Dy. CIT, Circle-1(1), Hyderabad V. M/s AP Technology Services Ltd., Hyderabad

ITA 104/HYD/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82314 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 27-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: A V RAGHURAM
• Keywords: Opportunity of being heard; Principle of natural justice; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS. 104 & 105/HYD/2014 ASSESSMENT YEAR : 2009-10 & 2010-11 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 1(1), HYDERABAD M/S AP TECHNOLOGY SERVICES LTD., HYDERABAD. PAN AABCA 7630E (APPELLANT) (RESPONDENT) REVENUE BY SHRI SOLGY JOSE T. KOTTARAM ASSESSEE BY SHRI A.V. RAGHURAM DATE OF HEARING 27-08-2014 DATE OF PRONOUNCEMENT 05-09-2014 O R D E R PER SAKTIJIT DEY, J.M.: THESE APPEALS OF THE DEPARTMENT ARE AGAINST TWO SEP ARATE ORDERS OF CIT(A)-II, HYDERABAD BOTH DATED 01/11/13 PERTAINING TO AYS 2009-10 & 2010-11. ITA NO. 104/H/14 FOR AY 2009-10 2. THE DEPARTMENT HAS RAISED THE FOLLOWING GROUNDS: 1. THE LD. CIT(A) OUGHT TO HAVE REMANDED THE MATTER BACK TO THE AO FOR VERIFICATION BEFORE ADMITTING ADDITIONAL EVIDENCE. 2. THE LD. CIT(A) ERRED IN NOT GIVING AN OPPORTUNIT Y TO THE AO UNDER RULE 46A AND UPHELD THE PRINCIPLES OF NATURAL JUSTICE. 3. THE CIT(A) OUGHT TO HAVE NOTICED THAT THE PROOF OF PAYMENT OF LIC OF RS. 36,66,098/- WHICH IS MANDATORY. 2 ITA NOS. 104 & 105/HYD/2014 M/S AP TECHNOLOGY SERVICES LTD. 3. AS CAN BE SEEN IN GROUND NOS. 1 & 2, THE ONLY IS SUE RAISED IS WITH REGARD TO CIT(A) ADMITTING ADDITIONAL EVIDENCE IN VIOLATION OF RULE 46A OF THE ACT. 4. BRIEFLY THE FACTS ARE, ASSESSEE A COMPANY, WHOLL Y OWNED BY THE STATE GOVERNMENT, IS ENGAGED IN PROVIDING SERVICES IN PROCUREMENT OF SOFTWARE AND HARDWARE TO ALL GOVERNMENT DEPARTMENTS , CORPORATIONS, OTHER GOVERNMENT ESTABLISHMENTS AND TO PROMOTE COMP UTER LITERACY AMONGST GOVERNMENT EMPLOYEES AND UNEMPLOYED YOUTH. FOR THIS PURPOSE, ASSESSEE RECEIVED FUNDS FROM THE STATE GOV ERNMENT DEPARTMENTS AS WELL AS CENTRAL GOVERNMENT EARMARKED FOR THE PROCUREMENT OF SOFTWARE AND HARDWARE, TRAINING PROG RAMMES AS WELL AS OTHER UTILITY ACTIVITIES. FOR THE AY UNDER DISPU TE, ASSESSEE FILED ITS RETURN OF INCOME ON 10/02/11 DECLARING TOTAL INCOME OF RS. 6,58,65,650. DURING SCRUTINY ASSESSMENT PROCEEDING, ON VERIFICATION OF THE INFORMATION FURNISHED, AO NOTICED THAT AS PE R FORM 26AS ASSESSEE WAS IN RECEIPT OF INTEREST OF RS. 10,53,71 ,063 WHEREAS ASSESSEE HAS SHOWN INTEREST RECEIPTS IN BOOKS OF AC COUNT TO THE TUNE OF RS. 6,58,85,309 ONLY THEREBY ASSESSEE HAD NOT OF FERED TO TAX THE DIFFERENTIAL AMOUNT OF RS. 3,95,85,754. AS MENTIONE D BY AO IN THE ASSESSMENT ORDER, THOUGH ASSESSEE WAS ASKED TO EXPL AIN/RECONCILE THE DIFFERENCE, SINCE ASSESSEE COULD NOT RECONCILE THE SAME, DIFFERENTIAL INTEREST OF RS. 3,94,95,764 WAS ADDED TO THE INCOME OF ASSESSEE. FURTHER, IT WAS NOTICED BY AO THAT AS PER FORM NO. 26AS ASSESSEE WAS IN RECEIPT OF RS. 12,60,33,104 FROM CO NTRACT WORK AND RS. 6,08,044 FROM SERVICE CHARGES WHEREAS ASSESSEE HAS OFFERED AN AMOUNT OF RS. 6,70,04,942 UNDER THE HEAD SERVICE C HARGES AND OTHER INCOME. AS STATED BY AO, SINCE ASSESSEE COULD NOT RECONCILE THE DIFFERENCE, OF RS. 5,96,35,242, SAME WAS ADDED TO THE RETURNED INCOME. AO ALSO MADE THE FOLLOWING ADDITIONS: I) RS. 20,56,977 BEING THE AMOUNT DEBITED TOWARDS H APPY VILLAGE EXPENSES. II) RS. 46,07,570 BEING PROVISION FOR GRATUITY. III) RS. 14,01,098 DEBITED TOWARDS PRIOR PERIOD E XPENSES. 3 ITA NOS. 104 & 105/HYD/2014 M/S AP TECHNOLOGY SERVICES LTD. IV) RS. 25,00,000 TOWARDS SPONSORSHIP FEES. AS A RESULT OF THE SAID ADDITIONS, TOTAL INCOME WAS DETERMINED AT RS. 17,54,34,071/-. BEING AGGRIEVED OF THE ORDER, SO PA SSED, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 5. CIT(A) AFTER CONSIDERING THE SUBMISSIONS MADE BY ASSESSEE AND EVIDENCES PRODUCED BEFORE HER CALLED FOR A REMA ND REPORT AND THEREAFTER PASSED THE ORDER DELETING FULLY THE ADDI TIONS OF RS. 3,94,85,754, RS. 5,96,35,242 AND RS. 20,56,977. OUT OF THE ADDITIONS MADE OF RS. 46,07,570 ON ACCOUNT OF PROVISION TOWAR DS GRATUITY, CIT(A) NOTICED THAT ASSESSEE HAS PAID AN AMOUNT OF RS. 36,66,098 ON 30/06/09 I.E. PRIOR TO THE DUE DATE OF FILING OF RE TURN OF INCOME, HENCE, SHE DIRECTED AO TO ALLOW THE AMOUNT OF RS. 36,66,09 8. HOWEVER, CIT(A) CONFIRMED THE ADDITIONS MADE ON ACCOUNT OF P RIOR PERIOD EXPENSES AND SPONSORSHIP FEES AMOUNTING TO RS. 12,8 2,878 AND RS. 25 LAKHS RESPECTIVELY. BEING AGGRIEVED OF THE AFORE SAID ORDER OF THE CIT(A), DEPARTMENT IS BEFORE US. 6. LEARNED DR SUBMITTED BEFORE US THAT CIT(A) WHILE DELETING ADDITIONS MADE BY AO HAS CONSIDERED ADDITIONAL EVID ENCE WITHOUT GIVING AN OPPORTUNITY TO THE AO, WHICH IS IN VIOLAT ION OF RULE 46A OF THE IT RULES. HE, THEREFORE, SUBMITTED THAT ORDER O F CIT(A) NEEDS TO BE SET ASIDE. SO FAR AS DIRECTION OF CIT(A) RELATING T O DISALLOWANCE MADE IN RESPECT OF PROVISION MADE TOWARDS GRATUITY, LEAR NED DR SUBMITTED THAT AS ASSESSEE COULD NOT PRODUCE PROOF OF PAYMENT , AO WAS CORRECT IN MAKING DISALLOWANCE. 7. LEARNED AR, ON THE OTHER HAND, SUBMITTED THAT DU RING APPEAL PROCEEDING, ASSESSEE HAS NOT PRODUCED ANY NEW/FRESH EVIDENCE EXCEPT A LETTER DATED 05/02/13 RECEIVED FROM MINIST RY OF COMMUNICATION AND INFORMATION TECHNOLOGY, DEPARTMEN T OF INFORMATION TECHNOLOGY, GOVT. OF INDIA CLARIFYING THE ISSUE RELATING TO 4 ITA NOS. 104 & 105/HYD/2014 M/S AP TECHNOLOGY SERVICES LTD. INTEREST ACCRUED ON THE GRANT-IN-AID. IT WAS SUBMIT TED THAT SO FAR AS THE OTHER ISSUES ARE CONCERNED, CIT(A) IN FACT HAS CALLED FOR A REMAND REPORT FROM AO AND ONLY AFTER CONSIDERING AOS COMM ENTS, SHE HAS DISPOSED OFF THE APPEAL BY DECIDING ISSUES RAISED B Y ASSESSEE, HENCE, DEPARTMENTS GRIEVANCE THAT AO WAS NOT GIVEN OPPORTUNITY IS NOT VALID. SO FAR AS THE PAYMENT OF GRATUITY IS CON CERNED, LEARNED AR SUBMITTED THAT AS THE PAYMENT WAS MADE WITHIN THE D UE DATE OF FILING OF RETURN, CIT(A) WAS JUSTIFIED IN ALLOWING DEDUCTI ON CLAIMED TO THE EXTENT OF RS. 36,66,098. 8. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON R ECORD. AT THE OUTSET, WE MUST MENTION THAT GROUND NOS. 1 & 2 RAIS ED BY THE REVENUE ARE QUITE VAGUE AND GENERAL IN NATURE. DEPA RTMENT HAS NEITHER MADE OUT ANY CASE NOR SPECIFICALLY STATED E ITHER IN THE GROUNDS OR AT THE TIME OF HEARING BEFORE US WHAT AR E THE ADDITIONAL EVIDENCES SUPPOSED TO HAVE BEEN CONSIDERED BY LEARN ED CIT(A) OR IN RESPECT OF WHICH SPECIFIC ADDITIONS MADE BY AO THE ADDITIONAL EVIDENCES WERE PRODUCED. EVEN IN THE COURSE OF HEAR ING, LEARNED DR WAS NOT ABLE TO THROW ANY LIGHT ON THIS ISSUE. HOWE VER, ON CONSIDERING THE FACTS AND MATERIALS ON RECORD, WE ARE OF THE VI EW, THE ONLY DOCUMENT PRODUCED BY THE ASSESSEE WHICH CAN BE CONS IDERED TO BE AN ADDITIONAL EVIDENCE IS COMMUNICATION DATED 05/02 /13 RECEIVED FROM THE MINISTRY OF COMMUNICATION AND INFORMATION TECHNOLOGIES, DEPARTMENT OF INFORMATION TECHNOLOGY, GOVT. OF INDI A IN RESPECT OF INTEREST ACCRUED ON GRANT-IN-AID, WHICH RELATES TO THE ISSUE OF ADDITION OF AN AMOUNT OF RS. 3,94,85,754. SO FAR AS THE OTHE R ADDITIONS DELETED BY CIT(A), ON PERUSAL OF RECORD, WE FIND THAT IN CO URSE OF APPEAL PROCEEDING, CIT(A) IN FACT HAS CALLED FOR A REMAND REPORT FROM THE AO IN RESPECT OF THOSE ADDITIONS AND HAS DELETED THE SAME AFTER RECEIVING THE REMAND REPORT FROM AO. AS THE DEPARTM ENT HAS NOT CHALLENGED THE DELETION MADE BY CIT(A) ON MERITS, W E CANNOT EXAMINE THE ISSUE ON MERIT. THEREFORE, THE ONLY ISS UE, IN OUR VIEW, ON 5 ITA NOS. 104 & 105/HYD/2014 M/S AP TECHNOLOGY SERVICES LTD. WHICH CIT(A) HAS CONSIDERED ADDITIONAL EVIDENCE WIT HOUT GIVING AN OPPORTUNITY TO THE AO IS RELATING TO ADDITION OF RS . 3,94,84,754 ON ACCOUNT OF INTEREST RECEIVED ON GRANT-IN-AID. AS P RIMA-FACIE, THERE IS VIOLATION OF RULE 46A, WE REMIT THE MATTER BACK TO FILE OF AO WITH A DIRECTION TO DECIDE THE ISSUE AFRESH AFTER CONSIDER ING ADDITIONAL EVIDENCE PRODUCED BY ASSESSEE BEFORE CIT((A) I.E. L ETTER DATED 05/02/13 OF MINISTRY OF INFORMATION AND TECHNOLOGY, GOVT. OF INDIA. THE AO MUST ALSO TAKE INTO CONSIDERATION THE OBSER VATIONS OF LD. CIT(A) ON THIS ISSUE IN APPEAL ORDER. AO MUST ALSO AFFORD REASONABLE OPPORTUNITY OF BEING HEARD TO ASSESSEE IN THE MATTE R. WE MAKE IT CLEAR THAT THE AO SHOULD CONFINE HIMSELF TO THE ISS UE OF ADDITION MADE ON ACCOUNT OF INTEREST. 9. GROUND NO. 3 RELATES TO DIRECTION OF CIT(A) TO D ELETE ADDITION OF RS. 36,66,098 BEING GRATUITY PAID TO LIC. AFTER CON SIDERING THE SUBMISSIONS OF THE PARTIES, WE DO NOT FIND ANY INFI RMITY IN THE ORDER OF CIT(A) AS CIT(A) AFTER SATISFYING HIMSELF OF THE FA CT AMOUNT OF RS. 36,66,098 WAS PAID BY ASSESSEE BEFORE DUE DATE OF F ILING OF RETURN OF INCOME ALLOWED THE CLAIM. ACCORDINGLY, GROUND RAISE D BY THE DEPARTMENT BEING DEVOID OF MERIT IS DISMISSED. ITA NO. 105/H/14 FOR AY 2010-11 10. AS GROUNDS RAISED BY THE DEPARTMENT IN THIS APP EAL IS IDENTICAL TO THE ISSUE RAISED IN GROUND NOS 1 & 2 IN ITA NO. 104/H/14, FOLLOWING OUR DECISION THEREIN WE DIRECT AO TO EXAMINE AND DE CIDE THE ISSUE OF INTEREST RECEIVED ON GRANT-IN-AID IN TERMS WITH OUR DIRECTIONS THEREIN. 6 ITA NOS. 104 & 105/HYD/2014 M/S AP TECHNOLOGY SERVICES LTD. 11. IN THE RESULT, APPEAL IN ITA NO. 104/HYD/14 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND APPEAL IN ITA NO. 105/HY/1 4 IS CONSIDERED TO BE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 05/09/2014. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 5 TH SEPTEMBER, 2014 KV COPY TO:- 1) DCIT, CIRCLE 1(1), 4 TH FLOOR, AAYAKAR BHAVAN,BASHEERBAGH, HYDERABAD. 2) M/S AP TECHNOLOGY SERVICES LTD., 4 TH FLOOR, BRR COMPLEX, TANK BUND, HYDERABAD. 3) CIT(A)-II, , HYDERABAD. 4) CIT-I, HYDERABAD 5)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD.