BUILDBYTE.COM (INDIA) P. LTD, MUMBAI V. ACIT CEN CIR 36, MUMBAI

ITA 7350/MUM/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9565 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2002-2003
• Appeal Filed On: 13-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PAVAN VED SHRI SUMAN KUMAR
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 27; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.7350 /MUM/2013 (ASSESSMENT YEAR: 2002-03) M/S. BUILDBYTE.COM (INDIA) VS. ACIT, CENTRAL CIRCLE - 36 PVT. LIMITED 511, DALAMAL TOWER, FREE PRESS MARG, NARIMAN POINT MUMBAI 400021 AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 PAN AABCB5417G APPELLANT RESPONDENT APPELLANT BY: SHRI PAVAN VED RESPONDENT BY: SHRI SUMAN KUMAR DATE OF HEARING: 13.09.2017 DATE OF PRONOUNCEMENT: 13.09.2017 O R D E R PER P.K. BANSAL, VICE PRESIDENT THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-41, MUMBAI DATED 30.07.2013 FOR A.Y. 2002-03 . 2. THIS APPEAL IS BARRED BY LIMITATION OF 30 DAYS. THE ASSESSEE HAS FILED AN APPLICATION FOR CONDONATION OF DEALT OF 30 DAYS IN FILING THE APPEAL ALONG WITH AN AFFIDAVIT. AFTER HEARING HEARD BOTH THE PAR TIES WE ARE SATISFIED THAT THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM FILING THE APPEAL WITHIN THE PERMISSIBLE TIME. WE, THEREFORE, CONDONE THE DELAY IN FILING THE APPEAL. 3. THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES TO T HE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF INCOME TAX ACT AMOUNTING TO ` 98,26,441/-. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF WEBSITE AND SOFTWARE DEVELOPMENT AND OT HER INFORMATION TECHNOLOGY RELATED ACTIVITIES. THE ASSESSEE WAS INC ORPORATED ON 27.09.2000 ITA NO. 7350/MUM/2013 M/S. BUILDBYTE.COM (INDIA) P. LTD. 2 AND STARTED TO DEVELOP WEBSITE DESIGNING ONLINE AND DATABASE ACCESS TILL A.Y. 2001-02. ASSESSEE INCURRED LOSS DURING THE IMP UGNED ASSESSMENT YEAR. THE ASSESSEE FURTHER INCURRED A SUM OF ` 94,65,325/- TOWARDS DEVELOPMENT OF THE SAID WEBSITE/PORTAL. THE TOTAL E XPENDITURE THUS INCURRED BY THE ASSESSEE TILL THE IMPUGNED ASSESSME NT YEAR TOWARDS WEBSITE/PORTAL DEVELOPMENT WERE ` 2,75,25,044/-. THE ASSESSEE SUBMITTED ITS RETURN DECLARING A LOSS OF ` 3,35,60,228/- WHICH WAS PROCESSED UNDER SECTION 143(1). SUBSEQUENTLY THE ASSESSMENT WAS REO PENED ON THE REASON THAT THE ASSESSEE HAS NOT CAPITALISED THE SOFTWARE DEVELOPMENT EXPENSES AMOUNTING TO ` 2,75,25,044/-. ULTIMATELY THE ASSESSMENT WAS COMPLE TED UNDER SECTION 144 R.W.S 147 AT A LOSS OF ` 60,35,244/- TREATING THE SUM OF ` 2,75,25,044/- AS CAPITAL EXPENDITURE. WHEN THE MATT ER WENT BEFORE THE CIT(A), THE CIT(A) CONFIRMED THE ORDER OF THE AO BU T DIRECTED THE AO TO ALLOW DEPRECIATION ON THE CAPITALISED SOFTWARE EXPE NSES. THE ASSESSEE DID NOT FILE ANY APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL. THE AO INITIATED PENALTY PROCEEDINGS DURING THE COURSE OF ASSESSMENT BY OBSERVING AS PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) ARE INITIATED SIMULTANEOUSLY FOR FURNISHING INACCURATE PARTICULAR S OF INCOME. SUBSEQUENTLY NOTICE DATED 27.10.2008 FOR INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) WAS ISSUED AND ULTIMATELY P ENALTY WAS LEVIED ON THE ASSESSEE VIDE ORDER DATED 30.03.2012 @ 100% OF THE TAX SOUGHT TO EVADED AMOUNTING TO ` 98,26,441/- FOR CONCEALING PARTICULARS OF INCOME AND FILING INACCURATE PARTICULARS OF INCOME. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY C ONSIDERED THE SAME. WE NOTED THAT IN THIS CASE THE AO INITIATED P ENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME WHICH MEANS THAT T HE AO HAS NOT APPLIED EXPLANATION 1 SO THAT THE DEEMING PROVISION FOR CON CEALMENT OF PARTICULARS OF INCOME COULD HAVE BEEN APPLIED. IT IS A CASE WHE RE THE ONUS IS ON THE AO TO PROVE THAT THE ASSESSEE HAS FURNISHED INACCUR ATE PARTICULARS OF INCOME. NOW THE QUESTION BEFORE US IS WHETHER CLAIM ING A DEDUCTION OF A SUM OF ` 2,75,25,044/- ON ACCOUNT OF SOFTWARE DEVELOPMENT AS REVENUE EXPENDITURE WHICH WAS SUBSEQUENTLY HELD TO BE CAPIT AL EXPENDITURE CAN BE ITA NO. 7350/MUM/2013 M/S. BUILDBYTE.COM (INDIA) P. LTD. 3 REGARDED AS FURNISHING OF INACCURATE PARTICULARS SO THAT THE ASSESSEE CAN BE MADE LIABLE FOR LEVYING PENALTY UNDER SECTION 27 1(1)(C). THE LEARNED A.R. BEFORE US DRAWN OUR ATTENTION TOWARDS THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. AMWAY INDIA ENTER PRISES 22 TAXMANN.COM 22 (DEL). FROM THE SAID DECISION IT IS APPARENT THAT EXPENDITURE INCURRED BY THE ASSESSEE ON PURCHASE OF SOFTWARE APPLICATION AND PAYMENT OF CONSIDERATION FOR ACQUIRING LICENCES TO USE THOSE APPLICATIONS WILL BE REVENUE EXPENDITURE. IN VIEW O F THE DECISION OF THE HON'BLE DELHI HIGH COURT WE FIND FORCE IN THE SUBMI SSION OF THE LEARNED A.R. THAT THE EXPENDITURE INCURRED BY THE ASSESSEE FOR SOFTWARE CAN BE REGARDED TO BE REVENUE EXPENDITURE. THEREFORE, THE CLAIM MADE BY THE ASSESSEE AS REVENUE EXPENDITURE WAS A BONAFIDE CLAI M. THE ASSESSEE HAS DECLARED ALL THE PARTICULARS WHILE MAKING THE CLAIM IN THE RETURN. IT CANNOT BE SAID THAT THE ASSESSEE HAS NOT FURNISHED ALL THE DETAILS WHATEVER WAS REQUIRED FOR MAKING THE CLAIM. WE NOTED THAT THE CA SE OF THE ASSESSEE IS DULY COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODCUTS PVT. LTD. (2010) 332 ITR 158 WHEREIN THE COURT HELD THAT MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPEND ITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF, WOULD NOT ATTRACT THE PENALTY UNDER SECTION 271(1)(C). THE HON'BLE SUPREME COURT IN THE SAID DECISION HAS CLEARLY LAID DOWN THAT BY ANY STRETCH OF IMAGINATION, MAKING AN INCORRECT CLAIM I N LAW CANNOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. IN CASE OF THE ASSESSEE WE NOTED THAT THE ASSESSEE HAS MADE A CLAIM AND HAS FURNISHED ALL THE DETAILS IN RESPECT OF THE EXPENSES WHICH HAS BEEN C LAIMED AS REVENUE EXPENDITURE BUT THE REVENUE TREATED THAT TO BE A CA PITAL EXPENDITURE WHICH MEANS THE REVENUE DID NOT ACCEPT THE CLAIM MADE BY THE ASSESSEE. MERELY THE REVENUE HAS DISALLOWED THE CLAIM MADE BY THE AS SESSEE BY ITSELF WILL NOT MEAN THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME. ON THIS BASIS, IN OUR VIEW, NO PENALTY UNDE R SECTION 271(1)(C) CAN BE LEVIED. WE, THEREFORE, DELETE THE PENALTY LEVIED BY THE AO UNDER SECTION 271(1)(C). ITA NO. 7350/MUM/2013 M/S. BUILDBYTE.COM (INDIA) P. LTD. 4 6. WE ALSO NOTED THAT THIS IS A CASE WHERE THE AO WHI LE LEVYING PENALTY DID NOT BRING OUT ANY SPECIFIC CHARGE EVEN THOUGH AS PER THE PROVISIONS OF SECTION 271(1)(C) BOTH THE CHARGES OF FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME ARE DIFFERENT. EXPLANATION 1 IS APPLICABLE IN THE CASE OF CONCEALMENT OF INCOM E. IN THIS CASE WE NOTED THAT THE AO HAS INITIATED PENALTY PROCEEDINGS FOR FURNISHING INACCURATE PARTICULARS OF INCOME WHILE PENALTY HAS BEEN LEVIED BY THE AO FOR CONCEALING PARTICULARS OF INCOME AND FILING INA CCURATE PARTICULARS OF INCOME. THIS MEANS THE AO HAS LEVIED PENALTY FOR BO TH THE CHARGES. THERE CANNOT BE A CASE WHERE PENALTY CAN BE LEVIED FOR BO TH THE CHARGES. THE WORD USED IN SECTION 271(1)(C) IS OR IN BETWEEN T HE TWO CHARGES. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. SAMSON PERINCHERY 392 ITR 4 HELD AS UNDER: - HELD, DISMISSING THE APPEAL, THAT THE SATISFACTION OF THE ASSESSING OFFICER WITH REGARD TO ONLY ONE OF THE TWO BREACHES UNDER SECTION 271(1)(C) OF THE ACT, FOR INITIATION OF PENALTY PRO CEEDINGS WOULD NOT PERMIT PENALTY BEING IMPOSED FOR THE OTHER BREACH. THUS, THE ORDER IMPOSING PENALTY WAS TO BE MADE ONLY ON THE ROUND O N WHICH THE PENALTY PROCEEDINGS WERE INITIATED AND IT COULD NOT BE ON A FRESH GROUND OF WHICH THE ASSESSEE HAD NO NOTICE. THE TRI BUNAL RIGHTLY DELETED THE PENALTY. IN THE IMPUGNED CASE ALSO WE NOTED THAT PENALTY PR OCEEDINGS WAS INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME BUT HAS BEEN LEVIED FOR BOTH THE LIMBS, NOT ONLY FOR FURNISHING INACCURATE PARTICULARS OF INCOME. ON THIS BASIS ALSO THE PENALTY LEVIED BY THE AO CAN NOT BE SUSTAINED. THEREFORE, WE DELETE THE SAME. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH SEPTEMBER, 2017. SD/ SD/ - (PAWAN SINGH) (P.K. BANSAL) JUDICIAL MEMBER VICE PRESIDENT MUMBAI, DATED: 10 TH OCTOBER, 2017 ITA NO. 7350/MUM/2013 M/S. BUILDBYTE.COM (INDIA) P. LTD. 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -41, MUMBAI 4. THE CIT - CENTRAL III, MUMBAI 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.