DCIT, Circle-16(3), Hyderabad V. M/s Prajna Technologies & Services Ltd., Hyderabad

ITA 772/HYD/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7690 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 28-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B RAMA KRISHNA
• Assessee Lawyers: S RAMA RAO
• Keywords: Cost of acquisition; Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.772/HYD/14 : ASSESSMENT YEAR 2002 - 03 DY. COMMISSIONER OF INCOME - TAX, CIRCLE 16(3), HYDERABAD V/S. M/S. PRAJNA TECHNOLOGIES & SERVICES LTD., HYDERABAD (PAN AABCP 9162 A) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.RAMAKRISHNA RESPONDENT BY : SHRI S.RAMA RAO DATE OF HEARING 28 . 1 0.2014 DATE OF PRONOUNCEMENT 12.11.2014 O R D E R PER P.M.JAGTAP, ACCOUNTANT MEMBER : THIS APPEAL I S PREFERRED BY THE REVENUE AGAINST THE O R DER OF THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) V, HYDERABAD DATED 16.10.2013, WHER E BY HE CANCELLED THE PENALTY OF R S .1 1 ,11,250 IMPOSED BY THE ASSESSING OFFICER UNDER S.271(1)(C) OF THE ACT. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, WHICH IS ENGAGED IN THE B U SI N ESS OF PROVIDING CONSULTANCY SERVI C ES IN CONNECTION WITH TH E BUSIN E SS AND FINANCIAL MANAGEMENT. TH E R ETURN OF IN C OM E FOR THE Y E AR UN D ER CONSIDERATION WAS FILED BY IT ON 31.10.2012 DE C L A RING TOTAL IN C OM E AT RS.NIL UNDER THE NORMAL PROVI S ION S AND RS.2,08, 300 UN DE R S.115JB OF THE ACT. THE SAID RETURN WAS INITIALLY A CCEPTED BY THE ASSESSING OFFICER UNDER S.143(1). SUBSEQUENTLY, IT WAS FOUND DURING THE SCRUTINY ASSESSMENT IN THE CA S E OF M/S. PINTELL SYSTEMS PVT. LTD. T H AT THE ASSESSEE COMPANY HAS SOLD COMMERCIAL RIGHTS TO THE SAID COMPANY DURING THE YEAR UNDER CONSI DERATION FOR A SUM OF R S .3 1 ,75,000. SIN C E THE I NC OME ARISING FROM THE SAID TRANSACTION W AS NO T OFFERED BY THE I TA NO. 772/H YD/20 14 M/S. PRAJNA TECHNOLOGIES & SERVICES LTD., HYDERABAD 2 ASSESSEE IN TH E RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION , THE ASSESSMENT WAS REOPENED BY THE ASSESSING OFFICER AND A NO T I C E UNDER S.14 8 OF THE AC T WAS ISSUED BY HIM. DURING TH E COU R SE OF RE - ASSESSMENT PROCEEDINGS, I T W AS FOUND THAT THE ASSESSEE HA S ENTERED INTO AN AGREEMENT WITH M/S. PINTELL SYSTEMS PVT. LTD. ON 1.1.2002 TO TRANSFER THE MOU WHICH WAS ENTERED INTO BY TH E ASSESSEE WITH M/S. ELDIS S RO CZECH REPUBLIC FOR C ONSU L TANCY AND DEVELOPING DIFFERENT TYPES OF SOFTWARE AS AND WHEN REQUIRED IN TH E AVIATION F I ELD. WHEN TH E ASSESSEE WAS CALLED UPON BY THE ASSESSING OFFICER TO SHOW CAUSE AS TO WHY THE SHO R T - TERM CAPITAL GAINS ARISING OUT O F THE SAID TRANSACTION SHOULD NO T BE ASSESSED IN ITS HANDS, IT WAS CONTENDED THAT THE COMMERCIAL RIGHTS SOLD BY TH E ASSESSEE IN ITS CONSU L TANCY BUSINESS TO M/S. PINTELL SYSTEMS PVT. LTD. HA D NO COST OF ACQUISITION AND THER E FORE, NO CAPITAL GAINS TAX W AS LIVIABLE IN RESPECT OF THE SAID TRANSACTION AS P E R THE PROVISIONS OF S.45 OF THE ACT IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN TH E CASE OF CIT V/ S. SRINIVASA SETTY (128 ITR 294). THIS CONTENTION OF THE ASSESSEE WAS NOT F OUN D AC C EPTABLE BY THE ASSESSING OFFICER. ACCO RD ING TO HIM, IT WAS NO T A CASE OF SALE OR TRANSFER OF RIGHT TO CARRY ON ANY BUSINESS BY THE ASSESSEE, BUT WHAT WAS SOLD B Y THE ASSESSEE AS PER THE MOU TO M/S. M/S. PINTELL SYSTEMS PVT. LTD. WAS A SPECIFIC SALES CONTRACT WITH TH E CLIENT. HE HELD THAT IT WAS THUS A CASE O F SALE O F COM M ERCIAL RIGHT BY THE ASSESSEE AND THE PROFIT ARISING FROM THE SAME WAS CHARGEABL E TO TAX IN THE HANDS OF THE ASSESSEE AS SHO R T TERM CAPITAL GAINS. ON APPEAL, THE LEARNED CIT(A) UPHELD THE ACTION OF TH E ASSESSING OFFICER ON THIS ISSUE OBSERVING THAT IT WAS A CASE O F SALE OF ITS RIGHTS TO PRODUCE AVIATION SOFTWARE WHICH TRANSACTION IS SQUARELY COVERED WITHIN THE P R OVISION S OF S.55(2) ( A ) OF THE ACT. ON FURTHER APPEAL, THE TRIBUNAL ALSO UPHELD THE ORDER OF THE LEARNED CIT(A) CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SHO R T TERM CAPITAL GAINS. I TA NO. 772/H YD/20 14 M/S. PRAJNA TECHNOLOGIES & SERVICES LTD., HYDERABAD 3 3. AS A RESULT OF THE SUSTENANCE OF THE ADDITION MADE ON ACCOUNT OF SHO R T TERM CAPITAL GAIN BY THE TRIBUNAL IN TH E QU A NTUM PR OCEEDINGS, NO T I C E WAS ISSUE D BY THE ASSESSING OFFICER REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY UNDER S.271(1)(C) SHOULD NOT BE IMPOSED IN RESPECT O F THE SAID ADDITION. IN REPLY, THE SUBMISSION MADE DURING TH E CO U RSE OF QUANTUM P R OCEE D ING W AS REITERATED ON BEHALF OF THE ASSESSEE. THE ASSESSING OFFICER HOWEVER, DID NO T FIND THE SAME TO BE ACCEPTABLE. ACCO RD ING TO HIM, TH E ASSESSEE HA D NO T DI S CLO S ED THE RECEIPT OF INCOME OF R S .31,75,000 FROM THE SALE OF COMMERCIAL RIGHTS THROUGH MOU IN THE RE TURN O F INCOME AND THIS FACT WAS BROUGHT TO LIGHT ONLY AS A RESULT OF SCRUTINY ASSESSMENT MADE IN THE C A SE OF M/S. PINTELL SYSTEMS PVT. LTD. HE ALSO HELD THAT THE CLAIM MADE BY TH E ASSESSEE FOR NOT OFFERING THE CAPITAL GAINS FROM THE SALE OF A COM M ER C IAL RIGHTS ON THE BASIS THAT NO COST OF A C QUI S IT I ON WAS ASCERTAINABLE, WAS PATENTLY WRONG AND THE CA S E LAW RELIED UPON BY THE ASSESSEE IN SUPPORT OF SUCH CLAIM WAS TOTALLY IR RELEVANT TO ITS CASE. HE AC C OR D INGLY HELD THAT THE ASSESSEE WAS GUILTY OF CONCEALIN G THE PARTICULARS OF I T S INCOME AND IMPOSED A PENALTY OF RS.11,11,250 UN D ER S.271(1)(C), BEIN G 100 % OF THE TAX SO U G H T T O BE EVAD E D BY THE ASSESSEE BY WAY OF SUCH CONCEALMENT. 4. THE PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER S.271(1)(C) WAS C HALLENGED BY T H E ASSESSEE IN APPEAL FILED BEFORE THE LEARNED CIT(A) AND THE FOLLOWING SUBMISSIONS , AS REPRODUCED IN THE IMPUGNED ORDER OF THE LEARNED CIT(A), WERE MADE ON BEHALF OF THE ASSESSEE IN SUPPORT OF ITS CASE THAT PENALTY IMPOSED BY THE ASSESSI NG OFFICER WAS NO T SUSTAINABLE. I TA NO. 772/H YD/20 14 M/S. PRAJNA TECHNOLOGIES & SERVICES LTD., HYDERABAD 4 I TA NO. 772/H YD/20 14 M/S. PRAJNA TECHNOLOGIES & SERVICES LTD., HYDERABAD 5 5. THE LEARNED CIT(A) FOUND M E RIT IN TH E SUBMI S SION S MADE BY THE ASSESSEE. HE HELD T H A T THE ASSESSEE HAD ENTERTAIN E D A BONA FIDE B E LI E F THAT THE PROFIT ARISING FROM TH E RELEVANT TR A N S AC T ION WITH M/S. PINTELL SYSTEMS PVT. LTD. WAS NO T CHARG E ABLE TO TAX. HE ALSO H E LD THAT ALL T H E R ELEVANT PARTICULARS IN SUPPORT OF I T S CLAIM IN THIS REGARD W E RE DULY FUR N ISHED BY THE ASSESSEE AND BASED ON TH O SE VERY PARTICULARS, A DIFFE RE NT VI E W WA S TAKEN BY THE ASSESSING OFFIC ER , REJECTING THE CLAIM OF THE ASSESSEE FOR EXEMPTION ON ACCOUNT OF SHORT TERM CAPITAL GAINS. ACCOR D ING TO THE LEARNED CIT(A), THE DECISION OF TH E HON'BLE SUPREME COURT IN THE CASE OF RELIANCE P ET R O P RODUCTS P . L TD. (3 2 2 ITR 158) CITED BY THE ASSESSEE WAS SQUARELY APPLI C ABLE IN THE CASE OF THE ASSESSEE AND RELYING ON THE SAME, HE CANCELLED THE PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER S.271(1)(C) HOL D IN G THAT THERE WAS N E I T H E R CONCE A L M ENT OF PARTICULARS OF ITS INCOME BY THE ASSESSEE NOR FURNISHING OF INACCURATE PAR T ICULARS OF INCOME. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), RE VENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE, AT THE OUTSET, SUBMI T TED T H A T THE CLAIM O F TH E ASSESSEE FOR EXEMPTION OF SHO R T TER M CAPITAL GAINS ARISING FROM THE TRANSACTION ENTERED INTO WITH M/S. PINTELL SYSTEMS PVT. LTD. HAS ALREADY BEEN REJECTED BY TH E T RIBUNAL IN TH E QUANTUM PROCEEDINGS BY PASSING A WELL REASONED AND WELL DISCUSSED ORDER. HE INVITED OU R ATTENTION TO THE RELEVANT OB S ERVATION S / F IN D INGS RECORDED BY THE TRIBUNAL IN PARAGRAPH NO.9 OF ITS ORDER DATED 24.6.2011 P A SSED IN ITA NO. 1 331/ H YD / 20 1 0 AND SUBMITTED THAT THE SAME ARE I TA NO. 772/H YD/20 14 M/S. PRAJNA TECHNOLOGIES & SERVICES LTD., HYDERABAD 6 SUFFI CIEN T TO SHOW THAT THE CLAM OF THE ASSESSEE FOR EXEMPTION OF SHO R T T ERM CAPITAL GAINS WAS PATENTLY WRON G. A S REGA R DS THE OB S ERVATION S OF THE LEARNED CIT(A) THAT THE CLAIM OF THE ASSESSEE FOR SUCH EX E MPTION WAS DISALLOWED BY THE ASSESSING OFFICER BY TAKING A DIF F ERENT VIEW THAN THE ONE TAKEN BY THE ASSESSEE , HE CON T ENDED T HAT NO SUCH EXEMP T ION WAS AC T U A LLY CLAIMED BY THE ASSESSEE SP E CIFICALLY IN THE RETURN OF INCOME, AND THERE WAS THUS NO QUESTION OF THE ASSESSING OFFICER TAKING A DIFFERENT VIEW THAN THE ONE TAKEN BY THE ASSESSEE. HE ALSO POINTED OUT THAT THE RELEVANT DETAILS O F TH E TR A N S AC T ION WITH M/S. PINTELL SYSTEMS PVT. LTD. WERE NO T AT ALL FURNISHED BY THE ASSESSEE ALON G WITH ITS RETURN OF IN C OM E , AND IT WAS TOTALLY WRONG ON THE PART OF THE LEARNED CIT(A) TO OBSERVE IN HIS IMPUGNED OR DE R THAT ALL THE REL E VANT PARTI CULARS IN RESPECT OF ITS CLAIM FOR EXEMPTION OF SHO R T TERM CAPITAL GAINS WERE FULLY FURNISHED BY THE ASSESSEE. HE SUBMITTED THAT THE RELEVANT TRANSACTION IN FACT, CAME TO THE LIGHT ONLY AS A RESULT OF SC R U T I N Y ASSESSMENT MADE IN THE CA S E OF M/S. PINTELL SYSTEMS PVT. LTD. AND CON SE QUENTLY, THE ASSESSMENT IN TH E CA S E OF THE ASSESSEE WAS REOPENED TO BRIN G TO TAX THE SHO R T TERM CAPITAL GAINS ARI S IN G FROM THE SAID TR A N S ACTION. HE TOOK US THROUGH THE COPY OF TH E AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE C OMPANY AND M/S. PINTELL SYSTEMS PVT. LTD. PLACED AT PAGES 29 AND 30 O F TH E PAPER BOOK AND POINTED OUT THAT IT WAS A CASE O F TRAN S FER OF COMMERCIAL RIGHT BY THE ASSESSEE AND NO T THE SALE OF A RIGHT TO CARRY ON ANY BU S IN ES S, AS RIGHTLY HELD BY THE TRIBUNAL. HE CONTENDED THAT THE P R O F IT ARISING FROM SUCH TRANSFER THEREFORE WAS CHARGEABLE TO TAX IN THE HANDS OF TH E ASSESSEE AS SHO R T TERM CAPITAL GAINS AND TH E CLA I M MADE BY THE ASSESSEE FOR EXEMP T ION WAS PATENTLY WRONG, ATTRACTING IMPOSITION OF PENALTY UN D ER S.271(1)(C) AS RIGHTLY HELD BY THE ASSESSING OFFICER. HE TH E R E FORE, URGED THAT THE IMPU G N E D ORDER OF THE LEARNED CIT(A) CANCELLIN G THE PENALTY MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. I TA NO. 772/H YD/20 14 M/S. PRAJNA TECHNOLOGIES & SERVICES LTD., HYDERABAD 7 7. THE LEARNED COUN S EL F OR TH E ASSESSEE, O N TH E OTHER HAND, INVITED OU R ATTENTION TO THE REL E VANT PO R TION OF THE DIRECTORS R E PO R T AT PAGE 6 OF TH E P APER - BOOK AND SUBMI T TED HA TH A T FACT OF SALE O F ITS CONSULTANCY BU S IN E SS BY TH E ASSESSEE COMPANY FOR A CON S ID E RATION OF RS.31.75 LAKHS WAS CLEARLY DI S CLO S ED IN TH E D I R ECTORS R E PO R T, WHICH WAS FIL E D ALON G WITH THE RETURN OF INCOME. IN REPLY TO THE QUERY RAISED BY THE BENCH REGARDING THE ACCOUN T IN G TREATMENT GIVEN TO THI S TRANS A CTION, HE CLARI F IED THAT THE NET INCOM E ARISIN G FROM TH E SAID TRANSACTION AMOU NTI N G TO R S .20,12,902 WAS CREDITED BY THE ASSESSEE COMPANY TO C A P I TAL RESERVES ACCOUNT AND THE SAME WAS DISCLOSED UND E R R E SERVES AND SURPLUS IN THE SCH E DULE II FORMING PART OF THE BALANCE SHEET. HE ALSO TOOK US THROUGH TH E A GREEM E NT ENTERED INTO BY TH E ASSESSEE WITH M/S. PINTELL SYSTEMS PVT. LTD. IN AN ATTEMPT TO SUPPORT THE CA S E OF THE ASSESSEE THAT WHAT WAS TR A N S FERRED AS PER THE SAID AGREEMENT WAS RIGHT OF THE ASSESSEE TO CARRY ON THE BU S IN E SS. HE CONTENDED THAT SIN C E THE SAID RIGHT HAD NO COS T OF ACQUISITION, NO CAPITAL GAIN ARISING FROM TH E TR A N S FER O F THE S UCH RIGHT WAS CHARGEABL E TO T AX IN THE YEAR UNDER CONSIDERATION, I.E. ASSESSMENT YEAR 2002 - 03, AND THI S PO S I TI ON IS DULY SUPPO R TED BY THE AMENDMENT MADE IN THE P R O V I SI ON S O F S.55(2)(A), WHEREBY CAPITAL GAIN ARISING FROM TH E TR A NSFER OR SALE OF RIGHT TO CARRY ON BU SI NESS IS MADE LIABLE TO CAPITAL GAINS TAX WITH EFF E CT F ROM ASSESSMENT YEAR 200 3 - 04. HE CONTENDED THAT TH E TRIBUNAL, HOWEVER DID NO T APPRECIATE THE EXACT NATURE OF THE RIGHT TRA NSFERRED BY TH E ASSESSEE TO M/S. PINTELL SYSTEMS PVT. LTD. WHILE REJECTING THE CLAIM O F THE ASSESSEE FOR EX E MPTION ON ACCOUNT OF SHO R T TERM CAPITAL GAINS . HE ALSO CONTENDED THAT A LTHOUGH THE SAID DECISION OF THE TRIBUNAL IS NO T DISPUTED BY THE ASSESSEE B Y FILIN G A FURTHER APPEAL BEFORE THE HON'BLE HIGH COURT , THE FACT REMAINS THAT THE CLAIM MADE BY TH E ASSESSEE FOR EXEMP T ION ON ACCOUNT OF SHO R T TERM CAPITAL GAINS WAS BONA FIDE C LA IM AND THE RELEVANT PARTICULARS HAVING BEEN FULLY FURNISHED BY THE ASSESSEE , IT WAS NO T A FIT CA S E TO I M POSE PENALTY UNDER S.271(1)(C) AS RIGHTLY HELD BY THE LEARNED I TA NO. 772/H YD/20 14 M/S. PRAJNA TECHNOLOGIES & SERVICES LTD., HYDERABAD 8 CIT(A). H E THER E FORE, STRONGLY SUPPO R TED THE IMPU G N E D ORDER OF TH E LEARNED CIT(A) CANCELLIN G THE PENALTY IMPOSED BY THE ASSESSING OFFICER UN D ER S.271(1)(C) AND URGED THAT TH E SAME DESER V ES TO BE UPHELD. 8. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE PENALTY IMPOSED BY THE ASSESSING OFFICER UN D ER S.271(1)(C) IN RESPECT OF ADDITION MADE TO THE TOTAL IN C OM E O F T H E ASSESSEE ON ACCOUN T OF SHO R T TERM CAPITAL GAINS HAS BEEN CANCELL E D BY THE LEARNED CIT(A) ON TH E BASIS THAT THE CLAIM MADE BY T H E ASSESSEE FOR EXEMPTION OF SUCH SHO R T TERM CAPITAL GAIN WAS A BONA FIDE CLAIM AND ALL THE PART ICUL A RS REL E VANT TO TH E SAID CLAM WERE DULY FURNISHED BY TH E ASSESSEE . INSOFAR AS THE CLAIM OF TH E ASSESSEE FOR EXEMPTION ON MERIT IS CONCERNED, IT IS OBSERVED THAT THE SAME HAS ALREADY BEEN REJ E CTED BY THE TRIBUNAL IN TH E QUANTUM P R OCEEDIN G S FOR THE FOL LO W IN G REASON S GIVEN IN PARAGRAPH 9 OF ITS ORDER DATED 24.6.2011 IN ITA NO.1331/HYD/2010 . 9. WE HAVE CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND FROM THE ORDER OF THE CIT (A) THAT THE ASSESSEE HAD NEVER SOLD ITS RIGHT TO CARRY ON THE BUSINESS OF SOFTWARE DEVELOPMENT OR ITS RIGHT TO CARRY ON ANY BUSINESS AND IT MERELY SOLD A SPECIFIC SALES CONTRACT WITH A CLIENT, WHICH IS ROUTINE OUTSOURCING IN ALL BUSINESSES AND IN THE PRESENT CASE, ONLY A SPECI FIC CONTRACT HAS BEEN OUTSOURCED. WE FURTHER FIND THAT THE EXPRESSION FROM SECTION 55(2)(A) OF THE ACT WHICH IS APPLICABLE IN THE INSTANT CASE RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THING, AND IN OUR OPINION, THE CASE OF THE ASSESSEE CLE ARLY FELL WITHIN THE PURVIEW OF SUB - SECTION 55(2)(A) OF THE ACT AND THERE IS NO DOUBT THAT THE AMOUNT RECEIVED ON THE SALE OF THE MOU WAS CLEARLY TAXABLE AS PER SPECIFIC PROVISION OF THE ACT. THE SAID EXPRESSION IN SECTION 55(2)(A) OF THE ACT WAS INSERTED BY THE FINANCE ACT, 1997 WITH EFFECT FROM 1 - 4 - 1998 AND HENCE THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE AMENDMENT TO SECTION 55(2)(A) BRINGING THE TRANSFER OF COMMERCIAL RIGHT TO CAPITAL GAIN TAX IS EFFECTIVE FROM THE ASSESSMENT YEAR 2003 - 04 AND 2002 - 03, IS NOT CORRECT. IN VIEW OF THE ABOVE AND AFTER CONSIDERING THE TOTALITY OF FACTS AND THE CIRCUMSTANCES OF THE INSTANT CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT (A) IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER. THERE FORE, NO INTERFERENCE IS CALLED FOR. I TA NO. 772/H YD/20 14 M/S. PRAJNA TECHNOLOGIES & SERVICES LTD., HYDERABAD 9 9. AS HELD BY THE TRIBUNAL IN TH E QUANTUM P R OCEEDIN G S, TH E RE WAS NO TRANSFER O F RIGHT TO CARRY ON BU S IN E SS AS CL A IM E D BY TH E ASSESSEE AND IT WAS A CASE O F TRAN S FER O F A COMMERCIAL RIGHT BY THE ASSESSEE COMPANY, THE PROFIT OF WHICH WAS CHA R GEABLE TO TAX AS CAPITAL GAIN IN THE YE A R UNDER CONSIDERATION , TAKING THE COST O F ACQU I SITION AS NIL AS P E R THE P R OV I SION S OF S.55(2)(A) . AT THE TIM E O F H E ARING BEFORE US, THE LEARNED COUN SE L FOR THE ASSESSEE HAS TAKEN US THROU GH TH E RELEVANT AGREEMENT BETWEEN THE ASSESSEE COMP A NY AND M/S. P I NTELL SYSTEMS P. LTD. AND HAS RELIED ON CLAUSE (III) THEREOF WHEREBY THE ASSESSEE H A D AGREED NOT TO SOLICIT THE CLIENT WITH RESPECT TO CON S ULTANCY OF SOFTWARE BU S IN E SS , I N SUPPORT OF HIS CA S E THAT THERE WAS A TRANSFER OF RIGHT TO CARRY ON BU S IN E SS BY THE ASSESSEE COMPANY. W E FIND IT DIFFICULT TO ACCEPT THIS CON T EN T ION OF THE LEARNED COUNSEL FOR THE ASSESSEE . I N OUR OPI N ION, THE RELEVANT CL A USE RELIED UPON BY THE LEARNED COUN S EL FOR TH E ASSESSEE CANNO T B E SEEN IN ISOLATION TO ASCERTAIN THE EXACT NATURE OF ASSET TRANSFERRED BY TH E ASSESSEE , AND IT IS NECESSARY TO READ THE ENTIRE AGREEMENT AS A WHOLE TO ASCERTAIN SUCH NATURE. IF THE ENTIRE AGR E EMENT IS READ AS A WHOLE, WE FIND TH A T THE A SSESSEE COMPANY HA D ENTERED INTO AN MOU WITH ELDIS SRO C Z E CH REPUBLIC FOR CONSU L TANCY AND DEVELOP I NG DIFFE RE NT TYPES OF SOFTWARE AS AND WHEN REQUIRED IN THE AVIATION FIELD AND THE SAID MOU WAS TR A N S FERRED BY IT TO M/S. PINTELL SYSTEMS PVT. LTD FOR A TOTAL CONSIDERATION OF RS .31,75,000. IT WAS THUS A CLEAR CA S E OF TRANSFER OF COMMER C IAL RIGHT BY THE ASSESSEE AS RIGHTLY HELD BY TH E TRIBUNAL IN TH E QUANTUM P R OCEE D INGS, AND IN OUR OPINION, THERE I S NOTHING IN TH E AGREEMENT TO SUGGEST OR IN DI CATE THAT ANY RIGHT TO CARRY ON BU S IN E SS WAS TRANSFERRED BY THE ASSESSEE . AS RIGHTLY CONTENDED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, THE CLAIM MADE BY THE ASSESSEE FOR EXEMPTION OF SHO R T TERM CAPITAL GAIN ARISING FROM TH E TRANSACTION E N T ERED INTO WITH M/S. PINTELL SYSTEMS PVT. LTD ON TH E BASIS THAT THE SAID TRANSACTION INVOLVED TRANSFER OF RIGHT TO CARRY ON BU S IN E SS, THUS, I TA NO. 772/H YD/20 14 M/S. PRAJNA TECHNOLOGIES & SERVICES LTD., HYDERABAD 10 WAS PATENTLY A WRONG CLAIM AND THERE IS NOTHIN G TO SHOW THAT THE S AID CLAIM OF THE ASSESSEE WAS A BONA FIDE CLAIM. 10 . AS REGARDS THE CLAIM OF THE ASSESSEE THAT ALL THE MATERIAL PARTICULARS REL A TIN G TO ITS CL A IM OF EXEMPTION OF SHO R T TERM CAPITAL GAINS WERE DULY FURNISHED BY IT, IT IS OB S ERVED THAT IN THE DIRECTORS R E PO R T, A PASSING REFERENCE ONLY WAS MADE TO INDICATE THAT ITS CONSU L TANCY BU S IN E SS WAS SOLD BY THE ASSESSEE COMPANY FOR RS.31,75,000. TH E RE WAS HOW E VER , NO MENTION MADE ABOUT THIS TRAN SA CTION IN THE NOTES FORMING PART OF ACCOUNTS, DESPITE THE FACT THAT A SUM O F RS .20,12,902 STATED TO BE PROFIT ARISING FROM TH E TRAN S ACTION WAS CREDITED TO THE CAPI T AL ACCOUN T AND THE SAME WAS DIRECTLY SHOWN UNDER R E SERVES AND SU R PLUS IN SCHEDULE 2 OF THE BALANCE SHEET. NO DETAILS W E RE GIVEN SHOWING THE EXACT NATURE O F THIS AMOUN T APPEARING AS CAPITAL RESERVE NOR THE BASIS OF ARRIVING AT THE S AID FIGURE WAS GIVEN EITHER IN THE S C HEDULE OR EVEN IN THE NOTES FORMING PART OF THE ACCOUNTS FOR THE YEAR UN D ER CONSIDERATION. IT I S ALSO PERTIN E NT TO NO T E THAT NO EXEMPTION FOR THE SHORT TERM CAPI T AL GAIN WAS SEPARATELY OR SP E CIFI C ALLY CL A IM E D BY THE ASSESSEE EIT H ER IN THE RETURN OF INCOME OR EVEN IN TH E CO M PU T ATION OF TOTAL IN C OM E AND EVEN THE BASIS OF CLAIMIN G THE SAID EX E MP T ION BEIN G THE REL E VANT ASSET HAVING NO CO S T OF ACQU I SITION WAS NOT M E N T ION ED BY TH E ASSESSEE EITHER IN THE RETURN OF INCOM E OR IN ANY OF THE D O CU M E N T S FILED A L ONGWITH THE RETURN OF IN C OM E . HAVING REGARD TO ALL THESE FACTS O F THE CA S E BORNE OUT FROM THE RECORD, WE FIND IT DIFF I CU L T TO AGREE WITH THE VIEW OF THE LEARNED CIT(A) THAT ALL TH E MATE R IAL PARTICULARS REL A TING TO I T S CL AIM FOR EXEMPTION ON A C CO U NT OF CAPITAL GAIN WERE FULLY AND T RULY FURNISHED BY TH E ASSESSEE . 1 1 . AS RE G ARDS THE RELIANCE PLACED BY THE DISALLOWED CIT(A) ON THE DECISION OF THE HON'BLE APEX COURT IN THE CA S E OF R E LI A NCE PETRO PRO D UCTS LTD. (SUPRA) , I T IS OBSERVED THAT THE QUES T ION BEFORE THE I TA NO. 772/H YD/20 14 M/S. PRAJNA TECHNOLOGIES & SERVICES LTD., HYDERABAD 11 HON'BLE SUPREME COURT IN THAT CASE WAS WHETH E R THE ASSESSEE COULD BE SAID TO HAVE FURNISHED INACCURATE PAR T I C UL A RS OF HIS INCOME AND IN THIS CONTEXT , THE MEANING OF THE EXPRESSION INACCURATE PAR T ICUL A RS WAS EXPLAI NED BY THE HON'BLE SUPREME COURT. IN TH E PRESENT CA S E, PENALTY UNDER S.271(1)(C) WAS IMPOSED BY THE ASSESSING OFFICER HOLDING THE ASSESSEE TO B E GUILTY OF CONCEALING PARTICULARS OF ITS INCOME, AND THEREFORE, THERE BEING NO CHARGE L E VELLED AGAINST THE ASSESSEE OF HAVING FURNISHED INA C CURATE PARTICULARS O F ITS INCOME, TH E RATIO OF THE DECISION OF THE HON'BLE SUPREME COURT IN TH E CA S E OF RELIANCE PET R O P RODUCTS (SUPRA) , IN OUR O P I N ION, IS NO T APPLICABLE IN THE CA S E OF THE ASSESSEE . 12. FOR THE REASONS GIVEN ABOVE, WE ARE OF TH E VIEW THAT THE CLAIM MADE BY TH E ASSESSEE F OR EXEMPTION ON ACCOUNT OF SHO R T TERM CAPITAL GAIN ARI S IN G FROM THE TR A NSA CT ION ENTERED INTO WITH M/S. PINTELL SYSTEMS PVT. LTD WAS PATENTLY A WRONG CLAIM AND THE ASSESSEE HA VING FAILED TO FURNISH THE CORRECT PARTICULARS OF ITS INCOME ON ACCOU N T OF SHO R T TERM CAPITAL GAINS, IT IS A FIT CA S E TO IMPOSE PENALTY UN D ER S.271(1)(C) OF THE AC T. I N THAT VIEW OF THE MATTER, WE SET ASIDE THE IMPU G NED ORDER OF THE LEARNED CIT(A) CANCEL LIN G THE PENALTY IMPOSED BY THE ASSESSING OFFICER, AND RESTORE THAT OF TH E ASSESSING OFFICER. 13. IN TH E RESULT, APPEAL OF THE REVENUE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 12 TH NOVEMBER, 2014 SD / - SD/ - ( SAKTIJIT DEY ) ( P.M.JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/ - 12 TH NOVEMBER 2014 I TA NO. 772/H YD/20 14 M/S. PRAJNA TECHNOLOGIES & SERVICES LTD., HYDERABAD 12 COPY FORWARDED TO: 1. M/S. PRAJNA TECHNOLOGIES & SERVICES LTD., C/O. DAGLIYA & CO., CHARTERED ACCOUNTANTS, 5 - 5 - 9/13, SECOND FLOOR, SRINIVASA BUILDING, RANIGUNJ, SECUNDERABAD 2 . DY , COMMISSIONER OF INCOME - TAX CIRCLE 16(3), HYDERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) V, HYDERABAD COMMISSIONER OF INCOME - TAX IV , HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S