Appeal Allowed: Penalty for Treating Software Purchase as Revenue Expenditure Deleted

The ITAT allowed the appeal filed by the assessee, deleting the penalty levied for treating the purchase of software as a revenue expenditure. The ITAT dismissed the revenue's appeal due to the total addition falling below the revised monetary limit for filing appeals before ITAT. The judgment emphasized the importance of disclosing information clearly and in good faith, considering the nature of the transaction and relevant legal provisions.

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Issues Involved:
- Penalty levied under section 271(1)(c) for treating purchase of software as revenue expenditure
- Appeal against penalty order by both assessee and revenue
- Monetary limit for filing appeals before ITAT
- Applicability of Circular No.17 of 2019 by CBDT

Detailed Analysis:

Issue 1: Penalty for treating purchase of software as revenue expenditure
The assessing officer observed that the assessee purchased software as a revenue expenditure, which was later deemed eligible for depreciation as per income tax rules. The penalty was initiated as the assessee inadvertently claimed the expenditure as revenue. The assessing officer confirmed and levied the penalty, which was sustained by Ld CIT(A). The assessee argued that the claim was a debatable issue and that there was no concealment of information since it was disclosed in the tax audit report. The AR relied on a case to support the argument. The DR contended that the assessee should have clearly disclosed relevant information and supported Ld CIT(A)'s findings.

Issue 2: Appeal against penalty order
The AR highlighted that the penalty order was based on the assessee's inadvertent claim of software purchase as revenue expenditure. The AR argued that the claim was disclosed in good faith and that no concealment occurred. The AR further contended that the penalty could not be imposed solely based on a difference in treatment by the assessing officer. The ITAT referred to a similar case and decided to delete the penalty levied on the assessee, following the precedent.

Issue 3: Monetary limit for filing appeals
The ITAT noted that the total addition in the revenue's appeal was less than the revised monetary limit for filing appeals before ITAT as per Circular No.17 of 2019. As the addition fell below the new limit, the ITAT was inclined to dismiss the revenue's appeal based on the revised guidelines.

Conclusion:
The ITAT allowed the appeal filed by the assessee, deleting the penalty levied for treating the purchase of software as a revenue expenditure. The ITAT dismissed the revenue's appeal due to the total addition falling below the revised monetary limit for filing appeals before ITAT. The judgment emphasized the importance of disclosing information clearly and in good faith, considering the nature of the transaction and relevant legal provisions.

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