ITO, New Delhi V. M/s. A.H, Multisoft Pvt. Ltd., New Delhi

ITA 1164/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90943 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 28-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Keywords: Business income; Revenue expenditure

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL IN (DELHI BENCH A NEW DELHI) BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER AND SHRI C.M.GARG, JUDICIAL MEMBER ITA NO. 1164/DEL/2013 (ASSESSMENT YEAR: 2009-10) ITO VS. A. H. MULTISOFT PVT. LTD. WARD 1(1) 4 TH FLOOR, DHAKA HOUSE, 18/17, WEA, KAROL BAGH NEW DELHI NEW DELHI AAGCA0146C (APPELLANT) (RESPONDENT) REVENUE BY : MS. Y.KAKKAR, DR ASSESSEE BY : MR. SANJEEV SA PRA, ADV. DATE OF HEARING : 25.02.2015 DATE OF PRONOUNCEMENT : 17.04.2015 ORDER PER C.M.GARG, JUDICIAL MEMBER : THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IV, NEW DELHI DATED 27.12.2012 IN APPEAL NO. 327/ 2011-12 FOR AY 2009-10. ITA NO.1164/ DEL/2013 2 2. THE GROUND RAISED BY THE REVENUE READS AS U NDER :- 1. WHETHER THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS. 19,68,410/- MADE ON AC COUNT OF PURCHASE AND OTHER EXPENSES IGNORING THE FACT THAT (A) FROM THE RECORDS THERE IS NO STOCK IN HAND AS S UCH. (B) THE ASSESSEE DID NOT ENTER ANY ACTUAL SALE PURC HASE TRANSACTION. 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APPEALS ARE THAT THE ASSESSEE FILED RETURN OF INCOME DECLARING OF LOSS O F RS. 17,39,750/-. SUBSEQUENTLY, THE CASE WAS PICKED UP FOR SCRUTINY A ND A NOTICE U/S 143(2) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE A CT) ISSUED TO THE ASSESSEE. THE ASSESSING OFFICER AFTER SEEKING EXPLA NATION FROM THE ASSESSEE OBSERVED THAT THE PURCHASES EXPENSES, OF R S. 13,10,000/-, SOFTWARE DEVELOPMENT AND SUPPORT EXPENSES RS. 75,00 0/- AND PRINTING & STATIONARY EXPENSES AMOUNT INTO RS. 5,83,410/- AS CLAIMED BY THE ASSESSEE ARE BOGUS AND HENCE, THESE ARE NOT ALLOWAB LE. THE LD. ASSESSING OFFICER ALSO OBSERVED THAT LOSS FROM EXC HANGE FLUCTUATION OF RS. 3,14,998/- IS NOT A REVENUE EXPENDITURE AND HENCE, THE SAME IS ALSO NOT ALLOWABLE. THE ASSESSING OFFICER ALSO HOLD THAT THE RECEIPTS FROM SALE ARE THE INCOME FROM OTHER SOURCES AS THER E IS NO DENYING THE FACT THAT THE ASSESSEE ACTUALLY RECEIVED THESE AMOU NTS AND IF THE ITA NO.1164/ DEL/2013 3 SAME ARE NOT BUSINESS RECEIPTS THEN OTHERWISE AS A REVENUE RECEIPTS THE AMOUNT RECEIVED FROM SALE IS AN INCOME IN THE H ANDS OF ASSESSEE. THE ASSESSING OFFICER FINALISE THE ASSESSMENT AT TO TAL INCOME OF RS. 5,43,654/- AS AGAINST THE RETURN INCOME OF THE ASSE SSEE. 4. BEING AGGRIEVED BY THE ABOVE ASSESSMENT ORDE R THE ASSESSEE PREFERRED AN APPEAL BEFORE CIT(A) WHICH WAS PARTLY ALLOWED ON THE GROUND OF PURCHASE, SOFTWARE DEVELOPMENT AND SUPPOR T EXPENSES AND STATIONARY & PRINTING EXPENSES. NOW, THE AGGRIEVED REVENUE IS BEFORE THIS TRIBUNAL WITH THE SOLE GROUND AS REPRODUCED HE REINABOVE. 5. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) PL ACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F SUMATI DAYAL VS. CIT 214 ITR 801(SC) AND SUBMITTED THAT WHERE ANY SO ME AMOUNT FOUND CREDITED IN THE BOOKS OF ACCOUNTS OF ASSESSE E FOR ANY PREVIOUS YEAR IT MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE, IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT TH E NATURE AND SOURCE THEREOF IS , IN THE OPINION OF THE ASSESSING OFFICE R, NOT SATISFACTORY. THE LD. COUNSEL OF THE ASSESSEE REPLIED THAT THE ASSESS EE COMPANY CARRIED OUT TRADING IN ITA NO.1164/ DEL/2013 4 COMPUTER SOFTWARE ETC. AND THE TRADING/SALE IN COMP UTER SOFTWARE CANNOT BE HELD AS INCOME FROM OTHER SOURCES AS THE ASSESSEE IS REGISTERED WITH THE VAT DEPARTMENT OF GOVERNMENT OF DELHI VIDE REGISTRATION NO. 07170340412 AND HAS REGULARLY BEI NG FILED ITS VAT RETURN. THE LD. COUNSEL VEHEMENTLY CONTENDED THAT N O SALE CAN BE CONDUCTED WITHOUT ANY PURCHASE AND THE ASSESSING OF FICER ON ONE HAND DISALLOWED THE PURCHASES MADE BY THE ASSESSEE AND ON THE OTHER HAND THE AO WRONGLY ALLEGED THAT THE RECEIPTS FROM SALE DESERVE TO BE ASSESSED TO TAX UNDER THE HEAD OF INCOME FRO M OTHER SOURCES. THE LD. COUNSEL SUPPORTING THE IMPUGNED ORDER SUBMI TTED THAT THE CIT(A) TOOK A REASONABLE AND JUSTIFIED APPROACH AND DELETED THE ADDITION. 6. THE LD. COUNSEL OF THE ASSESSEE ALSO SUBMITT ED THAT THE ASSESSING OFFICER MADE IMPUGNED THREE ADDITIONS WIT HOUT ANY DETAILED DELIBERATIONS AND CONCLUSION AND IT WAS NOT JUST AN D PROPER TO HELD IMPUGNED EXPENSES AS BOGUS WITHOUT POINTING OUT ANY DEFECT IN THE BOOKS OF ACCOUNT OF ASSESSEE AND WITHOUT REJECTING THE SAME BY FOLLOWING THE PROCEDURE AS STIPULATED U/S 145(3) OF THE ACT. ITA NO.1164/ DEL/2013 5 7. REPLYING TO THE ABOVE CONTENTIONS, THE LD. D R ALSO PLACED THE REJOINDER AND SUBMITTED THAT THE CIT(A) HAS SIMPLY NOTED THAT THE AO HAS NOT POINTED OUT ANY DEFECTS IN THE AUDITED BOOK S OF ACCOUNTS OF THE ASSESSEE WHICH WERE PRODUCED BEFORE HIM AND HAS ALS O NOT POINTED OUT ANY DEFECT IN THE PURCHASE AND SALE VOUCHERS PR ODUCED BY THE ASSESSEE BEFORE HIM BUT THE CIT(A) HAS NOT COMMENTE D ON THE MERITS OF THE EXPLANATION AND DOCUMENTARY EVIDENCE FILED B Y THE ASSESSEE IN SUPPORT OF HIS CLAIM. THE LD. DR ALSO POINTED OUT T HAT THE CIT(A) HAS DELETED ALL THREE ADDITIONS BY RECORDING HIS FILE C ONCLUSION IN PARA NO. 5 OF THE IMPUGNED ORDER BUT PARA NO. 5 BY OBSERVING B RIEF POINTS ON THE ISSUE OF IMPUGNED PURCHASE AND SALES BUT THERE IS N O DISCUSSION ABOUT OTHER TWO ISSUES VIZ. SOFTWARE DEVELOPMENT SU PPORT EXPENSES AND PRINTING AND STATIONARY EXPENSES WHICH WERE HEL D AS BOGUS BY THE ASSESSING OFFICER. THE LD. DR STRENUOUSLY CONTENDED THAT THE CIT(A) GRANTED FOR THE ASSESSEE ALL THREE ISSUES WITHOUT A NY PROPER, JUST AND COGENT ADJUDICATION AND THEREFORE THE ORDER OF THE CIT(A) IS NOT SUSTAINABLE. ITA NO.1164/ DEL/2013 6 8. ON CAREFUL CONSIDERATION OF ABOVE RIVAL S UBMISSIONS AT THE VERY OUTSET, WE OBSERVE THAT THE ASSESSING OFFICER MADE IMPUGNED THREE ADDITIONS WITH FOLLOWING CONCLUSION; CONCLUSION SALE IS THE SECONDARY ASPECT TO EXISTING STOCK AND/OR PURCHASES. FROM THE RECORDS IT IS CLEAR THAT THERE WAS NO STOCK-IN-HAND AS SUCH. THE ASSESSEE ALSO FAILED TO ESTABLISH ITS PURCHASES. AS A RESULT, THE EXPENSES, CLAIMED T O HAVE BEEN CONNECTED WITH THE SALE-PURCHASE, ALSO CANNOT BE HELD GENUINE. ANOTHER MAJOR HEAD OF EXPENDITURE, I.E. PR INTING & STATIONARY ALSO REMAINS UN-ESTABLISHED. THE ONLY INFERENCE THAT CAN JUDICIOUSLY BE DRAWN FROM THE ABOVE ALL IS THAT THE ASSESSEE DID NOT ENTER INTO A NY ACTUAL SALE-PURCHASE TRANSACTION. THIS WHOLE PICTURE OF PU RCHASE- SALE WAS PAINTED TO SET-OFF THE INCOMES. THEREBY TH E ASSESSEE UNDERTOOK AN ATTEMPT TO EVADE DUE TAXES ON ITS RECEIPTS. IN LIGHT OF THE ABOVE, THE PURCHASES EXPENSES, SOFTWARE DEVELOPMENT & SUPPORT EXPENSES AND PRINTING & STATI ONARY EXPENSES ARE HELD AS BOGUS AND HENCE NOT ALLOWABLE. FURTHER, LOSS FROM EXCHANGE RATE FLUCTUATION IS NOT REVENUE EXPENDITURE IN THE CASE OF THE ASSESSEE AND HENCE N OT ALLOWABLE. THE INCOME FROM SALE IS HELD AS INCOME FROM OTHER SOURCES, AS THERE US BI DENYING THE FACT THA T THE ASSESSEE ACTUALLY RECEIVED THESE AMOUNTS, IF NOT AS BUSINESS RECEIPT THAN OTHER-WISE, BUT AS A REVENUE-RECEIPT, I.E. INCOME. 9. WE, FURTHER, NOT THAT THE CIT(A) GRANTLY F OR THE ASSESSEE BY DELETING ADDITIONS FROM ALL THREE ISSUES WHICH FOLL OWING OBSERVATIONS AND CONCLUSIONS ; ITA NO.1164/ DEL/2013 7 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. AR AND PERUSED THE ASSESSMENT ORDER PASSED BY THE A O. I FIND THAT THE AO HAS BASED HIS CONCLUSION ON THE FA CT THAT PARTIES IN QUESTION NAMELY SURYA TRADERS AND CHAND TRADING COMPANY HAVE FILED THEIR INCOME TAX RETURN IN ITR NO. 2 IN ASSESSMENT YEAR 2009-10 AND HAVE NOT SHOWN ANY INCOME FROM BUSINESS OR PROFESSION AND MIHIR IMPEX HAS NOT FILED ANY RETURN FOR ASSESSMENT YEAR 2009-10. HOWEV ER, THE AO HAS NOT POINTED OUT ANY DEFECTS IN THE AUDITED B OOKS OF THE ACCOUNTS OF THE ASSESSEE WHICH WERE PRODUCED BE FORE HIM. THE AO HAS ALSO NOT POINTED OUT ANY DEFECTS IN THE PURCHASE AND SALES VOUCHERS PRODUCED BY THE ASSESSE E BEFORE HIM. THE MERE FACT THAT THE PARTIES FROM WHO M THE APPELLANT COMPANY HAS CLAIMED PURCHASES ARE NOT FIL ING PROPER INCOME TAX RETURNS CANNOT BE HELD AGAINST TH E APPELLANT. I AGREE WITH THE SUBMISSIONS OF THE LD. AR THAT THE AO WAS FREE TO TAKE ACTION AS PER LAW AGAINST T HOSE PARTIES. THE AO HIMSELF HAS MENTIONED THAT THE ASSE SSEE HAS ACTUALLY RECEIVED THESE AMOUNTS AND THE SAME WE RE REVENUE RECEIPTS THOUGH THE SAME WERE NOT ACCEPTED AS BUSINESS RECEIPTS. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE I AGREE WITH THE SUBMISSI ONS OF THE LD. AR THAT THE ADDITION MADE BY THE AO IS NOT JUSTIFIED. HENCE, THE SAME IS DELETED. THESE GROUNDS OF APPEAL ARE ALLOWED. 10. IN VIEW OF ABOVE CONCLUSION OF THE AO IT IS CLEAR THAT THE ASSESSING OFFICER HELD PURCHASE EXPENSES, SOFTWARE DEVELOPMEN T & SUPPORT EXPENSE AND PRINTING AND STATIONARY EXPENSES AS BOG US AND NOT ALLOWABLE. THE ASSESSING OFFICER HAS ALSO NOTED THA T FROM THE RECORD IT IS CLEAR THAT THERE WAS NO STOCK IN HAND AS SUCH T HE ASSESSEE FAILED TO ESTABLISH ITS PURCHASES. THE ASSESSING OFFICER ALSO NOTED THAT ITA NO.1164/ DEL/2013 8 ANOTHER MAJOR HEAD OF EXPENDITURE I.E. PRINTING & S TATIONARY ALSO REMAINS UNESTABLISHED. AT THIS POINT, WE OBSERVE TH AT THE ASSESSEE HAS FILED A PAPER BOOK SPREAD OVER 61 PAGES WHERE I N ACCEPT ITEM NO. 1, 10, 11, 14 AND 17 OTHER 11 DOCUMENTS WERE VERY WELL BEFORE THE AO BUT THERE IS NO CONSIDERATION AND DELIBERATIONS THEREON IN THE ASSESSMENT ORDER. IN THIS SITUATION, WE ARE INCLIN ED TO HOLD THAT THE ASSESSING OFFICER MADE ADDITIONS WITHOUT GIVING ANY FINDINGS ON THE EXPLANATION, DETAILS AND DOCUMENTS FILED BY THE ASS ESSEE AND WITHOUT POINTING OUT ANY DEFECTS IN THE PURCHASE, SALES AND OTHER RELATED VOUCHERS AND IN THE AUDITED BOOKS OF ACCOUNTS OF TH E ASSESSEE WHICH WERE PRODUCED BEFORE AO DURING ASSESSMENT PROCEEDIN GS. 11. FROM THE BARE READING OF THE IMPUGNED ORDER WE ALSO NOTE THAT THE CIT(A) HAS REPRODUCED WRITTEN SUBMISSIONS OF TH E ASSESSEE AND THEREAFTER ARGUMENTS AND SUBMISSIONS OF THE ASSESSE E HAVE BEEN MENTIONED AND THE CIT(A) HAS GRANTED FOR THE ASSES SEE IN OPERATIVE PARAGRAPH NO. 5 AND REPRODUCED HEREINABOVE. FROM OP ERATIVE PART OF THE IMPUGNED ORDER WE NOTE THAT THE CIT(A) HAS ALSO NOTE DISCUSSED ANY WRITTEN SUBMISSIONS OF THE ASSESSEE, COPIES OF THE RELEVANT BILLS VOUCHERS, BANK STATEMENTS & OTHER RELATED DOCUMENTS , WHICH WERE ALSO FILED BEFORE US IN THE PAPER BOOK OF 61 PAGES AND SIMPLY ITA NO.1164/ DEL/2013 9 NOTED THAT NO DEFECTS WAS POINTED OUT BY THE AO IN THE PURCHASES AND SALE VOUCHERS AND AUDITED BOOKS OF ACCOUNTS OF THE ASSESSEE AND THE CIT(A) AGREED WITH THE SUBMISSIONS OF THE ASSESSEE WITHOUT ANY ADJUDICATION. WE ALSO OBSERVE THAT IN OPERATIVE PA RAGRAPH NO. 5 THERE IS NO OBSERVATIONS OR FINDINGS IN REGARD TO THE SOF TWARE DEVELOPMENT AND SUPPORT EXPENSES AND PRINTING AND STATIONARY EX PENSES BUT THE CIT(A) HAS DELETED ENTIRE ADDITIONS MADE BY THE AO ON ALL THREE ISSUES WHICH IS NOT A PROPER AND JUSTIFIED APPROACH. 12. UNDER FACTS AND CIRCUMSTANCES AS NOTED ABOV E, WE ARE INCLINED TO HOLD THAT THE REVENUE AUTHORITIES BELOW HAS NOT PRO PERLY CONSIDERED SUBMISSIONS, DETAILS, EXPLANATION AND OTHER RELEVAN T DOCUMENTARY EVIDENCE AND RELATED BILLS AND VOUCHERS AUDITED BOO KS OF ACCOUNTS OF THE ASSESSEE AND THE AO PROCEEDED TO MAKE ADDITIONS WITHOUT BRINGING OUT ANY ADVERSE MATERIAL OR FACTS AGAINST THE ASSESSEE AND WITHOUT REJECTING AUDITED BOOKS OF ACCOUNTS OF THE ASSESSEE. AT THE SAME TIME, WE ALSO NOTE THAT THE CIT(A) GRANTED RE LIEF FOR THE ASSESSEE BY PASSING A SLIP SHORT AND CRYPTIC ORDER BY MAKING ONLY SHORT DELIBERATIONS ON THE ISSUE OF PURCHASE AND S ALES AND WITHOUT ANY CONCLUSION ON OTHER TWO ISSUES AND THEREFORE, O RDERS OF THE AUTHORITIES BELOW SUFFERS AMBIGUITY, PERVERSITY AN D THE SAME ARE NOT A ITA NO.1164/ DEL/2013 10 SUSTAINABLE. UNDER ABOVE NOTED FACTS AND CIRCUMS TANCES, WE FIND A JUST AND PROPER TO RESTORE THE ASSESSMENT TO THE FI LE OF ASSESSING OFFICER FOR FRAMING A FRESH ASSESSMENT, AFTER AFFO RDING FEW OPPORTUNITY OF HEARING FOR ASSESSEE AND WITHOUT BEING PREJUDICE D FROM THE EARLIER ASSESSMENT ORDER AND IMPUGNED ORDER. ACCORDINGLY, THE MAIN GROUND OF THE REVENUE IS DEEM TO BE ALLOWED FOR STATISTICA L PURPOSES. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOW ED FOR STATISTICAL PURPOSES IN THE TERMS AS INDICATED ABOVE. ORDER PRONOUNCED IN OPEN COURT ON 17 TH APRIL, 2015. SD/- SD/- (N.K.SAINI) (C.M.GARG) ACCOUNTANT MEMBER JUDICI AL MEMBER DATED 17 TH APRIL, 2015 B.RUKHAIYAR COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. CIT (ITAT), NEW DELHI. AR, ITAT N. DELHI ITA NO.1164/ DEL/2013 11