW WHEN THE COMPLETE DETAILS IN RESPECT OF THE AFORESAID EXPENDITURE WERE DISCLOSED BY THE ASSESSEE IN ITS RETURN OF INCOME, THEREFORE, MERELY FOR THE REASON THAT THE SAME WAS DISALLOWED BY THE A.O W OULD NOT JUS TIFY SADDLING THE ASSESSEE WITH PENALTY UNDER SEC.271(1)(C) OF THE I.T ACT. 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDER S OF THE LOWER AUTHORITIES. P A G E | 4 ITA NO. 3561/MUM/2017 A.Y. 2010 - 11 CLIQUE DEVELOPMENT LTD. VS. ITO - 9(1)(2) 7. WE HAVE HEARD THE AUTHORISED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE COMPLETE DETAILS AS REGARDS THE STAMP DUTY AND REGISTRATION FEES OF RS.5,60,000/ - INCURRED BY THE ASSESSEE IN CONNECTION WITH INCREASE IN ITS AUTHORI ZED SHARE CAPITAL FROM RS.1.6 CRORES TO RS.9.6 CRORE WERE DISCLOSED BY THE ASSESSEE IN ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. APART THERE FROM, IT IS NOT THE CASE OF THE REVENUE THAT ANY PART OF THE FACTS DISCLOSED BY THE ASSES SEE IN RESPEC T OF ITS AFORESAID CLAIM WERE FOUND TO BE INCORRECT OR FALSE. IN FACT, THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF THE STAMP DUTY AND REGISTRATION EXPENSES WAS DISALLOWED BY THE A.O FOR THE REASON THAT AS PER HIM THE SAME WERE IN THE NATURE OF A CAPITAL EXP E NDITURE. IN OUR CONSIDERED VIEW, MERE DISALLOWANCE OF A CLAIM OF EXPENDITURE RAISED BY AN ASSESSEE, IN THE ABSENCE OF ANY WRONG OR INCORRECT FACTS HAVING BEEN FILED IN RESPECT OF SUCH CLAIM WOULD NOT JUSTIFY LEVY OF PENALTY UNDER SEC.271(1)(C ) . OUR AFORESAID VIEW STANDS FORTIFIED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC). IN THE AFORESAID CASE THE HONBLE APEX COURT HAD OBSE RVED THAT MAKING OF A CLAIM THAT IS NO T SUSTAINABLE IN LAW BY ITSELF WOULD NOT AMOUNT TO FURNISH ING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE. WE ARE OF THE CONSIDERED VIEW THAT MERELY FOR THE REASON THAT THE CLAIM OF THE ASSESSEE THAT THE STAMP DUTY AND REGISTRATION FEES INCURRED IN CONNECTION WITH INCREASE IN THE AUTHORIZED SHARE CAPITAL WAS TO BE ALLOWED AS A REVENUE EXPENDITURE WAS DISALLOWED BY THE A.O AS UNSUSTAINABLE IN LAW, THE SAME ON THE SAID STANDALONE BASIS COULD NOT HAVE JUSTIFIED IMPOSITION OF PENALTY UNDER SEC.271(1)(C) . IN TERMS OF OU R AFORESAID OBSERVATIONS, WE NOT BEING ABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE VIEW TAKEN BY THE LOWER AUTHORITIES SET ASIDE THE ORDER P A G E | 5 ITA NO. 3561/MUM/2017 A.Y. 2010 - 11 CLIQUE DEVELOPMENT LTD. VS. ITO - 9(1)(2) OF THE CIT(A) AND QUASH THE PENALTY OF RS.1,75,000/ - IMPOSED BY THE A.O UNDER SEC.271(1)(C). 8. THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRON OUNCED IN THE OPEN COURT ON 1 0 .04.2019 S D / - S D / - ( N.K. PRADHAN) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 10 .04 .2019 PS. ROHIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI P A G E | 6 ITA NO. 3561/MUM/2017 A.Y. 2010 - 11 CLIQUE DEVELOPMENT LTD. VS. ITO - 9(1)(2)