CAIRS COMPUTER AIDED INFORMATION AND RESEARCH SERVICES PRIVATE LIMITED,DELHI V. ITO,WARD-5(1), DELHI

ITA 3565/DEL/2024

AI Insights

The case involves multiple appeals by Cairs Computer Aided Information and Research Services Pvt. Ltd. against the orders of the Learned Commissioner of Income-Tax (Appeals)/National Faceless Appeal Centre, Delhi, which arose from assessment orders by the Income Tax Officer, Ward 5(1), New Delhi. The appeals pertain to the assessment years 2013-14, 2014-15, and 2015-16. The primary issues revolved around the classification of interest income, the treatment of time deposits, the entitlement to depreciation and administrative expenses, and the validity of the case reopening under Sections 147 and 148 of the Income-Tax Act, 1961.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 26835 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Other Referred Cases: CIT vs. M/s. K and Co., CIT Vs. Bokaro Steel Ltd., CIT Vs. Koshika Telecom Ltd., CIT Vs. Jaypee DSC Ventures Ltd., CIT vs. Nahar Exports Ltd., DCIT vs. Rapipay Finvest Pvt. Ltd., CIT vs. Yamaha Motor India Pvt. Ltd.
• Laws Referred To: Income-Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: MANISH AGGARWAL
• Keywords: Set aside; Business income; Difference of opinion; Change of opinion; Depreciation; Unexplained investment; Competent authority; Reason to believe
• Section: 147; 148; 142(1); 271(1)(c); 56; 32; 13; 234B; 37

Judgement Text

" INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B”: NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No. 3566/DEL/2024 Asstt. Year: 2013-14 ITA No. 3565/DEL/2024 Asstt. Year: 2014-15 ITA No. 3602/DEL/2024 Asstt. Year: 2015-16 Cairs Computer Aided Information and Research Services Pvt. Ltd., 8A/36G W.E.A. Karol Bagh, Delhi PIN 1100 05 PAN No. AAACC1968Q Vs. ITO, Ward-5 (1), New Delhi (Appellant) (Respondent) O R D E R PER VIMAL KUMAR, JUDICIAL MEMBER: The appeals filed by the Assessee are against separate orders dated 07.06.2024 passed by Learned Commissioner of Income-Tax(Appeals)/National Faceless Appeal Centre(NFAC), Delhi (hereinafter referred as ‘Ld. CIT(A)’) arising out of assessment orders dated 30.03.2022 by Learned ITO, Ward 5(1), New Delhi (hereinafter referred as ‘Ld. A.O.’) under Sections 147 read with section 144B of the Income-Tax Act, 1961 (hereinafter Assessee by: Shri Manish Aggarwal, CA Department by: Shri Rajesh Kumar Dhanesta, Sr. DR Date of Hearing: 13.03.2025 Date of pronouncement: 26.03.2025 ITA Nos.3566 3565 & 3502/Del/2024 2 referred as “the Act”) for the assessment years 2013-14 and 2014-15 respectively. ITA No.3602/Del/2024 is against the order dated 10.06.2024 of Ld. CIT(A) arising out of assessment order dated 18.12.2017 of Ld. AO for assessment year 2015-16. All the appeals involve similar facts, grounds and issues. So, they were heard together. 2. Brief facts of the lead case i.e. ITA No.3566/Del/2024 are that the appellant/assessee e-filed return of income for the assessment year 2013-14. From the information available on record that assessee had made time deposits of Rs.4,50,700/- and received interest of Rs.28,30,150/- during assessment year 2013-14. There was reason to believe that income to the extent of Rs.32,80,820/- has escaped assessment within the meaning under Section 147 of the Act. The case was reopened under Section 147 and notice dated 31.03.2021 under Section 148 of the Act was issued after recording reasons for reopening and obtaining prior approval from the Competent Authority. In response to notice, assessee did not submit his return of income within the stipulated time. Notice under Section 142 dated 22.11.2021 was issued. The case was transferred to NFAC assessment unit. The assessee submitted response on ITA Nos.3566 3565 & 3502/Del/2024 3 12.01.2022 vide letter dated 26.11.2021 stating that notice under Section 148 of the Act could be issued within a period of six years from the end of relevant assessment year. The assessee has not filed his return of income in response to notice under Section 148 of the Act. Notice dated 18.01.2022 under Section 142(1) of the Act along with detailed questionnaire was issued. In response to notice, the assessee submitted reply vide letter dated 27.01.2022. On verification of reply and details, Ld. AO vide order dated 30.03.2022 made additions of Rs.66,33,774/- and Rs.4,50,700/-. 3. Against order dated 30.03.2022, appellant/assessee preferred appeal before the Ld. CIT(A) which was dismissed vide order dated 07.06.2022. 4. In ITA No.3566/Del/2024 for assessment year 2013-14, grounds of appeal are as under: “a. That on facts and circumstances of the case and in law, the order passed by the Ld. CIT (Appeals) is contrary to facts and bad in law. Therefore, the addition confirmed for INR 70,84,474 on account of disallowance of depreciation, administrative expenditure and investment in feed deposit an unexplained income must be deleted. b. Addition of interest income relating to Business and Profession to Income from other sources amounting to INR 28,30,150/- ITA Nos.3566 3565 & 3502/Del/2024 4 The Ld. Commissioner (Appeals) erred in law and on facts has confirmed in making the addition of interest income of INR 28,30,150 under the head \"Other Sources\" instead of \"Profits and gains of business or profession\" without appreciating the facts that the appellant has accurately declared the interest income under the Schedule BP. Snip attached in the appeal order is related to Part A- P&L and nothing but a replica of audited profit and loss account and to arrive at taxable income, we need to classify the income under a particular schedule e.g. BP or CG elc. c. The Ld. Commissioner (Appeals) was clearly wrong in holding that that the Time Deposit of INR 4,50,700 as an unexplained investment. d. The Ld. Commissioner (Appeals) was clearly wrong in holding that that the assessee was not entitled to the deduction of depreciation under section 32 and administrative expenses under section 37 of the Act. Disallowance of expense amounting to Rs.66,33,774/-. e. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in charging interest and the Ld. CIT (Appeals) erred in confirming interest under section 234A and 2348 of the Act. 1. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in initiating and the Ld. CIT (Appeals) erred in confirming penalty proceedings under section 271(1)(c). General: That the appellant craves leave to add, alter and modify any of the grounds during the course of proceedings.” 5. In ITA No.3565/Del/2024 for assessment year 2014-15, grounds of appeal are as under: “a. That on facts and circumstances of the case and in law, the order passed by the Ld. CIT (Appeals) is contrary to facts ITA Nos.3566 3565 & 3502/Del/2024 5 and bad in law. Therefore, the addition confirmed for INR 54,39,329 on account of disallowance of depreciation must be deleted. b. Addition of interest income relating to Business and Profession to Income from other sources amounting to Rs. 27,08,093/- The Ld. Commissioner (Appeals) erred in law and on facts has confirmed in making the assessment of income of INR 27,08,093 under the head \"Other Sources instead of \"Profits and gains of business or profession without appreciating the facts that the appellant has accurately declared the interest income under the Schedule BP. Snip attached in the appeal order is related to Part A- P&L and nothing but a replica of audited profit and loss account and to arrive at taxable income, we need to classify the income under a particular schedule e.g. BP or CG etc. The Ld. AO also erred while framing the assessment order and in taking the taxable income/ (loss), depreciation amounts from Part A- P&L amounting to INR 28,35,643 (loss), INR 54,39,329 respectively. However, the correct source to compute taxable income and tax depreciation is Part B -TI read with Schedule BP line 37 of the income tax return which is INR 7,89,473 (loss) and INR 34,43,159 respectively. c. The Ld. Commissioner (Appeals) was clearly wrong in holding that that the assessee was not entitled to the deduction of depreciation under section 32 of the Act. Disallowance of expense amounting to Rs. 54,39,329/- d. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in charging interest and the Ld. CIT (Appeals) erred in confirming interest under section 234A and 234B of the Act. e. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in initiating and the Ld. CIT (Appeals) erred in confirming penalty proceedings under section 271(1)(c). ITA Nos.3566 3565 & 3502/Del/2024 6 f. General: That the appellant craves leave to add, alter and modify any of the grounds during the course of proceedings.” 6. In ITA No.3602/Del/2024 for assessment year 2015-16, grounds of appeal are as under: “a) That on facts and circumstances of the case and in law, the order passed by the Learned CIT (Appeals) is contrary to facts and bad in law. Therefore, the addition confirmed for INR 46,47,716/- on account of disallowance of deprecation must be deleted. b) i) The Ld. Commissioner (Appeals) was clearly wrong in holding that the assessee was not entitled to the deduction of depreciation under section 32 of the Act. ii) The Ld. Commissioner (Appeals) erred in law and on facts has confirmed making the assessment of income of INR 11,10,254 under the head \"Other Sources instead of “Profits and Gains of business or profession” without appreciating the facts that the appellant has accurately declared the interest Income under the Schedule BP. Snip attached in the appeal order is related to Part A- P&L and nothing but a replica of audited profit and loss account and to arrive at taxable income, we need to classify the income under a particular schedule e.g. BP or CG etc. iii) The Ld. AO also erred while framing the assessment order and in taking the depreciation amounts from Part – A- P&L amounting to INR 46,47,716. However, the correct source to compute taxable income and tax depreciation is Part B -TI read with Schedule BP line 37 of the income tax return which is INR 29,28,798. Even assessing officer while framing assessment order has computed the correct depreciation in accordance with the Income Tax Act. The assessment was completed in a hurry due to time barring limitation. ITA Nos.3566 3565 & 3502/Del/2024 7 c. Assessment becomes invalid u/s 147 and 148. d. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in charging interest and the Ld. CIT (Appeals) erred in confirming interest under section 234A and 234B of the Act. e. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in initiating and the Ld. CIT (Appeals) erred in confirming penalty proceedings under section 271(1)(c) of the Act f. That the appellant craves leave to add, alter and modify any of the grounds during the course of proceedings.” 7. (i) On basis of ground no.2 in ITA No.3566, following issue arises: “(A) Whether addition of interest income relating to Business and Profession to income from other sources is legal.” 7. (ii) On basis of ground no.3 in ITA No.3566 & 3565/Del/2024, following issue is framed: “B. Whether holding that the Time Deposit as an unexplained investment is legal?”. 7. (iii) On basis of ground no.4 in ITA No.3566/Del/2024 and ground no.3 in ITA No.3565/Del/2024 and ground no.2 in ITA No.3602/Del/2024, following issue is framed: ITA Nos.3566 3565 & 3502/Del/2024 8 “C. “Whether the assessee was not entitled to the deduction of depreciation under Section 32 and administrative expenses under Section 37 of the Act?” 7. (v) On ground no.3 in ITA No.3602/Del/2024, following issue is framed: (D). “Whether the assessment becomes invalid under Sections 147 and 148?” 8. Learned Authorised Representative for the appellant/assessee submitted that interest income on margin money for issuance of bank guarantee submitted to the Government of Nagaland was earned from last 10 years and taxed under the head PGBP. Even in order passed under Section 148 for assessment year 2015-16, the same is allowed under the same head. (Refer Page No.189, para 6.1 of the Paper Book). In support of it, Ld. AR relied upon the decision of Hon’ble Delhi High Court in the case of ITA Nos. 60-61/1999 and ITA Nos. 69- 72/1999 titled as “CIT vs. M/s. K and Co.” Decided on 14.02.2013. 9. Learned departmental representative for the Revenue, relied on the assessment order. ITA Nos.3566 3565 & 3502/Del/2024 9 10. From examination of record in the light of the aforesaid rival contentions, it is crystal clear, interest income on margin money for issuance of bank guarantee submitted to the Government of Nagaland earned for last 10 years and taxed under the head PGBP. Even during order passed under Section 148 for assessment year 2015-16, the same is allowed under the same head. (Refer Page No.189, para 6.1 of the Paper Book). Hon'ble High Court of Delhi in ITA Nos.60-61/1999 and ITA Nos.69- 72/1999 titled as “CIT Vs. M/s. K & Co.” Decided on 14.02.2013 in para no.10 has held as under: “10. We are left with the assessment year 1990-91 wherein the three questions raised in assessment year 1989-90 have been raised in the year 1990-91 also. They stand answered accordingly. Additionally, two questions with regard to the claim under Section 32AB of the Income Tax Act, 1961 have been raised. The questions raised are as under: \"(4) Whether on the facts and in the circumstances of the case, the Hon'ble Tribunal was right in law in holding that the interest income of ₹87,695/- included in ₹10,51,987/- shown as 'other income' by the assessee was eligible for deduction u/s 32 AB of the I.T. Act, 1961? ITA Nos.3566 3565 & 3502/Del/2024 10 (5) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that investment income amounting to 63,365/- shown by the assessee as other income was eligible for deduction u/s 32 AB of the 1.T. Act 1961 even though the said income being interest received from the Bank on Short Term Fixed Deposit was assessable as income from other sources?\" These questions arose in the backdrop of the factual situation that the respondent-assessee had to place certain funds as margin money in order to obtain the bank guarantee which was required by the State Government of Sikkim for the purpose of enabling the respondent-assessee to carry on the business of printing lottery tickets and for conducting lotteries on behalf of the State Government of Sikkim. The funds which were placed as margin money earned interest. The question which arose was whether these amounts would be placed under the head of business income' or under the head of income from other sources' under Section 56 of the Income Tax Act, 1961. We need not labour much on this issue inasmuch as the law stands settled in several decisions including those of the Supreme Court and this Court. The decisions are: 1. CIT Vs. Bokaro Steel Ltd.: (1999) 236 ITR 315 (SC) 2. CIT Vs. Koshika Telecom Ltd.: (2006) 287 ITR 479 (Del.) 3. CIT Vs. Jaypee DSC Ventures Ltd.: (2011)335 ITR 132 (Del.) These decisions make it clear that where income is received from deposits made by the assessee are deposits which are inextricably linked to the business of the assessee, such income cannot be treated as income received from other sources. In the present case, the Tribunal has held that the interest received by the assessee was inextricably linked to the business of the assessee. This is so because the margin money requirement was an essential element for obtaining the bank guarantee which was necessary for the contract between the State Government of Sikkim and the respondent-assessee. If the respondent-assessee had not furnished the bank guarantee ITA Nos.3566 3565 & 3502/Del/2024 11 it would not have got the contract for running the said lottery. Therefore, the interest received on the funds which were kept by way of margin money for obtaining the bank guarantee cannot but be said to be inextricably linked to the business of the assessee. Consequently, we answer these questions in favour of the assessee and against the revenue.” 11. In view of above said material facts and well settled principle of law, the addition of interest income relating to ‘business and profession’ to the income from other sources deserves to be set aside. Accordingly, issue no. A is decided in favour of the appellant/assessee. 12. Learned Authorised Representative for the appellant/assessee, submitted that the assessee did not have any additional investment which remain unexplained. In fact, it was yearly accrued interest credited to the FDR. Copy of bank account ledger submitted with the Paper Book (refer Page no.19, para 3 and Page No.163 of the Paper Book). 13. Learned departmental representative relied on impugned orders. 14. On minute consideration of record, in the light of the rival contentions, it is evident that the assessee did not have any additional investment. Therefore, holding that the time deposit of ITA Nos.3566 3565 & 3502/Del/2024 12 Rs.4,50,700/- as unexplained is bad in law and deserves to be set aside. Accordingly, Issue no. B is decided in favour of the appellant/assessee. 15. Learned departmental representative for the appellant/assessee submitted that administrative expenses has been allowed in all further years under Section 148 except for the year under consideration (Refer page No.182, para 6.5 of the Paper Book). For ground related to disallowance of depreciation and in furtherance to ground no.2, the assessee had not abandoned the business and waiting for the improved market conditions and the assessee company is entitled to depreciation on the principle of passive use. In prior years, Hon'ble Delhi High Court, ITAT and Ld. CIT(A) allowed the claim of depreciation. Please refer copies of the orders at Page Nos. 175-178, 192-195, 165-174 of the Paper Book. (Reliance was placed on cases in CIT vs. Nahar Exports Ltd. [2008] 296 ITR 0419 (P&H), DCIT vs. Rapipay Finvest Pvt. Ltd. in ITA No.161 & 162/Del/2019 and Hon'ble Delhi High Court’s decision in the case of CIT vs. Yamaha Motor India Pvt. Ltd. (2010) 328 ITR 0297. 16. Learned departmental representative for the Revenue, relied on the orders of the Ld. AO. ITA Nos.3566 3565 & 3502/Del/2024 13 17. From the perusal of the record, it is apparent that record, administrative expenses has been allowed in all further years under Section 148 except for the year under consideration (Refer page No.182, para 6.5 of the Paper Book). In prior years, Hon'ble Delhi High Court, ITAT and Ld. CIT(A) allowed the claim of depreciation. In view of above material facts as well as in the light of case laws relied upon the decisions, the assessee was entitled to deduction under Section 32 and administrative expenses under Section 37 of the Act. Accordingly, issue C is decided in favour of the appellant/assessee. 18. Learned Authorised Representative for the appellant/assessee submitted that the case was reopened under Section 147 of the Act where Ld. AO recorded reasons under Sections 151 of the Act. The issue raised is covered by the decision of Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs. CIT (2011) 12 taxmnn.com.74. 19. Learned departmental representative relied on order of the Ld. AO. 20. From the reading of record, in the light of above rival contentions, it is evident that This case was reopened under ITA Nos.3566 3565 & 3502/Del/2024 14 Section 147 of the Act where Ld. AO recorded the reasons under Section 151 of the Act and have the reason to believe that the income of INR 91,23,937/- has been escaped assessment. However, while framing the assessment order, Ld. AO did not make any addition as per the reasons recorded instead had change of opinion and disallowed deduction of depreciation under Section 32 of the Act. Neither fresh approval under Section of the Act was taken during nor before the proceedings. 21. In the result, all the three appeals filed by the assessee are allowed. Order pronounced in the open court on 26/03/2025. Sd/- Sd/- (SHAMIM YAHYA) (VIMAL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 26/03/2025 Mohan Lal Copy forwarded to - 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "