2021 (7) TMI 835

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....he 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....

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....dated 31/12/2015. ii) 327 ITR 543 (Delhi) GIT vs Nalwa Sons investments Ltd. iii) Supreme Court order in SLP Civil No.18564/2011 in the case of Nalwa Sons Investments Ltd. vide judgment dated 04/05/2012. iv) ITAT Delhi Bench In ITA No.1026/Del/2012 in the case of M/s. Century Communication Ltd. vide judgment dated 21/09/2012, 5. Perusal of assessment order does not show any satisfaction or even Initiation of penalty proceedings u/s 271(1)(c) of J.T Act 1961. Penalty levied in absence of satisfaction in assessment order is bad in law. Reliance on: i) ITAT Kotkata Bench in ITA Nc,477/Ko//2017 in the case of Late Baijnath Agarwal vide judgment dated 23/01/2019, 6. The assesses has incurred expenditure for services rendered by W/s. Nifinity Ltd and M/s. Cobweb Solution Ltd. in the course of business. The expenditure incurred does not bring into existence any capital asset or benefit/ advantage of an enduring nature. It is annual subscription for services rendered and is no capital expenditure. It is in the nature of allowable revenue expenditure. Addition itself being unsustainable question of levy of penalty does not arise. Penalty levied is bad in law. 7. Expendi....

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....foresaid decision has concluded that Mens rea is not on essential ingredient of s. 271(1)(c). Hon'ble Apex Court in the case of Reliance Petroproducts (P) Ltd. reported at 322 ITR 0158 after considering decision in the case of Dharmendra Textile Processors & Others concluded that mere making of the claim which is not sustainable in law will not amount to furnishing inaccurate particulars regarding the income of assesses. Ratio laid-down by Apex Court in the case of Reliance Petroproducts (P) Ltd. Is more appropriate to the facts in the case of assesses and thus nothing adverse remain out of decision relied upon by A.O. 11. A.O. in penalty order at para 5,2 has placed reliance on decision of MAK Data Pvt, Ltd. vs. GIT reported at 35S ITR 0593. In the aforesaid case incriminating evidence was found in the course of survey proceedings from premises of sister concern before the original return was filed by assessee. Income emanating out of incriminating evidence was not shown in original return and was surrendered subsequently. On aforesaid facts it was concluded by Hon'ble Apex Court that surrender of Income is not voluntary and assessee is liable for penalty u/s. 271(l)(c)....

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....7/Del/2010 in the case of Tristar Intech (P) Ltd, vide order dated 07/09/2015 9. (2010) 322 ITR 0158 (SC) CIT vs. Reliance Petroproducts (P) Ltd. 8. Per contra, the ld. Departmental Representative (ld. DR for short) relied on the orders of the authorities below. 9. Upon careful consideration, we note that the penalty has been levied on an addition of Rs. 35,92,393/-. The said expenditure was claimed as revenue expenditure. The same was disallowed and held to be in capital field. The nature of the expenditure was service rendered by two parties, which was of the nature of annual subscription of exchange service. The assessee's claim is that the same does not bring into existence any asset of capital nature. The A.O. has held otherwise. Now the first question in the aforesaid circumstances is whether the aforesaid can be treated as concealment of income and or furnishing of inaccurate particulars of income. 10. In this regard, the exposition of Hon'ble Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd. [2010] 322 ITR 158 (SC) applies on all fours to the facts of the present case. In the aforesaid case, the Hon'ble Supreme Court has expounded that me....