Powersoft Consulting Pvt. Ltd.,, Ahmedabad v. The Dy.CIT.,Circle-5,, Ahmedabad

ITA 140/AHD/2011 | 2004-2005
Pronouncement Date: 25-11-2011 | Result: Dismissed

Appeal Details

RSA Number 14020514 RSA 2011
Assessee PAN AABCP7988E
Bench Ahmedabad
Appeal Number ITA 140/AHD/2011
Duration Of Justice 10 month(s) 5 day(s)
Appellant Powersoft Consulting Pvt. Ltd.,, Ahmedabad
Respondent The Dy.CIT.,Circle-5,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 25-11-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 25-11-2011
Date Of Final Hearing 21-10-2011
Next Hearing Date 21-10-2011
Assessment Year 2004-2005
Appeal Filed On 20-01-2011
Judgment Text
ITA NO.140/AHD/2011 A.Y. 2004-05 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE SHRI D.K. TYAGI J.M. & A. MOHAN ALANKAMON Y A.M.) I.T.A.NO. 140 /AHD/2011 (ASSESSMENT YEAR : 2004-2005) POWERSOFT CONSULTING PVT. LTD. 801 SATKRUT PARTH SARTHI AVENUE NR.SHYAMAL CHAR RASTA AHMEDABAD. (APPELLANT) VS. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-5 C.U. BUILDING ASHRAM ROAD AHMEDABAD. (RESPONDENT ) PAN: AABCP 7988 E APPELLANT BY : SMT. ARTIBEN SHAH RESPONDENT BY : SHRI SAMIR TEKRIWAL SR. D.R. DATE OF HEARING : 21-10-2011 DATE OF PRONOUNCEMENT : 25-11-2011 ( )/ ORDER PER: SHRI A. MOHAN ALANKAMONY A. M. THIS APPEAL OF THE ASSESSEE COMPANY IS DIRECTED AGA INST THE IMPUGNED APPELLATE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XI AHMEDABAD IN APPEAL NO. CIT(A)- XI/718/09-10 DATED 3.12.2010 (U/S 271(1)(C) OF THE ACT). THE ASSESSEE IN THE GROUNDS OF APPEAL HAS RAISED TW O GROUNDS NAMELY: (1) THE LD. CIT (A) HAS ERRED IN CONFIRMING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT ON DISALLOWANCE IN RESPECT OF BUSINESS DEVELOPMENT EXP ENSES MADE BY THE AO; AND (2) IT WAS PRAYED TO DELETE THE PENALTY LEVIED U/S 271( 1)(C) OF THE ACT ON BUSINESS DEVELOPMENT EXPENSES OF RS.50 13 780/-. ITA NO.140/AHD/2011 A.Y. 2004-05 2 DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE F ILED ITS RETURN OF INCOME DECLARING A TOTAL LOSS OF RS.22.15 LAKHS AND THE ASSESSMENT WAS CONCLUDED U/S 143(3) OF THE ACT DETERMINING THE TOTAL INCOME AT RS.54.57 LAKHS WHER EBY MAKING THE FOLLOWING ADDITIONS/DISALLANCES WERE MADE: BUSINESS DEVELOPMENT EXPENSES RS.50 13 780 CONSULTING SALARY RS.10 63 274 INTEREST ON LOANS AND ADVANCES RS. 4 94 072 DISALLOWANCE U/S 14A RS. 4 67 865 FOREIGN TRAVEL EXPENSES RS. 6 33 763 PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE I NITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME BY ISSUANCE OF NOTICE U/S 274 R.W. SEC.271(1)(C) OF THE ACT. IN THE QUANTUM APPEAL FILED BY THE ASSESSEE BEFORE THE LD. CIT (A) THE LD. CIT (A) IN HIS APPELLATE ORDER DATED 13.7.2007 HAD CONFIRMED THE F OLLOWING ADDITIONS/DISALLOWANCE: BUSINESS DEVELOPMENT EXPENSES RS.50 13 780 CONSULTING SALARY RS. 2 00 000 DISALLOWANCE U/S 14A RS. 4 67 865 FOREIGN TRAVEL EXPENSES RS. 6 33 763 WHILE FINALIZING THE PENAL PROCEEDINGS THE LD. AO HAD TAKEN NOTE OF THE LD. CIT (A)S FINDINGS IN THE ASSESSEES QUANTUM APPEAL AND ACCO RDINGLY ARRIVED AT THE TOTAL INCOME AT RS.20.33 LAKHS AND THE PENALTY WAS LEVIED ON THE ADDITION CONFIRMED BY THE LD. CIT (A) TOTALING TO RS.63.15 LAKHS. AFTER DUE CONSIDER ATION OF THE ASSESSEES SUBMISSION AND ALSO EXTENSIVELY QUOTING THE PROVISIONS OF S. 2 71(1)( C) OF THE ACT AS WELL AS VARIOUS JUDICIAL PRONOUNCEMENTS ON A SIMILAR ISSUE THE LD . AO CONCLUDED THAT THIS WAS A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT A ND BY VIRTUE OF EXPLANATION 1 OF S. 271(1) (C) OF THE ACT PENALTY WAS LEVIABLE AND AC CORDINGLY IMPOSED A PENALTY OF RS.22 65 700/-. ITA NO.140/AHD/2011 A.Y. 2004-05 3 AGGRIEVED THE ASSESSEE TOOK UP THE ISSUE WITH THE LD. CIT (A) FOR REDRESSAL. AFTER DUE CONSIDERATION OF THE ASSESSEES CONTENTIONS BACKED UP WITH VARIOUS CASE LAWS AND FOLLOWING THE HONBLE TRIBUNALS FINDINGS IN THE CA SE OF THE ASSESSEE FOR THE AY 2003-04 IN ITA NOS.1586 AND 1221/AHD/2010 DATED 15.10.2010 AND FOR THE REASONS RECORDED IN HIS IMPUGNED ORDER UNDER CONSIDERATION THE LD. CI T (A) HAD DELETED THE PENALTY IMPOSED ON THE ADDITIONS MADE UNDER THE FOLLOWING H EADS: CONSULTING SALARY RS. 2 00 000 DISALLOWANCE U/S 14A RS. 4 67 865 FOREIGN TRAVEL EXPENSES RS. 6 33 763 WITH REGARD TO THE IMPOSITION OF PENALTY U/S 271(1) (C) OF THE ACT ON THE DISALLOWANCE OF BUSINESS DEVELOPMENT EXPENSES OF RS.50.13 LAKHS TH E LD. CIT (A) HAS TAKING INTO ACCOUNT THE OBSERVATIONS OF THE LD. A O THE LD. CI T (A) AND ALSO THE HONBENCH IN THE ASSESSEES QUANTUM APPEAL(S) OBSERVED THE FOLLOWIN G: 2.1.12. THE APPELLANT DEBITED HUGE BUSINESS DEVEL OPMENT EXPENSES OF RS.50 13 780/- TO THE P & L A/C. AS SEEN FROM THE A.OS FINDINGS REPRODUCED ABOVE NO EVIDENCE WHATSOEVER VOUCHERS NAME AND ADDRESS OF THE PAYE ES AGREEMENT THE PURPOSE OF THE SAID EXPENSES WAS FURNISHED TO THE AO. AS SE EN FROM CIT (A)S OBSERVATIONS EVEN DURING APPELLATE PROCEEDINGS NO EVIDENCE WAS F ORTH-COMING AND HENCE DISALLOWANCE WAS UPHELD. THE TRIBUNALS OBSERVATIO NS REPRODUCED ABOVE SHOW THE INTEGRITY OF THE APPELLANT IN POOR LIGHT. EVEN DUR ING THE COURSE OF PENALTY PROCEEDINGS AND THE CURRENT APPELLATE PROCEEDINGS B EFORE ME NOT EVEN A SHRED OF EVIDENCE [IN SUPPORT OF THE BUSINESS DEVELOPMENT EX PENSES] HAS BEEN FURNISHED. THEREFORE I HAVE NO HESITATION IN HOLDING THAT THE APPELLANT BY CLAIMING BOGUS EXPENSES FURNISHED INACCURATE PARTICULARS OF INCOM E. APPELLANTS CONTENTION THAT ITS INCOME IS EXEMPT U/S 10A IS NOT CORRECT AS IN THE SAME SUBMISSIONS IT ADMITS THAT THE ISSUE WAS RESTORED TO THE FILE OF AO BY THE TRIBUNA L. EVEN OTHERWISE IT DOES NOT ABSOLVE THE APPELLANT IN MAKING A BLATANTLY BOGUS C LAIM OF EXPENSES. WITH REGARD TO THIS PATENTLY INADMISSIBLE CLAIM NONE OF THE CASE- LAWS RELIED BY THE APPELLANT IS OF ANY ASSISTANCE. A.OS ACTION IN LEVYING PENALTY WI TH REFERENCE TO THESE EXPENSES IS UPHELD. 2.1.13. TO SUM UP PENALTY LEVIED WITH REFERENCE TO BUSINESS DEVELOPMENT EXPENSES OF RS.50 13 780/- IS CONFIRMED AND THE PENALTY LEVIED W.R. TO THE OTHER FOUR DISALLOWANCE IS CANCELLED. A.O IS DIRECTED TO RE-COMPUTE THE PE NALTY ACCORDINGLY. ITA NO.140/AHD/2011 A.Y. 2004-05 4 AGITATED THE ASSESSEE HAS COME UP WITH PRESENT APP EAL. DURING THE COURSE OF HEARING THE LD. A R SUBMITTED THAT THERE WAS NO JUSTIFICATI ON ON THE PART OF THE LD. AO IN ASSUMING THAT THE ASSESSEE HAD FAILED TO EXPLAIN SA TISFACTORILY AND PRODUCE NECESSARY EVIDENCES IN SUPPORT OF THE CLAIM OF EXPENSES. IT WAS FURTHER SUBMITTED THAT ON THE CONTRARY THE ASSESSEE HAD FULLY AND SATISFACTORILY EXPLAINED SUCH CLAIMS. HOWEVER THE EXPLANATION GIVEN BY THE ASSESSEE ALONG WITH NECESS ARY EVIDENCES IN SUPPORT THEREOF HAS BEEN REJECTED BY THE AUTHORITIES BELOW WITHOUT PROPER APPRECIATION AND JUSTIFICATION. IT WAS FURTHER EMPHASIZED THAT THOUGH THE EXPLANA TION OFFERED BY THE ASSESSEE HAS BEEN TURNED DOWN BY THE AUTHORITIES BELOW NO MATER IAL EVIDENCE HAS BEEN BROUGHT ON RECORD TO SUGGEST BEYOND ANY DOUBT THAT THE CONTENT IONS AND EVIDENCES PRODUCED BY THE ASSESSEE IN THIS REGARD WERE FALSE AND INCORREC T. DURING THE COURSE OF HEARING THE LD. A R HAD FURNISHED A PAPER BOOKING CONTAINING 1 42 PAGES WHICH CONSIST OF INTER ALIA COPIES OF (I) THE CORRESPONDENCE WITH THE AUT HORITIES; (II) ASSESSMENT ORDER; (III) ORDERS OF HONBLE BENCH ETC. ON THE OTHER HAND THE LD. D.R. SUBMITTED THAT IN S PITE OF REPEATED QUERIES BY THE LD. AO TO FURNISH CERTAIN SPECIFIC DETAILS WITH REGARD TO THE OTHER OPERATIVE EXPENSES IN SCHEDULE 10 AND REQUIRED THE ASSESSEE COMPANY TO PRODUCE THE COPY OF LEDGER ACCOUNT AND THE WRITTEN AGREEMENT/DOCUMENTS ALONG W ITH CONNECTED PAPERS VOUCHERS THE NAMES AND ADDRESSES OF THE PERSONS TO WHOM THES E EXPENSES HAVE BEEN PAID ETC. TO SUBSTANTIVE IN INCURRING OF BUSINESS DEVELOPMENT EXPENSES OF RS.50.13 LAKHS. IN STEAD OF FURNISHING THE DOCUMENTS REQUISITIONED BY THE LD. AO THE LD. D R SUBMITTED THAT THE ASSESSEE CAME UP WITH A REPLY THAT THE ASSESSEE HAD MADE STRATEGIC ALLIANCE WITH POWERSOFT MEDISVETTE LTD. (PML) FOR T HE DEVELOPMENT AND MARKETING ITA NO.140/AHD/2011 A.Y. 2004-05 5 OF HOSPITAL/CLINIC AND CHEMIST SHOP MANAGEMENT SYST EM. AS PER THE UNDERSTANDING REACHED BETWEEN THE ASSESSEE AND PML THE ASSESSEE IS SUPPOSED TO PAY ALL THE DAY TO DAY EXPENSES INCURRE D BY PML FOR THE DEVELOPMENT AND MARKETING OF THE SAID SOFTWARE ETC. THE LD. D R FURTHER SUBMITTED THAT SINCE THE ASSESSEE HAD FAILED TO FURNISH THE N AMES AND ADDRESSES OF THE PERSONS TO WHOM THOSE EXPENSES HAVE BEEN PAID AND FROM THE AVA ILABLE DETAILS ON RECORD IT WAS NOT ESTABLISHED WHETHER THE BUSINESS DEVELOPMENT EX PENSES OF RS.50.13 LAKHS HAVE BEEN INCURRED FOR THE BUSINESS OF THE ASSESSEE EXCL USIVELY AND THUS THE LD. AO DISALLOWED RS.50.13 LAKHS UNDER THE HEAD BUSINESS D EVELOPMENT EXPENSES AND ACCORDINGLY INITIATED PENAL PROCEEDINGS U/S 271(1) (C) OF THE ACT WHICH HAS BEEN DULY SUSTAINED BY THE LD. CIT (A ). THE LD. D R FURTHER POINTED OUT THAT THE ASSESSEE HAD CAMOUFLAGED THE BUSINESS DEVELOPMENT EXPENSE UNDER THE HEAD OTHER OPERATING EXPENSE AND THUS CONCEALED THE FACTS. THE LD. D R THEREFORE PLEADED THAT THE IMPUGNED ORDER OF THE LD. CIT (A) UNDER CONSIDERATI ON REQUIRES TO BE SUSTAINED. TO STRENGTHEN HIS ARGUMENTS THE LD. D.R FURNISHED VAR IOUS CASE LAWS ON SIMILAR ISSUE. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND METICULOUSLY PERUSED THE MATERIALS ON THE RELEVANT RECORDS AND ALSO THE DOCU MENTARY EVIDENCES PRODUCED BY THE EITHER PARTY ALONG WITH COPIES OF VARIOUS CASE LAWS . WE HAVE WITH DUE REGARDS PERUSED THE FINDINGS OF THE EARLIER HONBLE BENCH IN THE ASSESSEES OWN CASE FOR THE AY 2003-04 (U/S 271(1)( C) OF THE ACT) IN ITA NO.1586/AHD/2010 DATED 15.10.2010 WHEREIN THE ISSUE BEFORE THE HONBLE BENCH WAS LEVY OF PENALTY U/S 271(1)(C) OF THE ACT IN RESPECT OF ADDITIONS AMOUNTING TO RS.11.91 LAKHS CONFIRMED BY THE LD. CIT (A) UNDER THE HEADS SALARY FOREIGN TRAVEL EXPENSES AND ITA NO.140/AHD/2011 A.Y. 2004-05 6 CONSULTANCY CHARGES. HOWEVER ON AN APPEAL THE L D. CIT (A) HAD SUSTAINED THE PENALTY IN RESPECT OF DISALLOWANCE OUT OF FOREIGN TRAVEL EXPENSES. AFTER DELIBERATING THE ISSUE IN DETAIL TAKING INTO ACCOUNT THE RIVAL SUBM ISSIONS AND RELYING ON THE RULING OF THE HONBLE APEX COURT IN THE CASE OF CIT V. RELIANCE P ETROPRODUCTS PVT. LTD REPORTED IN 322 ITR 158 (SC) THE HONBLE BENCH TOOK A VIEW TH AT SINCE THE ASSESSEE HAS DULY DISCLOSED ALL THE FACTS RELATING TO EACH AND EVERY EXPENDITURE IT WAS NOT THE CASE OF THE REVENUE THAT SUCH PARTICULARS FURNISHED BY THE ASSE SSEE WERE EITHER INACCURATE OR FALSE AND THUS FOLLOWING THE APEX COURTS RULING CITED SUPRA AND ACCORDINGLY HELD THAT LEVY OF PENALTY U/S 271(1)(C) ON THE FACTS OF THE CASE WAS NOT JUSTIFIED. WITH RESPECTS WE WOULD LIKE TO REITERATE THAT IN T HE PRESENT ISSUE THE ASSESSEE HAD FAILED TO FURNISH ANY DETAILS SUCH AS COPY OF LEDGE R ACCOUNT WRITTEN AGREEMENTS/DOCUMENTS AND CONNECTED PAPERS WITH VOUC HERS IN SUPPORT OF ITS CLAIM IN SPITE OF REPEATED QUERIES FROM THE LD. A O. EVEN A T THE STAGE OF APPELLATE PROCEEDINGS ON QUANTUM APPEAL BEFORE THE LD. CIT (A) NO EVIDENC E WHATSOEVER VOUCHERS NAME AND ADDRESS OF THE PAYEES AGREEMENT THE PURPOSE O F THE SAID EXPENSES WAS FURNISHED AND ACCORDINGLY THE DISALLOWANCE WAS UPHELD. AS RIGHTLY POINTED BY THE LD. CIT (A) WHOSE IMPUGNED ORDER UNDER CONSIDERATION EVEN A SH RED OF EVIDENCE IN SUPPORT OF THE BUSINESS DEVELOPMENT EXPENSES HAS NEITHER BEEN FURN ISHED DURING THE COURSE OF PENALTY PROCEEDINGS NOR IN THE APPELLATE PROCEEDING S BEFORE THE LD. CIT (A). HENCE THE FINDINGS OF THE EARLIER HONBLE BENCH IN THE AS SESSEES OWN CASE FOR THE AY 2003-04 CANNOT COME TO ITS RESCUE. ON THE OTHER HAND THE REVENUE HAS COME UP WITH HU MPTY NUMBER OF CASE LAWS IN SUPPORT OF ITS CONTENTIONS CHIEFLY :- ITA NO.140/AHD/2011 A.Y. 2004-05 7 (1) PSB INDUSTRIES INDIA PVT. LTD. VS. CIT (DELHI HIGH COURT) (2) CIT VS. ZOOM COMMUNICATION (P)LTD. (327 ITR 510) (3) GUJARAT STATE FINANCIAL SERVICES LTD. VS. ACI T (2010) 39 SOT 570(AHD) (4) ITO VS. GEEP INDUSTRIAL SYNDICATE LTD. (1987) 23 ITD(ALL) 448 (5) A.M.SHAH & CO. VS. CIT (1999) 238 ITR 415 (G UJ) (6) CIT VS. LALCHAND TIRTH RAM (1997) 225 ITR 67 5 (P&H) FURTHER IT IS APPARENT FROM THE ORDER OF THE LD. C IT (A) REPRODUCED HEREINABOVE THAT THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE WHATSOEVER T O SUBSTANTIATE HIS CLAIM OF BUSINESS DEVELOPMENT EXPENDITURE. EVEN BEFORE US AT THIS STAGE THE ASSESSEE HAS NOT COME UP WITH ANY EVIDENCE TO SUBSTANTIATE HIS CLAIM . TAKING INTO CONSIDERATION ALL THE RELEVANT FACTS AS DISCUSSED IN THE FORE-GOING PARAG RAPHS WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT (A) WAS JUSTIFIED IN HIS FINDING I N UPHOLDING THE LD. AOS ACTION IN LEVYING PENALTY WITH REFERENCE TO THE EXPENSES CLAIMED UNDE R THE HEAD BUSINESS DEVELOPMENT EXPENSES. IN SUBSTANCE THE LD. AO SHALL RE-COMPU TE THE QUANTUM OF PENALTY TO THE EXTENT OF ONLY RS.50 13 780/- CLAIMED UNDER THE BU SINESS DEVELOPMENT EXPENSES. IN THE RESULT THE ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 25 11 - 2011. SD/- SD/- (D. K.TYAGI) (A. MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT EMBER AHMEDABAD. S.A.PATKI. ITA NO.140/AHD/2011 A.Y. 2004-05 8 COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-XI AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT AHMEDABAD. 1.DATE OF DICTATION - -2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING / / 2011 MEMBER.OTHER MEMBER . 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S - -2011. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 25 -11 -2011 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 25 -11 -2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 2 5 - 11 -2011. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..