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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’ NEW DELHI
Before: SMT DIVA SINGH & SH.L.P.SAHU
Date of Hearing 15.03.2016 Date of Pronouncement 19.05.2016 ORDER PER DIVA SINGH, JM By way of the present appeal filed by the assessee the correctness of the order dated 24.12.2010 of CIT(A)-IX, New Delhi pertaining to 2000–01 assessment year has been assailed on the grounds that the penalty imposed u/s 271(1)(c) by the AO has wrongly been upheld by the CIT(A).
The Ld.AR relying upon the order dated 10.06.2015 in & 2807/Del/2007 passed in the quantum proceedings submitted that the addition on the basis of which penalty was sustained stands deleted by the ITAT. Accordingly in the circumstances it was submitted that the penalty order may be quashed.
I.T.A .No.-2410/Del/2011
The Ld. CIT DR considering the order of the ITAT submitted that the Revenue has not accepted the quantum order passed by the ITAT. Accordingly it was his submission that while deciding the appeal the grievance posed by the Revenue towards the finding in the quantum order may be recorded. The Ld.AR objected to this argument and the Ld. CIT DR did not press the issue further. However, permission to file written submission was sought.
Subsequently written submissions dated 15.02.2016 were filed by the Revenue. Since contrary to the arguments the arguments made in writing addressed the conclusion arrived at in the quantum proceedings accordingly to ascertain whether they were made available to the assessee or not the appeal was re-fixed and both the parties were again heard. Since apart from arguing on merits that deletion on facts was not justified the Ld.CIT DR further contended thereon that the decision arrived at in the quantum proceedings was not accepted by the Revenue and when this fact is read alongwith the decision of the Apex Court in the case of CIT vs Reliance Petro Products 322 ITR 158 (SC), the assessee does not have any case. Referring to the facts of Reliance Petro Products it was submitted that the assessee therein had duly filed an explanation giving reasons for making its claim and having filed the explanation the Court held that the onus thereafter shifts to the Revenue. In the facts of the present case, the Ld.CIT DR submitted that the explanation offered by the assessee was neither bonafide nor true.
The Ld.AR re-iterated that the arguments assailing the merits of the decision of the ITAT in the quantum proceedings would be at best addressed before the Hon’ble High Court and no miscellaneous petition had also been field by the Revenue as far as the present appeal is concerned. In the present proceedings in the face of the addition having been deleted it was submitted the arguments have no merit. The decision of the Apex Court in I.T.A .No.-2410/Del/2011 Reliance Petro Products (cited supra) sought to be distinguished on facts has no relevance as the assessee is not relying on the said decision. Even otherwise there is nothing on record to show that the explanation offered was not true or lacking in bonafide as the relief is being sought on the ground that penalty is not leviable as addition is deleted and not on the grounds of reasonable cause.
The Ld. CIT DR submitted that his submission may be recorded that he places reliance on Madras Industrial Corporation Ltd. vs CIT (1997) 225 ITR 802. It was his submission that since the issue is being contested further and in the eventuality the appeal in quantum proceedings is decided in Revenue’s favour by the higher forum in such an eventuality the Revenue may find itself in a predicament. Accordingly it was his submission that he may be allowed to argue in the penalty proceedings how the issue cannot be said to have been conclusively decided in favour of the assessee in the quantum proceedings. These arguments of the Ld. CIT DR were again strongly opposed by the Ld.AR who stated that it a mere waste of time of the Court. The arguments it was submitted are not relevant in the present proceedings and have no merit for the purposes of deciding the present penalty proceedings. The admitted position as on date being that the issue in quantum stands decided in favour of the assessee thus the arguments are abusing the trust reposed in the Revenue and are a waste of time of the Court. For the sake of completeness it was submitted that the view taken by the ITAT in the quantum proceedings is supported by the decision of the Apex Court in the case of Civil Appeal No.6366 to 6368 of 2003 in the case of Taparia Tools Ltd. vs JCIT dated 23.03.2015. Accordingly the arguments of the Revenue have no merit.
I.T.A .No.-2410/Del/2011
We have heard the rival submissions and perused the material available on record.
We find on a perusal of the penalty order dated 21.03.2009 that penalty u/s 271(1)(c) was imposed by the Assessing officer on account of the following additions/ disallowances:-
(a) “Software expenditure considered to be capital expenditure amounting to Rs.17,46,202/- (after allowance of depreciation); (b) Bad debts written off in the books of account amounting to Rs.4,49,69,588/-; (c) Administrative expenditure amounting to Rs.2,92,000/- alleged to be incurred in relation to earning of the exempt income; (d) Upfront claim of cost of raising of loan funds deferred in books of accounts amounting to Rs.12,22,263,212/-.”
6.1. In the Appellate proceedings, the CIT(A) on the issues addressed in (a); (b) and (c) above quashed the penalty imposed by the Assessing Officer and on the issue addressed in (d) the penalty imposed by the Assessing Officer was upheld. We find from the record that in the quantum proceedings amongst other grounds, the assessee had raised Ground No.5 before the ITAT which reads as under:-
5. “That on the facts and in the circumstances of the case, the learned CIT(A) erred in upholding addition of Rs.12,22,63,212/- being expenditure incurred in respect of raising loan funds, by treating the same as Deferred revenue expenditure.”
6.2. A perusal of the said order shows that the Co-ordinate Bench deleted the addition on the basis of which penalty has been imposed holding as under:-
“We have heard rival parties and have gone through the material placed on record. We find that as per Section 37, all expenditure incurred wholly and exclusively for the purpose of business are allowed in the computation of income unless they are of capital nature or of personal nature. There is no intention of deferred revenue expenditure in the income tax Act. In the case of Mad. Industrial as relied upon by Ld. CIT(A), the issue was decided in favour of revenue on account of the fact that assessee itself had claimed proportionate amount in the P & L account and the Hon’ble Court had held that in such a scenario proportionate claim was admissible. We further find that Section 35D is also not applicable in the case of assessee as the assessee is a NBFC and in the year under consideration, Section 35D was applicable only for industrial units. We further find that similar issue was considered by the Tribunal in the case of I.T.A .No.-2410/Del/2011
group companies of assessee and copy of order is placed at paper book pages 189-222. ………………………………. ……………………………….
From the facts of the present case, we find that there is no dispute about the fact that assessee had incurred the expenditure and the expenses are not of capital nature, therefore, as per section 37 of Act, these are allowable in the year in which such expenditure has been incurred. The A.O. had relied upon the judgement of Madras Industrial Corpn. For disallowing a part of expenditure. However, in the judgement of Madras Industrial Investment, the Hon’ble Court had held that expenditure can be spread over a period of time provided the assessee decides to do so and therefore, from the above judgement it can be concluded that right to claim deferred revenue expenditure is given to assessee and not to revenue. In view of the above discussion and judicial precedents, we allow ground No.5 of assessee’s appeal.” (emphasis provided)
6.3. In the aforesaid peculiar facts and circumstances, we find that penalty order becomes infructuous. Reference may be made to the decision of the Apex Court in the case of K.C.Builder vs ACIT [2004] 265 ITR 562, 569 (SC) which has authoritatively laid down that where the additions made in the assessment order on the basis of which penalty for concealment was levied has been deleted, there remains no basis at all for levying the penalty for concealment and therefore, in such a case no such penalty can survive. We find that no departmental appeal has been filed assailing the relief granted by the CIT(A) and in the face of the relief granted by the ITAT in the quantum proceedings the penalty order is dismissed as infructuous and the impugned order is set aside.
In the result the appeal of the assessee is allowed. The order is pronounced in the open court on 19th of May, 2016.