Applitech Solutions Ltd., Ahmedabad V. The Dy. Commissioner of Income Tax, Circle-1(1)(1), Ahmedabad

CO 74/AHD/2020

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3310 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 04-08-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-07-2022
• Assessment Year: 1999-2000
• Appeal Filed On: 12-10-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Business expenditure; Opportunity of being heard; Principle of natural justice; Rule of consistency; Rule 8D; Set aside
• Section: 6; 40A(3); 143(3); 133A; 14A; 143(1)

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘बी’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No. 246/Ahd/2020 & CO No. 74/Ahd/2020 Assessment Year : 1999-2000 Dy. Commissioner of Income-tax, Circle 1(1)(1), Ahmedabad Vs Applitech Solution Limited, 503, Paritosh, Nr. Darpan Academy, Usmanpura, Ahmedabad-380013 PAN: AABCA 8332 P ITA No. 247/Ahd/2020 & CO No. 75/Ahd/2020 Assessment Year : 2001-02 Dy. Commissioner of Income-tax, Circle 1(1)(1), Ahmedabad Vs Applitech Solution Limited, 503, Paritosh, Nr. Darpan Academy, Usmanpura, Ahmedabad-380013 PAN: AABCA 8332 P (Appellant) (Respondent)/Cross-Objector Assessee by : Shri Anil Kshatriya & Shri Alay Anil Kshatriya, ARs Revenue by : Shri James Kurian, CIT-DR & Ms. Pooja Parekh, Sr. DR /Date of Hearing : 25/07/2022 /Date of Pronouncement: 05/08/2022 आदेश/O R D E R PER P.M. JAGTAP, VICE-PRESIDENT : These two appeals are preferred by the Revenue against two separate orders of learned Commissioner of Income-tax (Appeals)-1, Ahmedabad [“CIT(A) in short]”, both dated 06.01.2020, for Assessment Year 1999-2000 and 2001-2002; and since the issues involved therein are common, the same have been heard together and are being disposed of by a single consolidated order along with Cross-Objections filed by the assessee being CO Nos. 74 & 75/Ahd/2020. ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 2 2. First, we take up the Revenue’s appeal for AY 1999-2000 being ITA No. 246/Ahd/2020. The main issue involved in this appeal of the Revenue as raised in Ground No.1 relates to the deletion by the learned CIT(A) of the addition of Rs.2,21,51,688/- made by the Assessing Officer on account of disallowance of assessee’s claim for depreciation on computers. 3. The assessee, in the present case, is a company which is engaged in the business of development of software, customized software solution and providing IT consultancy services to domestic as well as overseas clients. The return of income for AY 1999-2000 was filed by the assessee-company on 31.02.1999 declaring a total income of Rs.1,11,97,335/-. The said return was initially processed by the Assessing Officer under Section 143(1) of the Act on 07.03.2001. Subsequently, during the course of assessment proceedings for AY 2000-2001, a survey under Section 133A of the Act was carried out at the premises of the assessee on 07.03.2003. The findings of the said survey as mentioned in the assessment order for AY 2000-01 were as under:-- “1. No insurance cover was taken for the computers 2. No adequate evidences relating to the real purchase of computer hardware were produced. 3. The main directors of the alleged vendor companies Rahul Infotech Pvt. Ltd and Vandan Computers Ltd. were found to be the employee and his wife of Applitech Solution Ltd., who by way of statements and affidavit categorically denied any actual sales made by companies run and operated in their name by Applitech Solution Ltd. and its Chairman and Managing Director. 4. None of the computer hardware including systems, sun server, monitors, UPS, stabilizers, etc. shown to be purchased during F.Y. 99-00 were found in possession of the assessee company during survey operation on all its premises on 07.03.2003.” 4. On the basis of the above findings as well as other facts and circumstances elaborately discussed in assessment order for AY 2000-01, the claim of the assessee of having purchased the computers from Rahul Infotech Pvt. Ltd., Vandan Computers Pvt. Ltd., M/s. Design Tech Computers and M/s. Soft Design was ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 3 held to be bogus and depreciation claimed by the assessee on the said computers was disallowed by the Assessing Officer. Keeping in view this inference drawn in the assessment order passed in assessee’s own case for AY 2000-01 and having regard to the fact that computers were claimed to be purchased by the assessee- company even during the year under consideration from the concerned four parties on which depreciation was claimed, assessment for the year under consideration was reopened by the Assessing Officer and a notice under Section 148 of the Act was issued by him to the assessee on 03.03.2004 after recording the reasons. During the course of assessment proceedings, the assessee was called upon by the Assessing Officer to support and substantiate its claim for depreciation on computers stated to be purchased from the concerned four parties during the year under consideration. In reply, a detailed list was filed by the assessee of the additions made to the fixed asset during the previous year relevant to AY 1999-2000. It was submitted by the assessee that majority of the computers was purchased from the renowned suppliers of the town and payments against the said purchases were made by account payee cheques. It was also submitted that the assessee-company was in the business of development of computer software and computer hardware formed the prime fixed asset of the assessee- company without which proper business could not have been carried out. It was pointed out that computers worth Rs.7,21,23,503/- were purchased during the year under consideration and because of this addition to the core fixed asset, the assessee-company could able to increase its income to Rs.11,07,68,774/- during the year under consideration from Rs.5,40,27,565/- of the previous year. It was submitted that inventory was taken during the course of survey proceedings which itself was sufficient to show that the computers were readily available with the assessee-company. This explanation offered by the assessee was not found acceptable by the Assessing Officer. According to him, there was a failure on the part of the assessee to produce necessary evidence to satisfactorily establish its claim for purchases of computers during the year under consideration. Keeping in view the same as well as the inference drawn in the assessment order for AY 2000- ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 4 2001 against the assessee on this issue, the Assessing Officer held that the claim of the assessee of having purchased the computers during the year under consideration was not established. Accordingly, he disallowed the claim of the assessee for depreciation of Rs.2,21,51,688/- on the said computers in the assessment completed under Section 143(3) r.w.s. 147 of the Act vide an order dated 23.03.2005. 5. Against the order passed by the Assessing Officer under Section 143(3) r.w.s. 147 of the Act, an appeal was filed by the assessee before the learned CIT(A) challenging the action of the Assessing Officer in disallowing its claim for depreciation on computers. The said appeal, however, was dismissed by the learned CIT(A) vide his appellate order passed ex parte for the non-compliance on the part of the assessee to the notices issued by him fixing the same for hearing from time to time. The Tribunal vide its common order dated 20.04.2006 set aside the order passed by the learned CIT(A) ex parte and remitted the matter back to the learned CIT(A) for disposing of the appeal of the assessee afresh on merit in accordance with law after giving proper and sufficient opportunity of being heard to the assessee. During the course of fresh appellate proceedings before the learned CIT(A), the following submissions were made on behalf of the assessee in support of its claim for depreciation on computers purchased during the year under consideration:- “(1) The appellant is a domestic company incorporated in 1993 and has been carrying on business in development of software, customized software solutions and providing I.T. Consultancy Services to domestic clients as well as exports thereof to International Clients. (Deduction u/s 80HHE of the Act being allowed on export turn over) (2) During the course of assessment proceedings for A.Y. 2000-01 (which is the lead year), the then A.O. disallowed assessee's claims of depreciation and interest paid to bank for term loan & working capital, both on the basis of statement of third party recorded by the then A.O. and cross-examination was granted to the assessee, as per his order dated 28. 03.2003. The assessee’s appeals were pending then. ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 5 (3) In the meanwhile, taking base of the order for A.Y.2000-01, the successor officer reopened the assessment for A.Y.1997-98 to 1999-2000, 2001-02 & 2002-03 and passed reassessment orders u/s 143(3) r.w.s 147 on 23.03.2005 and he made major disallowance on account of depreciation and interest solely relying upon the order for A. Y. 2000-01 . (4) Being aggrieved and dissatisfied, the assessee preferred appeals before CIT(A) for A.Ys 1997-98 and 1998-99 and also A.Ys.1999-2000,2001-02 and 2002-03 which were partly allowed & further appeals to ITAT against the said orders of the Ld. C.I.T.(A). As a result, the Hon'ble ITAT vide their consolidated order dated 24/04/2006 for all the above assessment years set aside these appeals and restored back the same to the file of the Ld.CIT (A) for deciding the appeals as per provision of law. A Photostat copy of Hon’ble ITAT's order is enclosed for ready reference. (Exhi.1) (5) At this juncture, it would be worthwhile to refer to Hon'ble ITAT's order in ITA Nos. 385 to 389/Ahd/2006 dated 20/04/2006. Relevant para may be reproduced as below:- "4. As it can be seem from the grounds of appeal produced in earlier part of this order, the main grievance of the assessee is that notice of hearing was not properly served by CIT(A) on assesses. The notices on the strength of which ex-parte order had been passed by CIT (A) were, in fact, served on Official Liquidator, who could not take possession due to stay granted by the Hon'ble High Court, vide order dated 29/09/2005, a copy of which has also been filed along with original appeal as per Annexure-A. The relevant portion of the order is reproduced as under: "1. Mr. P.C. Kavina, Ld. Advocate appearing for the applicant has filed a note with the Registry with the permission of this court to place the papers of these matters before this court for obtaining urgent order. The Official Liquidator has issued notices on 27/09/2005 to the Ex-Directors of the company and copies thereof were endorsed to the Financial Institutions and Banks whereby the Ex-Directors were informed to remain present at the Registered Office for handing over the possession of Regd. Office of the applicant company. The addressee of the notice have not received the notice. However, they have come to know from the Bank that the Official Liquidator will take possession on 30/09/2005. In the above view of the matter, this note is filed and papers are called for today for passing appropriate order. 2. After hearing Ld. Senior Advocate Mr. S.N. Soparkar with P.C.Kavina appearing for the applicant, the Court is of the view that since the matter is pending before this court for re-calling the winding up the order and time was sought for on behalf of the Petitioning Creditors on the ground that the counsel appearing is not well and also on the ground that the proposal given ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 6 by the company to the Petitioning Creditors is under consideration, the Court is of the view that till application for the review and/or re-calling the winding up order is heard, the official liquidator should not take possession of the property in question. Accordingly, the Official Liquidator is hereby directed not to take possession till 14/10/20015, on condition that the applicant will deposit a sum of Rs.4 lacs on or before 01/10/2005 and another Rs.4 lacs on or 10/10/2005, with the Registry of this court. It is made clear that if the aforesaid amount is not deposited, the protection granted by this court shall stand vacated. S.O. to 13/10/2005. Thus it is contended that in the grounds of appeal as per order of Hon'ble High Court dated 29 th September, 2005 the Official Liquidator was not working in his official capacity. After taking into consideration all these facts, and after considering the submissions of Ld. DR who relied on the order's of CIT(A), we are of the opinion that notice was not properly served by CIT(A). Consequently the assessee was denied all natural justice. Considering this aspects, we restore these appeals to the file of CIT(A) with a direction to serve proper notice to the assessee and thereafter decide these appeals as per provisions of law after giving reasonable opportunity of hearing to the assessee. With this direction these appeals are restored to the file of CIT(A). As we have restored all the appeals to the CIT(A), we do not express any opinion on merits of additions contested in these appeals which will be decided by CIT(A) after serving the notice on assessee as well as taking into consideration the submissions made in that regard. We direct accordingly". (Emphasis Supplied) (6) Relying on the above extracted portion of the operative part of the order, it was strongly contended to appreciate that notice of hearing issued by the then Ld.CIT(A) on 27/10/2005 and 25/11/2005, were not addressed & served properly on the assessee company and the then Ld.CIT(A) had proceeded to dispose off assessee's appeal in without any representation. The procedure adopted by the then Ld.CIT (A) described herein above had resulted into violation of principles of natural justice. Therefore, on appreciation of peculiar facts & circumstances, the Hon'ble ITAT has set aside and restored back it to the file of the CIT(A), for deciding afresh. (7) In the meanwhile, the appeal of the appellant in respect of lead year i.e. A.Y.2000-01 came to be decided by the Hon'ble ITAT vide their order's dated 19.04.2016 in ITA No.1452/Ahd/2014, whereby both the issues (Depreciation and interest) decided in favour of the appellant. (8) On the facts leading to the restoration of present appeal, the appellant since 29/3/2016 and subsequently took the matter upto the level of Pri. CCIT, Ahmedabad and vehemently contended that due to subsequent development of passing of the order by the I.T.A.T.in the base year A. Y. 2000-01 and others, the issues arising for consideration in the years under consideration are squarely ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 7 covered by the said decision of the I.T.A.T. The Pri. CCIT, Ahmedabad has granted permission to fix up the case for early hearing on total appreciation of submissions made by the appellant. (9) At this stage it is specifically brought on record that with a view to a true status in regard to the captioned set aside appeal, the appellant has moved an application u/s 6 of the RTI Act dated 10/06/2016 before the CPIO-cum-the DCIT, Circle-1(1)(1) to ascertain certain facts in this regard. The mandatory inspection of the case record for all the assessment year was allowed and while taking inspection of the entire case record. As a result, the CPIO has passed an order u/s 7(1) of the RTI Act, 2005 dated 15.09.2016, a copy providing relevant information stating that "no such appellate order are placed in the file as per records available with this office." In these circumstances, without any fault on the part of the assessee the set aside appeals remained to be locked up for considerable time. (10) In the meanwhile, the appeal of the assessee in respect of lead year i.e. A.Y.2000-01 came to be heard and decided by the Hon’ble ITAT vide their consolidated orders dated 19/4/2016 in ITA No. 1452/Ahd/2014, whereby both the issues are decided in favour of the assessee. Relevant portion of Tribunal's orders (in respect of depreciation) reproduced below: "24. For verifying the genuineness of the purchases, statement of Rahul Parikh & Vandna Parikh were recorded by A.O. In the respective statement, both the persons denied of such transaction with the assessee company. Based on these statements, the claim of depreciation wets disallowed As mentioned elsewhere, the ITAT restored the issue to the files of the A.O. for fresh adjudication. During the course of assessment proceedings, it was brought to the notice of the A.O. that the Parikh couples have left India for good and are now settled at Kuwait. It was also brought to the notice of the A.O. that Rahul & Vandna had already resigned as Directors from their respective companies with effect from 15/10/2001. Therefore, there was no credibility in their statements recorded by A.O. on 21/02/2003. The affidavits of present Directors Sahid Saved and Ketan Parikh were filed with the A. O. to establish the genuineness of the purchase of computers. 25. In the de-novo proceedings, we find that the A.O. did nothing to enforce the attendance of Parikh couple so that the assessee could cross examine, them. We also filed that no efforts were made by the A.O. to dismiss the veracity of the contents of the Affidavits of present Directors namely Sahid Sayed & Ketan Parekh; we also find that the payments for purchases of computers have been accepted by the A.O. We also find that parts of the computers have been financed by the bank and no adverse inference has been drawn by the bank while financing the same. The allegation of the revenue that during the course of survey proceedings, the computers were not found at the surveyed premises do not hold any good, since it is a fact that the entire premises of the assessee located at various places have not been surveyed. Therefore, possibility of computer hardware installed at those premises ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 8 cannot be rule out. One more important factor which has to be considered and which goes in favour of the assessee is the claim of short payment of octroi department The assessee has been found to have made short payments of octroi by Rs.1,71,000/-. There is no adverse remark by the revenue authorities in so far as insurance policies are taken to insure the computers. 26. Considering the aforementioned facts, in our considered opinion, the circumstantial evidences are in favour of the assessee. The revenue's rejection of the claim of depreciation is only based on the statements of Parikh couple who were not allowed to be cross examined by the assessee; therefore, their statements are in complete violation of principles of natural justice. On the basis of circumstantial evidences mentioned elsewhere, we are of the opinion that the assessee had purchased computers and is eligible for the claim of depreciation. We accordingly set aside the findings of Ld.CIT(A) and direct the A.O. allow the claim of depreciation. This ground is accordingly allowed." Relevant portion of Tribunal orders (in respect of interest) is reproduced below: "Para-28., during the course of the assessment proceedings, it was explained that the interest was paid on term loans taken from Co-operative Bank of Ahmedabad loan as working capital loan. The loan taken were used for the business purpose of the company. It was explained that out of total loan of Rs.5 crore, interest on term loan is paid to Bank and rest of interest pertained others on working capitals. In the first round of litigation, the A.O. did not accept the contention of the assessee because the purchase of computers have been held to be bogus. In the set aside proceeding, the A.O. simply borrowed the findings of his own predecessor given in the first round of litigation. We have carefully gone through the contents of the facts in issues, there is no dispute that the disallowance is based upon the findings given in the first round of litigation. Since we have held the purchase of computers to be genuine as per our detailed decision / discussion qua first grievance of this appeal. We have no hesitation ^to hold that the money has been borrowed for the purpose of business and therefore any interest paid has to be allowed as business expenditure. The second grievance is accordingly allowed''. (11) In the back drop of the above, the following is being submitted or kind consideration -while deciding the appeals of the appellant. A. Major Issues (i.e. disallowance of depreciation on computer hardware & claim of interest expenses) having already decided in favour of the assessee, stands fully covered by virtue of Hon'ble ITAT's order dated 19/4/2016. (1) At the outset it is submitted that during the course of the assessment proceedings for A. Y. 2000-01, the claims of depreciation on purchase of computer hardwares & interest paid to bank for Term Loan and working capital were disallowed on the basis of statements of third parties recorded by the then A. O. in his office and no cross examination was granted to the assessee, while passing order dated 28/3/2003. The assessee's appeal was pending then. ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 9 (2) In the meanwhile, taking base of the above order for A.Y.2000-01, the successor A.O. reopened the assessments for the five years i.e. A.Y.1997-98 to 1999-2000 & A.Y.2001-02 and 2002-03 and passed re-assessment orders u/s 143(3) r.w.s 147 on 20/3/2005, by making major disallowances on account of depreciation on computer hardwares and interest, in a quite repetitive manner. (3) From the above, it may kindly be appreciated that in respect of lead year i.e. A.Y. 2000-01, the Hon'ble Tribunal, on appreciation of facts and cogent material evidences placed on record (PBP-89 to 114) has already decided both the issues (i.e. depreciation on computer hardware and claim of interest expenses) in favour of the assessee, by holding that the assessee had genuinely purchased computers and is eligible for claim of depreciation & simultaneously holding that money having borrowed purposes of business and therefore, any interest paid thereon has to be allowed as business expenditure. (4) Therefore, considering overall legal effect and having regard to the aforesaid peculiar facts and circumstances, it is respectfully submitted that as of now by virtue of jurisdictional Tribunal's order dated 19/4/2016 (supra) both the issues stand fully covered and set at rest in assessee's favour and the same is squarely applicable. Photostat copy of Hon'ble ITAT's order dated 19.04.2016 is enclosed for ready reference. (Exhihit-1) (5) Further, it is respectfully submitted that out of five years appeals, appeals in respect of A.Y. 1997-98 & 1998-99 have already been decided in favour of the assessee by the then Ld.CIT-1, Ahmedabad vide appellate order in dated 22.02.2018 passed in I.T. Appeal no. CIT(A)-I/DCIT-(OSD) R-1 505 & 504/2016-17, respectively. It is stated that the matter has finally set at rest in favor of the assessee. Photo stat copies thereof are enclosed for ready reference(Exhibit-2). (6) Presently, the appeals for the assessment years 1999-2000, 2001-02 & 2002-03 are being heard by your honor.” 6. The learned CIT(A) found merit in the submissions made on behalf of the assessee company and allowed the claim of the assessee for depreciation on computers for the following reasons given in his impugned order:- “I have gone through the material available on record and have carefully gone through the written submission of the appellant and also the oral arguments advanced by the AR and after critical examination of the same, it is observed as follows: (1) That for the year under consideration, the appellant submitted its return of income on 31.12.1999 duly supported by statutorily required Tax Audit Report u/s ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 10 44AB of the Act and report in Form no. 10CCA. The same was processed u/s 143(1) of the Act on 07.03.2001 determining total income of Rs. 1,11,97,335/-. (2) Subsequently, the assessment was reopened on the footing that the claim of depreciation in A.Y.2000-01 was disallowed on the basis of statements of Rahul Parikh & Vandana Parikh who alleged that thethe purchases from Rahul Infotech P. Ltd. & Vandan Computers P. Ltd. [RIPL & VCPL, in short] were not genuine. Drawing inference from the assessment order of A.Y. 2000-01, the AO disallowed depreciation of Rs.2,21,51,688/-. (3) Significantly, the entities RIPL & VCPL came into existence on 10.03.1998 & 17.03.1998 respectively. They were assessed to tax. Now, therefore, both the entities having incorporated under Companies Act, presuming them as non-existent in itself is baseless. (4) Even when survey was conducted on 07.03.2003, the survey team did not record any finding that the computes brought in this assessment, were not in possession of the appellant. Thus, the very basis forming the bedrock for assessment for A.Y.2000-01 is wholly absent in the period relevant to this assessment year. (5) Further, during the course of re-assessment proceedings, the AO issued appellant show-cause notice dated 24.12.2005 [P.B.P.-49]. In response to which the appellant very instantly submitted a detailed reply dated 28.02.2005 [P.B.P.-50 to 52]. Although, the AO has reproduced a selective portion thereof at page 3 to 5 of the assessment order. Not only this but the AO has tacitly avoided to take note of the following material facts stated therein being vital part of the assessee's submission as contended by the appellant: "We herewith, once again provided you the photocopies of invoices for purchase of computer hardware & software and the detailed ledger account of the parties from whom the company had purchased computers. Once again, we would like to request you to please provide us the details/reasons/qround on which your good selves wanted to disallow our claim of depreciation so as to enable us to provide further satisfactory evidence". (6) It is also found that during the course of the assessment proceedings, the appellant has produced all the material before the AO as may be perused from the detailed order sheet entry dated 11.03.2005, which reads as under: "11/03/05......Attended Shri. Manan Shah CA. Produced ledger accounts with supporting bills and vouchers which are test checked. ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 11 Case is discussed. Sd/-Manan Shah Sd Sd/- I.P.S. Bindra) 11/03/05 , 11/03/05" The certified copies of such order sheet are available and placed on record [P.B.P-63 to 65]. (6A) Another vital aspect of the matter is that during this year, out of the fixed assets in the block of computers, purchased from referred two entities [RIPL & VCPL] is of Rs 1.70 lakhs only. On this depreciation worked out to Rs.53,88,160/- only [P.B.P. 27 & 60-61] Whereas, the AO has disallowed Rs. 2,21,51,688/- i.e. the entire claim of depreciation, including WDV & purchase from other third parties. Thus, there is non-application of the mind of the AO. (6B) It is also noticed that in the appellant's own case, in the A.Y.2003-04, the claim of the appellant of depreciation on purchase of computer hardwares from third parties have been allowed by the then C.I.T.(A)-VI, Ahmedabad vide his appellate order dated 25/3/2014 as evidenced from the order giving appeal effect dated 20/05/2014.(Anne.3 to Brief Notes dated 19/12/2019).The said decision has been accepted by the department as also fortified from the order dated 19/04/2016 of I.T.A.T as no appeal against the said decision of the C.I.T.(A) was filed by the department, hence on the principle of consistency the A.O. is bound to follow the same. Thus, there is considerable force in the submissions of the appellate that the A.O. was not justified in disallowing depreciation on the entire purchases made in the year including those made from other entities (Other than RIPL &VCPL). (6B) However, ignoring the above stated facts and without application of mind, the AO has wrongly and unreasonably concluded that the appellant has failed to produce proof of purchase of computers and under the false presumption that computers hardware claimed by the appellant is non-existence that too , without bringing on record any cogent material or evidence. The A.O. has merely proceeded on the basis of observation made in the base year. (7) A perusal of record reveal that the company was basically providing services of design and development of web-interface module materials, including export thereof. The details of company's turnover & export sales are as under: A.Y. Total turn over (Rs.) Export (Rs) 1997-98 1,67,34,050/- -- 1998-99 5,40,27,565/- 1,27,97,664/- 1999-2000 11,07,68,774/- 3,98,57,000/- 2000-2001 25,91,63,881/- 12,92,38,754/- -2001-2002 60,18,97,291/-- 46,61,08,341/- 2002-2003 52,00,00,525/- 20,66,37,102/- ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 12 Thus, when the appellant has disclosed huge turnover which included substantial amount of export earning in foreign exchange, the allegation of the AO, that computers hardware were non-existence is wholly unfounded as without the output of these hardwares such input of revenue could not have been generated in this particular line of business. Putting it in other words, when the sales are accepted in toto, the purchases cannot be disallowed. Therefore, such contrary view of the A.O. cannot be subscribed. (8) At this juncture, it is a matter of fact that the appeals of the appellant for A.Y. 1997-98 to 2002-03 were set-aside by ITAT which were pending with the FAA. lo the meanwhile, the appeal of the appellant in respect of the lead year i.e. A.Y.2000- 01 came to be heard and decided by the Hon. ITAT vide their consolidated orders dated 19.04.2016 in ITA no. 1452/Ahd/2014, whereby the issue is decided in appellant's favour. Relevant portion of Tribunals orders is reproduced below: "24. For verifying the genuineness of the purchases, statement of Rahul Parikh & Vandna Parikh were recorded by A.O. In the respective statement, both the persons denied of such transaction with the assessee company. Based on these statement, the claim of depreciation was disallowed. As mentioned elsewhere, the ITAT restored the issue to the files of the A.O. for fresh adjudication. During the course of assessment proceedings, it was brought to the notice of the A.O. that the Parikh couples have left India for good and are now settled at Kuwait. It was also brought to the notice of the A.O. that Rahul & Vandna had already resigned as Directors from their respective companies with effect from 15/10/2001. Therefore, there was no credibility in their statements recorded by A.O. on 21/02/2003. The affidavits of present Directors Sahid Sayed and Ketan Parikh were filed with the A.O. to established the .genuineness of the purchase of computers. 25 In the de-novo proceedings, we find that the A.O. did nothing to enforce the attendance of Parikh couple so that the assessee could cross examine them. We a/so fifed that no efforts were made by the A.O. to dismiss the veracity of the contents of the Affidavits of present Directors namely Sahid Sayed & Ketan Parekh; we a/so find that the payments for purchases of computers have been accepted by the A.O We also find that parts of the computers have been financed by the bank and no adverse inference has been drawn by the bank while financing the same. The allegation of the revenue that during the course of survey proceedings, the computers were not found at the surveyed premises do not hold any good, since It is a fact that the entire premises of the assessee located at various places have not been surveyed. Therefore, possibility of computer hardware installed at those premises cannot be rule out. One more important factor which has to be considered and which goes in favour of the assessee is the claim of short payment of octroi department. The assessee has been found to have made short payments of octroi by Rs.1,71,000/-. There is no adverse remark by the ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 13 revenue authorities in so far as insurance policies are taken to insure the computers. 26. Considering the aforementioned facts, in our considered opinion, the circumstantial evidences are in favour of the assessee. The revenue's rejection of the claim of depreciation is only based on the statements of Parikh couple who were not a/lowed to be cross examined by the assessee; therefore, their statements are in complete violation of principles of natural justice. On the basis of circumstantial evidences mentioned elsewhere, we are of the opinion that the assessee had purchased computers and is eligible for the claim of depreciation. We accordingly set aside the findings of Ld.CIT(A) and direct the A.O. allow the claim of depreciation. This ground is accordingly allowed." (Page -15 of Exl.1 filed with submission dated 19.12.2019) (9) From the above, it is evident that in respect of lead year i.e. A.Y. 2000-01, the Hon'ble Tribunal, on appreciation of facts and cogent material evidences placed on record (PBP-39 to 71) has already decided the issue i.e. depreciation on computer hardware in favour of the assessee, by holding that the assessee had genuinely purchased computers and is eligible for claim of depreciation (10) Further, I find that out of the five years' appeals, appeals in respect of A.Y.1997-98 & 1998-99 have already been decided in favour of the appellant by the then Ld. CIT(A)-1, Ahmedabad vide appellate order dated 22.08.2018 passed in I.T. Appeal no. CIT(A)-1/DCIT(OSD)/R-1/505 & 504/2016-17. (Exhi.2 enclosed with additional submission dated 19.12.2019.) Thus, the matter has finally set at rest in favour of the appellant. (11) I also find that the AO, in all fairness, was duty bound to make some efforts to bring some evidence on record to reject appellant's claim. However, a perusal of the record reveal that the AO did nothing and simply preferred a short cut method and proceeded to pass the orders in the pattern of assessment order that was passed for A.Y. 2000-01, ignoring/overlooking material evidence placed on record and passed impugned orders in respect of 5 years at a one go, on a single day i.e. on 20.03.2005. (12) Thus, ignoring all these vital facts and material placed on record and without application mind, the AO has wrongly and unreasonably concluded that the appellant has failed to prove its case and has made disallowance. In nutshell, in the reopened assessment, the AO has simply made disallowance based on the assessment for A.Y.2000-01 as is evident from the cut & paste method used in stereo typed assessment order in respect of all the five years under appeal. (13) Having regard to the aforesaid peculiar facts and circumstances of the case, and evidences available on record, and there being no change in facts and / or any material difference in the present appeals, the Hon'ble Jurisdictional Tribunal's ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 14 orders in lead year i.e. A.Y.2000-01 (supra) are squarely applicable. Therefore, the major issues involved in the present appeals are covered by virtue of orders of Hon'ble ITAT being relied upon by the assessee, as well as by virtue of appellate orders for A.Y.1997-98 & 1998-99 (supra). The revenue has to maintain consistency for the purpose of finality in all litigations and a decision on the same question would be respected unless some new facts were found with material difference in other years having regard to landmark judgment of Hon'ble Apex Court in the case of Berger Paints Ltd. [2004] 266 ITR 99 (SC). Followed further in ratio laid down by the Hon'ble Apex Court in Parashuram Pottary Works Co. Ltd. V/s ITO 1977 CTR (SC) 32: (1977) 106 ITR 1 (SC) whose relevant portion (Para 10) is reproduced as below: "It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realizing the price should familiarize themselves with the relevant provisions and become well-versed with the law on the subject Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all level proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity." (14) Therefore, considering overall facts and binding effect of jurisdictional Tribunal's order dated 19/4/2016 (supra) I am inclined to agree with the submissions made by the appellant in entirety. On appreciation of all the above, I find that there is no justification to disallow the purchases made from the third parties i.e. other than RIPL & VCPL or even RIPL & VCPL as the same have been allowed by Hon'ble ITAT in appreciation of facts. No evidence or material is brought on record by the A.O.to hold it otherwise, the addition was made on the basis of statements of said persons and no efforts were made by the A.O.to dismiss the veracity of the contents of affidavits filed by the present directors. The payments for the purchases of computers have been made by account payee cheques. No evidence is brought on record that the computers were physically not available for the year under consideration. Finally, all other evidences produced before A.O. and available on record goes to establish beyond doubt that the appellant had purchased computers and is eligible for the claim of depreciation on it. (15) Considering the totality of the facts and peculiar circumstances of the case and respectfully following the orders of the Hon. Tribunal dated 19.04.2016 (Supra), the issue is fully covered by virtue of Hon. Tribunal's orders, as well as appellate orders for A.Y. 1997-98 & 1998- 99 (supra). Therefore, I am of the considered view that the appellant had purchased computer hardware and its claim of deprecation ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 15 thereof has been genuine one and direct the AO to allow the claim of depreciation and delete the disallowance of Rs.2,21,51,688/-.” 7. The learned DR submitted that during the course of assessment proceedings in assessee’s case for AY 2000-01, a survey under Section 133A of the Act was conducted at the premises of the assessee in order to verify the claim of the assessee for depreciation on computers. He submitted that specific adverse findings were recorded by the Assessing Officer in the assessment completed for AY 2000-01 based on the survey and the claim of the assessee for depreciation on computers was disallowed as the corresponding purchases of computers were not found genuine. He invited our attention to the specific adverse findings recorded by the Assessing Officer in the assessment for AY 2000-01 as reproduced by the Assessing Officer in the assessment for AY 1999-2000 and contended that the same have not been properly appreciated by the learned CIT(A) while allowing the claim of the assessee for depreciation on computers purchased during the year under consideration from the same parties. He pointed out that the quantum of purchases of computers stated to be made by the assessee during the year under consideration from the tainted parties was much more than what has been mentioned by the learned CIT(A) in his impugned orders. He, therefore, strongly relied on the orders of the Assessing Officer in support of the Revenue’s case on this issue. 8. The learned Counsel for the assessee, on the other hand, submitted that the existence of computers in the premises of the assessee was overlooked during the course of survey and since all the premises of the assessee-company were not covered in the survey operation, the allegation of non-existence of computers as made by the Assessing Officer is not tenable. He contended that the assessee, in any case, had submitted a detailed chart of date-wise purchases and location-wise installation of computers with reconciliation of computers found during the course of survey before the Assessing Officer and there was no adverse finding recorded by the Assessing Officer on this count. He submitted that supporting ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 16 evidence including invoices/bills was filed by the assessee in support of its claim for purchases of computers along with copies of ledger accounts of the concerned parties as well as bank statements to prove that payments against the said purchases were made by account payee cheques. He submitted that even in respect of alleged two suppliers Rahul Infotech Pvt. Ltd. (RIPL) and Vandan Computers Pvt. Ltd. (VCPL), their annual accounts and returns of income were filed by the assessee along with the relevant ledger accounts to show the source from which the said entities had purchased the computers which were sold to the assessee-company. He submitted that even the proof of payment of octroi and insurance cover against computers purchased and installed by the assessee- company was produced. He submitted that the evidence to show that Shri Rahul Parikh and Vandana Parikh had already resigned as Directors from RIPL and VCPL on 15.10.2001 was filed by the assessee to show that their statements recorded by the Assessing Officer on 21.02.2003 had no credibility. He submitted that affidavits of the present Directors of RIPL and VCPL were also filed by the assessee to establish the genuineness of the purchases of computers made by the assessee from the said parties, but the same was completely ignored by the Assessing Officer. He submitted that the allegation of the Assessing Officer as regards the bogus claim of computers purchased during the year under consideration was based on the assessment order passed in assessee’s case for AY 2000-01. He contended that the Tribunal, however, has decided the similar issue involved in AY 2000-01 in favour of the assessee by passing a well-reasoned and well-discussed order. He submitted that even in Assessment Year 2003-04, the similar disallowance made by the Assessing Officer on account of depreciation on computers was deleted by the learned CIT(A) and the Department has accepted the order of the learned CIT(A). He contended that keeping in view all these facts of the case as well as the turnover achieved by the assessee during the years under consideration which was not possible without the computers in question purchased by the assessee and utilized for the purpose of business, the learned CIT(A) is fully justified to delete the disallowance made by the Assessing Officer ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 17 on account of depreciation on computers by holding that the purchase of the said computers by the assessee was genuine. 9. We have considered the rival submissions and also perused the relevant material available on record. It is observed that the assessment for the year under consideration was reopened by the Assessing Officer and the claim of the assessee for depreciation on computers was disallowed by him mainly on the basis of adverse finding recorded by the Assessing Officer in the assessment order passed in assessee’s case for AY 2000-01 based on the survey carried out under Section 133A of the Act on the basis of which purchase of computes as claimed by the assessee was held to be not genuine. At the time of hearing before us, the learned DR has mainly relied on these adverse findings which are extracted by the Assessing Officer in the order passed under Section 143(3) r.w.s. 147 of the Act for the year under consideration in support of the Revenue’s case on this issue. As pointed out by the learned Counsel for the assessee, this issue as involved in assessee’s case for AY 2000-01 was carried before the Tribunal and the Tribunal vide its common order dated 19.04.2016 passed in ITA No.1452/Ahd/2014 decided the same in favour of the assessee vide paragraph Nos. 24 to 26 which read as under:- "24. For verifying the genuineness of the purchases, statement of Rahul Parikh & Vandna Parikh were recorded by A.O. In the respective statement, both the persons denied of such transaction with the assessee company. Based on these statements, the claim of depreciation wets disallowed As mentioned elsewhere, the ITAT restored the issue to the files of the A. O. for fresh adjudication. During the course of assessment proceedings, it was brought to the notice of the A.O. that the Parikh couples have left India for good and are now settled at Kuwait.. It was also brought to the notice of the A.O. that Rahul & Vandna had already resigned as Directors from their respective companies with effect from 15/10/2001. Therefore, there was no credibility in their statements recorded by A.O. on 21/02/2003. The affidavits of present Directors Sahid Saved and Ketan Parikh were filed with the A. O. to establish the genuineness of the purchase of computers. 25. In the de-novo proceedings, we find that the A.O. did nothing to enforce the attendance of Parikh couple so that the assessee could cross examine, them. We also ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 18 filed that no efforts were made by the A.O. to dismiss the veracity of the contents of the Affidavits of present Directors namely Sahid Sayed & Ketan Parekh; we also find that the payments for purchases of computers have been accepted by the A.O. We also find that parts of the computers have been financed by the bank and no adverse inference has been drawn by the bank while financing the same. The allegation of the revenue that during the course of survey proceedings, the computers were not found at the surveyed premises do not hold any good, since it is a fact that the entire premises of the assessee located at various places have not been surveyed. Therefore, possibility of computer hardware installed at those premises cannot be rule out. One more important factor which has to be considered and which goes in favour of the assessee is the claim of short payment of octroi department The assessee has been found to have made short payments of octroi by Rs.1,71,000/-. There is no adverse remark by the revenue authorities in so far as insurance policies are taken to insure the computers. 26. Considering the aforementioned facts, in our considered opinion, the circumstantial evidences are in favour of the assessee. The revenue's rejection of the claim of depreciation is only based on the statements of Parikh couple who were not allowed to be cross examined by the assessee; therefore, their statements are in complete violation of principles of natural justice. On the basis of circumstantial evidences mentioned elsewhere, we are of the opinion that the assessee had purchased computers and is eligible for the claim of depreciation. We accordingly set aside the findings of Ld.CIT(A) and direct the A.O. allow the claim of depreciation. This ground is accordingly allowed." 10. A perusal of the order passed by the Tribunal in assessee’s own case for AY 2000-01 on similar issue shows that the so-called adverse findings/inferences recorded by the Assessing Officer in the assessment order for AY 2000-01 on the basis of survey carried out under Section 133A of the Act were found to be untenable by the Tribunal for the cogent reason given in the order. As noted by the Tribunal, Shri Rahul Parikh and Vandana Parikh whose statements were strongly relied upon by the Assessing Officer to draw an adverse inference in the matter of genuineness of purchase of computers by assessee-company had already resigned as Directors from the concerned companies on 15.10.2001 itself while their statements were recorded by the Assessing Officer on 21.02.2003. The Tribunal, therefore, held that their statements relied upon by the Assessing Officer had no credibility. The Tribunal also noted that the affidavits of the present Directors of companies from whom the computers were stated to be purchased by ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 19 the assessee had also been filed by the assessee before the Assessing Officer to establish the genuineness of the said purchases, but no efforts were made by the Assessing Officer to dismiss the veracity of the contents of the said affidavits. As further noted by the Tribunal, the purchase of computers by the assessee was financed by the bank and there was no adverse inference drawn by the bank regarding the genuineness of the purchases. Even the allegation of the Revenue that the computers were not found during the course of survey was found to be baseless by the Tribunal considering the fact that the entire premises of the assessee located at various places were not covered under survey operation. The proof of payment of octroi on purchase of computers as produced by the assessee was found by the Tribunal to support the case of the assessee regarding genuineness of the purchase of the computers. Keeping in view all these details and documents, the Tribunal held that the purchase of computers by the assessee- company was genuine and allowed the claim of the assessee for depreciation thereon. 11. It is thus clear that the issue relating to the disallowance of assessee’s claim that deprecation on computers as involved in the year under consideration is squarely covered by the decision of this Tribunal in assessee’s own case for AY 2000-01 as rightly held by the learned CIT(A) in his impugned order. Moreover, as submitted on behalf of the assessee before the learned CIT(A) as well as before the Tribunal, a similar claim of the assessee was allowed by the learned CIT(A) in AYs 1997-98 and 1998-99 which orders have also relied upon by the learned CIT(A) to give relief to the assessee on this issue vide his impugned orders. At the time of hearing before us, learned Counsel for the assessee has also submitted that a similar issue has been decided by the learned CIT(A) in favour of the assessee in AY 2003-04 and the Department has accepted the said decision of the learned CIT(A) rendered in AY 2003-04. ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 20 12. In his impugned order, the learned CIT(A) has taken note of the fact that the entire purchases of computers during the year under consideration were not made by the assessee-company from RIPL and VCPL and in spite of the fact that some of the said purchases were made by the assessee-company from other parties, the Assessing Officer disallowed the claim of the assessee for depreciation on all the computers purchased by the assessee during the years under consideration which clearly shows non-application of mind by the Assessing Officer as rightly observed by the learned CIT(A). Moreover, there was substantial increase in the turnover of the assessee-company for the years under consideration including exports as noted by the learned CIT(A) in his impugned order which, in our opinion, was difficult to achieve without the computers claimed to be purchased by the assessee during the years under consideration as rightly held by the learned CIT(A). Having regard to all these facts of the case and keeping in view the consistent view taken by the appellate authorities in assessee’s own case on a similar issue in the preceding years as well as succeeding years including the decision of the Tribunal for AY 2000-01, we are of the view that the disallowance made by the Assessing Officer on account of depreciation on computers by alleging the purchase of computers as not genuine was not sustainable and the learned CIT(A) was fully justified in deleting the same. In that view of the matter, we uphold the impugned order of the learned CIT(A) on this issue and dismiss Ground No.1 of the Revenue’s appeal for AY 1999-2000. 12. As regards the issue involved in Ground No.2 of the Revenue’s appeal for AY 1999-2000 relating to the deletion by the learned CIT(A) of the disallowance of Rs.23,28,416/- made by the Assessing Officer on account of interest, it is observed that the same is consequential in nature inasmuch as the claim of the assessee on purchase of computers having been held to be not genuine, the interest expenditure incurred by the assessee in respect of loan borrowed for the said purchase of computers was disallowed by the Assessing Officer by treating the same as not for the purpose of business. The learned CIT(A), however, accepted ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 21 the claim of the assessee for the purchase of computers as genuine and consequentially deleted the disallowance made by the Assessing Officer on account of interest. Since we have upheld the decision of the learned CIT(A) holding the purchase of computers by the assessee-company as genuine and allowing depreciation on the computers so purchased, it follows that the interest expenditure incurred by the assessee on loan borrowed from bank for the purposes of said purchase of computers is allowable as deduction being expenditure incurred wholly and exclusively for the purpose of assessee’s business. We accordingly uphold the impugned order of the learned CIT(A) giving relief to the assessee on this issue and dismiss Ground No.2 of the Revenue’s appeal for AY 1999-00. 13. As regards the issue raised in Ground No.3 of the Revenue’s appeal for AY 1999-2000 relating to the deletion by the learned CIT(A) of the disallowance of Rs.5000/- made by the Assessing Officer under Section 40A(3) of the Act. It is observed that the said payment of Rs.5000/- was made by the assessee on account of advance and since the same was not claimed as expenditure deductible while computing income, we find ourselves in agreement with the learned CIT(A) that the disallowance made by the Assessing Officer under Section 40A(3) of the Act was liable to be deleted. Ground No.3 of the Revenue’s appeal for AY 1999-2000 is accordingly dismissed. 14. Now we shall take up Revenue’s appeal for AY 2001-02 being ITA No.247/Ahd/2020. As regards Ground Nos.1 & 2 of this appeal, it is observed that the issues raised therein by the Revenue relating to deletion by the learned CIT(A) of the addition made by the Assessing Officer on account of disallowance of depreciation on computers and disallowance of interest amounting to Rs.9,79,12,936/- and Rs.1,96,52,980/- respectively are similar to Ground Nos. 1 & 2 involved in Revenue’s appeal for AY 1999-2000 which have already been decided by us. Following our conclusion drawn in AY 1999-2000, we uphold the ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 22 impugned order of learned CIT(A) giving relief to the assessee on these two issues and dismiss Ground Nos. 1 & 2 of Revenue’s appeal for AY 2001-02. 15. As regards the issue involved in Ground No.3 of Revenue’s appeal for AY 2001-02 relating to the deletion by the learned CIT(A) of the disallowance of Rs.36,880/- made by the Assessing Officer under Section 14A of the Act, it is observed that the disallowance of Rs.36,880/- made by the Assessing Officer under Section 14A of the Act was deleted by the learned CIT(A) vide paragraph No.9.2 of his impugned order which reads as under:- “9.2 I have gone through the submission of the appellant and the finding of the A.O. in the assessment order. I find that there is considerable force in the submission of the appellant that the word "other than dividends referred to in section 115-0" are inserted by the Finance Act, 2003 effective from 01.04.2004. Thus, the expenditure if any related to earning of dividend income is excluded from admissibility u/s 57 of the Act only from 01.04.2004. Further the provisions of Rule 8D which have been notified with effect from 24.03.2008 are not retrospective in nature and shall apply with effect from A.Y.2008-09. I have also gone through the case laws relied by the appellant (P.B.P.34). Recently the Hon'ble Supreme Court in a case of CIT Vs. Essar Technoholdings Ltd reported in [2018] 401 ITR 445 has held that applying the principle of statutory interpretation for interpreting retrospectivity of a fiscal statute and looking into the nature and purpose of section 14A(2) & (3) as well as purpose and intent of Rule 8D coupled with the explanatory notes in the Fin. Bill, 2016 & the department's understanding as reflected by circular dated 28.12.2016, the Apex Court was of the opinion that Rule 8D was intended to operate prospectively. Respectfully following the decisions of the Hon'ble Courts including Supreme Court (supra) the disallowance u/s 14A of the Act for the year under consideration is not justified. The same is deleted.” 16. The learned CIT(A) thus deleted the disallowance made by the Assessing Officer after taking into consideration the relevant provisions of the Act as inserted from time to time as well as the ratio laid down by the Hon’ble Supreme Court in the case of Essar Technoholdings Ltd (supra) to hold that the disallowance made by the Assessing Officer under Section 14A of the Act for the year under consideration, i.e. AY 2001-02, was not sustainable. At the time of ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 23 hearing before us, the learned DR has not been able to raise any contention to dispute this position. We, therefore, find no justifiable reason to interfere with the impugned order of the learned CIT(A) giving relief to the assessee on this issue and upholding the same, we dismiss Ground No.3 of the Revenue’s appeal for AY 2001-02. 17. As regards the issue involved in Ground No.4 of the Revenue’s appeal for AY 2001-02 relating to the deletion by the learned CIT(A) of the disallowance of Rs.1,59,028/- made by the Assessing Officer on account of preliminary expenses, it is observed that the disallowance made by the Assessing Officer on account of preliminary expenses was deleted by the learned CIT(A) vide paragraph No. 10.2 of his impugned order which reads as under:- “10.2 I have gone through the submission of the appellant and the finding of the A.O. in the assessment order. I find considerable force in the submission of the appellant (P.B.P.35) that the addition is made without affording any opportunity to the appellant to explain the same, since it is not included in the A.O/s show cause notice dated 24.02.2005. Further from the record it is seen that the appellant has neither floated any public issue nor invited any share application from anybody during the previous year. The appellant is a body corporate, it has to incur various expenditure before the Registrar of companies etc. There is no adverse finding by the A.O. that the expenditure was not for the purpose of business. Besides, the similar issue was involved in A.Y. 2000-01 wherein, in the appellant's own case the Hon'ble Tribunal vide their orders dated 19.04.2016 (supra) has deleted the addition of Rs.1,59,028/- (page 18 of Exi. 1 enclosed with submission dated 19.12.2019). Therefore, respectfully following the decision of the Hon'ble ITAT I hold that there is no justification in disallowing the same. I accordingly direct the A.O. to delete the addition of Rs.1,59,028/-.” 18. The learned CIT(A) thus followed the decision of this Tribunal in assessee’s own case for AY 2000-01 on a similar issue to delete the disallowance made by the Assessing Officer on account of preliminary expenses. Further, as found by the learned CIT(A), there was nothing to show that the assessee during the year under consideration had floated any public issue or invited any share application from anybody. At the time of hearing before us, the learned DR has not been able to ITA Nos. 246 & 247/Ahd/2020 & CO Nos.74 & 75/Ahd/2020 Assessee : Applitech Solution Limited AYs : 1999-2000 & 2001-2002 24 bring anything on record to rebut or controvert this finding recorded by the learned CIT(A). We, therefore, find no infirmity in the impugned order of the learned CIT(A) deleting the disallowance made by the Assessing Officer on account of preliminary expenses and dismiss Ground No.4 of the Revenue’s appeal for AY 2001-02. 19. At the time of hearing before us, the learned Counsel for the assessee has submitted that the assessee is not interested to press the Cross-Objections filed by it for both the years under consideration and the same may be treated as withdrawn. We accordingly dismiss the Cross Objections filed by the assessee for both the years under consideration as withdrawn. 20. In the result, both the appeals of the Revenue as well as Cross-Objections of the assessee are dismissed. Order pronounced in the open Court on 5 th August, 2022 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (P.M. JAGTAP) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad, Dated 05/08/2022 *Bt /Copy of the Order forwarded to : 1. ! / The Appellant 2. "# ! / The Respondent. 3. $%$&' # # ( / Concerned CIT 4. # # ( ) (/ The CIT(A)- 5. + , # &' , # # &' /DR,ITAT, Ahmedabad, 6. , ./ 0 /Guard file. / BY ORDER, TRUE COPY ह # $ज (Asstt. Registrar) # # &' ITAT, Ahmedabad