CMS INFO SYSTEMS P. LTD, MUMBAI V. ACIT 5(3), MUMBAI

ITA 5391/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6152 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 21-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIRAMA KARTIKEYAN
• Assessee Lawyers: PRAKSH K JOTWANI
• Keywords: Depreciation; Wrong claim; Set aside
• Section: 271(1)(c)

Judgement Text

, ,, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL MEMBER ./ ITA NO.5391/MUM/2017 ( / ASSESSMENT YEAR :2011-2012) CMS INFO SYSTEMS PVT. LTD., CMS HOUSE, PLOT NO.91, STREET NO.7, MAROL MIDC, ANDHERI(E), MUMBAI-400093 VS. ACIT-5(3), MUMBAI ./PAN NO. : AAMCS 2311 K ( /APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI PRAKSH K. JOTWANI, AR /REVENUE BY : SHRI ABHIRAMA KARTIKEYAN, DR / DATE OF HEARING : 07/01/2019 /DATE OF PRONOUNCEMENT 15/01/2019 / O R D E R PER SHRI RAJESH KUMAR, AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER OF THE CIT(A) 10, MUMBAI, DATED 19.06.2017, WHICH IN TURN HAS ARI SEN OUT OF THE ORDER PASSED U/S.271(1)(C) OF THE ACT. 2. THE ISSUE RAISED BY THE ASSESSEE IN THE PRESENT APPEAL IS AGAINST THE CONFIRMATION OF PENALTY OF RS.3,72,040/- AS IMP OSED BY THE AO U/S.271(1)(C) OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSMENT WAS FRAMED U/S.143(3) OF THE ACT VIDE ORDER DATED 03.02.2014 S HOWING TOTAL INCOME AT RS.14,82,53,110/- AGAINST THE RETURNED INCOME OF RS .14,71,33,110/-, HEREBY MAKING ADDITION OF RS.11,20,000/- ON ACCOUNT OF DISALLOWANCE OF EXCESS DEDUCTION CLAIMED U/S.35DD OF THE ACT. THE S AID EXPENSES CLAIMED BY THE ASSESSEE WERE COMPRISED OF STAMP DUT Y AND RELATED ITA NO.5391/17 2 EXPENSES INCURRED FOR INCREASE OF AUTHORISED CAPITA L CONSEQUENT TO ALLOTMENT OF SHARES TO SHAREHOLDERS OF THE DEMERGED COMPANY M/S CMS COMPUTERS LTD. AND NO NEW FUNDS HAVE BEEN RECEIVED BY THE ASSESSEE COMPANY AND, THUS, EXPENSES WERE RELATED TO DEMERGE R OF THE COMPANY. AS PER THE AO THE SAID EXPENSES WERE TO BE ALLOWED IN FIVE SOLVENT AS PER THE PROVISIONS OF SECTION 35DD OF THE ACT AND, THUS , THE ASSESSEE HAS MADE WRONG CLAIM BY CLAIMING ENTIRE EXPENSES IN ONE YEAR. IN PARA 4 OF THE PENALTY ORDER IT IS MENTIONED THAT SIMILAR DIS ALLOWANCE OF EXCESS CLAIM OF DEDUCTION U/S.35DD WAS ALSO MADE BY THE AO IN AY 2010-2011 FOR WHICH NO PENALTY PROCEEDINGS WAS INITIATED. THE AO ALSO STATED THAT THE ASSESSEE HAS NOT FILED ANY APPEAL AGAINST THE SAID DISALLOWANCE WHICH SHOWS THAT THE ASSESSEE HAS ACCEPTED THE DISALLOWAN CE FOR AY 2010- 2011. THE ASSESSEE SHOULD HAVE SUO MTOU DISALLOWED THE WRONG CLAIM OF THE DISALLOWANCE. FINALLY, RELYING ON THE ORDER OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION (P) LTD., 327 ITR 510, THE AO LEVIED PENALTY EQUAL TO 100% TAX SOUGHT TO BE EV ADED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME THEREBY NOT SPECIFYING THE SP ECIFIC CHARGE ON WHICH THE PENALTY WAS PROPOSED TO BE LEVIED. FINALLY, THE ORDER IMPOSING PENALTY U/S.271(1)(C) OF THE ACT WAS PASSED ON 27.08.2014. 4. THE CIT(A) IN APPEAL, UPHELD THE PENALTY ORDER O N THE GROUND THAT THE ASSESSEE WAS ENTITLED TO CLAIM OF RS.2,80,000 O UT OF RS.11,20,000/- BY CLAIMING FULL AMOUNT GIVING REASON THAT SIMILAR DISALLOWANCE WAS GIVEN IN A.Y.2010-2011 AND NO APPEAL WAS FILED BY THE ASS ESSEE. ITA NO.5391/17 3 CONSEQUENTLY, THE CIT(A) ALSO HELD THAT THE EXPLANA TION 1 OF SECTION 271(1)(C) OF THE ACT IS APPLICABLE AS THE DIFFERENC E BETWEEN THE RETURN OF INCOME AND ASSESSED INCOME REPRESENTED THE INCOME I N RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED AND, THUS, JUSTIFIE D IN IMPOSITION OF PENALTY. THIRD REASON STATED BY THE CIT(A) THAT THE ASSESSEE HAS NOT DISPUTED THE DISALLOWANCE BEFORE THE APPELLATE AUTH ORITY IN PREVIOUS AS WELL AS IN CURRENT YEAR AND, THEREFORE, IT IS PRESU MED THAT THE ASSESSEE HAS NO OBJECTION FOR DISALLOWANCE. THE OPERATIVE PA RT OF THE ORDER OF THE CIT(A) IS REPRODUCED AS UNDER :- 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND THE SUBMISSIONS OF THE ID.AR. I HAVE ALSO GONE THROUGH THE DECISIONS RELIED ON BY THE AO AND THE ID.AR. THE ONLY DISPUTE AT THE TIME OF ASSESSMENT WAS WHETHER THE EXPENDITURE INCURRED FOR INCREASE OF AUTHORISED CAPITAL OF A DEMERGED COMPANY IS CAPITAL OR REVENUE. THE APPELLANT HAS TREATED IT AS A REVENUE AND CLAIM ED ENTIRE 14 LAKHS IN P&L ACCOUNT WHEREAS THE AO HAS ALLOWED ONL Y RS. 2, 80, 000 WHICH IS 1/5 OF 14 LAKHS AND THE BALANCE OF RS. 11. 20, 000 WAS DISALLOWED ON WHICH THE PRESENT PENALTY IS LEVIED. THERE WAS NO APPEAL FILED ON THIS DISALLOWANCE. FURTHER, SIMILAR DISALLOWANCE WAS ALSO MADE IN A.Y 2010-11 AND NO APPEAL WAS FILED FO R THIS YEAR ALSO, 5.1. IN MY CONSIDERED OPINION THE PENALTY LEVIE D BY THE AO IS IN ORDER FOR THE FOLLOWING REASONS- FIRSTLY, THE PROVISIONS OF 35 DO ARE VERY CLEAR IN THE SENS E THAT ONLY ONE FIFTH OF .SUCH EXPENSES SHOULD BE ALLOWED TO BE CLAIMED AS EXPENDITURE FOR THE YEAR. THE SAID PROVISIONS ARE R EPRODUCED AS UNDER- [AMORTISATION OF EXPENDITURE IN CASE OF AMALGAMATION OR DEMERGER, 351)1). (1) WHERE AN ASSESSEE BEING AN INDIAN COMPANY. -INCURS ANY EXPENDITURE, ON OR ALTER AFTER THE 1ST DAY OF APRIL, 1999, WHOLLY AND EXCLUSIVELY FOR THE PURP OSES OF AMALGAMATION OR DEMERGER OF AN UNDERTAKING, THE ASS ESSEE SHALL BE ALLOWED A DEDUCTION OF AN AMOUNT EQUAL TO ONE- FILTH OF SUCH EXPENDITURE- FOR EACH OF THE LIVE SUCCESSIVE PREVIOUS YEARS BEGINNING WITH THE PREVIOUS YEAR IN WHICH THE AMALGAMATION OR DEMERGER TAKES PLACE. ITA NO.5391/17 4 (2) NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF THE EXPENDITURE MENTIONED IN SUB-SECTION (1) UNDER ANY OTHER PROVISIONS OF THIS ACT. AS THERE IS NO AMBIGUITY IN THE PROVISIONS THAT ONL Y ONE FIFTH OF SUCH EXPENSES ARE TO BE ALLOWED, AND THE APPELLANT HAS C LAIMED HUNDRED PERCENT OF SUCH EXPENSES INCURRED FOR INCREASING TH E AUTHORISED CAPITAL, IT IS EVIDENT THAT THERE IS VIOLATION OF S TATUTORY PROVISIONS WHICH CLEARLY ATTRACTS PENAL PROVISIONS. SECONDLY, AS PER EXPLANATION-1 OF SECTION 271(1)(C) , ANY AMOUNT ADDED/DISAVOWED IN COMPUTING THE TOTAL INCOME WHEN COMPARED TO RETURNED INCOME, SUCH AN AMOUNT SHOULD BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEE N CONCEALED. IN OTHER WORDS PENALTY U/S 271(1)(C) WILL ATTRACT IF T HERE IS A DIFFERENCE BETWEEN RETURNED INCOME AND ASSESSED INCOME, IN THE INSTANT CASE SUCH DIFFERENCE HAS ARISEN IN THE ASSESSMENT DUE TO THE DISALLOWANCE OF US. 11. 20, 000 WHICH IS 4/5 OF RS. 14 LAKHS WHICH WAS DEBITED IN THE P&L ACCOUNT AS REVENUE EXPENDITU RE. THEREFORE, PENALTY U/S271(1)(C} IS ATTRACTED. THIRDLY, THE APPELLANT HAS NOT DISPUTED THE DISALLO WANCE BEFORE THE APPELLATE AUTHORITIES EITHER IN THE PREVIOUS A.Y OR FOR THE YEAR UNDER CONSIDERATION. THEREFORE, IT IS PRESUMED THAT THE A PPELLANT HAS NO OBJECTION FOR DISALLOWANCE, MORE SO, AS THE BALANCE AMOUNT WAS ALLOWED IN THE SUBSEQUENT FOUR YEARS TO BE CLAIMED . 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE OBSERVE THAT IN THE PRESENT CASE THE PENALTY HAS BEEN IMPOSED BY THE AO ON ACCOUNT OF WR ONG CLAIM OF DEDUCTION TO THE TUNE OF RS.11.20 LAKHS WHICH WAS I NCURRED BY THE ASSESSEE FOR STAMP DUTY FOR INCREASE IN AUTHORISED SHARE CAPITAL. INDISPUTABLY, THE EXPENSES WERE INCURRED FOR INCR EASE IN AUTHORISED SHARE CAPITAL WHICH WAS NECESSITATED DUE TO ISSUE A ND ALLOTMENT OF SHARES TO THE SHAREHOLDERS OF THE DEMERGER COMPANY. IN THE PRESENT CASE ,THOUGH THE ASSESSEE HAS CLAIMED THESE EXPENSES IN CURRENT YEAR AND ALSO THE FACT REMAINS THAT IN PREVIOUS YEAR ALSO S UCH DISALLOWANCE WAS MADE BY THE AO BUT THE FACT OF THE MATTER IS THAT THE ASSESSEE HAS MADE ITA NO.5391/17 5 FULL DISCLOSURE OF THE FACTS IN THE FINANCIAL STATE MENT AND ALSO BEFORE THE REVENUE AUTHORITIES. THE ONLY DIFFERENCE WAS THAT I NSTEAD AMORTISATION IN FIVE EQUAL INSTALMENTS, THE ASSESSEE HAS CLAIMED TH E ENTIRE AMOUNT IN ONE YEAR. WE FIND MERIT IN THE SUBMISSIONS OF LD. AR TH AT THIS IS BONAFIDE AND INADVERTENT MISTAKE ON THE PART OF THE ASSESSEE. FU RTHER WE FIND THAT THE PENALTY HAS BEEN IMPOSED ON A MECHANICAL MANNER WIT HOUT SPECIFYING ONE OF THE TWO LIMBS ON WHICH THE PENALTY WAS PROPO SED TO BE LEVIED AND SIMILARLY IN THE PENALTY ORDER BOTH THE LIMBS WERE SPECIFIED WHICH REFLECTS A CLEAR CUT CASE OF NON-APPLICATION OF MIND BY THE AO AND MECHANICAL APPLICATION OF LAW IN IMPOSING THE PENALTY ON THE A SSESSEE. THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS (P) LTD ., 322 ITR 158(SC), WHEREIN THE HONBLE APEX COURT HAS HELD THAT A CLA IM OF EXPENSES BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS WHICH IS NOT ACCE PTED BY THE REVENUE WILL NOT ATTRACT THE PENALTY. BESIDES, THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF HONBLE KARNATAKA HIGH C OURT IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTORY & ORS., 359 ITR 565 (KAR.) , THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF A SHOK PAI VS CIT 292 ITR 11(SC), CIT VS SAMSON PERINCHERY ITA NO 1154 OF 2014 ORDER DATED 5.1.207 AND CIT VS. SSAS EMERLAD MEADOWS, [2016] 73 TAXMANN.COM 241(KAR.), WHICH WAS SUBSEQUENTLY, AFFIRMED BY THE HONBLE APEX COURT REPORTED IN [2016] 73 TAXMANN.COM 248 (SC). IN AL L THE ABOVE DECISIONS THE HONBLE COURTS HAVE HELD NO PENALTY IS TO BE LE VIED WHERE THE AO HAS NOT SPECIFIED ONE OF THE TWO LIMBS U/S 271(1)C) OF THE ACT ON WHICH THE ITA NO.5391/17 6 PENALTY IS PROPOSED TO BE LEVIED. WE, THEREFORE, FO LLOWING THE RATIO LAID DOWN IN THE ABOVE DECISIONS, SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY LEVIED AGAINST THE ASSESSE E. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 15/01/2019. SD/- (RAM LAL NEGI) SD/- (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 15/01/2019 . . /PRAKASH KUMAR MISHRA , SR.PS. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSISTANT REGISTRAR ) , / ITAT, MUMBAI 1. / THE APPELLANT- 2. / THE RESPONDENT- 3. ( ) / THE CIT(A), MUMBAI 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//