Income Tax Appellate Tribunal - Mumbai
Cms Info Systems P. Ltd, Mumbai vs Acit 5(3), Mumbai on 15 January, 2019
आयकर अपीलीय अिधकरण "सी" यायपीठ,
यायपीठ, मुब
ं ई
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH, MUMBAI
BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER
&
SHRI RAM LAL NEGI, JUDICIAL MEMBER
आयकर अपील सं./ITA No.5391/MUM/2017
( िनधा रण वष / Assessment Year :2011-2012)
CMS Info Systems Pvt. Ltd., Vs. ACIT-5(3), Mumbai
CMS House, Plot No.91, Street
No.7, Marol MIDC, Andheri(E),
Mumbai-400093
थायी ले खा सं . /PAN No. : AAMCS 2311 K
(अपीलाथ /Appellant) .. ( यथ / Respondent)
िनधा रती की ओर से /Assessee by : Shri Praksh K. Jotwani, AR
राज की ओर से /Revenue by : Shri Abhirama Kartikeyan, DR
सुनवाई क तारीख / Date of Hearing : 07/01/2019
घोषणा क तारीख/Date of Pronouncement 15/01/2019
आदेश / O R D E R
Per Shri Rajesh Kumar, AM:
This appeal by the assessee arises out of the order of the CIT(A) - 10, Mumbai, dated 19.06.2017, which in turn has arisen out of the order passed u/s.271(1)(c) of the Act.
2. The issue raised by the assessee in the present appeal is against the confirmation of penalty of Rs.3,72,040/- as imposed by the AO u/s.271(1)(c) of the Act.
3. Brief facts of the case are that the assessment was framed u/s.143(3) of the Act vide order dated 03.02.2014 showing total income at Rs.14,82,53,110/- against the returned income of Rs.14,71,33,110/-, hereby making addition of Rs.11,20,000/- on account of disallowance of excess deduction claimed u/s.35DD of the Act. The said expenses claimed by the assessee were comprised of stamp duty and related 2 ITA No.5391/17 expenses incurred for increase of authorised capital consequent to allotment of shares to shareholders of the demerged company M/s CMS Computers Ltd. and no new funds have been received by the assessee company and, thus, expenses were related to demerger of the company. As per the AO the said expenses were to be allowed in five solvent as per the provisions of Section 35DD of the Act and, thus, the assessee has made wrong claim by claiming entire expenses in one year. In para 4 of the penalty order it is mentioned that similar disallowance of excess claim of deduction u/s.35DD was also made by the AO in AY 2010-2011 for which no penalty proceedings was initiated. The AO also stated that the assessee has not filed any appeal against the said disallowance which shows that the assessee has accepted the disallowance for AY 2010- 2011. The assessee should have suo mtou disallowed the wrong claim of the disallowance. Finally, relying on the order of Hon'ble Delhi High Court in the case of CIT Vs. Zoom Communication (P) Ltd., 327 ITR 510, the AO levied penalty equal to 100% tax sought to be evaded for concealment of particulars of income or furnishing of inaccurate particulars of income thereby not specifying the specific charge on which the penalty was proposed to be levied. Finally, the order imposing penalty u/s.271(1)(c) of the Act was passed on 27.08.2014.
4. The CIT(A) in appeal, upheld the penalty order on the ground that the assessee was entitled to claim of Rs.2,80,000 out of Rs.11,20,000/- by claiming full amount giving reason that similar disallowance was given in A.Y.2010-2011 and no appeal was filed by the assessee. 3 ITA No.5391/17 Consequently, the CIT(A) also held that the Explanation 1 of Section 271(1)(c) of the Act is applicable as the difference between the return of income and assessed income represented the income in respect of which particulars have been concealed and, thus, justified in imposition of penalty. Third reason stated by the CIT(A) that the assessee has not disputed the disallowance before the appellate authority in previous as well as in current year and, therefore, it is presumed that the assessee has no objection for disallowance. The operative part of the order of the CIT(A) is reproduced as under :-
"5. I have carefully considered the facts of the case and the submissions of the Id.AR. I have also gone through the decisions relied on by the AO and the Id.AR. The only dispute at the time of assessment was whether the expenditure incurred for increase of authorised capital of a demerged company is capital or revenue. The appellant has treated it as a revenue and claimed entire 14 lakhs in P&L account whereas the AO has allowed only Rs. 2, 80, 000 which is 1/5 of 14 lakhs and the balance of Rs. 11. 20, 000 was disallowed on which the present penalty is levied. There was no appeal filed on this disallowance. Further, similar disallowance was also made in A.Y 2010-11 and no appeal was filed for this year also, 5.1. In my considered opinion the penalty levied by the AO is in order for the following reasons-
Firstly, the provisions of 35 DO are very clear in the sense that only one fifth of .such expenses should be allowed to be claimed as expenditure for the year. The said provisions are reproduced as under-
[Amortisation of expenditure in case of amalgamation or demerger, 351)1). (1) Where an assessee being an Indian company. -incurs any expenditure, on or alter after the 1st day of April, 1999, wholly and exclusively for the purposes of amalgamation or demerger of an undertaking, the assessee shall be allowed a deduction of an amount equal to one- filth of such expenditure- for each of the live successive previous years beginning with the previous year in which the amalgamation or demerger takes place.
4ITA No.5391/17 (2) No deduction shall be allowed in respect of the expenditure mentioned in sub-section (1) under any other provisions of this Act.
As there is no ambiguity in the provisions that only one fifth of such expenses are to be allowed, and the appellant has claimed hundred percent of such expenses incurred for increasing the authorised capital, it is evident that there is violation of statutory provisions which clearly attracts penal provisions.
Secondly, as per Explanation-1 of section 271(1)(c), any amount added/disavowed in computing the total income when compared to returned income, such an amount should be deemed to represent the income in respect of which particulars have been concealed. In other words penalty u/s 271(1)(c) will attract if there is a difference between returned income and assessed income, in the instant case such difference has arisen in the assessment due to the disallowance of Us. 11. 20, 000 which is 4/5 of Rs. 14 lakhs which was debited in the P&L account as revenue expenditure. Therefore, penalty u/s271(1)(c} is attracted.
Thirdly, the appellant has not disputed the disallowance before the appellate authorities either in the previous A.Y or for the year under consideration. Therefore, it is presumed that the appellant has no objection for disallowance, more so, as the balance amount was allowed in the subsequent four years to be claimed".
5. We have heard the rival submissions of both the parties and perused the material on record. We observe that in the present case the penalty has been imposed by the AO on account of wrong claim of deduction to the tune of Rs.11.20 lakhs which was incurred by the assessee for stamp duty for increase in authorised share capital. Indisputably, the expenses were incurred for increase in authorised share capital which was necessitated due to issue and allotment of shares to the shareholders of the demerger company. In the present case ,though the assessee has claimed these expenses in current year and also the fact remains that in previous year also such disallowance was made by the AO but the fact of the matter is that the assessee has made 5 ITA No.5391/17 full disclosure of the facts in the financial statement and also before the revenue authorities. The only difference was that instead amortisation in five equal instalments, the assessee has claimed the entire amount in one year. We find merit in the submissions of ld. AR that this is bonafide and inadvertent mistake on the part of the assessee. Further we find that the penalty has been imposed on a mechanical manner without specifying one of the two limbs on which the penalty was proposed to be levied and similarly in the penalty order both the limbs were specified which reflects a clear cut case of non-application of mind by the AO and mechanical application of law in imposing the penalty on the assessee. The case of the assessee is squarely covered by the decision of the Hon'ble Supreme Court in the case of Reliance Petroproducts (P) Ltd., 322 ITR 158(SC), wherein the Hon'ble Apex Court has held that a claim of expenses by the assessee in the books of accounts which is not accepted by the revenue will not attract the penalty. Besides, the case of the assessee is squarely covered by the decision of Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory & Ors., 359 ITR 565 (Kar.) , the decision of Hon'ble Supreme Court in the case of Ashok Pai Vs CIT 292 ITR 11(SC), CIT Vs Samson Perinchery ITA No 1154 of 2014 order dated 5.1.207 and CIT Vs. SSA's Emerlad Meadows, [2016] 73 taxmann.com 241(Kar.), which was subsequently, affirmed by the Hon'ble Apex Court reported in [2016] 73 taxmann.com 248 (SC). In all the above decisions the hon'ble courts have held no penalty is to be levied where the AO has not specified one of the two limbs u/s 271(1)c) of the Act on which the 6 ITA No.5391/17 penalty is proposed to be levied. We, therefore, following the ratio laid down in the above decisions, set aside the order of CIT(A) and direct the AO to delete the penalty levied against the assessee.
6. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 15/01/2019.
Sd/- Sd/-
(RAM LAL NEGI) (RAJESH KUMAR)
लेखा सद य / ACCOUNTANT MEMBER
मुंबई Mumbai;
याियक सद य / JUDICIAL MEMBER
दनांक Dated 15/01/2019
कु .िम/Prakash Kumar Mishra, Sr.PS.
.
आदेश क ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant-
2. थ / The Respondent-
3. आयकर आयु (अपील) / The CIT(A), Mumbai
4. आयकर आयु / CIT
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, मुं बई / DR, ITAT, Mumbai
6. गाड फाईल / Guard file.
स यािपत ित //True Copy//
आदेशानुसार/ BY ORDER,
(Assistant Registrar)
आयकर अपीलीय अिधकरण, मुबं ई / ITAT, Mumbai