Vichara Technology India Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 4125/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74080 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2008-2009
• Appeal Filed On: 05-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMEER SHARMA
• Assessee Lawyers: LALITHA KRISHNAMURTHY
• Keywords: Wrong claim
• Section: 10B; 154

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H: NEW DELHI BEFORE SHRI J. S REDDY, ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER I TA NO. 4125 /DEL/ 2013 (ASSESSMENT YEAR: 2008 - 09 ) VICHARA TECHNOLOGY INDIA PVT. LTD., E - 186, GREATER KAILASH - I, NEW DELHI PAN AABC2180N VS. DCIT, CIRCLE - 17(1), NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : LALITHA KRISHNAMURTHY, ADV. RESPONDENT BY: SAMEER SHARMA, SR. DR O R D E R PER A. T. VARKEY , JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A) - 19, NEW DELHI 26.03.2013 FOR THE ASSESSMENT YEAR 2008 - 09. 2. THE GROUNDS OF APPEAL ARE AS FOLLOWS: - 1. THAT THE LD CIT(APPEALS) OUGHT TO HAVE MODIFIED THE QUANTUM OF PENALTY AS POINTED OUT BY THE ASSESSEE AND T HE VARIOUS OBSERVATIONS AS MADE BY LD CIT(APPEALS) ARE NEITHER FACTUALLY CORRECT NOR IN PROPER PERSPECTIVE OF LAW. 2. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER AMEND OR WITHDRAW ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING . 3. APROPOS THE SOLE GROUND IN RESPECT TO MODIFICATION OF QUANTUM OF PENALTY. 4. BRIEF FACT S OF THE CASE IS THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT. THE RETURN OF INCOME RELEVANT TO THE ASSESSMENT YEAR WAS FILED ON 29.09.2008 DECLARING TOTAL INCOME OF RS. 3,13,179/ - . THE CASE OF THE A SSESSEE WAS SELECTED FOR SCRUTINY AND AFTER DULY SERVING NOTICE U/S 143(2) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT ) ON 05.05.2010, THE ASSESSEE WAS ASKED TO EXPLAIN CERTAIN CL AIMS MADE BY IT, IN ITS RETURN . THE ASSESSEE IN HIS RETURN OF INCOME HAD CLAIMED EXEMPTION U/S 10B TO THE TUNE OF RS. 45,78,919/ - . THOUGH THE ASSESSEE COMPAN Y HAD DECLARED AN INCOME OF RS. 3,13,179/ - , IT HAD CLAIMED DEDUCTION U/S 10B AND PAGE NO. 2 CONSEQUENTLY THE T AXABLE INCOME WAS RS. NIL. DURING THE ASSESSMENT PROCEEDING IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE COMPANY HAS INCLUDED FOR DEDUCTION U/S 10B , ITS INCOME FROM OTHER SOURCES AN AMOUNT OF RS. 8,80,565/ - . THEREFORE THE ASSESSING OFFICER ASKED THE ASSESSEE COMPANY TO EXPLAIN THE SAID INCOME AND JUSTIFY ITS CLAIM FOR EXEMPTION U/S 10B OF THE ACT. THEN THE ASSESSEE COMPANY FURNISHED THE FOLLOWING DETAILS BEFORE THE AO : - THE OTHER INCOME OF RS. 8,80,565/ - C ONSISTS OF THE FOLLOWING ITEMS: - INTEREST EARNED RS. 5,91,872/ - DIVIDEND RS. 2,48,685/ - REIMBURSEMENT OF EXPENSES RS. 40,000/ - SHORT AND EXCESS RS. 7/ - AND THE ASSESSEE ALSO EXPLAINED THAT THE AFORESAID DIVIDEND INCOME WAS FULLY TA X FREE ; AND THE INTEREST INCOME SHOWN ABOVE WAS IN THE NATURE OF TEMPORARY DEPLOYMENT OF SURPLUS FUNDS OF BUSINESS ; AND IT IS NOT IN THE NATURE OF INDEPENDENT INVESTMENT ; AND ALSO IT WAS ADMITTED IN THE LETTER TO THE ASSESSING OFFICER THAT THE SAID AMOUNT WAS NOT EXEMPT ED U/S 10B AND THE SAME MAY BE SUBJECTED TO TAX. IT WAS ALSO STATED THAT THE AFORESAID AMOUNT HAD NEVER BEEN CONCEALED OR DELIBERATELY NOT OFFERED FOR TAX AND THE ASSESSEE OFFERED IN THE SAID LETTER TO THE ASSESSING OFFICER, TO TREAT THE SAME AS REVISED COMPUTATION OF AMOUNT FOR EXEMPTION U/S 10B OF THE ACT. 5 . SINCE THE SAID INCOME OF RS. 8,80,965/ - HAS NOT BEEN DERIVED FROM INDUSTRIAL UNDERTAKING THE ASSESSING OFFICER ADDED BACK THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE. THUS THE ASSESSING OFFICER HELD THAT SECTION 10B BENEFIT IS ALLOWABLE ONLY TO THE EXTENT OF RS. 36,98,354/ - AS AGAINST THE CLAIM OF THE ASSESSEE AT RS. 45,78,919. HE WAS ALSO OF THE OPINION THAT TO THE EXTENT OF RS. 8,80,565/ - THE ASSESSEE HAS CONCEALED/ FURNIS HED INACCURATE PARTICULARS OF ITS INCOME AND PENALTY PROCEEDING U/S 271(1)(C) OF THE ACT NEED TO BE INITIATED. 6 . THEREAFTER THE ASSESSING OFFICER VIDE NOTICE DATED 30.12.2010 GAVE AN OPPORTUNITY TO THE ASSESSEE TO SHOW CAUSE ON 14.01.2011 AS TO WHY PENAL TY U/S 271(1)(C) OF THE ACT SHOULD NOT BE IMPOSED ON RS. 36,98,354/ - FOR WRONG CLAIM EXEMPTION U/S 10B . THE ASSESSING OFFICER AFTER EXAMINING THE REPLY OF THE ASSESSEE HELD AS FOLLOWS: - AMOUNT ON WHICH PENALTY IS TO BE IMPOSED :RS. 36,98,354/ - PAGE NO. 3 TOTAL TA X SOUGHT TO BE EVADED: RS. 11,09,506/ - 100% OF THE TAX SOUGHT TO BE EVADED RS. 11,09,506/ - 300% OF THE TAX SOUGHT TO BE EVADED RS. 33,28,518/ - IN VIEW OF THE ABOVE, I THEREFORE IMPOSE PENALTY OF RS. 11,09,506/ - BEING 100% OF THE TAX SOUGHT TO BE EVADED. 7 . AGGRIEVED BY THE SAID ORDER OF THE ASSESSING OFFICER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD CIT(A) WHO VIDE ORDER DATED 28.09.2012 DISMISSED THE APPEAL AND CONFIRM ED THE PENALTY LEVIED BY THE ASSESSING OFFICER. 8 . THEREAFTER THE ASSESSEE AGAIN FILED AN APPLICATION U/S 154 OF THE ACT BEFORE THE LD CIT(A) AND THE CONTENTION OF THE ASSESSEE WAS AS FOLLOWS: - SUB: RECTIFICATION OF APPEAL ORDER DATED 28.09.2012 OF VICHARA TECHNOLOGY INDIA PVT. LTD. A.Y. 2008 - 09 REF: AP PEAL NO. 38/2011 - 12 DEAR SIR, WITH REFERENCE TO ABOVE WE WISH TO SUBMIT AS UNDER: - 1. THE APPELLANT HAS RAISED THE GROUND IN PARA 3 OF ITS LETTER DATED 23.09.2011 SUBMITTED TO THE COMMISSIONER OF INCOME TAX (APPEALS) - XIX, THAT LD ASSESSING OFFICER HAS ERR ED IN CONSIDERING THE AMOUNT ON WHICH PENALTY THE IMPOSED AT RS. 36,98,354/ - , INSTEAD OF ON THE AMOUNT OF DISALLOWANCE OF RS. 8,80,565. SIMILARLY THE PENALTY LEVIED HAS BEEN WRONGLY WORKED AT RS. 11,09,506/ - INSTEAD OF RS. 2,64,170/ - . THE SAME GROUND WAS A GAIN REPEATED VIDE APPELLANTS LETTER DATED 26.09.2012. HOWEVER IT IS FOUND THAT WHILE PASSING THE APPEAL ORDER THIS GROUND HAS SKIPPED THE ATTENTION AND NO RELIEF HAS BEEN GIVEN ON THIS GROUND. HENCE YOUR HONOUR IS REQUESTED TO KINDLY CONSIDER THIS GROU ND AND RECTIFY THE APPEAL ORDER TO THIS EXTENT. 9 . BY AN ORDER DATED 26.03.2013 WHICH IS IMPUGNED BEFORE US THE LD CIT(A) DISMISSED THE SAID APPLICATION PREFERRED U/S 154 OBSERVING AS UNDER: - 2. THE SUBMISSION OF THE APPELLANT AND THE FACTS HAVE BEEN CAREFULLY CONSIDERED. THE APPELLANTS CLAIM THAT A GROUND OF APPEAL WAS RAISED IN PARA 3 OF HIS LETTER DATED 23 . 09.2012 IS INCORRECT. NO LETTER DATED 23.09.2012 HAS BEEN SUBMITTED IN APPEAL. A LETTER DATED 26.09.2012 WAS SUBMITTED ON 26.09.2012 BUT NO GROU ND OF APPEAL WAS RAISED IN THIS LETTER AND ONLY SUBMISSIONS WERE MADE. THE GROUNDS OF APPEALS ARE QUOTED IN PARA 1 OF THE APPELLATE ORDER AND NO FURTHER GROUND WAS RAISED IN APPEAL. 10 . AGGRIEVED BY THE SAID ORDER OF THE LD CIT(A) THE ASSESSEE IS BEFORE U S. THE SOLE GROUND RAISED BY THE ASSESSEE IS THAT THE QUANTUM OF PENALTY SHOULD HAVE BEEN MODIFIED BY THE LD CIT(A) WHEN IT WAS SPECIFICALLY POINTED OUT TO HIM THAT ON THE FACTUAL BACKGROUND , A PATENT IRREGULARITY ON THE FACE OF THE RECORD, HAS BEEN PAGE NO. 4 COMMI TTED BY THE ASSESSING OFFICER AS WELL BY THE LD CIT(A). THE LD AR CONTENDED THAT THE EXEMPTION CLAIMED BY THE ASSESSEE U/S 10B OF RS. 49,78,919/ - WAS DULY SUPPORTED BY AUDIT CERTIFICATE. THE ASSESSEE ON A BONA - FIDE BELIEF, BASED ON THE CERTIFICATE OF THE AUDIT OR CLAIM ED THE EXEMPTION U/S 10B OF THE ACT AND BASED ON THE VERY SAME PAPERS THE ASSESSING OFFICER HA S DRAWN ANOTHER INFERENCE THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM EXEMPTION U/S 10B TO THE EXTENT OF RS. 8,80,564/ - . THEREFORE THE LD AR CONTEN DS THAT THE INCOME WAS DISCLOSED AND THE ASSESSEE DID NOT CONCEAL THE INCOME OR FURNISHED ANY INCORRECT PARTICULARS . THE LD AR ALSO CONTENDED THAT THE DIVIDEND TO THE TUNE OF RS. 2,48,685/ - ON ANY RATE IS EXEMPTED U/S 10(33) OF THE ACT. THE LD AR ALSO CONTENDED THE REIMBURSEMENT OF EXPENDITURE SHOULD HAVE BEEN CONSIDERED ON THE MATCHING PRINCIPLE AND ALSO STATED THAT THE SHORT AND EXCESS RECOVERY OF SMALL AMOUNT OF RS. 7/ - COULD BE SAID TO BE ELIGIBLE EXPENSE . IT WAS ALSO STRESSED BY THE LD AR, THAT THE APPELLANT HAS SHOWN OTHER INCOME OF RS. 8,80,565/ - SEPARATELY IN ITS AUDITED PROFIT AND & LOSS ACCOUNT AND IN ITS INCOME TAX RETURN FILED PART A OF P&L OF THE RETURN SHOWS THAT THE INTEREST INCOME OF RS. 8,40,557/ - AND ANY OTHER INCOME OF RS. 40,000/ - , TO TALING RS. 8,80,565/ - AS OTHER INCOME. SO IT WAS CONTENDED BY THE LD AR, THAT THIS CLEARLY SHOWS THAT OTHER INCOME OF RS. 8,80,565/ - WAS SEPARATELY SHOW IN P&L ACCOUNT AND IT WAS FROM THIS DISCLOSURE OF THE ASSESSEE THAT THE ASSESSING OFFICER HAS DISALLOWE D THE EXPENDITURE U/S 10B TO THE TUNE OF RS. 8,80,565/ - AND THEREFORE THE APPELLANT HAS NEITHER CONCEALED THE PARTICULARS OF INCOME NOR HAS FURNISHED INACCURATE PARTICULARS OF INCOME. IT WAS ALSO STATED THAT THE AUDITORS REPORT IN FO R M N O . 56G HAS WORKED O UT THE DEDUCTION U/S 10B AT RS. 45,78,918/ - AND IN THE SAID CIRCUMSTANCES, THE ASSESSEE CLAIMED DEDUCTION FOR THE SAID AMOUNT. IT WAS ALSO POINTED OUT BY THE LD AR THAT AS SOON AS THE ASSESSING OFFICER DISAGREED WITH THE QUANTUM OF CLAIM MADE U/S 10B THEN ITSELF THE ASSESSEE OFFERED RS. 8,80,565/ - TO BE SUBJECTED TO TAX. IN THE SAID CIRCUMSTANCE HE CONTENDS THAT THERE WAS NO CONCEALMENT OR FURNISHING INACCURATE PARTICULARS OF INCOME BECAUSE FIRSTLY SUCH AMOUNT WAS APPEARING IN THE PROFIT AND LOSS ACCOUNT AN D SECONDLY IT IS ALSO SUPPORTED BY AUDIT CERTIFICATE AND THAT IT WAS NOT A CASE WHERE IN, INCOME HAS BEEN DISCOVERED BY THE ASSESSING OFFICER AND MERE DISALLOWANCE OF A CLAIM CANNOT WARRANT IMPOSITION OF PENALTY BECAUSE A DISTINCTION HAS TO BE MADE BETWEEN A WRONG CLAIM AND A FALSE CLAIM. WHILE THE LATTER MAY WARRANT PENALTY THE FORMER WILL NOT. ON THE PAGE NO. 5 OTHER HAND THE LD DR CONTENDED THAT THE INCOME IN ORDER TO CLAIM EXEMPTION U/S 10B NEED TO BE DERIVED FROM THE INDUSTRIAL UNDERTAKING AND THERE MUST BE DIRECT OR IMMEDIATE NEXUS OF THE INCOME WITH THE SAID INDUSTRIAL UNDERTAKING TO QUALIFY FOR EXEMPTION U/S 10B. THE LD DR CITED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. STERLING FOODS (1999) 237 ITR 579 (SC) AND THE CASE OF PANDIAN CHEMICALS LTD. VS. CIT (2003) 262 ITR 579 (SC) TO BUTTRESS THE ORDER OF LD CIT(A). 11 . THE MAIN AND SOLE GRIEVANCE OF THE LD AR IS THAT THERE IS A MISTAKE IN THE COMPUTA TION OF THE PENALTY AND TO DEMONSTRATE THAT HE PROPOSE THE FOLLOWING COMPUTATION BEFORE US: - ASSESSED INCOME RS. 11,93,746/ - RETURNED INCOME RS. 3,13,179/ - DIFFERENCE RS. 8,80,567/ - ] ASSESSING OFFICER WITHOUT PREJUDICE COULD HAVE IMPOSED PENALTY ONLY ON THE DIFFERENCE OF RS. 8,80,567/ - . BUT IN THE PENALTY ORDER HE HAS IMPOSED PENALTY ON THE DEDUCTION OF RS. 36,98,354/ - ALLOWED BY HIM UNDER SECTION 10B OF THE INCOME TAX ACT, 1961. THE PENALTY SHOULD HAVE BEEN COMPUTED AS FOLLOW S: - DIFFERENCE BETWEEN RETURNED INCOME AND ASSESSED INCOME RS. 8,80,567/ - TAX AS 30% ON RS. 8,80,567/ - RS. 2,64,170/ - 100% OF THE TAX AS IMPOSED BY HIM RS. 2,64,170/ - 12 . WE HAVE HEARD BOTH THE SIDES AND PERUSED THE RECORDS. FROM A PERUSAL OF THE IMPUGNED ORDER REVEALS THAT THE ASSESSEE PREFERRED AN APPLICATION U/S 154 OF THE ACT BEFORE THE LD CIT(A) FOR RECTIFICATION OF THE APPELLATE ORDER DATED 28.09.2012 ; IN THAT IT WAS STATED THAT VIDE LETTERS DATED 23.09.2011 AND 26.09.20 12 THE APPELLANT HAD RAISED AN ADDITIONAL GROUND WHICH HAS NOT BEEN CONSIDERED BY THE LD CIT(A) AND THEREFORE THE SAID ADDITIONAL GROUND ALSO NEED TO BE CONSIDERED AND THE APPELLATE ORDER MAY BE RECTIFIED ACCORDINGLY. IN THE SAID IMPUGNED ORDER WE FIND TH AT THE LD CIT(A) HAVE NOTED THAT HE COULD NOT TRACE OUT THE LETTER DATED 23.09.2011 ; HOWEVER, HE NOTES THAT IN THE LETTER DATED 26.09.2012 , NO NEW GROUND OF APPEAL HAS BEEN RAISED AND THEREFORE HE CAME TO CONCLUSION THAT NO NEW GROUND OF APPEAL WAS RAISED BEFORE HIM ; AND IN RESPECT TO THE PLEA OF THE ASSESSEE THAT THERE WAS A MISTAKE IN COMPUTATION OF QUANTUM OF THE PENALTY IN THE APPELLATE ORDER DATED 28.09.2012, THE LD CIT(A) OBSERVES THAT THE APPELLANT DID NOT FILE ANY COPY OF THE RELEVANT DOCUMENTS AND HELD THAT THE SAID CLAIM OF THE ASSESSEE REMAINS UNSUBSTANTIATED. WITH THE SAID OBSERVATIONS THE LD CIT(A) REJECTED THE APPLICATION FILED U/S 154 OF THE ACT. THE SAID PAGE NO. 6 REASONING GIVEN BY THE LD CIT(A) CANNOT BE COUNTENANCE D SINCE THE MISTAKE POINTED OUT BY THE ASSESSEE COULD HAVE BEEN LOOKED INTO AND VERIFIED BY THE LD CIT(A), ON THE BASIS OF THE MATERIALS ALREADY ON RECORD AND SINCE THERE WAS NO REQUIREMENT OF ANY FRESH EVIDENCE TO ADJUDICATE THE SAID CLAIM MADE BY THE APP ELLANT U/S 154 OF THE ACT , WE SET ASIDE THE IMPUGNED ORDER DATED 26.03.2013 OF THE LD CIT(A) . 13 . IN THE INTEREST OF JUSTICE , WE DIRECT THE LD CIT(A) TO RE - ADJUDICATE THE CLAIM OF THE APPELLANT - ASSESSEE AND VERIFY WHETHER THE PENALTY HAS BEEN CORRECTLY COMPUTED AND VERIFY WHETHER THE CONTENTION OF THE ASSESSEE THAT PENAL TY HAS BEEN INCORRECTLY COMPUTED . NEEDLESS TO SAY THAT THE APPE LLANT MAY PRODUCE ALL THE RELEVANT DOCUMENTS TO SUBSTANTIATE ITS CLAIM BEFORE THE LD CIT(A) WHO MAY AFTER GIVING ADEQUATE OPPORTUNITY MAY PASS FRESH ORDERS. 14 . IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCE D IN THE OPEN COURT ON 2 8 .01.2014. - S D / - - S D / - ( J. S REDDY) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 2 8 /01 / 2014 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI