Jackson Engineers Ltd., New Delhi V. ACIT, New Delhi

ITA 6045/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4045 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2004-2005
• Appeal Filed On: 06-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASHISH CHADHA
• Keywords: Depreciation; Wrong claim; Difference of opinion; Revenue expenditure; Capital expenditure
• Section: 143(3); 153A; 32; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDEN T & SHRI K.N. CHARY, JUDICIAL MEMBER ITA NO.-6045/DEL/2015 ( ASSESSMENT YEAR: 2004-05) JACKSON ENGINEERS LTD. 626, 6 TH FLOOR, DLF TOWER-A, JASOLA, NEW DELHI. AAACJ1625K VS ACIT CENTRAL CIRCLE 4 NEW DELHI. ASSESSEE BY SH. ASHISH CHADHA, CA REVENUE BY SH. ARUN KUMAR YADAV, SR. DR ORDER PER SHRI K.N. CHARY, JUDICIAL MEMBER ASSESSEE FILED THIS APPEAL CHALLENGING THE ORDER DA TED 07.10.2015 IN APPEAL NO. 46/14-15 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-23, NEW DELHI (HEREINAFTER FOR SHORT CALLED AS THE LD. CIT (A)) ON THE FOLLO WING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE OR DER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] C ONFIRMING PENALTY U/S 271(1)(C) IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE PENALTY OF RS. 6,50,430/- DATE OF HEARING 18.09.2017 DATE OF PRONOUNCEMENT 13.10.2017 2 ITA NO. 6045/DEL/2015 U/S 271(1)(C) OF THE INCOME TAX ACT, 19671 (ACT) ON ACCOUNT OF DISALLOWANCE OF RS. 18,88,042/- HOLDING REVENUE EXP ENDITURE AS CAPITAL EXPENDITURE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN REJECTING THE CONTENTIO N OF THE ASSESSEE THAT THERE IS NEITHER CONCEALMENT NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME WHICH ARE THE TWO MAIN POSTUL ATES FOR THE APPLICABILITY OF THE PROVISION OF SECTION 271(1)(C) OF THE INCOME TAX ACT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN REJECTING THE CONTENTION OF THE APPELLANT THAT P ENALTY PROCEEDINGS ARE INDEPENDENT PROCEEDINGS AND AS SUCH MERELY ON T HE BASIS OF DISALLOWANCES AND ADDITIONS, PENALTY CANNOT BE LEVI ED. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN HOLDING THAT ASSESSEE H AS FAILED TO FURNISH ACCURATE PARTICULARS OF INCOME DESPITE OF T HE FACT THAT ALL THE MATERIAL FACTS WERE DULY DISCLOSED BY THE ASSESSEE AT THE TIME OF FILING OF RETURN OF INCOME AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE LD. AO. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE PENALTY BY IGNORING THE CONTENTION OF THE ASSESSEE THAT THE ADDITION HAS BE EN MADE ON ACCOUNT OF DIFFERENCE OF OPINION OF LD. AO AND ASSE SSEE AND, THEREFORE, NO PENALTY U/S 271(1)(C) OF THE ACT IS L EVIABLE IN CASE OF SUCH A DEBATABLE CLAIM IN VIEW OF VARIOUS JUDICIAL PRECEDENTS. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN IGNORING THE FACT THAT THE ASSESSEE HAVING RELIED UPON THE REPORT OF AUDITOR AS APPOINT ED UNDER SECTION 44AB OF THE ACT REGARDING SUCH EXPENDITURE BEING RE VENUE IN NATURE, NO PENALTY CAN BE IMPOSED IF SUCH EXPENDITURE IS AS SESSED AS CAPITAL EXPENDITURE. 8. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER A NY OF THE GROUNDS OF APPEAL. 2. BRIEFLY STATED FACTS RELEVANT FOR THE DISPOSAL O F THIS MATTER ARE THAT THE ASSESSEE IS A PUBLIC COMPANY INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT, 1956 AND A SEARCH WAS CONDUCTED IN THE PREMISES OF THE ASSESSEE ON 10.02.2010 PURSUANT TO WHICH NOTICE U/S 153A OF THE ACT WAS SERVED ON THE ASSESS EE. ASSESSEE 3 ITA NO. 6045/DEL/2015 FILED RETURN OF INCOME ON 28.03.2011 DECLARING A TO TAL INCOME OF RS. 1,82,63,915/-. IT WAS FOUND THAT THE ASSESSEE INCURRED EXPENSES OF RS. 25,90,060/- IN RESPECT OF UP-GRADAT ION AND MAINTENANCE OF SOFTWARE AND CLAIMED DEDUCTION TREAT ING IT AS REVENUE EXPENSE. HOWEVER, ASSESSING OFFICER DISALL OWED THE SAID EXPENSE OF SECTION 37 OF THE ACT, ADDED THE SAME TO THE COST OF THE COMPUTERS AND ALLOWED DEPRECIATION AT 60% U/S 32 OF THE ACT. IN THAT PROCESS, AO DISALLOWED A SUM OF RS. 18,13,032/ - AND PASSED ORDER DATED 26.12.2011 U/S 143(3) AND 153A OF THE A CT AND AT THE SAME TIME INITIATED PENALTY PROCEEDINGS U/S 271(1)( C) OF THE ACT. PENALTY PROCEEDINGS WERE CONCLUDED BY ORDER DATED 1 4.03.2014 LEVYING THE PENALTY OF RS. 6,50,430/- ON ACCOUNT OF THE DISALLOWANCE OF CLAIM U/S 37 OF THE ACT IN RESPECT OF THE SO CALLED CAPITAL EXPENDITURE. 3. APPEAL PREFERRED BY THE ASSESSEE WAS DISMISSED B Y THE LD. CIT (A) BY WAY OF IMPUGNED ORDER. HENCE, THIS APPE AL BY THE ASSESSEE. 4. IT IS THE ARGUMENT OF THE LD. AR THAT ON ACCOUNT OF DISALLOWANCE OF RS. 18,88,042/- CLAIMED BY THE ASSE SSEE AS 4 ITA NO. 6045/DEL/2015 REVENUE EXPENDITURE BUT TREATED BY THE AO AS CAPITA L EXPENDITURE CANNOT BE A BASIS FOR LEVYING THE PENALTY AND AS A MATTER OF FACT THERE IS NEITHER CONCEALMENT OF INCOME NOR FURNISHI NG INACCURATE PARTICULARS THEREOF, AS SUCH, PROVISIONS U/S 271(1) (C) OF THE ACT HAVE NO APPLICATION. PER CONTRA, IT IS THE ARGUMEN T OF THE LD. DR THAT A FALSE CLAIM U/S 37 OF THE ACT AMOUNTS TO FUR NISHING OF INACCURATE PARTICULARS, AS SUCH, THE AUTHORITIES BE LOW ARE RIGHT IN THEIR APPROACH AND IN LEVYING THE PENALTY. 5. SO FAR AS THE FACTS ARE CONCERNED, THERE IS NO D ISPUTE. IN RESPECT OF THE EXPENSE INCURRED BY THE ASSESSEE FOR UP-GRADATION AND MAINTENANCE OF SOFTWARE TO THE TUNE OF RS. 25,9 0,060/- THE ASSESSEE TREATED IT AS REVENUE EXPENDITURE, WHEREAS AO TREATED IT AS CAPITAL EXPENDITURE AND BY DENYING THE DEDUCTION U/S 37 OF THE ACT, AO ALLOWED THE DEPRECIATION AT 60% U/S 32 OF T HE ACT. HERE THE ENTIRE QUESTION REVOLVES AROUND THE TREATMENT O F THE EXPENSE RELATABLE TO THE UP-GRADATION AND MAINTENANCE TO TH E SOFTWARE. AO DIFFERED WITH THE VIEW TAKEN BY THE ASSESSEE BUT TH AT DOES NOT PER SE AMOUNT TO EITHER CONCEALMENT OF INCOME OR FURNIS HING ALL INACCURATE PARTICULARS IN AS MUCH AS ALL THESE DETA ILS ARE AVAILABLE 5 ITA NO. 6045/DEL/2015 BEFORE THE AO. IT IS NOT A MATTER OF CONCEALMENT O F INCOME OR FURNISHING OF WRONG PARTICULARS BUT ONLY A DEBATABL E QUESTION AS TO THE TREATMENT OF THIS PARTICULAR EXPENDITURE. IN T HESE CIRCUMSTANCES, WHILE FOLLOWING THE DECISION OF THE HONBLE APEX COURT IN CIT VS . RELIANCE PETRO PRODUCTS PVT . LTD ., ( 2010 ) 322 ITR 158 (SC) WE FIND IT DIFFICULT TO HOLD THAT ANY OF THE INGRE DIENTS REQUIRED TO INVOKE THE PROCEEDINGS U/S 271(1)(C) OF THE ACT ARE EXISTING IN THIS MATTER. WE, THEREFORE, QUASH THE PENALTY PROCEEDINGS. GROUND ARE ALLOWED ACCORDINGLY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON13.10.2017 SD/- SD/- (G.D. AGRAWAL) (K.N. CHARY) PRESIDENT JUDICIAL MEMBER DATED: 13.10.2017 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI 6 ITA NO. 6045/DEL/2015