WABAN SOFTWARE P. LTD, MUMBAI V. DCIT RG 8(3), MUMBAI

ITA 2011/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1182 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 27-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 24-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PURSHOTTAM KUMAR
• Keywords: Depreciation; Business expenditure; Additional evidence; Reasonable cause

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -GBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./2011/MUM/2014, /ASSESSMENT YEAR: 2010-11 WABAN SOFTWARE PVT.LTD. C/O. ORACLE INDIA PVT.LTD. 6 TH FLOOR, SILVER METROPOLIS, OPP. BIMBISAR NAGAR, OLD JAY COACH COMPOUND, WESTERN EXPRESS HIGHWAY,GOREGAON-(E),MUMBAI-400 063. PAN:AAACW 5953 D VS. DCIT-RANGE-8(3) MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI PURSHOTTAM KUMAR ASSESSEE BY: S/SHRI PARAS SAVLA & PRATIK PODDAR / DATE OF HEARING: 17.02.2017 / DATE OF PRONOUNCEMENT:12.04.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 13.12.2013 OF CIT(A)-18 , MUMBAI THE ASSESSEE HAD FILED THE PRESENT APPEAL.ASSESSEE-COMPANY, ENGAGED IN THE BUS INESS OF HANDLING SOFTWARE DEVELOPMENT ACTIVITIES,FILED ITS ORIGINAL RETURN OF INCOME ON 1 4.10.2010 DECLARING TOTAL INCOME OF RS.48.42 LAKHS.THE AO COMPLETED THE ASSESSMENT ON 16.01.2013 DETERMINING INCOME OF THE ASSESSEE AT RS.79.02 LAKHS. 2. VIDE ITS APPLICATION DATED 18.4.2016 THE ASSESSEE H AS REQUESTED TO ADMIT ADDITIONAL EVIDENCES AS PER RULE 29, ITAT RULES, 1963.IN ITS A PPLICATION THE ASSESSEE HAS STATED THAT A COPY OF INVOICES OF FIXED ASSETS PURCHASED DURING T HE YEAR AGGREGATING TO RS.88.15 LAKHS COULD NOT BE PRODUCED BEFORE THE FIRST APPELLATE AU THORITY (FAA), THAT THE FAA HAD REJECTED THE ADDITIONAL INVOICES OF RS.49.60 LAKHS SUBMITTED BEFORE HIM AS ADDITIONALL EVIDENCE, THAT THE EVIDENCE WOULD GO TO THE ROOT OF THE ISSUE.ASSE SSEE HAS REFERRED TO THE CASES OF SUHASINI GOENKA (216ITR518) AND SATYA SETHIA(143ITR486) ALON GWITH THE APPLICATION, THE ASSESSEE HAS FURNISHED A CHART SHOWING DETAILS OF DEPRECIATI ON ALLOWED/DISALLOWED. IT CONTAINS DETAILS LIKE DEPRECIATION RATE,VALUE OF FIXED ASSETS,DEPREC IATION ON ASSETS PUT TO USE AND TOTAL DEPRECIATION. 2.1. DURING THE COURSE OF HEARING BEFORE US, THE AUTHORI SED REPRESENTATIVE (AR) STATED THAT THERE WAS CHANGE IN MANAGEMENT, THAT ALL THE EVIDEN CES COULD NOT BE PRODUCED DURING THE ASSESSMENT/APPELLATE PROCEEDINGS, THAT ASSESSEE WAS ABLE TO TRACE OUT SOME DETAILS FROM BANK, 2011/M/14 (10-11) WABAN SOFTWARE PVT.LTD. 2 THAT THE FIRST APPELLATE AUTHORITY (FAA) HAD ENHANC ED THE DISALLOWANCE. THE DEPARTMENTAL REPRESENTATIVE(DR) STATED THAT THE ISSUE OF ADDITIO NAL EVIDENCE COULD BE DECIDED ON MERITS BY THE BENCH. 2.2. AFTER HEARING THE RIVAL SUBMISSIONS,WE ARE OF THE O PINION THAT THE ADDITIONAL EVIDENCES PRODUCED BY THE ASSESSEE(PG.91-176)SHOULD BE ADMITT ED AS PER RULE 29 OF THE ITAT RULES,AS THE DOCUMENTS ARE CRUCIAL TO DECIDE THE ISSUE BEFOR E US.THE ASSESSEE HAS SHOWN A REASONABLE CAUSE FOR NOT PRODUCING THE SAME BEFORE THE AO/FAA. THEREFORE,SAME ARE TAKEN ON RECORD. 3. FIRST EFFECTIVE GROUND OF APPEAL IS ABOUT DISALLOW ANCE OF CLAIM OF DEPRECIATION TO THE EXTENT OF RS.29.65 LAKHS IN RESPECT OF CERTAIN ADDI TIONS MADE TO FIXED ASSETS. DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESS EE HAD SHOWN ADDITION TO THE BLOCK OF PLANT AND MACHINERY OF RS.1.16 CRORES,THAT IT HAD S HOWN ADDITION OF RS.1.82 CRORES TO THE BLOCK OF FURNITURE AND FIXTURE,THAT IT HAD CLAIMED DEPRECIATION AS PER THE RULES FOR THE ADDITIONS MADE TO BOTH THE BLOCKS.HE DIRECTED THE A SSESSEE TO SUBMIT COMPLETE EVIDENCE IN THE SHAPE OF BILLS AND VOUCHERS TO PROVE THE GENUIN ENESS OF THE ADDITIONS MADE TO THE BLOCK OF ASSETS.IN RESPONSE TO THE SHOW CAUSE NOTICE,THE ASS ESSEE EXPRESSED ITS DIFFICULTY TO PRODUCE THE DETAILS CALLED FOR.IT WAS CONTENDED THAT SUBSEQUENT TO THE FILING OF RETURN THERE WAS CHANGE IN THE MANAGEMENT OF THE COMPANY, FOLLOWED BY CHANGE I N EMPLOYEES HANDLING THE WORK. THE AO FURTHER DIRECTED THE ASSESSEE TO SUBMIT THE RELE VANT EVIDENCE.THE ASSESSEE PRODUCED LEDGER ACCOUNT OF THE PARTIES FROM WHOM THE ASSETS WERE PURCHASED AND BANK STATEMENTS EVIDENCING THE PAYMENT MADE TO THEM. AS THE ASSESSE E HAD NOT PRODUCED THE EVIDENCES TO PROVE THE GENUINENESS OF PURCHASE OF ASSETS THE AO ALLOWED DEPRECIATION OF RS.29.65 LAKHS AS AGAINST THE CLAIM MADE BY THE ASSESSEE OF RS.56. 47 LAKHS. THUS, AN AMOUNT OF RS.26.81 WAS DISALLOWED. 3.1. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PREFERRE D AN APPEAL BEFORE THE FAA AND MADE ELABORATE SUBMISSIONS. IT SUBMITTED ADDITIONAL EVID ENCE BEFORE THE FAA WHICH INCLUDED BANK STATEMENT.THE FAA SENT THE BANK STATEMENT TO THE AO FOR EXAMINATION AND SUBMITTED A REMAND REPORT. VIDE HIS LETTER DATED 17.9.2013, THE AO SUBMITTED THE REPORT IN THAT REGARD. HE FORWARDED A COPY OF REMAND THE REPORT TO THE ASSESS EE AND ISSUED A SHOW CAUSE NOTICE TO IT TO EXPLAIN AS TO WHY DEPRECIATION, AMOUNTING TO RS.23. 71 LAKHS ALLOWED BY THE AO, WITHOUT VERIFYING THE BILLS AND VOUCHERS SHOULD NOT BE DISA LLOWED AND ENHANCEMENT TO THAT EXTENT SHOULD NOT BE MADE. THE ASSESSEE FILED ITS SUBMISSI ONS BEFORE THE FAA. AFTER CONSIDERING THE AVAILABLE MATERIAL THE FAA HELD THAT THE ASSESSEE HAD CLAIMED DEPRECIATION OF RS.56.47 LAKHS ON THE ADDITIONAL ASSETS OF RS.1,16,97,716/- (PLANT & MACHINERY) AND RS.1,82,76,432/- 2011/M/14 (10-11) WABAN SOFTWARE PVT.LTD. 3 (FURNITURE AND FIXTURE), THAT THE AO HAD GIVEN REAS ONABLE OPPORTUNITY TO THE ASSESSEE TO FILE COMPLETE DETAILS AND DOCUMENTARY EVIDENCE TO PROVE THE GENUINENESS OF THE PURCHASES OF THE ASSETS IN QUESTION, THAT THE DOCUMENTARY EVIDENCES AND DETAILS WERE NOT FILED CITING THE REASON OF CHANGE OF MANAGEMENT, THAT THE AO HAD WRONGLY AL LOWED DEPRECIATION OF RS.29,65,986/-, WITHOUT VERIFYING THE BILLS/VOUCHERS, THAT A NOTICE OF ENHANCEMENT WAS ISSUED TO THE ASSESSEE, THAT IN RESPONSE TO THE ENHANCEMENT NOTICE THE ASSE SSEE HAD ARGUED THAT THE AO HAD ALLOWED DEPRECIATION OF RS.15.45 LAKHS IN RESPECT OF FIXED ASSETS/ADDITIONS OF RS.80.56 LAKHS BASED ON THE VENDORS NAME APPEARING IN THE BANK STATEMENT, T HE AO HAD VERIFIED THE BANK ACCOUNT AND HAD ALLOWED THE DEPRECIATION.HE FURTHER OBSERVED TH AT BEFORE CLAIMING ANY DEDUCTION THE ONUS WAS ON THE ASSESSEE TO PRODUCE COMPLETE EVIDENCES B EFORE THE AO, THAT THE ASSESSEE HAD FAILED TO SUBMIT DOCUMENTARY EVIDENCES REGARDING TH E PURCHASE OF PLANT AND MACHINERY AS WELL AS FURNITURE AND FIXTURES, THAT THE AO HAD INA DVERTENTLY ALLOWED THE DEPRECIATION WITHOUT VERIFYING THE FACTS. THE ASSESSEE HAD STATED THAT A O HAD MADE DISALLOWANCE OF RS.15.45 LAKHS IN PLACE OF RS.23.71 LAKHS AS MENTIONED IN THE ENH ANCEMENT NOTICE. HE DIRECTED THE AO TO VERIFY THE FIGURES AND ADOPT THE CORRECT FIGURES. 3.1. BEFORE US,THE AR STATED THAT THE ADDITIONAL EVIDENC ES PRODUCED BEFORE THE TRIBUNAL WERE NOT CONSIDERED BY THE REVENUE AUTHORITIES,THAT THE ASSESSEE HAD PURCHASED THE PLANT, MACHINERY,FURNITURE,THAT EVIDENCES COULD NOT BE PRO DUCED DUE TO CHANGE IN MANAGEMENT. THE DR SUPPORTED THE ORDER OF THE FAA. 3.2. WE HAVE ALREADY ADMITTED THE ADDITIONAL EVIDENCES P RODUCED BEFORE US.THE FAA HAD NO OCCASION TO VERIFY THE CORRECTNESS OF THE CLAIM MAD E BY THE ASSESSEE IN ABSENCE OF THE SAID DOCUMENTS.THEREFORE,WE ARE OF THE OPINION THAT,IN T HE INTEREST OF JUSTICE,MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE FAA FOR FRESH ADJU DICATION.HE WOULD DECIDE THE ISSUE AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO TH E ASSESSEE AND AFTER CONSIDERING THE ADDITIONAL EVIDENCES PRODUCED BEFORE US.GROUND NO. IS DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. 4. NEXT GROUND OF APPEAL IS ABOUT FURTHER DISALLOWANCE OF RS. 15.45 LAKHS MADE BY THE FAA. IN THE EARLIER PARAGRAPH WE HAVE NARRATED THE FACTS OF DISALLOWANCE MADE BY HIM ON ACCOUNT OF DEPRECIATION. FOLLOWING OUR ORDER FOR THE FIRST GROUND OF APPEAL, WE RESTORE THE MATTER OF CLAIM ABOUT THE DEPRECIATION TO THE FILE OF FAA FOR FRESH ADJUDICATION. SECOND GROUND IS ALSO DECIDED IN FAVOUR OF THE ASSESSEE, IN PART. 5. LAST GROUND OF APPEAL IS ABOUT UPHOLDING THE DISALL OWANCE OF BUSINESS EXPENSES OF RS.93, 945/-,INCURRED BY THE ASSESSEE THROUGH CREDIT CARD BASED ON INFORMATION OF THE AIR STATEMENT. 2011/M/14 (10-11) WABAN SOFTWARE PVT.LTD. 4 DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT AS PER THE AIR INFORMATION, THE ASSESSEE HAD MADE CREDIT CARD PAYMENTS OF RS. 3.17 LAKHS TO AMERICAN EXPRESS BANKING CORPORATION. HE DIRECTED THE ASSESSEE TO EXPLAIN TH E SOURCE OF THE PAYMENTS. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THE D ETAILS OF RS. 2.23 LAKHS OUT OF THE TOTAL EXPENDITURE INCURRED BY IT. THE AO DISALLOWED THE R EMAINING AMOUNT I.E. RS. 93, 945/- AND ADDED THAT THE SAME TO THE TAXABLE INCOME OF THE AS SESSEE. 5.1. DURING THE APPELLATE PROCEEDINGS, BEFORE THE FAA, T HE ASSESSEE ARGUED THAT CREDIT CARD EXPENSES MENTIONED IN THE STATEMENT WERE TOWARDS RE IMBURSEMENTS MADE TO ONE OF ITS EMPLOYEES FOR THE PURPOSE OF CARRYING ON ITS BUSINE SS, THAT IT HAD REQUESTED THE AO TO PROVIDE THE BREAKUP OF RS. 93, 945/-AND ADDITIONAL TIME TO ENABLE IT TO PROVIDE THE DETAILS, THAT THE AO DID NOT GIVE ANY DETAILS IN THAT REGARD, THAT THE A BOVE PAYMENTS WERE ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS AND WERE DULY AUDITED, THAT THE B USINESS OF THE COMPANY WAS ACQUIRED AND NONE OF THE EMPLOYEES,WHO WERE HANDLING THE TAX/ACC OUNTS,HAD CONTINUED. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, T HE FAA HELD THAT THE AO HAD GIVEN REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE T O SUBMIT THE DETAILS OF PAYMENTS, THAT NO DOCUMENTARY EVIDENCES SUBMITTED TO VERIFY THE PAYME NT OF RS. 93, 945/-, THAT THE ONUS WAS ON THE ASSESSEE SUBMITTED THE COMPLETE DOCUMENTARY EVI DENCES BEFORE THE AO, THAT THE ASSESSEE HAD FAILED TO DISCHARGE ITS ONUS. FINALLY, HE UPHEL D THE ORDER OF THE AO. 5.2. BEFORE US, THE AR STATED THAT CARD WAS GIVEN TO THE EMPLOYEE, THAT THE EXPENDITURE WAS INCURRED FOR BUSINESS OF THE ASSESSEE.THE DR SUPPOR TED THE ORDER OF THE FAA. WE FIND THAT THE ASSESSEE HAD NOT PRODUCED DOCUMENTARY EVIDENCES ABOUT THE EXPENDITURE TO PROVE THAT SAME WAS INCURRED WHOLLY AND EXCLUSIVE FOR THE BUSI NESS PURPOSES. THE BANK STATEMENT, PRODUCED BY IT BEFORE THE AO INDICATES THE EXPENDIT URE INCURRED BUT IT DOES NOT PROVE THE FACT OF INCURRING OF EXPENDITURE FOR THE BUSINESS. THERE FORE, IN OUR OPINION THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY. UPHOLDING THE SAME, WE DECIDE THIRD GROUND OF APPEAL AGAINST THE ASSESSEE. AS A RESULT, APPEAL FI LED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH APRIL, 2017. 12 , 2017 SD/- SD/- ( / RAM LAL NEGI ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 12.04.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 2011/M/14 (10-11) WABAN SOFTWARE PVT.LTD. 5 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.