DCIT, CHENNAI V. Expo Freight Pvt. Ltd., CHENNAI

ITA 364/CHNY/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7860 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 14-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Depreciation; Wrong claim; Revised return; Revenue expenditure
• Section: 143(3); 133A; 27

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' # . $ , & ' BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICI AL MEMBER ./ I.T.A.NO.364/MDS/2014 ( / ASSESSMENT YEAR: 2009-10) THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-II(1), CHENNAI-600 034. VS M/S. EXPO FREIGHT P.LTD., 29, JOSIER STREET, NUNGAMBAKKAM, CHENNAI-34. PAN:AAACE2126J ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. SUPRIYO PAL, JCIT /RESPONDENT BY : MR. A.S.SRIRAMAN, ADVOCATE /DATE OF HEARING : 24 TH OCTOBER, 2016 /DATE OF PRONOUNCEMENT : 8 TH DECEMBER, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL IS FILED BY THE REVENUE AGGRIEVED BY T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)- II, CHENNAI DATED 28.10.2013 IN ITA NO.1536/2013- 14 PASSED UNDER SECTION 271(1)(C) R.W.S. 250(6) OF THE ACT. 2. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS AP PEAL, HOWEVER, THE CRUX OF THE ISSUE IS AS FOLLOWS:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE MINIMUM PENALTY LEVIED AMOUNTING TO ` 93.83 LAKHS BY THE LEARNED ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE ACT TOWARDS CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. 2 ITA NO.364/MDS/2014 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF FREIGHT FORWARDI NG FILED ITS RETURN OF INCOME ON 26.09.2009 ADMITTING TOTAL INCOME OF ` 9,23,96,780/- . THERE WAS A SURVEY UNDER SECTION 13 3A OF THE ACT CONDUCTED IN THE PREMISES OF THE ASSESSEE O N 07.09.2010. PURSUANT TO SURVEY, THE ASSESSEE FILED REVISED RETURNS AS FOLLOWS:- RETURN DATE OF FILING INCOME RETURNED RS. ORIGINAL 26.09.2009 9,23,96,780 REVISED 24.09.2010 12,15,55,010 REVISED 15.12.2010 12,15,55,010 REVISED 21.02.2011 12,00,02,320 SINCE THE LEARNED ASSESSING OFFICER IN THE SURVEY PROCEEDINGS HAD DISPUTED THE CLAIM OF THE ASSESSEE WITH RESPECT TO SOFTWARE EXPENSES AND REPAIRS & MAINTENA NCE EXPENSES TO BE TREATED AS REVENUE EXPENDITURE, THE ASSESSEE ACCEPTED THE VIEW OF THE LEARNED ASSESSING OFFICER, AND REVISED ITS RETURN OF INCOME FOR THE RELEVANT A SSESSMENT YEAR. SUBSEQUENTLY, THE LEARNED ASSESSING OFFICER C OMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT ON 30.12.2011 ASSESSING THE INCOME OF THE ASSESSEE AT 3 ITA NO.364/MDS/2014 RS.12,00,02,320/- ACCEPTING THE REVISED RETURN FILE D BY THE ASSESSEE DATED 21.02.2011. THEREAFTER PENALTY PROCE EDINGS UNDER SECTION 271(1)(C) OF THE ACT WAS INITIATED SE PARATELY AND VIDE ORDER DATED 25.06.2012 THE LEARNED ASSESSI NG OFFICER LEVIED MINIMUM PENALTY OF ` 93,83,123/- UNDER SECTION 271(1)(C) OF THE ACT FOR CONCEALING THE INCOME OF RS.2,76,05,540/- BEING THE DIFFERENCE OF INCOME RET URNED IN THE ORIGINAL RETURN ON 26.09.2009 AND REVISED RETUR N ON 21.02.2011. WHILE DOING SO, THE LEARNED ASSESSING OFFICER RELIED IN THE DECISION OF THE HONBLE APEX COURT IN THE CASE UOI VS. DHARMENDRA TEXTILES PROCESSORS REPORTED IN 306 ITR 277(SC) AND FURTHER OBSERVED AS FOLLOWS:- TO CONCLUDE THAT BY ITS ACT OF NOT DECLARING THE C ORRECT INCOME IN THE ORIGINAL RETURN OF INCOME FILED AND SUBSEQUENTLY OFFERING ADDITIONAL INCOME IN THE REVI SED RETURN CONSEQUENT TO ACTION U/S.133A, THE ASSESSEE HAS CONCEALED PARTICULARS OF ITS TRUE INCOME AS ENVISAG ED IN EXPLANATION (1) TO SECTION 271(1)(C) OF THE ACT. A S ALREADY NOTED ONLY THE SURVEY OPERATION U/S. 133A H AS BROUGHT TO LIGHT THE WRONG CLAIM LEADING TO SUPPRESSION OF INCOME, THEREFORE, I DEEM THAT THIS IS A FIT CASE FOR LEVY OF PENALTY U/S. 271 (1)( C) AND THIS DECISION IS BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE GUIDELINES DRAWN FROM VARIOUS JUDICIAL PRONOUNCEMEN TS, THE BASIS FOR ARRIVING AT THE INCOME SUPPRESSED IS TAKEN AS THE DIFFERENCE BETWEEN -THE INCOME ASSESSED AND THE INCOME ORIGINALLY RETURNED WHICH AMOUNTS TO RS2,76,05,540/ -. THE MINIMUM PENALTY LEVIABLE WORKS OUT TO RS.93.83,123/- AND THE MAXIMUM PENALTY IEVIA BLE 4 ITA NO.364/MDS/2014 WORKS OUT TO RS.2,81,49,369/-. CONSIDERING THE FACT S AND THE. BACKGROUND OF. THE CASE, I LEVY THE MINIMUM PENALTY OF RS.93,83,123/- WHICH SHOULD BE PAIR! AS PER THE DEMAND NOTICE ENCLOSED. 4. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) DELETED THE PENALTY BY OBSERVING AS FOLLO WS:- WHEREAS, IN THE INSTANT CASE THE FACTS ARE TOTALLY DIFFERENT. THE ASSESSEE IN ITS ORIGINAL RETURN OF I NCOME CLAIMED THE 'SOFTWARE EXPENSES' AND 'REPAIR AND MAINTENANCE EXPENSES' AS REVENUE EXPENSES. AT THE T IME OF SURVEY, THE ASSESSEE AGREED TO TREAT THEM AS CAP ITAL EXPENSES AND ACCORDINGLY FILED REVISED RETURN BY WITHDRAWING THE 'SOFTWARE EXPENSES' AND 'REPAIR AND MAINTENANCE EXPENSES' FROM REVENUE EXPENSES AND CLAIMED ONLY DEPRECIATION. THERE IS NO DISCUSSION O R REASONING, OF ANY SORT, EITHER IN THE ASSESSMENT OR DER OR IN THE PENALTY ORDER, AS TO HOW SUCH WITHDRAWAL WIL L AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. NOR THERE WAS ANY DISCUSSION AS TO HOW THE EXPENSES CLAIMED U NDER THESE HEADS OF 'SOFTWARE EXPENSES' AND 'REPAIR AND MAINTENANCE EXPENSES' ARE CAPITAL EXPENSES IN NATUR E. THUS, THERE IS NO ADMISSION BY THE ASSESSEE COMPANY THAT THE EXPENSES CLAIMED UNDER THESE HEADS OF 'SOFTWARE EXPENSES' AND 'REPAIR AND MAINTENANCE EXPENSES' ARE INDEED 'CAPITAL EXPENSES' IN NATURE. NOR THERE WAS ANY FINDING BY THE REVENUE TO THIS EXTENT. IN OTHER WOR DS, WHAT WAS ADMITTED BY THE ASSESSEE AT THE TIME OF SURVEY WAS ONLY TO WITHDRAW THE CLAIM OF 'SOFTWARE EXPENSES' A ND 'REPAIR AND MAINTENANCE EXPENSES' FROM REVENUE EXPENSES AND TREAT THEM ARE CAPITAL EXPENSES. AS DETAILED ABOVE THE ISSUES OF 'SOFTWARE EXPENSES' AND 'REPAIR AND MAINTENANCE EXPENSES', AS FAR AS THEIR NATURE - I.E. WHETHER REVENUE EXPENSES OR CAPITAL EXPENSES- IS CONCERNED, ARE HIGHLY DEBATABLE AND CONTENTIOUS. UN DER SUCH CIRCUMSTANCES, SURRENDERING/WITHDRAWING OF 'SO FTWARE EXPENSES' AND 'REPAIR AND MAINTENANCE EXPENSES' FRO M REVENUE EXPENSES AND TREATING THEM ARE CAPITAL EXPE NSES, CAN CLEARLY BE CONSIDERED AS A SURRENDER/WITHDRAWAL OF CLAIM WITH A VIEW TO AVOID UNNECESSARY LITIGATIONS AND TO BY PEACE OF MIND. THEREFORE, CLAIMING SUCH EXPENSES AS REVENUE EXPENSES IN THE ORIGINAL RETURN OF INCOME F LIED 5 ITA NO.364/MDS/2014 CANNOT BE CONSIDERED AS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME FOR THE PURPOSE OF SECTION 271(I)(C) OF THE ACT. FOR THIS P URPOSE, RELIANCE IS PLACED ON THE DECISION OF MUMBAI BENCH OF !TAT IN THE CASE OF DRESSER-RAND INDIA (P.) LTD. V. DCIT [2013] 37 TAXMANN.COM 328 (MUMBAI - TRIB.) DRESSER-RAND INDIA (P.) LTD. V. DEIT [2013137 TAXMANN.COM 328 (MUMBAI - TRIB.) SECTION 271(1)(C), READ WITH SECTION 37(1), OF THE INCOME-TAX ACT, 1961 - PENALTY - FOR CONCEALMENT OF INCOME [WR ONG CLAIM, EFFECT OF] - ASSESSMENT YEAR 2004-05 - ASSES SING OFFICER PARTLY DISALLOWED REPAIR AND MAINTENANCE EX PENSES IN RESPECT OF PLANT AND MACHINERY AND BUILDING ON G ROUND THAT SAME WERE CAPITAL IN NATURE- ON BASIS OF SAID ADDITION, PENALTY UNDER SECTION 271(1)(C) WAS IMPOSED ON ASSESSEE - WHETHER SINCE GENUINENESS OF EXPENSES WAS NOT DISPUTED BY ASSESSING OFFICER, DISALLOWANCE OF EXPENSES TREATING SAME AS CAPITAL IN NATURE COULD N OT BE BASIS FOR IMPOSITION OF PENALTY UNDER SECTION 271(1 )(C) - HELD, YES IT IS ALSO WORTH MENTIONING HERE THAT, ON IDENTICAL FACTS AND CONSEQUENT TO THE SURVEY, THE ASSESSEE FLIED A REVI SED RETURN OF INCOME IN A.Y. 2010-11 ALSO, BY WITHDRAWING THE CLAIM OF 'SOFTWARE EXPENSES' AND 'REPAIR AND MAINTENANCE EXP ENSES' FROM REVENUE EXPENSES AND TREATING THEM ARE CAPITAL EXPENSES. THE ASSESSING OFFICER COMPLETED THE ASSES SMENT OF A.Y.2010-11 ON 15.03.2013 BY ACCEPTING THE INCOME DECLARED IN THE SAID REVISED RETURN. THE ASSESSING OFFICER HAS NOT EVEN INITIATED ANY PENALTY PROCEEDINGS U/S.271(1)(C) IN THE SAID ASSESSMENT ORDER OF A.Y.2010-11. EVEN THE DISALLOWANCE OF 'REPAIR AND MAINTENANCE EX PENSES' MADE BY THE ASSESSING OFFICER IN A.Y.2000-01, BY TR EATING THEM AS 'CAPITAL EXPENSES' WAS DELETED BY THE CIT(A )-III, CHENNAI (VIDE ORDER IN ITA NO. 18/ 2003-04 A-III DATED 13.06.2003). THIS AMPLY DEMONSTRATES THAT THE ISSUE S ARE DEBATABLE AND CONTENTIOUS IN NATURE. IN SUCH A CASE , MERE WITHDRAWAL OF THE CLAIM FROM REVENUE EXPENSES AND T REATING THEM AS CAPITAL EXPENSES, WILL NOT AMOUNT TO CONCEA LMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME FOR THE PURPOSE OF SECTION 271 (1) (C) OF THE ACT. THEREFORE, IN VIEW OF THE ABOVE DISCUSSIONS AND THE JUDICIAL PRONOUNCEMENTS, THE ASSESSEE'S SURRENDERIN G / WITHDRAWING OF 'SOFTWARE EXPENSES' AND 'REPAIR AND MAINTENANCE EXPENSES' FROM REVENUE EXPENSES AND TRE ATING THEM ARE CAPITAL EXPENSES, CANNOT BE CONSIDERED AS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME FOR THE PURPOSE OF SECTION 27 1(1)(C) OF 6 ITA NO.364/MDS/2014 THE ACT. HENCE THE ASSESSING OFFICER'S ACTION IN LE VYING PENALTY U/S.271(1)(C) OF THE ACT IS NOT JUSTIFIED AND DELETED. 5. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATI VE SUBMITTED THAT THE ASSESSEE HAD FURNISHED INCORRECT PARTICULARS OF INCOME IN ITS ORIGINAL RETURN OF INC OME AND THE SAME WAS REVEALED ONLY DURING THE SURVEY PROCEEDING S. BUT FOR THE SURVEY PROCEEDINGS, THE INCOME WOULD HAVE E SCAPED FROM TAX AND THEREFORE IT AMOUNTS TO CONCEALMENT OF INCOME BY THE ASSESSEE. IT WAS THEREFORE PLEADED THAT THE ORDER OF THE LEARNED ASSESSING OFFICER LEVYING PENALTY MAY B E UPHELD AND THAT OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETING THE PENALTY MAY BE SET ASIDE. 6. THE LEARNED AUTHORIZED REPRESENTATIVE VEHEMENTLY ARGUED BEFORE US BY STATING THAT THE ISSUE WITH RES PECT TO SOFTWARE DEVELOPMENT EXPENSE AND REPAIRS & MAINTENA NCE EXPENSES TO BE TREATED AS REVENUE EXPENDITURE OR CA PITAL EXPENDITURE IS HIGHLY DEBATABLE. WHEN THE SAME WAS DISPUTED BY THE LEARNED ASSESSING OFFICER, IN ORDER TO AVOID PROTRACTED LITIGATION THE ASSESSEE HAD ACCEPTED THE VIEW OF 7 ITA NO.364/MDS/2014 THE LEARNED ASSESSING OFFICER AND REVISED ITS RETUR N OF INCOME ACCORDINGLY. IT WAS FURTHER ARGUED THAT ON IDENTICA L SITUATION FOR THE ASSESSMENT YEAR 2010-11, THE LEARNED ASSESS ING OFFICER HAD ACCEPTED THE INCOME DECLARED BY THE ASS ESSEE IN ITS REVISED RETURN, WHEREIN THE ASSESSEE HAD RECTIF IED THE DISCREPANCY POINTED OUT BY THE LEARNED ASSESSING OF FICER AND THE LEARNED ASSESSING OFFICER HAD NOT INITIATED ANY PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. IT WAS THEREFORE PLEADED THAT THE ORDER OF THE LEARNED COM MISSIONER OF INCOME TAX (APPEALS) MAY BE SUSTAINED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CASE, IT IS EVIDENT THAT THE CLAIM OF THE ASSESSEE TO TREAT THE SOFTWARE EXPENSES AND REPAIRS & MAINTENANCE EXPENSES INCURRE D BY IT AS REVENUE EXPENDITURE IS EXTREMELY DEBATABLE AND W HEN THE LEARNED ASSESSING OFFICER DISPUTED THE SAME, THE AS SESSEE HAD REVISED ITS RETURN OF INCOME AGREEING WITH THE VIEW OF THE LEARNED ASSESSING OFFICER IN ORDER TO AVOID LITIGAT ION. AS POINTED OUT BY THE LD.A.R ON THE IDENTICAL SITUATIO N FOR THE 8 ITA NO.364/MDS/2014 ASSESSMENT YEAR 2010-11, THE LEARNED ASSESSING OFFI CER HAS NOT INITIATED ANY PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. FURTHER, THE HONBLE APEX COURT HAS HE LD IN THE CASE CIT VS. RELIANCE PETRO PRODUCTS LTD., REPORTED IN 322 ITR 158 THAT A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABL E IN LAW, BE ITSELF DID NOT AMOUNT TO FURNISHING INCORRE CT PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN TH E RETURN CANNOT AMOUNT TO FURNISHING INCORRECT PARTICULARS. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE DECISION OF T HE HONBLE APEX COURT CITED ABOVE, WE OF THE CONSIDERE D VIEW THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS JUSTLY DELETED THE PENALTY IN THE CASE OF THE ASSES SEE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 8 TH DECEMBER, 2016 SD/- SD/- ( ' # . $ ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 8 TH DECEMBER, 2016 SOMU 9 ITA NO.364/MDS/2014 *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF