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ITO Ward 11(3) New Delhi Vs. FX Enterprises Solutions India Pvt. Ltd. E-27/8, Ground Floor, Right Side Malviya Nagar, New Delhi
May, 28th 2015
                        DELHI BENCH: `B' NEW DELHI

                   SH.T.S. KAPOOR, ACCOUNTANT MEMBER

                               I.T.A .No.-4246/Del/2013
                          (ASSESSMENT YEAR- 2009-10)

      ITO               vs   FX Enterprises Solutions India Pvt. Ltd.
      Ward 11(3)             E-27/8, Ground Floor, Right Side
      New Delhi              Malviya Nagar, New Delhi
      (APPELLANT)            AAACF4881H

                  Appellant by        Sh. K.K. Jaiswal, Sr. DR
                  Respondent by       Sh. Yogesh K. Jagia, ADV

                        Date of Hearing              08.05.2015
                     Date of Pronouncement           27.05.2015


      By the present appeal the assessee assails the correctness of the order dated
1/8/2012 of CIT(A) XIII, New Delhi pertaining to 2009-10 Assessment Year on the
following ground:-
      "1. On the facts and the circumstances, the Ld. CIT(A) has erred in law in
      deleting the penalty of Rs.7,39,338/- of the Act imposed u/s 271(1)(c) of
      the I.T. Act 1961 without considering that the assessee had furnished
      inaccurate particulars of its income."

2.    The relevant facts of the case are that the assessment in the case of the
assessee was completed u/s 143(3) at the book profit of Rs.53,98,386/-. In the
course of the assessment proceedings the assessing officer made an addition of
Rs.1,30,302/- on account of excess interest paid. Apart from that he also made an
addition by way of a disallowance of Rs.22,62,376/- considering the expenses
debited in the P &L account in regard to which the addition was made for want of
explanation filed. These additions were accepted by the assesses as no appeals
were filed. As a result of the additions having been accepted the AO required the
assessee to explain why penalty u/s 271(1)(C) should not be imposed.               The
                                                                      I.T.A .No.-4246/DEL/13

explanation offered by the assessee      was not accepted by the Assessing Officer on
account of the following reason.
      "..................The reply filed by the assessee nowhere mentions why excess
      interest amounting to Rs.1,30,302/- was paid or under what circumstances,
      the assessee had to pay interest @ 16% p.a. Similarly, as regard to
      disallowance made on account of expenses debited in P&L account
      amounting to Rs.22,62,376/-, the assessee did not furnish any
      documentary evidence neither at assessment proceedings nor at the time of
      issuing show cause notice."

3.    As a result of this, considering the additions made penalty amounting to
Rs. 7,39,338/- was imposed.
4.    Aggrieved by this the assessee came in appeal before the First Appellate
Authority re-iterating the submissions advanced before the AO in penalty
proceedings which have been extracted in the penalty order and also relying upon
various decisions. Considering the explanation offered and the judicial precedent
relied upon the penalty imposed was deleted.
5.    Aggrieved by this, the Revenue is in appeal before the Tribunal.
6.    Ld. Sr. DR, Mr. K. K. Jaiswal inviting attention to the assessment order and
the impugned order submitted that the CIT(A) has only discussed the two
additions holding the same to be Revenue in nature and has not made out a case
that it was a bogus claim.     Inviting attention to the third page of the assessment
order, it was submitted that since the assessee's income under the MAT provisions
being a 115JB case was higher than a normal income in regard to which also
satisfaction has been recorded. It was his submission that this fact has not been
discussed in the impugned order. Accordingly it was his submission that the said
issue has not been discussed by the CIT(A) and the order needs to be set aside and
the penalty order be confirmed.
7.    The Ld. AR on the other hand submitted that a perusal of the penalty order
would show that penalty has been imposed only on account of disallowance of
interest paid and disallowance of the expenditure claimed. The objection posed on
the ground that in the assessment order the AO also considered the other issue is
of no relevance as the fact remains that the penalty has been imposed by the AO
only on these two issues thus it was argued that even if the Assessing Officer
initiated proceedings on account of adjustments in the book profit but the fact
remains that at the time of levying penalty he has imposed penalty only on the

                                                                                       Page 2 of 5
                                                                 I.T.A .No.-4246/DEL/13

additions made as per the normal profits of the company and in these facts the
department can rely only on the reasons on which the penalty was imposed. It
was argued in the alternative even if the said issue is to be decided against the
assessee. Then reliance is placed on the judgment of the Delhi High Court in the
case of CIT VS. Nalwa Sons Investment (2010) 327 ITR 543 which addresses the
issue. Copy of the same it was submitted is at 11 to 19 of the paper book. Inviting
attention to Paper Book page 70, it was submitted that the department filed SLP
against the said order and it was dismissed by the Apex Court.
7.1.   Addressing the issue on facts considered in the impugned order it was
submitted that the assessee following its past practice on the issue had claimed
interest payment at the rate of 16% and the department following its past practice
had restricted the same to 12%. ON this fact no penalty has been imposed by the
Assessing Officer in the past and only in this year penalty was imposed. It was
submitted that it is not a case that a bogus claim was made by the assessee and
the mere fact that the assessee has not challenged this addition does not mean
that the assessee has withheld     any particulars of income or filed in accurate
particulars of income.
7.2.   Addressing the next issue, it was his submission that the claim is based on
the expenses in regard to the claim in 2008-09 wherein the assessee deferred the
expenses @ rate of 1/5th for 5 years and the amount of Rs.22,62,376/- consisted
of Rs.8,04,076/- for 2008-09 and the balance amount of 14,58,300/- pertaining to
the earlier years. The expenditure herein was also genuine and not bogus and this
too was not the case of filing any inaccurate income or withholding particulars of
income. Reliance it was submitted placed upon the decisions of the Apex Court in
the case of CIT vs Reliance Petro Products (2010) 322 ITR 158 (SC) and the order
of the Tribunal dated 16.04.2015 in ITA No.-5364/Del/2013 in ACIT vs Ortel
Communication Ltd. (copy at pages 21 -24 of the Paper Book).
8.     We have heard the rival submissions and perused the material available on
record. On a perusal of the assessment order it is seen that the Assessing Officer
has recorded his satisfaction for initiating penalty proceedings u/s 271(1)(c) on
three grounds. However, at the time of passing the penalty order, he has imposed
penalty    only on the grounds of the two additions of Rs.22,62,376/- and
Rs.1,30,302/-made while working out the normal profits of the assessee company.

                                                                             Page 3 of 5
                                                                        I.T.A .No.-4246/DEL/13

Presumably to avoid the confusion this fact is emphasized in the penalty order by
the AO in the     concluding portion of his order where specific reference is again
made to the total amount of addition on account of which it was held that the
penalty was to be imposed. Accordingly the arguments of the Ld. Sr. DR qua the
same do not arise from the penalty order.
8.1.   Addressing the remaining arguments of the department and the Ld. AR
which have been brought out in detail in the earlier part of this order, we find
ourselves in the facts as they stand that the finding under challenge considering
the judicial precedent relied upon before us deserves to be upheld. Being satisfied
with the reasoning and finding on facts we find ourselves unable to come to a
contrary finding in the face of the peculiar facts qua the issues involved.              In the
absence of any infirmity in the impugned order, the following finding of the CIT(A)
is upheld by us:-
       " 5.2 Decision
               "I have considered the submission of the appellant and observation
       of the Assessing Officer. It is seen that in the assessment order passed
       Assessing Officer had disallowed excess interest payment of Rs.1,30,302/-
       u/s 40A(2)(b) of the IT Act on the ground that this interest payment is
       excessive to the relatives of the appellant concerns. Similarly, the Assessing
       Officer has disallowed deferred revenue expenditure of Rs.22,62,376/- on
       the ground that no details were sub mitted. On the basis of these
       disallowances penalty u/s 271(1)(C) of the IT Act was levied by the
       Assessing Officer of Rs.7,39,338/-. It is submitted by the appellant that
       expenditure of interest payment claimed by the appellant was not fictitious
       or bogus. It was a genuine expenditure claimed by the appellant and same
       was paid to the person from who loans were taken. There was no
       concealment of facts or furnishing of inaccurate particulars of income. The
       appellant has disclosed all the facts of the interest expenditure in the return
       of income and claim was made on the basis of payment made to the
       persons. Similarly, the deferred revenue expenditure of Rs.22,62,376/- was
       claimed on the basis of consistent method followed by the appellant. The
       expenditure in question was revenu9e but same was deferred for future
       years to be claimed against the income of future years. The expenditure
       was to be amortized in 5 years period and 1/5th was too be claimed every
       year. The amount debited of Rs.22, 62,376/- consisted of Rs.8, 04,076/-
       for A.Y 2008-09 and the balance amount of Rs.14,58,300/- was pertaining
       to earlier years. The expenditure was revenue in nature and same was not
       bogus or not genuine. Everything was disclosed in the return of income and
       there was concealment or furnishing of inaccurate particulars.              The
       disallowance made by the Assessing Officer was on the basis of difference
       of opinion. Any disallowance made on the basis of difference of opinion is
       not sufficient for arriving at conclusion that appellant has furnished
       inaccurate particulars of income or has concealed the income. The appellant
       has not furnished any inaccurate particulars in the return of income. Mere
       making a claim which is not sustainable in law by itself will not amount to

                                                                                     Page 4 of 5
                                                                    I.T.A .No.-4246/DEL/13

       furnishing of inaccurate particulars regarding the income of the appellant.
       Such claim made in the return of income cannot amount to the inaccurate
       particulars of income.
       In view of the factual position discussed above, the penalty levied by the
       Assessing Officer of Rs.7,39,338/- on the basis of various disallowances
       made in the assessment order was not justified and same is deleted."

8.2.   Accordingly, in view of the above, the ground raised by the Revenue is
9.     In the result, the appeal of the Revenue is dismissed.
       The order is pronounced in the open court on 27th May 2015.

       Sd/-                                                                     Sd/-

(T. S. KAPOOR)                                                           (DIVA SINGH)
ACCOUNTANT MEMBER                                                   JUDICIAL MEMBER

Dated: the 27th May, 2015
*R. Naheed/Amit Kumar*

Copy   forwarded to:
1.      Appellant
2.      Respondent
3.      CIT
4.      CIT(Appeals)
5.      DR: ITAT

                                                                ASSISTANT REGISTRAR
                                                                      ITAT NEW DELHI

                                                                                     Page 5 of 5
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