DCIT, New Delhi V. M/s. A. Little World Pvt. Ltd., Mumbai

ITA 4800/DEL/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6540 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-12-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 07-09-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : A : NEW DELHI BEFORE SHRI R.S. SYAL, AM & SHRI K.N. CHARY, JM ITA NOS.4800 & 4801/DEL/2012 ASSESSMENT YEAR : 2008-09 DCIT, CIRCLE-1(1), NEW DELHI. VS. A LITTLE WORLD PVT. LTD., 21-22 B, IIND FLOOR, HAKOBA MILL COMPOUND, DATARAM LAD PATH, KALACHOWKI, MUMBAI. PAN: AACCA5044R ASSESSEE BY : SHRI SANJAY JAIN, CA DEPTT. BY : SHRI S.K. JAIN, DR DATE OF HEARING : 20.12.2016 DATE OF PRONOUNCEMENT : 21.12.2016 ORDER PER R.S. SYAL, AM: THESE TWO APPEALS BY THE REVENUE RELATING TO THE ASSESSMENT YEAR 2008-09 PERTAIN TO QUANTUM AS WELL AS PENALTY MATTERS. SINCE RELATED ISSUES ARE RAISED IN THESE APPEALS, WE ITA NOS.4800 & 4801/DEL/2012 2 ARE, THEREFORE, PROCEEDING TO DISPOSE THEM OFF BY T HIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. QUANTUM APPEAL 2. FIRST GROUND OF THE REVENUES APPEAL IN QUANTUM PROCEEDINGS IS AGAINST THE DELETION OF ADDITION OF RS.8,62,45,344/-. 3. BRIEFLY STATED, THE FACTS OF THIS GROUND ARE THA T THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPING, PROVIDING AND LICENSING TECHNOLOGY FOR ENABLING SMART CARD AN D OTHER ELECTRONIC TECHNOLOGY. ON PERUSAL OF THE ASSESSEE S BALANCE SHEET, IT WAS FOUND BY THE AO THAT IT HAD SHOWN A S UM OF RS.8.62 CRORE AS ADVANCE FROM CUSTOMERS IN THE BALA NCE SHEET UNDER THE HEAD CURRENT LIABILITIES WITH THE DETAI LS ,VIZ., ADVANCE FROM APGVB (AGAINST CARDS) RS.4,05,71,314 /- AND ADVANCE FROM SBI (AGAINST CARDS) RS.4,56,74,030/- . ON BEING CALLED UPON TO JUSTIFY THE SHOWING OF THIS AM OUNT AS ADVANCE, THE ASSESSEE SUBMITTED THAT THIS AMOUNT WA S RECEIVED ITA NOS.4800 & 4801/DEL/2012 3 AS 50% OF TOTAL AMOUNT TOWARDS THE SUPPLY OF A PART ICULAR NUMBER OF CARDS, WHICH WAS EVENTUALLY ADJUSTED AGAI NST THE SUPPLY OF CARDS WHEN INVOICES WERE RAISED IN SUBSEQ UENT YEARS. NOT CONVINCED, THE AO MADE THE ADDITION. THE LD. CI T(A) ORDERED FOR THE DELETION OF ADDITION. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE ASSES SEE HAS CONTENDED BEFORE THE AUTHORITIES BELOW THAT A SUM O F RS.8.62 CRORE WAS IN THE NATURE OF ADVANCE AND SHOWN AS INC OME IN LATER YEAR(S). ON AN EARLIER OCCASION WHEN THIS APP EAL CAME UP FOR HEARING, THE BENCH DIRECTED THE LD. DR TO VERIF Y THIS CONTENTION OF THE ASSESSEE FROM THE RECORDS OF THE AO. NO INTIMATION HAS BEEN RECEIVED DESPITE THE FACT THAT SUCH DIRECTION WAS GIVEN ON 9 TH JULY, 2013 AND A PERIOD OF MORE THAN THREE YEARS HAS ELAPSED SINCE THEN. UNDER THESE CIR CUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT IT WOULD BE I N THE FITNESS OF THINGS IF THE IMPUGNED ORDER IS SET ASIDE AND TH E MATTER IS ITA NOS.4800 & 4801/DEL/2012 4 RESTORED TO THE FILE OF THE AO. WE ORDER ACCORDING LY AND DIRECT HIM TO VERIFY THE ASSESSEES CONTENTION ABOUT THE O FFERING OF RS.8.62 CRORE TO TAX IN THE SUBSEQUENT YEAR(S). IF SUCH CONTENTION OF THE ASSESSEE IS FOUND TO BE CORRECT, THEN, OF COURSE, NO ADDITION CAN BE SUSTAINED IN THIS YEAR. IN THE OTHERWISE SCENARIO, THE REMAINING AMOUNT SHOULD BE CHARGED TO TAX IN THIS YEAR ITSELF. 5. GROUND NO.2 OF THE REVENUES QUANTUM APPEAL IS A GAINST THE DELETION OF ADDITION OF RS.9,20,518/- TOWARDS R ESEARCH AND DEVELOPMENT EXPENSES. THE ASSESSEE CLAIMED DEDUCTI ON OF RS.9,20,518/- BY TREATING IT AS A RESEARCH AND DEVE LOPMENT EXPENSES. ON BEING CALLED UPON TO JUSTIFY THE DEDU CTIBILITY, THE ASSESSEE STATED THAT IT STARTED DEVELOPING AN APPLICATION FOR THE ENROLMENT OF BENEFICIARIES OF MOBILE PHONE. TH E APPLICATION SOFTWARE COULD NOT BE DEVELOPED UP TO T HE REQUIREMENT FOR USAGE ON THE FIELD AND THE SAME WAS EXPENSED ITA NOS.4800 & 4801/DEL/2012 5 OUT. THE AO TREATED THIS AMOUNT AS CAPITAL IN NATU RE AND MADE THE ADDITION, WHICH CAME TO BE DELETED IN THE FIRST APPEAL. 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE REL EVANT MATERIAL ON RECORD. THE ASSESSEE ADMITTED THAT THI S SUM WAS INCURRED ON A SOFTWARE TO BE USED BY THE ASSESSEE I N ITS OWN BUSINESS. IT WAS FURTHER ADMITTED THAT IF THIS SOF TWARE HAD BEEN SUCCESSFULLY MADE, THEN, IT WOULD HAVE BEEN A CAPIT AL EXPENDITURE. AS THE SOFTWARE COULD NOT BE PROPERLY DEVELOPED AND THE ASSESSEE WROTE IT OFF, IN OUR CONSIDERED OP INION, THIS IS IN THE NATURE OF A CAPITAL LOSS NOT REQUIRING ANY D EDUCTION. THE VIEW TAKEN BY THE LD. CIT(A) ON THIS ISSUE IS REVER SED. THIS GROUND IS ALLOWED. 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. PENALTY APPEAL 8. THIS APPEAL IS AGAINST THE DELETION OF PENALTY I MPOSED BY THE AO U/S 271(1)(C) OF THE ACT AMOUNTING TO RS.2,9 6,27,675/- IN RELATION TO THE ABOVE DISCUSSED TWO ADDITIONS. WHILE ITA NOS.4800 & 4801/DEL/2012 6 DEALING WITH THE QUANTUM APPEAL, WE HAVE RESTORED T HE MATTER CONCERNING THE FIRST ISSUE OF DELETION OF ADDITION OF RS.8.62 CRORE TO THE AO. THE IMPUGNED ORDER IS SET ASIDE T O THIS EXTENT AND THE INSTANT PENALTY ON SUCH RESTORED ISSUE IS SENT BACK TO THE AO FOR TAKING AN APPROPRIATE DECISION AFTER THE FINALIZATI ON OF THE FRESH ASSESSMENT PURSUANT TO THE TRIBUNAL ORDER. OUR VIEW IN RESTORING THE PENALTY TO THE AO IS FORTIFIED BY THE JUDGMENT OF T HE HONBLE SUPREME COURT IN THE CASE OF MOHD. MOHATRAM FAROOQUI VS. CIT (SC) 2010- TIOL-23-SC-IT IN WHICH IT HAS BEEN HELD THAT IF ADDITION IS RES TORED TO THE AO, THEN PENALTY SHOULD ALSO BE RESTORED. THE H ONBLE JURISDICTIONAL HIGH COURT IN SANJAY GUPTA VS. CIT (2014) 366 ITR 18 (DEL) HAS ALSO HELD THAT WHERE THE QUANTUM HAS BEEN REMANDED TO TH E AO, THE QUESTION OF PENALTY ON ACCOUNT OF THE SAID AMOUNT BEING TREA TED AS UNDISCLOSED INCOME, SHOULD ALSO BE REMANDED TO THE AO. WE, THER EFORE, SET ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF THE AO FOR DETERMINING THE QUESTION OF PENALTY OR OTHERWISE ON THE ISSUE, AFTER THE PASSING OF THE ORDER PURSUANT TO THE RESTORATION MA DE BY THE TRIBUNAL. ITA NOS.4800 & 4801/DEL/2012 7 9. AS REGARDS THE SECOND ADDITION OF RS.9,20,518/- WHICH WE HAVE CONFIRMED, WE FIND THAT THE SAME IS A CASE IN WHICH THE ASSESSEE DECLARED NECESSARY PARTICULARS BEFORE CLAI MING DEDUCTION AND IT WAS A BONA FIDE VIEW OF THE ASSESSEE ABOUT THE ELIGIBILITY OF SUCH CLAIM FOR DEDUCTION, NOT WARRAN TING ANY PENALTY U/S 271(1)(C) OF THE ACT. THE HONBLE SUPR EME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) HAS HELD THAT SIMPLY FOR THE REASON THAT THE AO DID NOT FIND THE CLAIM OF THE ASSESSEE TO BE SUSTAINABLE IN LAW UP TO A CERTA IN EXTENT, CANNOT JUSTIFY PENALTY U/S 271(1)(C), MORE SO, WHEN PARTICULARS FU RNISHED BY THE ASSESSEE WERE NOT FOUND TO BE INACCURATE. THE FACTS OF THE INSTANT ISSUE AS TESTED ON THE RATIO DECIDENDI OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE ABOVE JUDGMENT, DO NOT CALL FOR ANY PE NALTY ON THIS ADDITION. THE IMPUGNED ORDER IN DELETING THE PENALTY TO THIS EXTENT IS APPROVED. ITA NOS.4800 & 4801/DEL/2012 8 10. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21.12.2016. SD/- SD/- [K.N. CHARY] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 21 ST DECEMBER, 2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.