Income Tax Appellate Tribunal - Mumbai
F-5 Shlok Media Services, Mumbai vs Department Of Income Tax on 6 April, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL "F" BENCH, MUMBAI BEFORE SHRI JASON P.BOAZ, AM AND SHRI SANDEEP GOSAIN, JM आयकर अपील सं./ I.T.A. No. 7037/Mum/2013 ( नधा रण वष / Assessment Year: 2007-08) ACIT-20(3), M/s. F-5 Shlok Media Services 401, Room No.506, 5th floor, Piramal 4th Floor, Indus House, Near बनाम/ Chamber, Parel, Monginis Factory, Plot No.53, New Mumbai-400 012. Vs. Link Road, Andheri (West), Mumbai-400 053.
थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. AABFF 5820G
(अपीलाथ /Appellant) : ( यथ / Respondent)
अपीलाथ क ओर से / Appellant by : Shri Mukundraj M. Chate
यथ क ओर से/Respondent by : None
सनु वाई क तार ख / : 16/03/2016
Date of Hearing
घोषणा क तार ख /
: 06/04/2016
Date of Pronouncement
आदे श / O R D E R
Per Sandeep Gosain, J. M.:
The Present Appeal has been filed by the Revenue against the order of Commissioner of Income Tax (Appeals)- 31, dated 05.09.2013 for A.Y. 2007-08 whereby the CIT(A) has partly allowed the appeal filed by the assessee and deleted part of the penalty.
2ITA No.7037/Mum/2013 (A.Y. 2007-08)
ACIT Vs.M/s. F-5 Shlok Media Services The grounds raised by revenue before us are as under:
1. "The Learned CIT(A) has erred on facts and in law and in the circumstances of the case in not considering decision of Delhi High Court in the case of "CIT Vs. Zoom Communication (P) Ltd." to levy penalty u/s 271(1)(c) of the Income Tax Act, 1961.
2. The Appellant prays that the order of the CIT(Appeals) on the above grounds be set aside and that of the AO be restored.
3. The Appellant craves leave to amend or alter any ground or to submit additional new ground which may be necessary."
5. At the very outset, it is noticed that even in spite of several notices, none has appeared on behalf of assessee and on the perusal of order sheet we have noticed that nobody was appearing on behalf of assessee for the last several dates.
Although the notices were also served upon the assessee for appearing before us, but even then the respondent has not preferred to appear and even no application for adjournment was moved today. On the other hand ld. DR is present in the court and is ready with arguments. Therefore we have decided to proceed with the hearing of the case ex-parte with the assistance of the ld. DR and the material on record.
3ITA No.7037/Mum/2013 (A.Y. 2007-08)
ACIT Vs.M/s. F-5 Shlok Media Services
2. The brief facts of the case are that the assessee firm engaged in the business of advertising, filed its return of income from A.Y. 2007-08 dated 29.10.2007 declaring total income of Rs.23,19,030/-. The return was processed and selected for scrutiny and ultimately AO passed the order of assessment thereby making additions on several grounds.
3. Aggrieved by the order of the AO, assessee filed appeal before CIT(A) and the CIT(A) vide its order dated 05.09.2013 deleted the disallowance made u/s 40(a)(ia) and confirmed the disallowance on account of commission payment. The CIT(A) further held that expenditure on software is capital in nature and directed the AO to allow depreciation. After passing of the orders by CIT(A) in the quantum proceeding, AO initiated the penalty proceedings and in this respect statutory notices were served upon assessee and ultimately AO after considering the case levied penalty of Rs.25,86,500/- computed on the cumulative additions of Rs.86,21,669/-.
Aggrieved by the order of penalty, assessee filed appeal before CIT(A) and the CIT(A) after considering the case of the assessee upheld the levy of penalty on the amount of commission payment disallowed. Further the CIT(A) deleted the 4 ITA No.7037/Mum/2013 (A.Y. 2007-08) ACIT Vs.M/s. F-5 Shlok Media Services penalty on the disallowance of software expenses and in this way ld. CIT(A) vide its order dated 05.09.2013 partly allowed the appeal filed by the assessee.
4. Aggrieved by the order of CIT(A), revenue filed the present appeal before us on the grounds mentioned herein above.
Ground No. 1&2 Since both the grounds raised by the assessee are inter-connected and inter- related. Therefore, we thought it fit to dispose off the same through the present consolidated order.
6. Ld. DR representing the revenue relied upon the orders passed by AO regarding levy of penalty. It was submitted by ld. DR that the CIT(A) has erred in not considering the decision of Delhi High Court in case of "CIT vs. Zoom Communication (P) Ltd." to levy penalty u/s 271(1)(c) of Income Tax Act.
7. Before we come on to the merits of the case it is necessary to analyse the orders passed by the CIT(A) and the operative portion of CIT(A) are reproduced below:
5ITA No.7037/Mum/2013 (A.Y. 2007-08)
ACIT Vs.M/s. F-5 Shlok Media Services
4. In appeal it has been submitted as follows:
"During A. Y. 2007-08 the assessee declared income of Rs. 23,90,030/- the assessing officer assessed a income of Rs. 6,70,78,150/- on passing order U/s. 143(3) of the Income Tax Act 1961 (ITA). The addition to the returned income was on the following 3 grounds:-
U/s. 40(a) (ia) Rs. 5,60,38,120/- 2. Commission disallowed Rs. 31,21,669/- 3. Software Expenses considered as capital Rs. 55,00,000/-
Aggrieved by the order of the assessing officer the appellant filed an appeal to the CIT(A) who deleted the addition U/s. 40(a)(ia), allowed depreciation on software expenses and confirmed the addition on account of commission paid. The assessing officer passed an order u/s. 271 (l)(c) of the ITA confirming penalty on the disallowance of commission paid and software expenses. The appellant has filed an appeal against this penalty order. Our submissions in this respect are as follows:-
1. Commission disallowed of Rs. 31,21,669/-
The appellant in its course of business conducted during A. Y. 2007-08 had procured an order for advertising from M/s. Diageo India. Mr. Umashankar Prasad Proprietor of M /s. Calyx enabled assessee to procure the contract and as per agreed terms with him the appellant paid a commission of Rs. 31,21,669/-· after withholding TDS u/s. 194H of the ITA and claimed the same as business expenditure. During the course of assessment and the appellate proceeding entire communication with M/s. Calyx was brought on record along with the bank statements of Mr. Umashankar Prasad, his return of income, ledger account copies of the aforesaid in the books of the appellant. The assessing officer summoned Mr. Umashankar Prasad and took his statement wherein he was asked various questions as set out in the assessment order. Your honours will appreciate that no question regarding the commission received from the appellant was put to Mr. Umashankar Prasad. He was posed all general questions to which he furnished replies. The assessing officer concluded that since the appellant could not show the nexus between the commission payment made and the business the said expenditure was not made wholly and exclusively for the purpose of appellant's business. The CIT (A) after going through the submission and case laws referred to, by the assessing officer came to a conclusion that it was not clear whether Mr. Umashankar Prasad had disclosed the receipt of commission in his return of income.6 ITA No.7037/Mum/2013 (A.Y. 2007-08)
ACIT Vs.M/s. F-5 Shlok Media Services Also he held that there was no evidence brought on records by the appellant to establish that any services were rendered for which commission was paid. It is also observed by him that M/s. Diageo India Pvt. Ltd. did not know Mr. Umashankar Prasad. Thereafter relying on the decision of Bombay High Court in case of Chemaux Private Ltd. vs. CIT (109 ITR 705), Calcutta High Court in case of Vishnu Agencies Pvt. Ltd. vs. CIT (117 ITR 754), Karnataka High Court in case of DCIT vs. Mcdowell (291 ITR 107), Apex Court in case of Swadeshi Cotton Mills (63 ITR 57) followed in Lachminarayan Madan Vs. CIT (86 ITR 439) he confirmed the disallowance stating that appellant had failed to substantiate the commission payment.
At the outset we draw your kind attention to the fact that the assessing officer erred in not understanding the basic details like the fact that Mr. Ajay Modgil, partner in the appellant firm had known of Mr. Umeshenker Prasad Proprietor of M/s. Calyx who in turn knew M/s. Diageo from whom the appellant had procured a contract for advertising during the financial year relevant to A. Y. 2007-08. The commission due to Mr. Umashankar Prasad @ 4% on the total value of Rs. 6,64,50,432/- (contract from Diageo) amounting to Rs. 26,58,017/- alongwith reimbursement of expenses of Rs. 1,23,228/- and service tax of Rs. 3,40,424/-, aggregating to Rs. 31,21,669/- were payable as agreed upon. The assessing officer instead understood that Mr. Ajay was partner of Calyx. Further as M/s. Diageo submitted that they did know of Mr. Urhashankar Prasad, the assessing officer held the commission as not incurred for business purposes. The CIT(A) has placed reliance on venous decisions as discussed below :-
Bombay High Court in case of Chemaux Private Ltd. vs. CIT (109 ITR 705) The CIT(A) has reproduced the order of the Bombay High Court in his order. The basic facts in that case were that Shri A. M. Khopkar the employee of the assessee company was agreed by the chairman to received commission of sale @ 2.5%. It was claimed by Mr. Khopkar the commission was spent for procuring business for which there was no proof of expenditure. The AAC accordingly disallowed the commission since the expenditure could not be substantiated. We may mention here that in the case of the appellant is distinguishable on facts since in the present case it is not the claim of the appellant that the recipient of the commission has incurred expenditure to procure business. In other words M/s. Calyx charged the appellant commission @ 4% of the contract as their service charges and has not claimed that they have in turn expended this amount. They have reported this as a part of their turnover.7 ITA No.7037/Mum/2013 (A.Y. 2007-08)
ACIT Vs.M/s. F-5 Shlok Media Services Calcutta High Court in case of Vishnu Agencies Pvt. Ltd. vs; CIT (117 ITR 754) In this case the CIT(A) has relied upon only one observation contained in Para 26 of the order given in case of Mr. Mangilal Sethia which is reproduced below:-
26. On a careful consideration of the facts as found, those on record and the conclusions drawn by the authorities below thereon, it appears to us that so far as Mangilal Sethia is concerned the assessee could not establish that he rendered any service to the assessee as a sole selling agent. It is not in evidence that Mangilal deposited the stipulated sum of Rs. 10,000 to the assessee in terms of the agreement or that he secured any order for the assessee for sale of the stipulated products. It was not established that he incurred any expenses on behalf of the assessee on account of establishment or publicity or godown rent or similar items in connection with his agency. Before the lTG, Mangilal stated that the business has been looked after by his brother, Bhikamchand, and that he himself could not state anything as to the services rendered in connection with the agency. The ITO, the AAC and the Tribunal all have come to the conclusion that no services had been shown to have been tendered by the sole selling agent. It does not appear to us that any relevant evidence in this connection was omitted to be considered by the Tribunal or that irrelevant material was taken into account in coming to the aforesaid findings. In our view the assessee has not been able to establish that the commission paid to the sole selling agent was wholly or exclusively for the purposes of its business.
And has not considered the finding of the Calcutta High Court in Para 28, 29, 30 with respect to another commission agent Sampat & Co. The same is reproduced below:-
28. The categoric evidence of Bhikamchand was that Sampat & Co. had negotiated the tender that the said firm had personal acquaintance with the officers of the Government, that Sampat & Co. had duly instructed the factory staff of the assessee regarding specification and that they had attended loading and unloading of goods manufactured and supplied. The authorities below seem to have proceeded on the basis that such statements do not constitute any evidence and that the assessee had to establish its case only by documentary evidence. The oral evidence was not considered at all. The Tribunal did not apply its mind or advert to the various risks and responsibilities undertaken as assumed by Sampat & Co. under its agreement with the assessee. Clauses of the agreement, apart from those connected with the acceptance of the said tender, are relevant for the 8 ITA No.7037/Mum/2013 (A.Y. 2007-08) ACIT Vs.M/s. F-5 Shlok Media Services purpose of determining whether Sampat & Co. was lawfully entitled to the remuneration paid to it by the assessee and whether such remuneration was paid solely and exclusively for the purpose of business of the assessee. The Tribunal also failed to appreciate or consider the evidence of Bhikamchand in the above context.
29. For the reasons given above, we hold that the finding of the Tribunal for the asst. yrs. 1963-64 and 1964-65 that the remuneration paid to Sampat & Co. as manufacturing supervisor was not deductible as business expenditure under s. 37(1) of the IT Act, 1961, is vitiated by non- consideration of the aforesaid material facts and evidence on record which were relevant for arriving at such finding.
30. We, therefore, send the matter back to the Tribunal with a direction to consider the claim of the assessee in the light of the observations made above and determine the question in accordance with law. The Tribunal will give further opportunity to the parties for making submissions on the point and, if necessary, may take fresh evidence.
From the above it can be appreciated that oral evidence apart from documentary evidence submitted to the AO/CIT(A) needed to be considered. It was repeatedly submitted before the assessing officer. that it was personal acquaintance of Mr. Umashankar Prasad with people at Diageo which enabled the assessee to procure the contract from M/s. Diageo. The fact that such income is reflected by Mr. Umashankar Prasad is evident from his return of income filed before the AO/CIT(A) and copy of which is enclosed here once again.
Karnataka High Court in case of DCIT vs. Mcdowell (291 ITR 107) In this case payment were said to have eben made to agents who provided some service for sale of liquor by assessee company. As per the law applicable the sale were directly made to government and its corporation. Canvassing was prohibited therefore assesseewas held as not entitled to deduction of commission. Your honours will appreciate that the facts in the present case are clearly distinguishable.
Apex Court in case of Swadeshi Cotton Mills (63 ITR 57) In this case the directors were paid commission of 1 % in addition to remuneration which was held to be non deductable as it was found that no special efforts were put in by the directors. In the case before your honours the appellant successfully got the contact from t-t/s. Diageo.9 ITA No.7037/Mum/2013 (A.Y. 2007-08)
ACIT Vs.M/s. F-5 Shlok Media Services Lachminarayan Madan Las vs. CIT (86 ITR 439) In this case the selling agency agreement was only a make-believe arrangement and device to minimize tax liability of the assessee firm and not genuine. In the present case before your honour there is no such finding that the arrangement is to avoid tax since Mr. Umashankar Prasad has reflected the same in his turnover.
From the above your honours will appreciate that the appellant has furnished all oral evidence I documentary evidence to substantiate its claim of commission expenditure. The assessing officer has disallowed it stating that there was no nexus between the expense and the appellant's business. He did not appreciate the fact that contract from M/s. Diageo was a live nexus with the expense incurred. The CIT (A) placed reliance on the afore stated decisions which are clearly distinguishable on facts and confirmed disallowance. The Disallowance of a claim of expense made by the assessee can certainly not be basis for levy of penalty.
2. Software Expenses considered as capital Rs.55,00,000/-
The assessing officer was furnished with the documentary evidence with respect to the purchase of software from Mr. Satish Pujari of Microbit. The software was acquired for executing of the order from M/s. Diageo. It was explained to the officer that every type of advertisement required different software and accordingly had limited life. The assessing summons Mr. Satish and since he did not appear him, he regarded software expense to be capital in nature and also no depreciation to be granted. The CIT(A) was furnished with the bank statements of appellant reflecting payment to Mis. Microbit, the fact that installation was pre condition for doing business with Mis. Diageo India Pvt. Ltd. was also stated. The CIT(A) has accordingly treated the software expenditure to be capital in nature and he allowed depreciation on ' the same.
From the fact furnished above it is submitted that the appellant has undoubtedly expended the aforesaid amounts for business purposes as even the CIT(A) has held so. He has by allowing depreciation reduced the dispute to capital vs. revenue. Your honour will appreciate that there neither any concealment nor any furnishing of in accurate particulars but merely a debate whether the software expenditure is capital or revenue. This certainly can not be basis for confirming penalty.
Further, we draw your kind attention to the provisions of section 271(1)(c) of the Income Tax Act, 1961 which reads as follows:10 ITA No.7037/Mum/2013 (A.Y. 2007-08)
ACIT Vs.M/s. F-5 Shlok Media Services "271(1)(c) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person-
(a)-----
(b)------
c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,-
i) ----
ii) ----
iii) in the cases referred to in clause(c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income.
[Explanation 1 - Where in respect of any facts material to the computation of the total income of any person under this Act -
A) Such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner(Appeals) or the Commissioner to be false, or B) Such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him], then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause( c) of this sub section, be deemed to represent the income in respect of which particulars have been concealed". Your goodselves will appreciate that Sec 271 (l)(c) deals with two situations namely:
a)concealment of particulars of income or
(b)furnishing of inaccurate particulars of income .
Penalty can be levied only if either of these two conditions is satisfied as held by the Supreme Court in CIT v/s Reliance Petroproducts Pvt Ltd. 11 ITA No.7037/Mum/2013 (A.Y. 2007-08)
ACIT Vs.M/s. F-5 Shlok Media Services [(2010)230 CTR 320 (SC)J [Civil Appeal no. 2463 of 201 OJ. It is submitted that the assessee has neither concealed the income from being offered to tax nor has it furnished inaccurate particulars of such income either in the return of income or during the course of assessment proceeding u/s 143(3) of ITA. We draw your kind attention to the decision of Dilip N. Shroff v/s. JCIT & ANR. [(2007) 291 ITR 519 (SC)] for interpretation of the above phrases as enshrined in Sec 271 (1)(c):
"43. The expression "conceal" is of great importance. According to Law Lexicon, the word "conceal" means: "to hide or keep secret. The word 'conceal is con + celare which implies to hide. It means to bide or withdraw from observation; to cover or keep from sight; to prevent the discovery of; to withhold knowledge of. The offence of concealment is, thus, a direct attempt to hide an item of income or a portion thereof from the knowledge of the income-tax authorities. "
In Webster's Dictionary, "inaccurate" has been defined as : "not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript. ""
Your goodselves would appreciate that the appellant has, not at any single instance, made any attempt (whether deliberate or intentional) to hide the fact or furnish erroneous/inaccurate statements with regard to the expenditure incurred made during A.Y. 2007-08.
The assessing officer has levied the penalty on the fact that the CIT (A) confirmed the additions made by the assessing officer.
There are plethoras of cases for section 271(1)(c) to hold the fact that penalty cannot be imposed on mere making of the claim, which is not sustainable in law, by itself.
The Hon'ble Supreme Court in crr vis Reliance Petroproducts Pvt . Ltd. [(2010)230 CTR 320 (SC)] wherein it was held that merely because the assessee claimed deduction of interest expenditure which has not been accepted by the revenue, penalty u/s . 271(1)(c) is not attracted.
" ....Reading the words "inaccurate" and "particulars" in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. In this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under s. 271(1)(c). A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee.12 ITA No.7037/Mum/2013 (A.Y. 2007-08)
ACIT Vs.M/s. F-5 Shlok Media Services Such claim made in the return cannot amount to the inaccurate particulars. The assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not attract the penalty under s. 271 (l)(c). If the contention of the Revenue is accepted then in case of every return where the claim made is not accepted by AO for any reason, the assessee will invite penalty under s. 271 (1)(c). That is clearly not the intendment of the legislature. The Tribunal, as well as, the CIT(A) and the High Court have correctly reached this conclusion."
Thus we pray that no penalty be imposed as there is neither concealment nor furnishing of inaccurate particulars.
We submit that the assessing officer has only proceeded on surmises as the appellant had actually incurred the said expenditures and full details were furnished to him.
Under these circumstances we request your honors to kindly drop the penalty levied and oblige. /I
5. I have carefully considered the facts relating to the levy of penalty as they emerge from the assessment and penalty orders. I have also perused the appellate order passed with reference to the quantum appeal in this case.
5.12 Regarding the disallowance of software expenses, the disallowance has been upheld by the CIT(A) holding that these are in the nature of capital expenses. Thus I find that the disallowance is made on account of a difference of opinion between the appellant and the revenue as to the category in which the concerned expenses fall.
5.12.1 It is well accepted principle that when the disallowance made by AO itself is debatable in nature, no penalty for conealment for such debatable issue can be lvied. This principle has been elaborated in the decisions rendered in the cases of Ajaib Singh & Co 253 ITR 630 (P&H), Harshvardhan Chemicals & Minerals Ltd. 259 ITR 212 (Raj.), Shivlal Desai & Sons 114 ITR 377 (Bom.), Kalyani Enterprises 83 ITD 764 (Mad 13 ITA No.7037/Mum/2013 (A.Y. 2007-08) ACIT Vs.M/s. F-5 Shlok Media Services Trib), National Textiles V/s CIT, 249 ITR 125 (Guj.), Indersons Leathers 328 ITR 167(P&H) and Gujarat Credit Corporation Ltd. v. ACIT 116 IT] (SB)(Ahd) 619.
5.13 In their judgment in the case of CIT v/s Fortis financial Services ITA Nos.243/2011 &244/2011, the Hon'ble Delhi High Court observed as under:
"It is settled that when two legal interpretations were plausible and. there was honest and bona fide difference of opinion, penalty for concealment/furnishing of inaccurate particulars, should not and cannot be imposed. If the view taken by the assessee required consideration and was reasonably arguable, he should not be penalized for taking the position. The tax statutes are complex and there can be a bona fide difference of opinion on legal interpretation and understanding of a provision. In such cases, even when the interpretation placed by the Revenue is accepted, penalty should not be imposed if the contention of the assessee was plausible and bona fide. Of course full facts should be disclosed. "
5.14 In the case of Reliance Petroproducts P. Ltd. reported at 322 ITR 158, it has been held by the Hon'ble Supreme Court that in order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. The Court held as follows:
"A glance at the provision of s.271 (1)(c) would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. Present is not the case of concealment of the income. That is not the case of the Revenue either. As per Law Lexicon, the meaning of the word "particular" is a detail or details (in plural sense); the details of a claim, or the separate items of an account.' Therefore, the word "particulars" used in the s.ec.271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. The words are plain and simple. In order to expose the assessee to the penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. Therefore, it is obvious 14 ITA No.7037/Mum/2013 (A.Y. 2007-08) ACIT Vs.M/s. F-5 Shlok Media Services that it must be shown that the conditions under sec.271 (1)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed because that is the only document, where the assessee can furnish the particulars of his income."
5.14.1 This principle has been followed in the judgement of VIP Industries Ltd. 21 DTR (MUM TRIB) 153.
5.15 In the present case, the appellant has claimed expenses incurred for purchase of software. The claim was examined during the quantum appeal proceedings and it was found that the software had been specifically designed to meet the advertising needs of the appellant's client M/s Diageo, and was installed for the first time in the year under consideration. The expenditure was held to be of capital nature as against revenue expenditure claimed by the appellant. Thus the disallowance stemmed from the difference of opinion. Accordingly, in view of the facts and the citations discussed above, I find that levy of penalty on this disallowance cannot be upheld. Accordingly, the A.O. is directed to recompute the penalty with reference to the amount of commission payment disallowed and the grounds raised by the appellant .are partly allowed.
8. We have considered the arguments addressed by ld. DR and we have also perused the orders passed by revenue authorities, we are of the considered view, that the CIT(A) has righty deleted the disallowance of software expense by discussing the facts of the case as well as relying upon the several judicial pronouncements. We also found that the judicial pronouncements mentioned in para 5.12 to 5.14 are fully applicable to the facts of the present case and the ld. CIT(A) has rightly followed the judgment passed in 'Reliance Petro Products Private Ltd.' reported at 322 ITR 158, wherein it has been held by Hon'ble Supreme Court that in order to expose the assessee to the penalty, it is to be adhered that unless the case is strictly covered by the provision, the provisions of 15 ITA No.7037/Mum/2013 (A.Y. 2007-08) ACIT Vs.M/s. F-5 Shlok Media Services penalty cannot be invoked. It has further been held by the Hon'ble Supreme court that by any stretch of imagination, making an incorrect claim in law cannot in itself tantamounts to furnishing 'inaccurate particulars'. The Hon'ble Supreme Court further held that in order to attract the provision of section 271(1)(c) of the Income Tax Act, there has to be "concealment of particulars" of the income of the assessee" secondly, the assessee must have furnish "inaccurate particulars" of his income, in the present case both the elements are missing as no information given by the assessee in the return was found to be incorrect or inaccurate. It is submitted that mere making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. As per the facts of the present case the disallowance made by CIT(A) is on account of difference of opinion between the assessee and the revenue as to the category in which the concerned expenses fall which certainly is a debatable in nature . It is settled law that when the disallowance made by AO/ CIT(A) itself is debateable in nature, no penalty of concealment for such debatable issue can be levied. And in this respect we rely upon judgment rendered by Hon'ble Punjab and Haryana High Court in the cases of Ajaib Singh & Co. 253 ITR 630. We have also considered the judgement rendered by ld. DR titled "CIT Vs. Zoom Communication (P) Ltd." the facts contained in the said judgement are entirely different and distinguishable and therefore the judgment rendered by Delhi High Court in case "CIT Vs. Zoom Communication (P) Ltd." is not applicable to 16 ITA No.7037/Mum/2013 (A.Y. 2007-08) ACIT Vs.M/s. F-5 Shlok Media Services the facts and circumstances of the present case as it is nowhere mentioned in the afore mentioned judgment that if two views are possible or when the disallowance made by revenue itself is debatable in nature, then penalty can be levied therefore on the factual and legal aspects the afore mentioned judgement is not applicable to the facts of the present case.
9. After analyzing the afore mentioned order we found that the CIT(A) has dealt with the issues and has passed judicious and well reasoned order and no circumstances have been brought before us in order to controvert or rebut the findings recorded by the CIT(A). Therefore, we see no reason to deviate or interfere into the findings recorded by the CIT(A) and hence, we reject these grounds of appeal raised by the revenue and uphold the order of the CIT(A).
Ground No.3 is general in nature and needs no separate adjudication.
11. In the result, the Revenue's appeal is dismissed.
Order pronounced in the open court on 6th April, 2016 Sd/- Sd/-
(Jason P. Boaz) (Sandeep Gosain) लेखा सद य / Accountant Member &या'यक सद य / Judicial Member मंब ु ई Mumbai; *दनांक Dated :06.04.2016 Ps. Ashwini 17 ITA No.7037/Mum/2013 (A.Y. 2007-08) ACIT Vs.M/s. F-5 Shlok Media Services आदे श क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent 3. आयकर आय+ ु त(अपील) / The CIT(A) 4. आयकर आय+ ु त / CIT - concerned 5. .वभागीय 'त'न1ध, आयकर अपील य अ1धकरण, मब ंु ई / DR, ITAT, Mumbai 6. गाड5 फाईल / Guard File आदे शानस ु ार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील$य अ%धकरण, मब ंु ई / ITAT, Mumbai