ACIT, New Delhi V. M/s. New Delhi Television Ltd., New Delhi

ITA 941/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87058 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 16-03-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 24-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P DAM KANUNJHA
• Keywords: Capital asset; Revision of order; Depreciation; Difference of opinion; Revenue expenditure; Capital expenditure
• Section: 234B; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E, NEW DELHI) BEFORE SHRI G. C. GUPTA, HONBLE VICE PRESIDENT AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO. 941/DEL/2012 ASSESSMENT YEAR : 2004-05 ACIT, CIRCLE 13(1), VS. NE W DELHI TELEVISION LTD ., NEW DELHI 207, OKHLA INDUSTRIAL ESTATE, NEW DELHI GIR / PAN:AAACN0865D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TARANDEEP SINGH, CA RESPONDENT BY : SHRI P DAM KANUNJHA, SR. DR DATE OF HEARING : 16.03.2015 DATE OF PRONOUNCEMENT : 25.03.2015 ORDER PER T.S. KAPOOR, AM: THIS IS AN APPEAL FILED BY REVENUE AGAINST THE ORD ER OF LD. CIT(A) DATED 30.09.2011. THE REVENUE IS AGGRIEVED WITH TH E ACTION OF LD. CIT(A) BY WHICH HE HAS ALLOWED RELIEF TO THE ASSESSEE BY D ELETING PENALTY IMPOSED BY A.O. U/S 271(1)(C) OF THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE A.O. IN HIS ORDER U/S 271(1)(C) HAS IMPOSED PENALTY OF RS.3.16 LACS IN VIEW OF THE FACT THAT ASSESSEE HAD CLAIMED AN EXPENDITURE OF RS.15,94,244/- ON ACCOUNT OF ACQUISITION OF NEW SOFTWARE WHICH, THE A.O. DURING ASSESSMENT PROCEEDI NGS HAD HELD TO BE OF CAPITAL NATURE AND, AND HELD THAT THE EXPENDITURE N EEDED TO BE CAPITALIZED. THE A.O. ALLOWED DEPRECIATION ON SUCH CAPITALIZATIO N AND MADE THE ADDITION ITA NO.941/DEL/2012 2 OF DIFFERENCE BETWEEN REVENUE EXPENDITURE CLAIMED A ND DEPRECIATION ALLOWED AND ALSO IMPOSED PENALTY U/S 271(10(C). AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) ON THE BASI S OF SUBMISSIONS FILED BY ASSESSEE, DELETED THE PENALTY BY HOLDING AS UNDE R: 2.2 I HAVE GONE THROUGH THE PENALTY ORDER AS WELL AS THE SUBMISSIONS OF THE APPELLANT'S AR. THE ASSESSING OF FICER HAS PLACED RELIANCE ON THE JUDGMENT OF THE HON'BLE SUPREME COU RT IN THE CASE OF M/S. DHARAMENDRA TEXTILES 306 ITR 277 WHEREIN IT HA S BEEN HELD THAT PENALTY U/S 271 (1) (C) IS A CIVIL LIABILITY. SUBSE QUENTLY, THE CASE OF DHARAMENDRA TEXTILES (SUPRA) HAS BEEN ANALYSED BY P UNE BENCH OF HON'BLE ITAT, WHEREIN IT HAS BEEN HELD THAT THE PEN ALTY PROCEEDING, NO DOUBT, IS A CIVIL LIABILITY BUT THE SAME CANNOT TAKE THE CHARACTER OF COMPENSATORY PAYMENTS, LIKE INTEREST U/S 234A, 234B AND 234C OF THE ACT AS THE PROVISION OF THE STATUTE IN THE CASE OF CIVIL LIABILITY ALSO HAS TO BE INTERPRETED IN TERMS OF EXPRESS PROVISIONS OF THE STATUTE AND NO PENALTY U/S 271 (I) (C) OF THE ACT CAN BE LEVIED ON THE BASIS OF ADDITIONS IN THE ASSESSMENT ORDER ONLY AS IN TERMS OF EXPLANATION I TO SECTION 271 (1 ) (C), PENALTY CANNOT BE IMPOSED, IF THE APPELLANT SHOWS JUSTIFICATION IN CLAIMING SUCH EXPENDITURE .. THE RATIO OF THE JUDGMENT OF PUNE BENCH OF ITA T IN THE CASE OF KANBAY SOFTWARE INDIA (I LTD. 122 TTJ 721, IS AS F OLLOWS :- 'BEFORE PENALTY IS IMPOSED THE AO HAS TO BE SATISFI ED THAT THE ASSESSEE HAS CONCEALED INCOME, OR THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS, THAT THE CASE OF ASSESSEE IS COVERED BY DEEMING FICTION OF ONE OF THE EXPLANATIO NS APPENDED TO S. 271 (1) (C). THE APART, IT IS ALSO WELL-SETTL ED IN LAW THAT PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSESSMEN T PROCEEDINGS AND BASED ON THE FINDINGS IN THE ASSESS MENT ORDER PER SE, PENALTY CANNOT BE IMPOSED. IT IS, THEREFORE , WHOLLY UNJUSTIFIED TO INTERPRET 'CIVIL LIABILITY' OF PENAL TY U/S. 271 (1) (C) SHOULD BE CONSTRUED TO MEAN THAT THE PENALTY IS AN AUTOMATIC CONSEQUENCE OF AN ADDITION BEING MADE TO THE INCOME OF THE ASSESSEE. A PENALTY U/S. 271 (1) (C) IRRESPECTIVE O F WHETHER IT IS ITA NO.941/DEL/2012 3 A CIVIL LIABILITY OR A CRIMINAL LIABILITY, CAN ONLY BE IMPOSED WHEN SCHEME OF THE ACT PERMITS OR REQUIRES SO; NOT ONLY THAT IT IS NOT AN AUTOMATIC CONSEQUENCE OF AN ADDITION BEIN G MADE TO THE INCOME, BUT AN ADDITION MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, BY ITSELF, CANNOT BE ENOUGH TO INITIATE, LEAVE ASIDE, CONCLUDE, PENALTY PROCEEDINGS U/S. 271 (1) (C). THEREFORE, A FINDING RECORDED IN THE ASSESSMENT ORD ER MAY CONSTITUTE GOOD EVIDENCE IN THE PENALTY PROCEEDINGS BUT THOSE FINDINGS CANNOT BE REGARDED AS CONCLUSIVE FOR THE P URPOSE OF PENALTY PROCEEDINGS.' IT HAS BEEN SUBMITTED THAT THE APPELLANT HAD ALREAD Y CAPITALIZED HIGH END SOFTWARE AMOUNTING TO RS.43.12 LACS AND THE SOF TWARE EXPENSES OF RS.15,94,244/- CLAIMED BY IT IN THE PROFIT AND L OSS ACCOUNT, BUT CAPITALIZED BY THE AO AND ON ACCOUNT OF WHICH PENAL TY U/S 271 (L)(C) HAS BEEN LEVIED, WERE OF ROUTINE AND RECURRING NATU RE LIKE ANNUAL MAINTENANCE CONTRACT, ETC. AFTER CONSIDERATION OF T HE FACTS OF THE CASE, I AM OF THE VIEW THAT THE APPELLANT HAD DISCLOSED A LL MATERIAL FACTS IN REGARD TO THESE EXPENSES WHILE FILING ITS RETURN OF INCOME AS WELL AS DURING ASSESSMENT PROCEEDINGS AND THEREFORE CANNOT BE SAID TO HAVE CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTIC ULARS OF INCOME. THE DISALLOWANCE OF THE SOFTWARE EXPENSES BY THE AO HAS ARISEN ON ACCOUNT OF DIFFERENCE OF OPINION BETWEEN THE APPELL ANT AND THE AO AS TO WHETHER THE SAME WERE REVENUE OR CAPITAL IN NATU RE. IN ANY CASE, CAPITALIZATION OF THE EXPENSES AND ALLOWING DEPRECI ATION ON THE SAME, AS HAS BEEN DONE BY THE AO, WOULD MERELY AMOUNT TO ALLOWING THE EXPENSES OVER A NUMBER OF YEARS, INSTEAD OF IN A SI NGLE YEAR, HAD THE EXPENSES BEEN TREATED AS REVENUE IN NATURE. IN THE CASE OF THE APPELLANT, THE RETURNED AND ASSESSED LOSSES ARE QUI TE HEAVY AND WHETHER SOFTWARE DEVELOPMENT EXPENSES ARE ALLOWED A S REVENUE OR TREATED AS CAPITAL IN NATURE, WOULD NOT IMPACT THE TAX LIABILITY OF THE APPELLANT, AND THE APPELLANT COULD NOT HAVE HAD A M OTIVE OF EVADING TAX WHILE CLAIMING THESE EXPENSES AS REVENUE EXPEND ITURE. FOR THE REASONS GIVEN ABOVE, THE CONCEALMENT PENALTY LEVIED BY THE ASSESSING OFFICER IS DIRECTED TO BE DELETED. GROUNDS NOS. 2 & 3 OF THE APPEALS ARE ALLOWED. ITA NO.941/DEL/2012 4 3. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 4. LD. D.R. AT THE OUTSET SUBMITTED THAT THE ASSESS EE HAD WRONGLY CLAIMED REVENUE EXPENDITURE FOR A CAPITAL ASSET AND THEREFO RE, HAD FURNISHED INACCURATE PARTICULARS OF INCOME AND HAD CONCEALED INCOME AND, THEREFORE, A.O. HAD RIGHTLY IMPOSED THE PENALTY. 5. LD. A.R. ON THE OTHER HAND SUBMITTED THAT THE AD DITION HAS BEEN MADE IN VIEW OF ASSESSMENT ORDER PASSED AS A CONSEQUENCE OF ORDER U/S 263 OF THE ACT AND A.O. IS NOT EMPOWERED TO INITIATE PENALTY P ROCEEDINGS U/S 271(1)(C), IN SUCH CIRCUMSTANCES IN VIEW OF THE ORDER OF HON'B LE DELHI HIGH COURT IN THE CASE OF CIT VS PADMINI MISHRA IN I.T.A. NO. 541 VIDE ORDER DATED 27.05.2014. ON MERITS LD. A.R. SUBMITTED THAT THE ASSESSEE HAD PURCHASED SOFTWARE WHICH WAS CLEARLY AN ITEM OF REVENUE NATUR E AND, THEREFORE, IT HAD DEBITED THE SAME TO P & L ACCOUNT WHEREAS, THE REVE NUE AUTHORITIES HAD HELD THE SAME TO BE AN EXPENDITURE OF CAPITAL NATUR E AND THEREFORE, HAD IMPOSED PENALTY FOR CONCEALMENT OF INCOME WHICH IN FACT WAS NEVER A CONCEALMENT AS THE ADDITION WAS MADE DUE TO DIFFERE NCE OF OPINION ON ACCOUNT OF DISALLOWANCE OF AN ITEM OF DEBATABLE NAT URE. HE FURTHER SUBMITTED THAT ALL THE FACTS AND PARTICULARS WERE B EFORE THE A.O. AND FROM THOSE PARTICULARS ONLY; THE A.O. HAD TREATED REVENU E EXPENDITURE AS CAPITAL EXPENDITURE. 6. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROU GH THE MATERIAL PLACED ON RECORD. WE FIND THAT IT IS A CLEAR CASE WHERE PENALTY HAS BEEN IMPOSED BY A.O. IN VIEW OF THE DIFFERENCE OF OPINIO N BETWEEN ASSESSEE AND THE A.O. THE ASSESSEE TREATED THE EXPENDITURE AS R EVENUE EXPENDITURE WHEREAS, THE A.O. TREATED THE PURCHASE OF SOFTWARE AS CAPITAL ASSET. ALL THE ITA NO.941/DEL/2012 5 PARTICULARS WERE BEFORE THE A.O. FROM WHICH ONLY HE COULD ARRIVE AT A CONCLUSION THAT ASSESSEE HAD DEBITED THE EXPENDITUR E IN THE P & L ACCOUNT. THEREFORE, IT IS NOT A CASE WHERE THERE WAS ANY WRO NG FURNISHING OF PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. IN VIEW OF ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A). 7. IN VIEW OF ABOVE, APPEAL FILED BY REVENUE IS DIS MISSED. 8. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH MARCH, 2015. SD./- SD./- ( G. C. GUPTA) (T.S. KAPOO R) VICE PRESIDENT ACCOUNTANT MEMBER DATE: 25.03. 2015 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 20/3 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 23,24, SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 25/3 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 25/3 SR. PS/PS 7 FILE SENT TO BENCH CLERK 25/3 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER