DCIT 8(2), MUMBAI V. IMS HEALTH INDIA P. LTD, MUMBAI

ITA 7073/MUM/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70906 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 22-08-2013
• Assessment Year: 1998-1999
• Appeal Filed On: 12-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: ARVIND SONDE
• Keywords: Depreciation; Bonafide belief; Bad and doubtful debts; Revenue expenditure; Capital expenditure
• Section: 143(3); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 7073/MUM/2010 ASSESSMENT YEAR : 1998-99 DCIT - 8(2) ROOM NO.216-A, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. VS. M/S. IMS HEALTH INDIA PVT. LTD ICC CHAMBERS, 2 ND FLOOR SAKI VIHAR ROAD, POWAI MUMBAI-400 072. PAN NO.AAACD 1939 N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ARVIND S O NDE REVENUE BY : SHRI O.P. SINGH DATE OF HEARING : 22/08/2013 DATE OF PRONOUNCEMENT : 30/ 0 8 /2013 O R D E R PER B. RAMAKOTAIAH, AM: THIS APPEAL BY REVENUE IS AGAINST THE ORDER OF CIT (A)-17, MUMBAI, DATED 12.07.2010 AGAINST CANCELLATION OF PENALTY UN DER SECTION 271(1)(C) OF THE INCOME TAX ACT OF RS.42,48,656/-. 2. BRIEFLY STATED, THE ASSESSEE FILED RETURN OF INC OME DECLARING LOSS OF RS.3,59,820/- UNDER NORMAL PROVISIONS AND OFFERED I NCOME UNDER SECTION 115JA OF BOOK PROFIT OF RS.16,85,280/-. IN THE COUR SE OF ASSESSMENT UNDER SECTION 143(3) DATED 23.03.2001, THE AO MADE THE FOLLOWING ADDITIONS/DISALLOWANCES. ITA NO.7073/M/10 A.Y.98-99 2 I) THE LOSS ON SALE OF IS DIVISION RS.1,02 ,57,797/- II) BAD DEBTS RS. 3,04,228/- III)LEASEHOLD IMPROVEMENT TREATED AS CAPITAL EXPENDITURE RS. 1 3,09,600/- IV) SOFTWARE EXPENDITURE TREATED AS CAPITAL IN NATURE RS. 2,67,393/- TOTAL RS.1,21,39,018/- 2.1 THESE ADDITIONS WERE SUBJECT MATTER OF APPEAL BEFORE ITAT BUT AO LEVIED PENALTY UNDER SECTION 271(1)(C) AS THE SAID ADDITIONS/DISALLOWANCES WERE CONFIRMED BY THE CIT(A ). THE LD. CIT(A) DELETED PENALTY, AFTER CONSIDERING EACH OF THE ITEM S ELABORATELY, AS UNDER:- 3.3 IN VIEW OF THE SUBMISSION ABOVE IT WAS CONTEND ED THAT MERE ADDITION OF INCOME OR DISALLOWANCE OF EXPENSES DOES NOT AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS SO AS TO ATTRACT THE PROVISIONS OF SECTION 271(1)(C) OF T HE ACT. TO ESTABLISH THAT THERE IS ANY INCOME CONCEALED BY THE ASSESSEE, IT IS NECESSARY THAT INDEPENDENT EVIDENCE BE BROUGHT ON RECORD TO S HOW THAT SOME INCOME WAS EARNED BY THE ASSESSEE WHICH HAS NOT BEE N DISCLOSED. NO SUCH EVIDENCE HAS BEEN BROUGHT ON RECORD, WHICH SHOWS THAT THE ASSESSEE HAD DELIBERATELY CONCEALED ANY INCOME OR F URNISHED INACCURATE PARTICULARS. THE LEVY OF PENALTY U/S. 27 1(1)(C) WAS HENCE NOT WARRANTED. 3.4 THE SUBMISSION HAS BEEN CONSIDERED. THE APPELLA NT HAD DISCLOSED INFORMATION ON THESE ISSUE IN THE RETURN AND SUPPORTING DOCUMENTS PENALTY U/S 271(1)(C) IS NOT ELIGIBLE IN SUCH A CASE AS HELD IN GLORIOUS REALTY (P) LTD. VS. ITO [29 SOT 29 1] (MUM) AND MIMOSA INVESTMENT CO. LTD. VS. ITO [28 SOT 470] (MU M) A DISALLOWANCE OF BONA FIDE CLAIM WILL NOT AUTOMATICA LLY LEAD TO LEVY OF PENALTY AS HELD IN THE CASE OF VIP INDUSTRIES [30 S OT 254] (MUM). AS HELD IN KAMBAY SOFTWARE INDIA (P) LTD. VS. DCIT 112 TTJ (PUNE) DEEMING FICTION OF EXPLANATION I TO SECTION 271 (1) (C) CAN BE PRESSED INTO SERVICE IN CONNECTION WITH FACTS MATERIAL TO COMPUTATION OF INCOME AND NOT IN CONNECTION WITH COMPUTATION OF I NCOME PER SE. THIS HAS BEEN REITERATED BY THE HONBLE SUPREME COU RT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS 2010 TIOL 21. IN THE ITA NO.7073/M/10 A.Y.98-99 3 CIRCUMSTANCES, THIS IS NOT A FIT CASE FOR LEVY OF P ENALTY U/S 271(1)(C). THE PENALTY LEVIED OF RS.42,48,656/- IS DELETED. 3. THE LD. DR REFERRING TO THE ORDER OF THE AO SUBM ITTED THAT CIT(A) WAS NOT CORRECT IN DELETING THE PENALTY AS ASSESSEE S CLAIMS CANNOT BE CONSIDERED AS BONAFIDE CLAIMS. LD. COUNSEL FOR THE ASSESSEE IN REPLY REFERRED TO THE ORDERS OF ITAT AND CONSEQUENT ORDER OF AO GIVING EFFECT TO ITAT ORDER TO SUBMIT THAT LOSS ON INFORMATION SERVI CE DIVISION WAS ALLOWED TO BE CARRYING FORWARD BY AO, THEREFORE THA T AMOUNT CAN NOT BE CONSIDERED FOR LEVY OF PENALTY. FURTHER, WITH REFER ENCE TO LEASE HOLD EXPENDITURE, IT WAS BONAFIDE BELIEF THAT EXPENDITUR E WAS REVENUE IN NATURE WHEREAS ASSESSING OFFICER CONSIDERED IT AS C APITAL IN NATURE. WITH RESPECT TO SOFTWARE EXPENSES MATTER WAS RESORTED TO ASSESSING OFFICER BY ITAT. AO IN THE CONSEQUENTIAL ORDER ALLOWED EXPENDI TURE OF RS.27,543/- AS REVENUE EXPENDITURE AND BALANCE AMOUNT WAS TREAT ED AS CAPITAL EXPENDITURE, ON WHICH DEPRECIATION WAS ALLOWED. WIT H REFERENCE TO BAD DEBTS, IT WAS SUBMITTED THAT EVENTHOUGH ASSESSEE HA S NOT PREFERRED AN APPEAL ON THIS SMALL AMOUNT, THE PREVALENT LAW AT T HAT POINT OF TIME ALLOWS THE AMOUNT AS BAD DEBT ON BEING WRITTEN OFF IN THE BOOKS. THE PRINCIPLE IS UPHELD BY THE HON'BLE SUPREME COURT IN THE CASE OF TRF LIMITED. IT WAS THE SUBMISSION THAT ON MERITS THERE WAS NO SCOPE FOR PENALTY. 4. WE HAVE CONSIDERED THE ISSUE. AS DISCUSSED BY LD . CIT(A) IN DETAIL IN THE ORDER, ALL CLAIMS ARE BONAFIDE CLAIMS AND IN FACT LOSS ON INFORMATION DIVISION WAS ALLOWED BY AO IN THE CONSE QUENTIAL ORDERS. THEREFORE, MAJOR AMOUNT ITSELF DOES NOT CALL FOR PE NALTY. THE BALANCE THREE AMOUNTS ARE BONAFIDE CLAIMS AND MERE DISALLOW ANCE OF BONAFIDE CLAIMS DOES NOT ATTRACT ANY PENALTY U/S. 271(1)(C) AS FURNISHING OF INACCURATE PARTICULARS. THE PRINCIPLES LAID DOWN B Y THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P.) LTD.[2010] 322 ITA NO.7073/M/10 A.Y.98-99 4 ITR 158(SC) WERE CORRECTLY APPLIED BY CIT(A). THERE IS NO MERIT IN THE GROUNDS RAISED BY REVENUE. 5. IN THE RESULT, REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST, 2013. SD/- SD/- (AMIT SUKLA ) JUDICIAL MEMBER (B. RAMAKOTAIAH ) ACCOUNTANT MEMBER MUMBAI, DATED: 30/08/2013. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.