TaxTMI 
TaxTMI 
2016 (5) TMI 527
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....ional new ground which may be necessary." 5. At the very outset, it is noticed that even in spite of several notices, none has appeared on behalf of assessee and on the perusal of order sheet we have noticed that nobody was appearing on behalf of assessee for the last several dates. Although the notices were also served upon the assessee for appearing before us, but even then the respondent has not preferred to appear and even no application for adjournment was moved today. On the other hand ld. DR is present in the court and is ready with arguments. Therefore we have decided to proceed with the hearing of the case ex-parte with the assistance of the ld. DR and the material on record. 2. The brief facts of the case are that the assessee firm engaged in the business of advertising, filed its return of income from A.Y. 2007-08 dated 29.10.2007 declaring total income of Rs. 23,19,030/-. The return was processed and selected for scrutiny and ultimately AO passed the order of assessment thereby making additions on several grounds. 3. Aggrieved by the order of the AO, assessee filed appeal before CIT(A) and the CIT(A) vide its order dated 05.09.2013 deleted the disallowance made....
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....id. The assessing officer passed an order u/s. 271 (l)(c) of the ITA confirming penalty on the disallowance of commission paid and software expenses. The appellant has filed an appeal against this penalty order. Our submissions in this respect are as follows:- 1. Commission disallowed of Rs. 31,21,669/- The appellant in its course of business conducted during A. Y. 2007-08 had procured an order for advertising from M/s. Diageo India. Mr. Umashankar Prasad Proprietor of M /s. Calyx enabled assessee to procure the contract and as per agreed terms with him the appellant paid a commission of Rs. 31,21,669/-* after withholding TDS u/s. 194H of the ITA and claimed the same as business expenditure. During the course of assessment and the appellate proceeding entire communication with M/s. Calyx was brought on record along with the bank statements of Mr. Umashankar Prasad, his return of income, ledger account copies of the aforesaid in the books of the appellant. The assessing officer summoned Mr. Umashankar Prasad and took his statement wherein he was asked various questions as set out in the assessment order. Your honours will appreciate that no question regarding the c....
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....109 ITR 705) The CIT(A) has reproduced the order of the Bombay High Court in his order. The basic facts in that case were that Shri A. M. Khopkar the employee of the assessee company was agreed by the chairman to received commission of sale @ 2.5%. It was claimed by Mr. Khopkar the commission was spent for procuring business for which there was no proof of expenditure. The AAC accordingly disallowed the commission since the expenditure could not be substantiated. We may mention here that in the case of the appellant is distinguishable on facts since in the present case it is not the claim of the appellant that the recipient of the commission has incurred expenditure to procure business. In other words M/s. Calyx charged the appellant commission @ 4% of the contract as their service charges and has not claimed that they have in turn expended this amount. They have reported this as a part of their turnover. Calcutta High Court in case of Vishnu Agencies Pvt. Ltd. vs; CIT (117 ITR 754) In this case the CIT(A) has relied upon only one observation contained in Para 26 of the order given in case of Mr. Mangilal Sethia which is reproduced below:- 26. On....
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....tance of the said tender, are relevant for the purpose of determining whether Sampat & Co. was lawfully entitled to the remuneration paid to it by the assessee and whether such remuneration was paid solely and exclusively for the purpose of business of the assessee. The Tribunal also failed to appreciate or consider the evidence of Bhikamchand in the above context. 29. For the reasons given above, we hold that the finding of the Tribunal for the asst. yrs. 1963-64 and 1964-65 that the remuneration paid to Sampat & Co. as manufacturing supervisor was not deductible as business expenditure under s. 37(1) of the IT Act, 1961, is vitiated by nonconsideration of the aforesaid material facts and evidence on record which were relevant for arriving at such finding. 30. We, therefore, send the matter back to the Tribunal with a direction to consider the claim of the assessee in the light of the observations made above and determine the question in accordance with law. The Tribunal will give further opportunity to the parties for making submissions on the point and, if necessary, may take fresh evidence. From the above it can be appreciated that oral evidence apart....
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.... The assessing officer was furnished with the documentary evidence with respect to the purchase of software from Mr. Satish Pujari of Microbit. The software was acquired for executing of the order from M/s. Diageo. It was explained to the officer that every type of advertisement required different software and accordingly had limited life. The assessing summons Mr. Satish and since he did not appear him, he regarded software expense to be capital in nature and also no depreciation to be granted. The CIT(A) was furnished with the bank statements of appellant reflecting payment to Mis. Microbit, the fact that installation was pre condition for doing business with Mis. Diageo India Pvt. Ltd. was also stated. The CIT(A) has accordingly treated the software expenditure to be capital in nature and he allowed depreciation on ' the same. From the fact furnished above it is submitted that the appellant has undoubtedly expended the aforesaid amounts for business purposes as even the CIT(A) has held so. He has by allowing depreciation reduced the dispute to capital vs. revenue. Your honour will appreciate that there neither any concealment nor any furnishing of in accurate....
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....iculars of such income either in the return of income or during the course of assessment proceeding u/s 143(3) of ITA. We draw your kind attention to the decision of Dilip N. Shroff v/s. JCIT & ANR. [(2007) 291 ITR 519 (SC)] for interpretation of the above phrases as enshrined in Sec 271 (1)(c): "43. The expression "conceal" is of great importance. According to Law Lexicon, the word "conceal" means: "to hide or keep secret. The word 'conceal is con + celare which implies to hide. It means to bide or withdraw from observation; to cover or keep from sight; to prevent the discovery of; to withhold knowledge of. The offence of concealment is, thus, a direct attempt to hide an item of income or a portion thereof from the knowledge of the income-tax authorities. " In Webster's Dictionary, "inaccurate" has been defined as : "not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript. "" Your goodselves would appreciate that the appellant has, not at any single instance, made any attempt (whether deliberate or intentional) to hide the fact or furnish erroneous/inaccurate statements with regard to ....
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....urred the said expenditures and full details were furnished to him. Under these circumstances we request your honors to kindly drop the penalty levied and oblige. /I 5. I have carefully considered the facts relating to the levy of penalty as they emerge from the assessment and penalty orders. I have also perused the appellate order passed with reference to the quantum appeal in this case. 5.12 Regarding the disallowance of software expenses, the disallowance has been upheld by the CIT(A) holding that these are in the nature of capital expenses. Thus I find that the disallowance is made on account of a difference of opinion between the appellant and the revenue as to the category in which the concerned expenses fall. 5.12.1 It is well accepted principle that when the disallowance made by AO itself is debatable in nature, no penalty for conealment for such debatable issue can be lvied. This principle has been elaborated in the decisions rendered in the cases of Ajaib Singh & Co 253 ITR 630 (P&H), Harshvardhan Chemicals & Minerals Ltd. 259 ITR 212 (Raj.), Shivlal Desai & Sons 114 ITR 377 (Bom.), Kalyani Enterprises 83 ITD 764 (Mad Trib), National Te....
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....e particulars. The words are plain and simple. In order to expose the assessee to the penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. Therefore, it is obvious that it must be shown that the conditions under sec.271 (1)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed because that is the only document, where the assessee can furnish the particulars of his income." 5.14.1 This principle has been followed in the judgement of VIP Industries Ltd. 21 DTR (MUM TRIB) 153. 5.15 In the present case, the appellant has claimed expenses incurred for purchase of software. The claim was examined during the quantum appeal proceedings and it was found that the software had been specifically designed to meet the advertising needs of the appellant's client M/s Diageo, and was installed for the first time in the year under consideration. The expenditure was held to be of capital nature as against revenue expenditure claimed by the appell....