SHADOWFAX TECHNOLOGIES PRIVATE LIMITED,BANGALORE V. THE ASSESING OFFICER, DELHI

ITA 1254/DEL/2024

AI Insights

The case involves Shadowfax Technologies Pvt. Ltd, which appealed against the penalty levied by the National Faceless Appeal Centre (NFAC), Delhi, under section 270A of the Income-tax Act, 1961, for the Assessment Year 2017-18. The penalty was imposed following an assessment that disallowed excess depreciation claimed on internally generated software, reclassifying it as an intangible asset eligible for a lower depreciation rate. The Tribunal examined whether the NFAC was justified in confirming the penalty, ultimately deciding in favor of the assessee, citing precedents that penalties for misreporting or underreporting income require clear evidence of concealment or inaccurate reporting, which was not present in this case.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 34846 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 17-10-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 12-03-2024
• Other Referred Cases: CIT Vs. Reliance Petro Products Ltd, Price Waterhouse Coopers (P) Ltd vs CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V.K. DUBEY
• Assessee Lawyers: C. V. JAIN; NOT FILING ANY FURTHER APPEAL
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI SUDHIR KUMAR, JUDICIAL MEMBER ITA No. 1254/Del/2024 (Assessment Year: 2017-18) Shadowfax Technologies Pvt. Ltd, 1st Floor, Appek Building, 93/A, 4th B Cross Road, Koramangala, Bengaluru Vs. DCIT, Circle-23(1), Delhi (Appellant) (Respondent) PAN:AAVCS6697K Assessee by : Shri C. V. Jain, CA Revenue by: Shri V. K. Dubey, Sr. DR Date of Hearing 17/10/2024 Date of pronouncement 25/10/2024 O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.1254/Del/2024 for AY 2017-18, arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. NFAC’, in short] in Appeal No. ITBA/NFAC/S/250/2023-24/1060673738(1) dated 08.02.2024 against the order of assessment passed u/s 270 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 23.03.2022 by the Assessing Officer, NFAC, Delhi (hereinafter referred to as ‘ld. AO’). 2. The only effective issue to be decided in this appeal is as to whether the National Faceless Appeal Centre (NFAC), Delhi was justified in confirming the levy of penalty u/s 270A of the Act in the facts and circumstances of the instant case. ITA No. 1254/Del/2024 Shadowfax Technologies Pvt. Ltd Page | 2 3.We have heard the rival submissions and perused the material available on record. The assessee company filed its return of income for AY 2017-18 on 31.10.2017 declaring loss of Rs. 25,50,97,407/-. The assessment was completed u/s 143(3) of the Act on 19.12.2019 determining the total loss of Rs. 23,96,60,234/- after making disallowance of depreciation of Rs. 1,54,37,173/- in respect of computer software. The assessee claimed depreciation on internally generated software and claimed depreciation @60% thereon in the return of income. The ld AO in the assessment considered the internally generated software to fall under the ambit of intangible assets thereby eligible for depreciation only @25% as against @60% claimed by the assessee. Accordingly, the ld AO disallowed the excess depreciation of Rs. 1,54,37,173/- in the assessment. This assessment was accepted by the assessee by not filing any further appeal as ultimately the difference in depreciation results only in timing difference to the assessee and there would be absolutely no purpose that would be served to the assessee as even after the said disallowance, the assessed income had resulted only in a loss. Since, the quantum proceedings had attained finality, the ld AO levied penalty u/s 270A(9) of the Act by holding that the assessee had misreported the income in consequence of under- reporting and levied penalty @200% of tax payable on the disallowance of depreciation. 4. The facts narrated herein above, in our considered opinion, clearly prove that there is neither underreporting nor misreporting by the assessee. The disallowance of depreciation by adopting different rate had arose only due to difference in interpretation by the ld AO by not agreeing to the contention of the assessee. Ultimately this is only disallowance of a claim made by the assessee. There cannot be any allegation of either underreporting or misreporting of income. There is no concealment on the part of the assessee as all the details relevant for adjudication of the issue ITA No. 1254/Del/2024 Shadowfax Technologies Pvt. Ltd Page | 3 had been duly placed on record by the assessee in the return coupled with tax audit report thereon. Hence, the principles laid down by the Hon'ble Supreme Court and various Hon’ble High Courts on the levy of penalty for concealment of income or furnishing inaccurate particulars of income u/s 271(1)(c) of the Act shall duly apply to the misreporting or underreporting of income in Section 270A of the Act. Hence, by placing reliance on the decision of the Hon'ble Supreme Court in the case of CIT Vs. Reliance Petro Products Ltd reported in 322 ITR 158 (SC) and Price Waterhouse Coopers (P) Ltd vs CIT reported in 348 ITR 306 (SC), there is absolutely no justification at all for levy of penalty u/s 270A of the Act in the facts and circumstances of the instant case. Accordingly, we direct the ld AO to delete the penalty and allow the grounds of appeal of the assessee. 3. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 25/10/2024. -Sd/- -Sd/- (SUDHIR KUMAR) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 25/10/2024 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "