ITO,Ward-2(4), Kolkata, Kolkata V. System Incorporate(P)Ltd, Kolkata

ITA 1307/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100276 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 11-09-2012
• Court: TRIBUNAL
• Department Lawyers: SHITAL C DAS
• Assessee Lawyers: A K TIBREWAL

Judgement Text

ITA NO. 1307/KOL/2012- SYSTEM INCORPORATE (P) LTD. A.Y.2007-08 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH 'C', KO LKATA [BEFORE HON'BLE SHRI N.V.VASUDEVAN, JM & SHRI WASEE M AHMCD, AM] ITA NO.1307/KO112012 ASSESSMENT Y CAR: 2007-08 I.T.O., WARD-2( 4), VERSUS- SYSTEMS INCORPROAT E (P)LTD. KOLKATA KOLKATA. (PAN:AAGCS 9687 J) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI SHITAL C.DAS, JCIT. SR.DR FOR THE RESPONDENT : SHRI A.K.TIBREWAL, FCA DATE OF HEARING : 02.12.2015. DATE OF PRONOUNCEMENT: 09.12.2015. ORDER PER SHRI N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 19.06.2012 0F CIT(A)-I, KOLKATA RELATING TO A.Y.2007-08. 2. GROUND NO.L RAISED BY THE ASSESSEE READS AS FOL LOWS :- 1. THAT THE ID. CIT(A) ERRED IN DELETING THE ADDIT ION OF RS 16,44,488/- BEING UNDISCLOSED RECEIPTS OF THE ASSESSEE WITHOUT PROPER VERIFICATION AND ANALYSIS OF BILLS RAISED AND PAYMENTS RECEIVED DURING THE I- YR 2005- 06 VIS-A-VIS F YR. 2006-07., 3. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT. THE AO NOTICED THAT THE ASSESSEE HAD C LAIMED CREDIT FOR TDS OF RS.1,56,335/-. THE AO NOTICED FROM THE PROFIT AND L OSS ACCOUNT THAT THE ASSESSEE HAD SHOWN INCOME OF RS.7,40,000/-. THE AO WAS OF THE VI EW THAT THE INCOME OF THE ASSESSEE WAS NOT COMMENSURATE WITH THE RECEIPTS ON WHICH TDS WAS MADE AS MENTIONED IN THE TDS CERTIFICATES GIVEN BY THE FOLL OWING THREE COMPANIES: I) INDRAPRASTHA POWER GENERATION : RS.2,70,000/- II)SECL : RS.4.50,000/- III)PIPER WAR AREA : RS.17,14,488/- ITA NO. 1307/KOL/2012- SYSTEM INCORPORATE (P) LTD. A.Y.2007-08 2 AO CONCLUDED THAT THE ASSESSEE FAILED TO DISCLOSE I NCOME OF RS.16,44,488/- BEING THE DIFFERENCE BETWEEN THE SUM OF RS.24,34,488/- WHICH ARE RECEIPTS AS PER THE TDS CERTIFICATE AND THE SUM OF RS.7,40,000/- WHICH WAS THE INCOME SHOWN ON SALE IN THE PROFIT AND LOSS ACCOUNT. 4. BEFORE THE CIT(A) THE ASSESSEE POINTED OUT THAT THE ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING. IT HAD RAISED BILLS FOR JOBS EXECUTED AND THESE APPEARED IN THE DEBTORS LIST TILL THE PAYMENTS WERE REALIZED. THE T DS IS DEDUCTED ONLY WHEN THE ACTUAL PAYMENT IS RECEIVED. HOWEVER, THE AMOUNTS DUE HAVE ALREADY BEEN SHOWN BY THE ASSESSEE IN THE EARLIER YEARS. IN OTHER WORDS THE A MOUNT IN QUESTION DISCLOSED IN THE TDS CERTIFICATES HAS ALREADY BEEN DECLARED BY THE A SSESSEE IN THE EARLIER ASSESSMENT YEAR. THE AO IN THE REMAND REPORT DATED 21.10.2011 FILED BEFORE CIT(A) DID NOT DISPUTE THAT THE SUM ADDED BY THE AO TO THE TOTAL I NCOME HAD ALREADY BEEN DECLARED BY THE ASSESSEE IN THE RETURNED INCOME FILED FOR THE E ARLIER ASSESSMENT YEARS. THE CIT(A) TAKING NOTE OF THE REMAND REPORT DELETED THE ADDITI ON MADE BY THE AO BY HOLDING THAT THE PAYMENTS REFLECTED IN THE TDS CERTIFICATE HAVE ALREADY BEEN SHOWN AND INCLUDED IN THE GROSS RECEIPTS OF THE EARLIER YEARS OF THE ASSE SSEE. 5. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE HA S RAISED GROUND NO.L BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE LEARNED DR, WHO RELIED ON THE ORDER OF THE AO. IN THE LIGHT OF THE FINDINGS OF CIT(A) THAT THE AMOUNTS IN QUEST ION HAVE ALREADY BEEN SHOWN AND INCLUDED IN THE GROSS RECEIPTS OF THE ASSESSEE IN T HE EARLIER ASSESSMENT YEAR AND IN THE ABSENCE OF ANY THING CONTRARY BEING BROUGHT TO OUR NOTICE BY THE LEARNED DR , WE ARE OF THE VIEW THAT THE ADDITION MADE BY THE AO WAS RI GHTLY DELETED BY CIT(A). ACCORDINGLY GROUND NO.1 RAISED BY THE REVENUE IS DI SMISSED. 7. GROUND NO.2 RAISED BY THE REVENUE READS AS FOLL OWS :- '2. THAT THE LD. CIT(A) ERRED IN DELETING THE DISAL LOWANCE OF RS.55,000/- MADE U/S 40(A)(IA) WITHOUT CONSIDERING THE REMAND REPORT OF THE A. 0. STATING SPECIFICALLY THAT NO EVIDENCE WAS FURNISHED BY THE ASSESSEE. ' ITA NO. 1307/KOL/2012- SYSTEM INCORPORATE (P) LTD. A.Y.2007-08 3 8. THE ASSESSEE MADE PAYMENT OF RS.1,88,155/- TOWA RDS OFFICE RENT AND MAINTENANCE. THE ASSESSEE ALSO MADE PAYMENT OF RS.6 7,671/- AS CONSULTANCY CHARGES. IN RESPECT OF RENT AND MAINTENANCE CHARGES AO FOUND THAT NO TAX HAD BEEN DEDUCTED AT SOURCE AND ACCORDINGLY RS.1,88,155/- WAS ADDED TO T HE TOTAL INCOME BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 9. BEFORE CIT(A) THE ASSESSEE POINTED OUT THAT OUT OF THE SUM OF RS.1,88,155/- CLAIMED UNDER THE HEAD 'RENT AND MAINTENANCE CHARGE S A SUM OF RS.L,33,161/- REPRESENTS RENT PAID TO MRS. ANITA MAZUMDAR. THE AS SESSEE HAD NOT DEDUCT TAX AT SOURCE ON THE SAID PAYMENT AS REQUIRED US 194I OF T HE ACT AND THEREFORE ADDITION WAS SUSTAINED. WITH REGARD TO THE REMAINING SUM OF RS.5 5,000/- THE ASSESSEE POINTED OUT THAT THE SAME WAS MAINTENANCE CHARGES AND DID NOT F ALL WITHIN THE CATEGORY OF RENT AS DEFINED IN SECTION 194I OF THE ACT. CIT(A) FOUND FO RCE ON THE AFORESAID SUBMISSIONS AND DELETED THE ADDITION OF RS.55,000/-. 10. AGGRIEVED BY THE ORDER OF CIT(A) REVENUE HAS R AISED GROUND NO.2 BEFORE THE TRIBUNAL. 11. THE GRIEVANCE OF THE REVENUE AS PROJECTED IN T HE GROUNDS OF APPEAL IS THAT THE REMAND REPORT OF AO FILED BEFORE CIT(A) HAS NOT BEE N TAKEN INTO CONSIDERATION BY CIT(A). WE HAVE PERUSED THE RELEVANT PART OF THE RE MAND REPORT OF THE AO AS EXTRACTED IN THE ORDER OF CIT(A) AND FIND THAT NO S PECIFIC OBJECTIONS WAS POINTED OUT BEFORE CIT(!\.) BY THE AO IN THE REMAND REPORT EXCE PT CONTENDING THAT NO EVIDENCE OF PAYMENT OF TDS WAS FILED BY THE ASSESSEE. IN FACT T HE SPECIFIC CONTENTION OF THE ASSESSEE WAS THAT TDS WAS NOT APPLICABLE ON A SUM O F RS.55,000/- AS IT WAS OFFICE MAINTENANCE CHARGES NOT IN THE NATURE OF RENT COVER ED U/S 1941 OF THE ACT. THE AO HAS NOT RAISED ANY OBJECTIONS ON THIS CONTENTION IN THE REMAND REPORT. CONSEQUENTLY GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 12. GROUND NO.3 RAISED BY THE REVENUE READS AS FOL LOWS :- ITA NO. 1307/KOL/2012- SYSTEM INCORPORATE (P) LTD. A.Y.2007-08 4 '3. THAT THE LD. CIT(A) ERRED IN DELETING THE DISAL LOWANCE OF RS.1,22,875/- OUT OF NON- ESSENTIAL EXPENSES MADE BY THE A.O ON THE GROU NDS OF FAILURE TO PRODUCE ANY EVIDENCE.' 13. AO IDENTIFIED EXPENSES TO THE TUNE OF RS.6,59, 188/- DEBITED TO THE PROFIT AND LOSS ACCOUNT WHICH WERE EXPENSES TOWARDS HOUSE RENT , PRINTING AND STATIONERY AND OFFICE EXPENSES ETC. AO WAS OF THE VIEW THAT THE AF ORESAID EXPENSES WERE NOT NECESSARY FOR THE PURPOSE OF BUSINESS OF THE ASSESS EE. AO ALSO OBSERVED THAT THE ASSESSEE FAILED TO PRODUCE BOOKS OF ACCOUNT BILLS A ND VOUCHERS TO VERIFY THE EXPENSES. HE FOUND THAT A SUM OF RS.45,265/- WAS INCURRED TOW ARDS PROFESSIONAL TAX, AUDIT FEES AND FBT ETC. AND ALLOWED THESE EXPENSES. WITH REGAR D TO THE REMAINING SUM OF RS.6,13,923/- AO DISALLOWED 20% OF THE AFORESAID EX PENSES FOR WANT OF EVIDENCE TO VERIFY THE EXPENSES. THUS AO MADE ADDITION OF RS.L, 22,785/- TO THE TOTAL INCOME OF THE ASSESSEE. 14. BEFORE CIT(A) THE ASSESSEE POINTED OUT THAT AL L THE EXPENSES IN RESPECT OF WHICH DISALLOWANCE WAS MADE BY THE AO ARE NECESSARY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. HE POINTED OUT THAT ITS ACCOUNTS W ERE AUDITED AND PASSED ON PHYSICAL VERIFICATION OF ALL BILLS AND VOUCHERS. IT WAS SUBM ITTED THAT NO SPECIFIC DISCREPANCY WAS POINTED OUT BY THE AO. IN THE REMAND REPORT THE AO HAD NOT OFFERED ANY COMMENTS BUT EXPRESSED A VIEW THAT THERE IS NO BASI S ON WHICH EXPENSES WERE CLASSIFIED AS 'ESSENTIAL' AND 'NOT ESSENTIAL' TO RU N THE BUSINESS OF THE ASSESSEE. CIT(A) WAS OF THE VIEW THAT THE ADDITION MADE BY THE AO CA NNOT BE SUSTAINED. 15. AGGRIEVED BY THE ORDER OF CIT(A) REVENUE HAS R AISED GROUND NO.3 BEFORE THE TRIBUNAL. 16. THE LEARNED DR RELIED ON THE ORDER OF AO. WE A RE OF THE VIEW THAT THE BASIS ON WHICH AO MADE THE IMPUGNED DISALLOWANCE CANNOT BE S USTAINED AND WAS RIGHTLY DELETED BY CIT(A). THE LAW IS WELL SETTLED THAT IT IS FOR THE ASSESSEE TO DECIDE WHAT EXPENSES ARE NECESSARY FOR THE PURPOSE OF BUSINESS. AO CANNOT SIT IN JUDGMENTS ON ITA NO. 1307/KOL/2012- SYSTEM INCORPORATE (P) LTD. A.Y.2007-08 5 WHAT THESE EXPENSES ARE ESSENTIAL OR NOT ESSENTIAL FOR THE PURPOSE OF BUSINESS. WE, THEREFORE, DISMISS GROUND NO.3 RAISED BY THE REVENU E. 17. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE COURT ON 09.12.2015. SD/- SD/- [WASEEM AHMED] [N.V.VASUDEVAN] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 09.12.2015. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. SYSTEM INCORPORATE (P)LTD., 38/2, MAHIM HALDER S TREET, KOLKATA-700026. 2 THE LT.O., WARD-2( 4), KOLKATA. 3. THE CIT- ,KOLKATA. 4. THE CIT(A)-I, KOLKAT A. 5. DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY \ASST. REGISTRAR, ITA T, KOLKATA BENCHES