HAWARE INFOTECH LTD, NAVI MUMBAI V. DCIT CC 4(2), MUMBAI

ITA 6694/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3709 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 15-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI C.N. PRASAD (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 6694/MUM/2016 ASSESSMENT YEAR: 2010 - 11 HAWARE INFOTECH LTD. 413/416 VARDHAMAN MARKET, SECTOR - 17, DBC, VASHI, NAVI MUMBAI - 400705. VS. DCIT - CC - 4(2), MUMBAI AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020. PAN NO. AABCH1613G APPELLANT RESPONDENT ASSESSEE BY : MR. RUTURAJ H. GURJAR, AR REVENUE BY : MR. MANOJ KUMAR SINGH, DR DATE OF HEARING : 02/08/2018 DATE OF PRONOUNCEMENT : 08/08/2018 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE . THE RELEVANT ASSESSMENT YEAR IS 201 0 - 1 1 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 52 [IN SHORT CIT(A) ], MUMBAI AND ARISES OUT OF PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL READ AS UNDER: 1. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, TH E CIT(A) HAS ERRED IN UPHOLDING THE VIEWS OF THE ASSESSING OFFICER (AO) IN RESPECT OF PENALTY LEVIED AMOUNTING TO RS1 3 , 84 ,539/ - U/S 271(1 )(C) OF THE INCOME HAWARE INFOTECH LTD. 6694/MUM/2016 2 TAX ACT BY HOLDING SUBMISSIONS OF THE APPELLANT AS COOKED UP STORY WITHOUT ANY CONCRETE RATIONAL REBUTTAL AS ALS O WITHOUT APPLYING THE MIND TO T HE DETAILS SUBMITTED. THE PENALTY LEVIED OF RS.13,84,539/ - SHOULD BE CANCELLED. 2. ON FACTS AND CIRCUMSTANCES OF THE CA SE, THE ORDER OF PENALTY U/S 271(1 )(C) OF THE ACT IS BAD IN LAW AND VOID AB INITIO, AS THE NO TICE ISSUED U/S 274 R.W.S . 271 IS NOT IN ACCORDANCE WITH LAW. FROM THE NOTICE, IT IS NOT DISCERNIBLE AS TO WHY PENALTY IS INITIATED, WHETHER THE PENALTY IS INITIALED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME OR FOR CONCEALMENT OF INCOME, ETC. CONS EQUEN TLY, THE PENALTY PROCEEDINGS ARE WHOLLY UNSUSTAINABLE IN LAW AND VOID A B INITIO, AND THE PENALTY DESERVES TO BE CANCELLED. 3. IN A NUTSHELL, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2009 - 10 ON 15.10.2010 DECLARING TOTAL INCOME OF RS.4,47,990/ - . THE AO COMPLETED THE ASSESSMENT U/S 143(3) ON 11.02.2013 MAKING AN ADDITION OF RS.44,80,711/ - , THUS ARRIVING AT AN ASSESSED INCOME OF RS.49,28,700/ - . THE GENESIS OF THE ABOVE ADDITION IS THAT THE AO, DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, FOUND FROM A PERUSAL OF A PROFIT AND LOSS ACCOUNT THAT THE ASSESSEE - COMPANY HAD INCURRED RS.54,85,348/ - AS ADVERTISEMENT EXPENSES AND OUT OF THIS, RS.44,80,711/ - WAS INCURRED FOR PROJECT VASHI - 39/3 - 30A, WHICH IS S HOWN AS WORK - IN - PROGRESS (WIP). HE HELD THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE - COMPANY HAD INCURRED ADVERTISEMENT EXPENDITURE OF RS.44,80,711/ - FOR THE PROJECT VASHI - 39/3 - 30A, WHICH IS SHOWN UNDER WIP. THEREFORE, HE HELD THAT THE EXPENDITUR ES INCURRED ON ACCOUNT OF THE SAID PROJECT SHOULD BE DEBITED TO WIP INSTEAD OF PROFIT AND LOSS ACCOUNT. THUS HE MADE AN HAWARE INFOTECH LTD. 6694/MUM/2016 3 ADDITION OF RS.44,80,711/ - THEREAFTER, THE AO LEVIED A MINIMUM PENALTY OF RS.13,84,539/ - U/S 271(1)(C) ON THE A BOVE ADDITION OF RS.41,53,617/ - . 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) AGREED WITH THE REASONS GIVEN BY THE AO AND UPHELD THE PENALTY OF RS.13,84,539/ - . 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE ISSUE IN THE INSTANT CASE HAS BEEN ADDRESSED BY THE HONBLE SUPREME COURT IN CIT V. RELIANCE PETROPRODUCTS PVT. LTD . (2010) 322 ITR 148 (SC) AND THE HONBLE BOMBAY HIGH COURT IN CIT V. S.M. CONSTRUCTION (2015) 60 TAXMANN.COM 135 (BOM). 6. ON THE OTHER HAND, THE LD. DR RELIES ON THE ORDER OF THE LD. CIT(A) AND SUBMITS THAT NO BONAFIDE EXPLANATION WAS OFFERED BY THE ASSESSEE. AS THE ASSESSEE HAD DEBITED EXPENDITURE OF RS.44,80,711/ - TO THE PROFIT AND LOSS ACCOUNT INSTEAD OF DEBITIN G IT TO WIP, THE LD. DR SUBMITS THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME AND THEREFORE, THE ORDER OF THE LD. CIT(A) BE CONFIRMED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. IN RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA), THE HONBLE SUPREME COURT HAS HELD THAT A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS . HAWARE INFOTECH LTD. 6694/MUM/2016 4 IN S.M. CONSTRUCTION (SUPRA), THE HONBLE BOMBAY HIGH COURT HAS HELD THAT WHERE THERE WAS COMPLETE DISCLOSURE OF FACTS BY THE ASSESSEE THAT AN AMOUNT OF RS.1.11 CRORE, WHICH WAS RECEIVED ON ACCOUNT OF A PROJECT NOT BEING FRUCTIFIED, WAS CREDITED TO PARTNERS CAPITAL ACCOUNT AND THE ASSESSEES CLAIM WAS NOT FOUND ACCEPTABLE, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE U/S 271(1)(C) OF THE ACT. THE MERE FACT THAT EXPLANATION OF ASSESSEE WAS NOT ACCEPTED IN THE QUANTUM PROCEEDINGS, WOULD NOT IPSO FACTO BECOME A REASON TO LEVY PENALTY FOR CONCEALMENT ON THE ASSESSEE. IN THE INSTANT CASE THE ASSESSEE HAD INCURRED RS.54,85, 348/ - AS ADVERTISEMENT EXPENSES AND OUT OF IT, AN AMOUNT OF RS.44,80,711/ - WAS INCURRED FOR PROJECT VASHI - 39/3 - 30A WHICH IS SHOWN AS WIP. THE AO HELD THAT THE EXPENDITURE OF RS.44,80,711/ - S HOULD BE DEBITED TO WIP INSTEAD OF PROFIT AND LOSS ACCOUNT AND THEREFORE, MADE AN ADDITION OF RS.44,80,711/ - . WE ARE OF THE CONSIDERED VIEW THAT THE RATIO LAID DOWN IN RELIANCE PETROPRODUCTS PVT. LTD. AND S.M. CONSTRUCTION NARRATED HEREINBEFORE SQUARELY A PPLIES TO THE INSTANT CASE . FOLLOWING THE SAME, WE HOLD THAT PENALTY U/S 271(1)(C) IS NOT LEVIABLE IN THE INSTANT CASE. 8. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/08/2018. SD/ - SD/ - ( C.N. PRASAD) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER HAWARE INFOTECH LTD. 6694/MUM/2016 5 MUMBAI ; DATED: 08/08/2018 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI