Income Tax Appellate Tribunal - Mumbai
Buildbyte.Com (India) P. Ltd, Mumbai vs Acit Cen Cir 36, Mumbai on 10 October, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
"B" Bench, Mumbai
Before Shri P K Bansal, Vice President
and Shri Pawan Singh, Judicial Member
ITA No.7350 /Mum/2013
(Assessment Year: 2002-03)
M/s. Buildbyte.com (India) ACIT, Central Circle-36
Pvt. Limited Aayakar Bhavan, M.K. Road
511, Dalamal Tower, Free Vs. Mumbai 400020
Press Marg, Nariman Point
Mumbai 400021
PAN - AABCB5417G
Appellant Respondent
Appellant by: Shri Pavan Ved
Respondent by: Shri Suman Kumar
Date of Hearing: 13.09.2017
Date of Pronouncement: 13.09.2017
ORDER
Per P.K. Bansal, Vice President This appeal has been filed by the assessee against the order of the CIT(A)-41, Mumbai dated 30.07.2013 for A.Y. 2002-03.
2. This appeal is barred by limitation of 30 days. The assessee has filed an application for condonation of dealt of 30 days in filing the appeal along with an affidavit. After hearing heard both the parties we are satisfied that the assessee was prevented by sufficient cause from filing the appeal within the permissible time. We, therefore, condone the delay in filing the appeal.
3. The only issue involved in this appeal relates to the levy of penalty under section 271(1)(c) of Income Tax Act amounting to `98,26,441/-.
4. The brief facts of the case are that the assessee is engaged in the business of website and software development and other information technology related activities. The assessee was incorporated on 27.09.2000 2 ITA No. 7350/Mum/2013 M/s. Buildbyte.com (India) P. Ltd.
and started to develop website designing online and database access till A.Y. 2001-02. Assessee incurred loss during the impugned assessment year. The assessee further incurred a sum of `94,65,325/- towards development of the said website/portal. The total expenditure thus incurred by the assessee till the impugned assessment year towards website/portal development were `2,75,25,044/-. The assessee submitted its return declaring a loss of `3,35,60,228/- which was processed under section 143(1). Subsequently the assessment was reopened on the reason that the assessee has not capitalised the software development expenses amounting to `2,75,25,044/-. Ultimately the assessment was completed under section 144 r.w.s 147 at a loss of `60,35,244/- treating the sum of `2,75,25,044/- as capital expenditure. When the matter went before the CIT(A), the CIT(A) confirmed the order of the AO but directed the AO to allow depreciation on the capitalised software expenses. The assessee did not file any appeal before the Income Tax Appellate Tribunal. The AO initiated penalty proceedings during the course of assessment by observing as "penalty proceedings under section 271(1)(c) are initiated simultaneously for furnishing inaccurate particulars of income". Subsequently notice dated 27.10.2008 for initiating penalty proceedings under section 271(1)(c) was issued and ultimately penalty was levied on the assessee vide order dated 30.03.2012 @ 100% of the tax sought to evaded amounting to `98,26,441/- for concealing particulars of income and filing inaccurate particulars of income.
5. We have heard the rival submissions and carefully considered the same. We noted that in this case the AO initiated penalty for furnishing inaccurate particulars of income which means that the AO has not applied Explanation 1 so that the deeming provision for concealment of particulars of income could have been applied. It is a case where the onus is on the AO to prove that the assessee has furnished inaccurate particulars of income. Now the question before us is whether claiming a deduction of a sum of `2,75,25,044/- on account of software development as revenue expenditure which was subsequently held to be capital expenditure can be 3 ITA No. 7350/Mum/2013 M/s. Buildbyte.com (India) P. Ltd.
regarded as furnishing of inaccurate particulars so that the assessee can be made liable for levying penalty under section 271(1)(c). The learned A.R. before us drawn our attention towards the decision of the Hon'ble Delhi High Court in the case of CIT vs. Amway India Enterprises 22 taxmann.com 22 (Del). From the said decision it is apparent that expenditure incurred by the assessee on purchase of software application and payment of consideration for acquiring licences to use those applications will be revenue expenditure. In view of the decision of the Hon'ble Delhi High Court we find force in the submission of the learned A.R. that the expenditure incurred by the assessee for software can be regarded to be revenue expenditure. Therefore, the claim made by the assessee as revenue expenditure was a bonafide claim. The assessee has declared all the particulars while making the claim in the return. It cannot be said that the assessee has not furnished all the details whatever was required for making the claim. We noted that the case of the assessee is duly covered by the decision of the Hon'ble Supreme Court in the case of CIT vs. Reliance Petroprodcuts Pvt. Ltd. (2010) 332 ITR 158 wherein the court held that "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 section 271(1)(c)". The Hon'ble Supreme Court in the said decision has clearly laid down that by any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In case of the assessee we noted that the assessee has made a claim and has furnished all the details in respect of the expenses which has been claimed as revenue expenditure but the Revenue treated that to be a capital expenditure which means the Revenue did not accept the claim made by the assessee. Merely the Revenue has disallowed the claim made by the assessee by itself will not mean that the assessee had furnished inaccurate particulars of income. On this basis, in our view, no penalty under section 271(1)(c) can be levied. We, therefore, delete the penalty levied by the AO under section 271(1)(c).
4 ITA No. 7350/Mum/2013M/s. Buildbyte.com (India) P. Ltd.
6. We also noted that this is a case where the AO while levying penalty did not bring out any specific charge even though as per the provisions of Section 271(1)(c) both the charges of furnishing inaccurate particulars of income or concealment of income are different. Explanation 1 is applicable in the case of concealment of income. In this case we noted that the AO has initiated penalty proceedings for furnishing inaccurate particulars of income while penalty has been levied by the AO for concealing particulars of income and filing inaccurate particulars of income. This means the AO has levied penalty for both the charges. There cannot be a case where penalty can be levied for both the charges. The word used in section 271(1)(c) is 'or' in between the two charges. The Hon'ble Jurisdictional High Court in the case of CIT vs. Samson Perinchery 392 ITR 4 held as under: -
"Held, dismissing the appeal, that the satisfaction of the Assessing Officer with regard to only one of the two breaches under section 271(1)(c) of the Act, for initiation of penalty proceedings would not permit penalty being imposed for the other breach. Thus, the order imposing penalty was to be made only on the round on which the penalty proceedings were initiated and it could not be on a fresh ground of which the assessee had no notice. The Tribunal rightly deleted the penalty."
In the impugned case also we noted that penalty proceedings was initiated for furnishing inaccurate particulars of income but has been levied for both the limbs, not only for furnishing inaccurate particulars of income. On this basis also the penalty levied by the AO cannot be sustained. Therefore, we delete the same.
7. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 13th September, 2017.
Sd/ Sd/-
(Pawan Singh) (P.K. Bansal)
Judicial Member Vice President
Mumbai, Dated: 10th October, 2017
5 ITA No. 7350/Mum/2013
M/s. Buildbyte.com (India) P. Ltd.
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A) -41, Mumbai
4. The CIT - Central III, Mumbai
5. The DR, "B" Bench, ITAT, Mumbai
By Order
//True Copy//
Assistant Registrar
ITAT, Mumbai Benches, Mumbai
n.p.