Quantrro Bpo Solutions Pvt.Ltd., New ... vs Department Of Income Tax

DCIT, Circle-14(1), Vs. M/s Quatrro BPO Solutions Pvt. Ltd. New Delhi A-16/9, Vasant Vihar, New Delhi - 110057

(PAN AAFCA 4469 B)

(Appellant) (Respondent)

Date of hearing : 10.04.2015 Date of Pronouncement : 22.04.2015

Appellant by : Sri Vikram Sahay, Sr. D.R. Respondent by : Smt. Lalita Krishnamurty, CA

ORDER

PER SHRI INTURI RAMA RAO, AM:

1. This is an appeal filed by the Revenue for the AY 2006-07 challenging the

deletion of penalty of Rs.7,53,253/- levied u/s 271(1)(c) of the Income Tax Act,

1961 (hereinafter called the 'Act') by the Commissioner of Income Tax (Appeals)-

XVII, New Delhi dated 01.08.2013.

2. The grounds of appeal raised are as follows:-

"1. On facts and circumstances of the case, the Ld. CIT(A) has erred in deleting penalty of Rs.7,53,253/- imposed by the assessing officer u/s 271(1)(c) of the Act.

ITA No.6137/Del /2013 2 1.1. On facts and circumstances of the case, the Ld. CIT(A) has erred in not appreciating the fact that the addition was confirmed bythe first appellate authority and assessee did not contest the order by filing appeal in ITAT.

2. The appellant craves to be allowed to add any fresh grounds of appeal and/ or delete or amend any other grounds of appeal."

3. The brief facts of the case are that the respondent-assessee is a company

incorporated under the provisions of the Companies Act. The assessment year

which is under appeal is 2006-07, for which return of income was filed on

15.12.2006, declaring a loss of Rs.90,19,244/-. Against the said return of income,

the assessment was completed u/s 143(3) of the Act vide order dated 26.12.2008 at

a loss of Rs.53,58,708/-. The disparity between returned and assessed loss was on

account of disallowance of legal and professional charges, rates and taxes

amounting to Rs.42,66,327/-. However, on the amount of disallowances, deduction

u/s 35D of the Act was allowed. Being aggrieved by this order of assessment an

appeal was filed before the CIT(A)-XVII, New Delhi, who vide order dated

26.02.2010 partly allowed the appeal. While doing Ld. CIT(A) had deleted the

amount of Rs.20,22,500/- out of rates and taxes of Rs.27,28000/- since the assessee

company itself disallowed the same by restricting the claim under the provisions of

Section 35D of the Act. Thereby confirming the addition to the tune of

Rs.22,37,827/-. The assessee had not carried the matter further. While matter stood

thus, the Assessing Officer had initiated the proceedings u/s 271(1)(c) by issuing

show cause notice in response to which the assessee company filed the reply vide ITA No.6137/Del /2013 3

its letter dated 18.08.2010, wherein it was pleaded that no penalty should be levied

in respect of additions sustained by CIT(A) in as much as the additions as

confirmed by CIT(A) are not free from doubt and different view is possible and

therefore, the question of levy of penalty does not arise and in support of this

proposition he has relied upon the following judicial decisions :

i) The Hon'ble Calcutta High Court in the cases of Calcutta Credit Corporation Vs. CIT, 166 ITR 29 and in the case of Jagabandhu Prasanna Kumar Ruplal Sen Poddar Vs. CIT reported in 133 ITR 156.

ii) The Hon'ble Rajasthan High Court in the case of CIT Vs. Harshvardhan Chemicals and Mineral Ltd. reported in 133 Taxman 320.

iii) The ITAT Delhi Bench in the case of DCIT Vs. Rahoul Siemssen Engg. P. Ltd. reported in 91 TTJ 62.

4. The Assessing Officer after considering the explanation filed by the assessee

company had held that the assessee company had failed to substantiate its claim of

legal and professional expenses and placing the reliance on the decision of Hon'ble

Delhi High Court in the case of CIT Vs. Zoom Communication Pvt. Ltd. reported

in [2010] 327 ITR 510 had levied the penalty of Rs.7,53,253/-. Aggrieved by this

order of penalty, the appeal was filed before the CIT(A)-XVII, New Delhi who

vide order dated 01.08.2013 deleted the penalty by holding that the explanation of

the assessee company is bona fide and assessee is not guilty of furnishing

inaccurate particulars of income. Aggrieved by this order, the Revenue had come

up with the present appeal.

ITA No.6137/Del /2013 4

5. It was argued by Ld. DR that the CIT(A) was not justified deleting the

penalty in as much as the appellant had made a claim which is not sustainable in

the eyes of law and he has placed reliance on the decision of Hon'ble Delhi High

Court in the case of Zoom Communication Pvt. Ltd. (supra). On the other hand,

Ld. AR had relied upon the order of CIT(A) and submitted that the order of

CIT(A) is well reasoned order and supported by the several judicial decisions and

therefore, there is no scope for the interference in order of the CIT(A) by this

Hon'ble Tribunal.

6. We heard the rival parties and perused the material available on record. On

perusal of the order passed by the Assessing Officer u/s 271(1)(c) of the Act dated

16.03.2011, we find that the penalty was levied on the item of legal and

professional charges of Rs.15,37,827/- alone and whereas while working of the

penalty leviable, the concealed income was adopted at Rs.22,37,827/-. Obviously,

it means that the Assessing Officer also taken the disallowance of Rs.7,00,000/-

being the amount paid to STPI without assigning any reasons. It is clear from the

penalty order that the penalty was levied for mere disallowance of the claim. The

Assessing Officer had failed to give a finding as to why the explanation offered by

the assessee company is not bona fide. The Assessing Officer had not even given

any finding as to which particulars filed by the assessee company are found to be

false thereby calling for the addition. The Hon'ble Supreme Court in the case of ITA No.6137/Del /2013 5 CIT Vs. Reliance Petroproducts P. Ltd. reported in [2010] 322 ITR 158 (SC) (head

note) held as follows:

"A mere making of claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars."

7. Further, we find that there are plethora of decisions in support of the

proposition that mere additions to the returned income would not per se

tantamount to furnishing of inaccurate particulars so as to attract under

section 271(1)(c).

a. In the case of Transport Corporation of India Ltd. v. Asstt. CIT [IT Appeal No. 195(Hyd.) of 2013, dated 27-9-2013] this Tribunal has held that unless the claim of the assessee was proved to be bogus or that any amount was received back by the assessee, the disallowance of expenditure by itself cannot be reason for levy of penalty.

b. The Delhi High Court in the case of Karan Raghav Exports (P.) Ltd. v. CIT [2012] 349 ITR 112/21 taxmann.com 8/[2013] 212 Taxman 55 (Mag.) has held that claim made by the assessee might have been rejected, but it would not be said that claim was not plausible or legally tenable and therefore it cannot be said that the assessee has furnished inaccurate particulars of income. c. In the case of CIT v. Balaji Distilleries Ltd. [2013] 31 taxmann.com 55/214 Taxman 96 (Mad.) (Mag.) it has been held that when additions were confirmed not for lack of bona fides but for rejecting the explanation of the assessee the penalty cannot be levied under section 271(1)(c).

d. In the case of CIT v. International Audio Visual Co. [2007] 288 ITR 570 (Delhi) it has been held that when all facts relating to claim were disclosed, but claim was not allowed, it does not suggest that ITA No.6137/Del /2013 6

particulars of income of the assessee or concealment of his true income has been made.

e. The Delhi High Court in the case of CIT v. DCM Ltd. [2013] 359 ITR 101/37 taxmann.com 447 held that (page 105) : "law does not bar or prohibit an assessee for making a claim, which he believes may be accepted or is plausible. When such a claim is made during the course of regular or scrutiny assessment, liberal view is required to be taken as necessarily the claim is bound to be carefully scrutinised both on facts and in law ... Threat of penalty cannot become a gag and/or haunt on assessee for making a claim which may be erroneous or wrong when it is made during the course of the assessment proceedings. Normally penalty proceedings in such cases should not be initiated unless there are valid or good grounds to show that factual concealment has been made or inaccurate particulars on facts were provided in the computation".

8. The ratio laid down in the above judicial decisions is squarely

applicable to the facts of the present case and, therefore, we are of the

considered opinion that we find no reason to interfere with the order passed

by the CIT(A).

9. Hence, the appeal filed by the Revenue is dismissed.

The Order pronounced in the open Court on 22 nd April, 2015.

Sd/- Sd/- (G.C. GUPTA) (INTURI RAMA RAO) Vice President Accountant Member

Dated: 22nd April, 2015. Aks/- DCOM

Copy forwarded to 1. Appellant ITA No.6137/Del /2013 7

2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi