Aanya Real Estate Pvt. Ltd. Vs DCIT (ITAT Mumbai)
In M/s. Aanya Real Estate Pvt. Ltd. v. Deputy CIT [IT A No. 115/Mum/2020 decided on July 20, 2021] M/s. Aanya Real Estate Pvt. Ltd. (“the Appellant”) is a real estate company. During assessment, it was noted that the Petitioner had disclosed payment for Exchange Server Services as revenue expenditure instead of capital expenditure.
Subsequently, a show cause notice was issued under Section 274 of the Income Tax Act, 1961 (“IT Act”) read with 271(1)(c) of the IT Act and penalty was levied. Upon Appellant’s appeal CIT(A) confirmed the penalty.
The Hon’ble Income Tax Appellate Tribunal, Mumbai relied on the exposition of Hon’ble Supreme Court in the case of CIT v. Reliance Petro Products Pvt. Ltd. [(2010) 322 ITR 158 (SC)] and held that the Appellant’s claim of payment being revenue expenditure, by no stretch of imagination can be said to be ex-facie bogus. Thus, a disallowance of the same cannot lead to the conclusion that the Appellant is guilty of furnishing of inaccurate particulars of income or concealment of income.
Further, stated that an authority may not levy penalty unless the conduct of the Appellant is found to be contumacious [Hindustan Steel Ltd. vs. State of Orissa [(1972) 83 ITR 26 (SC)]].
Allowed Appellant’s appeal.
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FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals)-24, Mumbai (‘ld.CIT(A) for short) dated 05.09.2019 and pertains to the assessment year (A.Y.) 2011-12.
2. The grounds of appeal read as under:
1. The order imposing penalty u/s. 271(1)(c) passed by A.O. and confirmed by Hon’ble CIT(A) is illegal, invalid and bad in law.
2. The penalty imposed at Rs.11,93,303/- u/s.271(1)(c) is unjustified, unwarranted and excessive.
3. The A.O. and Hon’ble CIT(A) erred in holding imposing that penalty u/s.271(1)(c) is impossible on addition made under normal provision of income tax where returned income and income assessed u/s.115JB is same.
4. The Hon’ble CIT(A) erred confirming the order imposing penalty u/s.271(1)(c) of I. T. Income Tax Act, 1961 1961 passed by the A.O. without giving reasonable opportunity of being heard.
3. Brief facts leading to the levy of penalty are that during the course of assessment proceedings, disallowance was made of Rs.35,92,393/- on account of treating revenue expenses as capital expenditure. It was noticed that the assessee company had made a payment of Rs.19,68,682/- to M/s. Nifinity Ltd. and Rs.15,60,782/- to M/s. Cobweb Solutions Ltd. as Exchange Server Services. As the reply of the assessee in this regard was not found satisfactory, the same amount was added to the total income of the assessee. Further, the Assessing Officer was satisfied that this was a fit case to initiate penalty proceedings u/s.271(1)(c) of the Act for furnishing inaccurate particulars of income on the above issue. He, therefore, issued a show cause notice u/s.274 r.w.s 271(1)(c) of the Act on the assessee.
In this regard, while levying the penalty, the A.O. placed reliance on the decision of Hon’ble Supreme Court in the case of Union of India vs. Dharmendra Textile Processors [2008] 306 ITR 277 (SC), Mak Data Pvt. Ltd. vs. CIT and Hon’ble Delhi High Court decision in the case of CIT vs. Zoom Communications Pvt. Ltd.(ITA No. 07/2010 dated 24.05.2010).
4. Upon the assessee’s appeal, the ld. CIT(A) confirmed the order of penalty. While passing the order he did not deal with the issue in appeal or the fact of the case. Rather he gave a theoretical treatise to the provision of section 271(1)(c) and the meaning of word concealment. He also referred some issues which were not at all arising in this appeal.
