INCOME TAX OFFICER WARD-2(1), Nagpur V. M/S NOVATECH SOFTWARE PVT. LTD., Nagpur

ITA 387/NAG/2014

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3241 (ITAT-NAGPUR)
• Duration Of Justice: 4 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2019
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 27-06-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 13-08-2014
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Assessee Lawyers: C J THAKKAR SHRI S C THAKKAR
• Keywords: Capital asset; Bonafide belief; Wrong claim
• Section: 271(1)(c); 133(6); 10B; 205

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO. 387/NAG./2014 ( ASSESSMENT YEAR : 2011-12 ) INCOME TAX OFFICER WARD2(1), AAYAKAR BHAWAN TELANGKEDI ROAD, NAGPUR 440 001 APPELLANT V/S NOVATECH SOFTWARE PVT. LTD. UNIT NO.103, I.T. TOWER, OPP. VNIT PARSODI, NAGPUR 4400 022 PAN AAACN9774H .... RESPONDENT REVENUE BY : SHRI A.R. NINAWE ASSESSEE BY : SHRI C.J. THAKKAR SHRI S.C. THAKKAR DATE OF HEARING 01.09.2016 DATE OF ORDER 01.09 .2016 O R D E R PER D.T. GARASIA, J.M. INSTANT APPEAL PREFERRED BY THE REVENUE, IS EMANAT ING FROM THE IMPUGNED ORDER DATED 11 TH JUNE 2014, PASSED BY THE LEARNED COMMISSIONER (APPEALS)I, NAGPUR, FOR THE ASSESSMEN T YEAR 201112, ON THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT (APPEALS) HAS, ON THE FACTS AND IN LAW, ERRED IN DELETING THE PENALTY U/S. 271(1)(C) OF RS.42,00,000 /- LEVIED BY THE ASSESSING OFFICER; 2 NOVATECH SOFTWARE PVT. LTD. 2. THE LEARNED CIT (APPEALS) HAS, ON THE FACTS AND IN LAW, ERRED GRAVELY IN HOLDING THAT THE CLAIM OF EXEMPTION UNDE R SECTION 10A OF THE ASSESSEE, DENIED BY THE ASSESSING OFFICER, WAS A BONAFIDE ERROR WHICH OCCURRED DUE TO INADVERTENCE AND MISCONCEPTIO N AND THUS IN DELETING THE PENALTY U/S 271(1)(C) OF RS.42,00,000/ - LEVIED BY THE ASSESSING OFFICER; 3. THE LEARNED CIT (APPEALS) IS IN GRAVE ERROR IN L AW INASMUCH AS HE RELIED ON OBSOLETE CASE LAWS CITED BY THE LEARNE D COUNSEL OF THE ASSESSEE WHICH ARE NO MORE A GOOD LAW IN VIEW OF LA TER DECISIONS OF VARIOUS COURTS AND TRIBUNALS AS ALSO THE DECISION O F THE HON. SUPREME COURT IN THE CASE OF MAK DATA (P) LTD., (20 13) 38 TAXMAN.COM 448 (SC) AND THUS IN DELETING THE PENALT Y U/S 271(1)(C) OF RS.42,00,000/- LEVIED BY THE ASSESSING OFFICER; 4. THE LEARNED CIT (APPEALS) HAS, ON THE FACTS AND IN LAW, ERRED IN NOT APPRECIATING THE AO'S CONTENTION THAT THE ASSES SEE HAD MENTIONED DATE OF MANUFACTURE AS FEBRUARY, 2002 IN FORM NO.S6F AS AGAINST THE CORRECT DATE OF 1 ST JUNE, 1999 WITH MALAFIDE INTENTION OF CLAIMING DEDUCTION U/S 10A BEYOND THE PRESCRIBED PERIOD OF 10 YEARS; THE SHORT FACTS OF THE CASE ARE AS UNDER: 2. THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS ASKED THE ASSESSEE TO JUSTIFY THE CLAIM OF DEDUCTION OF ` 1,24,84,297 UNDER SECTION 10A OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ). THE ASSESSEE FURNISHED COPY OF FORM NO.56F FOR ASSESSMENT YEAR 2 00809, 200910 AND 201011. THE ASSESSING OFFICER FOUND THAT IN ALL TH E FORMS, THE DATE OF COMMENCEMENT OR PRODUCTION IS SHOWN AS FEBRUARY 2002 . THE ASSESSING OFFICER ALSO QUOTED INFORMATION UNDER SECTION 133(6 ) OF THE CT FROM THE DY. DIRECTOR, STPI, NAGPUR. ON A PERUSAL OF THE INFORMA TION RECEIVED FROM THE DIRECTOR, STPL, NAGPUR, THE ASSESSING OFFICER FOUND THAT THE DATE OF COMMENCEMENT OR OPERATION WAS W.E.F. 1 ST JUNE 1999 AND NOT FROM FEBRUARY 2002. THE ASSESSING OFFICER NOTICED THAT COMPANYS ANNUAL REPORT FOR FINANCIAL YEAR 201011, FILED BY THE ASSESSEE ALONG WITH FORM NO.56F, ON 3 NOVATECH SOFTWARE PVT. LTD. 19 TH AUGUST 2011 ALSO MENTIONED THE COMMENCEMENT OR MAN UFACTURING DATE W.E.F. 1 ST JUNE 1999. THUS, THE ASSESSING OFFICER FOUND THAT THE CONTENTION OF THE ASSESSEE THAT PRODUCTION COMMENCED IN FEBRUARY 2002 IS NOT CORRECT IN VIEW OF THE EVIDENCE INCLUDING FORM NO.56F FILED BY THE ASSESSEE ALONG WITH AUDITED REPORT. THE ASSESSING OFFICER, THEREFORE, R ECORDED THE STATEMENT OF THE GENERAL MANAGER OF THE ASSESSEE COMPANY IN THE PRESENCE OF SHRI AMIT BAJAJ, CHARTERED ACCOUNTANT AND THE AUTHORISED REPR ESENTATIVE. THE GENERAL MANAGER STATED THAT DUE TO NONAVAILABILITY OF EXPE RT ADVICE AND UNDER SOME MISCONCEPTIONS, ASSESSEE HAS WRONGLY CLAIMED DEDUCT ION OF ` 1,24,84,296 UNDER SECTION 10A IN THE YEAR IN QUESTION FOR ASSES SMENT YEAR 201011. HOWEVER, HAVING REALIZED THE MISTAKE, THE ASSESSEE UNCONDITIONALLY WITHDREW THE SAID CLAIM AND OFFERED THE SAME AS INC OME OF THE YEAR AND READY TO PAY THE TAX WITH INTEREST WITHIN ONE MONTH . THUS, THE ASSESSEE HAS ACCEPTED THAT HE HAS INADVERTENTLY MADE A MISTAKE A ND CLAIMED THE DEDUCTION UNDER SECTION 10A WHICH IS ACCEPTED BY TH E ASSESSING OFFICER DURING THE ASSESSMENT ITSELF AND HAS PAID THE TAX T HEREUPON. HOWEVER, THE ASSESSING OFFICER HAS LEVIED PENALTY IN THE ASSESSM ENT ORDER. THE ASSESSEE FILED WRITTEN SUBMISSIONS BEFORE THE ASSESSING OFFI CER BUT THE ASSESSING OFFICER DID NOT AGREE WITH THE EXPLANATION FILED BY THE ASSESSEE AND LEVIED PENALTY OF ` 42 LAKH. BEING AGGRIEVED, THE ASSESSEE FILED APPEA L BEFORE THE FIRST APPELLATE AUTHORITY. 3. THE LEARNED COMMISSIONER (APPEALS) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: 4 NOVATECH SOFTWARE PVT. LTD. 6.1 ON CARE3FUL EXAMINATION OF THE FACTS, IT IS SE EN THAT IN THE RETURNS FILED FOR AYS 2008-09, 2009-10 AND 2010-11, THE CHARTERED ACCOUNTANT, AUTHORISED TO FILE THE RETURNS FOR THES E YEARS HAS STATED THE DATE OF COMMENCEMENT OF PRODUCTION IN FO RM NO. 56F AS FEBRUARY 2002. IN FACT, THE APPELLANT COMPANY WA S ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT UP TO AY 2008-09, EVEN IF THE DATE OF PRODUCTION IS TAKEN AS 1 ST JUNE, 1999 AS THAT BEING THE 10 TH YEAR OF CLAIM; WHEREAS IN AY 2009-10 AND AY 2010-1 1 THERE BEING A LOSS, NO CLAIM U/S 10A WAS MADE BY THE COMP ANY. IN THE RETURN FILED FOR THE YEAR AY 2011-12 UNDER APPEAL, FORM NO.S6F CONTAINS THE DATA OF PRODUCTION AS 1 ST JUNE, 1999 AND AS SUCH, THERE IS NO WRONG STATEMENT CONTAINED IN THE RETURN FOR THE YEAR UNDER APPEAL AS REGARDS TO THE DATE OF PRODUCTION. THEREFORE, THE CONTENTION OF THE APPELLANT THAT THE DATE OF PRODUC TION MENTIONED AS FEBRUARY, 2002 IN THE EARLIER THREE YEARS I.E. A YS 2008-09, 2009-10 & 2010-11 BY THE C.A., WHO FILED THE RETUR N OF INCOME FOR THESE YEARS, WAS DUE TO INADVERTENCE AND MISCONCEPT ION, CARRIES SUBSTANTIAL FORCE IN AS MUCH AS THAT FIRSTLY, IN TH E YEAR UNDER APPEAL. I.E., A.Y. 2011-12 THE DATE WAS CORRECTLY M ENTIONED AS 1 ST JUNE 1999 AND SECONDLY, THAT THERE BEING LOSSES IN A.Y. 2009-10 & 2010-11, CLAIM U/S 10A WAS NOT MADE, DUE TO WHICH T HE APPELLANT WAS UNDER BONAFIDE BELIEF TO TAKE THE A.Y. 2011-12 AS THE 10 TH YEAR FO THE CLAIM U/S 10A OF THE ACT, EXCLUDING THE YEAR S IN WHICH CLAIM WAS NOT MADE DUE TO LOSSES. BESIDES THE ABOVE FACTS , IT IS QUITE MANIFEST FROM THE RECORDS THAT THE APPELLANT HAD MA DE A CLAIM U/S 10A UNDER CERTAIN CIRCUMSTANCES BONAFIDELY IN THE R ETURN OF INCOME FILED. IT IS ALSO SIGNIFICANT TO NOTE THAT AS SOON AS THE ASSESSEE CAME TO KNOW ABOUT THE MISTAKE IN FORM NO.56F IN EA RLIER YEARS, IT REVISED THE RETURN AND HAD WITHDRAWN ITS CLAIM AND PAID THE TAXES IN THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF. THU S, THERE IS NOTHING TO SHOW THAT THE APPELLANT HAS CONCEALED TH E PARTICULARS OF ITS INCOME. THE RATIO OF THE DECISIONS RELIED UPON BY THE APPEL LANT IN THE CASES OF (A) BTX CHEMICALS (P) LTD. VS. C.I.T. 205 C.T.R. 252 (GUJ.), (B) C.I.T. VS. SHRADHA TEXTILE PROCESSORS (P) LTD. (2006) 286 ITR P.499 MADRAS, (C) DY.C.I.T. V/S GENESYS INTERNATIONAL CORPORATION LTD., MUMBAI TRIBUNAL BEN CH, 'G' (ITA 7459/MUM./2011) & (D) SARV PRAKASH KAPOOR V/S DY.C.I.T. (2012) 26 TAXMAN.COM 256/54, SOT 185(URO) (AGRA), I S PPLICABLE TO THE FACTS OF THE CASE. IN VIEW THEREOF, AFTER CO NSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE JUDICIAL DECI SIONS RELIED UPON BY THE AR OF THE APPELLANT, TO MY OPINION, THERE AP PEARS TO BE NO CONCEALMENT OR HAVING FURNISHED INACCURATE PARTICUL ARS OF INCOME, THEREFORE THE PENALTY LEVIED IS NOT JUSTIFIED, HENCE IS DIRECTED TO BE DELETED. 5 NOVATECH SOFTWARE PVT. LTD. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT DURING THE COURSE OF SCRUTINY PROCEEDINGS OF THE CLAIM OF THE ASSESSEE UNDER SECTION 10A, THE ASSESSEE MENTIONED THAT IN ASSESSMENT YEAR 201112, THE ASSESSEES CLAIM FOR EXEMPTION IS OF 10 TH AND FINAL YEAR. THEREFORE, THE ASSESSEE WAS ASKED TO PRODUCE A COPY OF FORM NO.56F FOR ALL THE YEARS. IN ALL THESE FORMS, THE DATE OF COMMENCEMENT OF MANUFA CTURING DATE WAS SHOWN AS FEBRUARY 2002 AND THEREAFTER, THE ASSESSING OFFICER HAS COLLECTED INFORMATION UNDER SECTION 133(6) OF THE A CT FROM THE DY. DIRECTOR, STPI, NAGPUR, AND IT WAS FOUND THAT THE DATE OF COM MENCEMENT OF OPERATION WAS 1 ST JUNE 1999. THUS, THE ASSESSEE HAS ACCEPTED HIS MIS TAKE AFTER DUE ENQUIRY AND WHEN THE CLAIM OF THE ASSESSEE WAS BOGU S, HE HAS ACCEPTED THEREFORE, IF THE ASSESSING OFFICER SHOULD HAVE NOT MADE ENQUIRY, THE ASSESSEES CLAIM MIGHT HAVE BEEN ALLOWED, THEREFORE , IT IS A REAL CASE OF WRONG CLAIM AND THE LEARNED COMMISSIONER (APPEALS) HAS NOT JUSTIFIED IN DELETING THE SAME. 5. THE LEARNED COUNSEL FOR ASSESSEE HAS SUBMITTED THAT THE ASSESSEE COMPANY IS GETTING ITS ACCOUNT AUDITED BY THE CHART ERED ACCOUNTANT FROM ASSESSMENT YEAR 200001 ALONG WITH AUDITED ACCOUNTS AND ALL RELEVANT ANNEXURES, STATEMENT OF TOTAL INCOME, INCOME TAX RE TURN UP TO THE ASSESSMENT YEAR 200708 WERE FILED IN PHYSICAL FORM WITH ALL RELEVANT ANNEXURE INCLUDING FORM NO.56G AND FROM THE ASSESSM ENT YEAR 200809, THEY ARE SUBMITTING ONLINE. THE ASSESSEE HAD NOT C LAIMED DEDUCTION IN ASSESSMENT YEAR 200607, 200910 AND 201011, THERE WERE LOSSES, THEREFORE, FOR THE REMAINING PERIOD, THE CLAIM UNDE R SECTION 10A / 10B, WAS 6 NOVATECH SOFTWARE PVT. LTD. MADE AND IT WAS ALLOWED. THE ASSESSEE HAS FILED FOR M NO.56 ALONG WITH RETURN OF INCOME IN THE YEAR UNDER CONSIDERATION WH EREIN THE ASSESSEE HAS SHOWN IN COL.7 AND 8 THE DATE OF COMMENCEMENT OF MA NUFACTURING AS 1 ST JUNE 1999 AND NUMBER OF CONSECUTIVE YEAR FOR WHICH THE DEDUC TION IS CLAIMED IS 10 TH YEAR. THE ASSESSEES CLAIM IS THAT ASSESSEE PAID M INIMUM ALTERNATE TAX AS THE ASSESSEE CAME UNDER MAT. THE A SSESSEE FILED IN FORM NO.56F FOR THE ASSESSMENT YEAR 200809, 200910 AND 201011, WHEREIN FORM NO.56F FOR PRIOR YEARS WERE NOT SUBMITTED. FOR M NO.56F FOR EARLIER YEARS WAS ALREADY ON THE FILE OF THE DEPARTMENT. IN ASSESSMENT YEAR 2003 04 TO 200607 THE DATE OF COMMENCEMENT OF MANUFACTU RING OR PRODUCTION WAS STATED AS 26 TH FEBRUARY 2009. THEREFORE, ASSESSMENT YEAR 200809 WAS THE 7 TH YEAR, ASSESSMENT YEAR 200910 WAS THE 8 TH YEAR AND 201011 WAS CONSIDERED AS 9 TH YEAR. HOWEVER, FORM NO.56F WAS THE ACTUAL YEAR IN WHICH THE PRODUCTION OF SOFTWARE STARTED. THE ASSES SEE HAS NOT CLAIMED DEDUCTION UNDER SECTION 10A / 10B IN THREE ASSESSME NT YEARS AS THERE WAS LOSSES, THEREFORE, THE CLAIM WAS MADE BUT DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THAT THE 10 TH YEAR WAS ASSESSMENT YEAR 201011. THEREFORE, ASSESSEE REALIZED MISTAKE AND PAID THE TAXES, THERE FORE, THERE IS NO CONCEALMENT BY THE ASSESSEE. THE LEARNED COUNSEL FO R ASSESSEE RELIED UPON THE FOLLOWING CASE LAWS: I) BTX CHEMICALS V/S CIT, [2007] 205 CTR 252 (GUJ.); II) CIT V/S SHARADHA TEXTILE PROCESSORS P. LTD., [2006] 286 ITR 499 (MAD.); AND III) SARV PRAKASH KAPOOR V/S DCIT, [2012] 54 SOT 185 (AG RA.) 7 NOVATECH SOFTWARE PVT. LTD. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIAL ON RECORD. LOOKING TO THE FACTS AND CI RCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE WAS CLAIMING DEDUCTION UN DER SECTION 10A / 10B OF THE ACT FROM THE ASSESSMENT YEAR 200001 ALONG WITH THE AUDITED ACCOUNTS AND ALL THE RELEVANT ANNEXURES, STATEMENT OF TOTAL INCOME, INCOME TAX RETURN. THE ASSESSEE HAS FILED RETURN OF INCOME UP TO THE ASSESSMENT YEAR 200708 IN PHYSICAL FORM WITH ALL RELEVANT ANNEXURE S INCLUDING FORM NO.56F AND FROM ASSESSMENT YEAR 200809, THEY WERE SUBMITT ING THE RETURN OF INCOME BY ONLINE. THE ASSESSEE DID NOT CLAIM DEDUC TION IN ASSESSMENT YEAR 200607, 200910 AND 201011 ON THE GROUND THAT THE ASSESSEE WAS RUNNING LOSSES, THEREFORE, THE ASSESSEE DID NOT CLA IM THE DEDUCTION UNDER SECTION 10A / 10B. THE ASSESSEE HAD FILED FORM NO.5 6 ALONG WITH THE RETURN OF INCOME WHEREIN FOR THE ASSESSMENT YEAR 200607, 200910 AND 2010 11, HE HAS SHOWN THE DATE OF MANUFACTURING AS 1 ST JUNE 2002 BUT, IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD FILED TH E RETURN OF INCOME WHEREIN THE ASSESSEE HAD SHOWN THE ACTUAL DATE AS 1 ST JUNE 1999 IN FORM NO.56. THE ASSESSEE HAD CLAIMED THE DEDUCTION IN TH E YEAR UNDER CONSIDERATION ON A BONAFIDE BELIEF THAT IF IN THREE YEARS, THE ASSESSEE HAD NOT CLAIMED THE DEDUCTION UNDER SECTION 10A / 10B, THEN THE ASSESSEE IS ENTITLED FOR CLAIMING DEDUCTION ON THE BELIEF THAT THE ASSESSEE IS ENTITLED FOR CLAIMING DEDUCTION FOR TOTAL 10 YEARS. DURING THE A SSESSMENT PROCEEDINGS, THE MISTAKE WHICH WAS COMMITTED BY THE ASSESSEE WAS BROUGHT TO THE NOTICE, THEREFORE, IMMEDIATELY HE HAS WITHDRAWN THE CLAIM AND PAID THE TAXES THEREON. WE ALSO FIND THAT IN THE YEAR UNDER CONSIDERATION, THE 8 NOVATECH SOFTWARE PVT. LTD. ASSESSEE HAS SHOWN THE DATE OF COMMENCEMENT OF PROD UCTION IN FORM NO.56F AS 1 ST JUNE 1999 . THE ASSESSEE HAD NOT MADE ANY MISTAKE IN SHOWING THE DATE OF PRODUCTION; THEREFORE, THE ASSE SSEE HAD NOT CONCEALED ANYTHING AND HAD NOT FILED ANY INACCURATE PARTICULA RS OF INCOME IN THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAD CLAIMED DEDUC TION UNDER A BONAFIDE BELIEF THAT HE IS ENTITLED FOR DEDUCTION ON THE 10 TH YEAR EXCLUDING THREE YEARS. THEREFORE, WE ARE OF THE VIEW THAT AS SOON AS THE A SSESSEE HAD PAID THE TAXES AND RECTIFIED THE MISTAKE, PENALTY UNDER SECT ION 271(1)(C) CANNOT BE LEVIED. WE ALSO GOT SUPPORT FROM THE DECISION OF TH E HONBLE GUJARAT HIGH COURT IN BTX CHEMICALS PVT. LTD. (SUPRA), WHEREIN, WHEN THE ASSESSEE CLAIMED A LOSS ON ACCOUNT OF DESTRUCTION OF CAPITAL ASSET ON ACCOUNT OF FIRE UNDER BONAFIDE BELIEF THAT LOSS WAS A REVENUE LOSS AND EVERYTHING WAS SUBMITTED IN THE RETURN OF INCOME, PENALTY UNDER SE CTION 271(1)(C) WAS DELETED. THE DECISION OF SARV PRAKASH KAPOOR (SUPRA ), IT IS HELD BY THE TRIBUNAL THAT IF THE RECTIFICATION OF BONAFIDE MIST AKES ARE NOT CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. THE FACTS OF THIS CASE ARE SIMILAR TO THE ABOVE DECISIO NS. THEREFORE, WE ARE OF THE VIEW THAT THE LEARNED COMMISSIONER (APPEALS) WAS JU STIFIED IN DELETING THE ADDITION. ACCORDINGLY, THE GROUNDS RAISED BY THE RE VENUE ARE DISMISSED. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01.09.2016 SD/ - RAJENDRA ACCOUNTANT MEMBER SD/ - D.T. GARASIA JUDICIAL MEMBER NAGPUR, DATED: 01.09.2016 9 NOVATECH SOFTWARE PVT. LTD. COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, NAGPUR CITY CONCERNED; (5) THE DR, ITAT, NAGPUR; (6) GUARD FILE. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY A SSISTANT REGISTRAR ITAT, NAGPUR