KANGA & CO, MUMBAI V. JT CIT 11(2), MUMBAI

ITA 2733/MUM/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9095 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-01-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 23-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M V RAJGURUDR
• Assessee Lawyers: P J PARDIWALLA
• Keywords: Depreciation; Opportunity of being heard; Additional evidence; Corroborative evidences; Revenue expenditure
• Section: 143(3); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2733/MUM/2012 ASSESSMENT YEAR: 2008-09 M/S. KANGA & CO VS. JT CIT 11(2) READYMONEY MANSION, 1 ST FLOOR, AAYAKR BHAVAN, 43, VEER NARIMAN ROAD M.K. MARG MUMBAI 400001 MUMBAI 400020 PAN : AAAFK9525E (APPELLANT) (RESPONDENT) ASSESSEE BY : MR. P.J.PARDIWALLA, AR REVENUE BY: MR. M.V.RAJGURU,DR DATE OF HEARING : 03/01/2017 DATE OF PRONOUNCEMENT: 03/01/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR 2008-09. THE APPEAL IS DIRECTED AGAINST THE OR DER OF THE COMMISSIONER (APPEALS) 3, MUMBAI AND ARISES OUT O F THE ORDER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (T HE ACT). 2. GROUND NO. 1, 2, 3 &4 IN THIS APPEAL ARE TAKEN TOGETHER FOR ADJUDICATION AS THEY ADDRESS A COMMON ISSUE. THE 1 ST GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE ADDITION TO THE EXTENT OF RS. 2,63,78 2/- AS CONCEALED PROFESSIONAL FEES OF THE APPELLANT ON THE GROUND TH AT THE APPELLANT WAS NOT ABLE TO OBTAIN CONFIRMATIONS IN RESPECT OF 15 ENTRIES IN THE AIR INFORMATION AND WAS NOT ABLE TO FULLY RECONCILE THE AIR INFORMATION RECEIVED BY THE INCOME TAX DEPARTMENT F ROM EXTERNAL SOURCES WITH THE PROFESSIONAL FEES AS PER THE BOOKS OF ACCOUNTS. THE 2 ND GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS TH AT THE LD. CIT(A) ERRED IN UPHOLDING THE ADDITION TO THE EXTENT OF RS . 1,32,000/- IN RESPECT OF RISHABHDEV TECHNOCABLE LTD. AS CONCEALED PROFESSIONAL ITA NO. 2733/MUM/2012 2 FEES OF THE ASSESSEE ON THE GROUND THAT THE ASSESSE E WAS NOT ABLE TO OBTAIN CONFIRMATION OF THE PARTY. THE 3 RD GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE ADDITION WITHOUT THERE BEING ANY PROVISION IN T HE ACT FOR MAKING SUCH AN ADDITION ON THE BASIS OF EXTERNAL INFORMATI ON AND NO CORROBORATIVE EVIDENCE. THE 4 TH GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS THAT THE LEARNED CIT(A) ERRED IN NOT CONS IDERING THE FACT THAT MERE TDS MADE BY THE CLIENT DOES NOT AUTOMATICALLY MEAN PAYMENT OF PROFESSIONAL FEES TO THE ASSESSEE, MORE SO WHEN THE ASSESSEE IS FOLLOWING CASH BASIS OF ACCOUNTING. 2.1 WE FIND THAT DURING THE COURSE OF APPELLATE PRO CEEDINGS BEFORE THE LD. CIT(A), THE ASSESSEE HAD FILED ADDITIONAL E VIDENCE IN RESPECT OF GROUND NO. 3 TO 7 FOR UNRECONCILED ENTRIES. THE LEA RNED CIT(A) SENT TO THE AO VIDE HIS OFFICE LETTER DATED 03.06.2011, THE ADDITIONAL EVIDENCE FOR EXAMINATION AND COMMENTS. THE AO VIDE HIS REMAN D REPORT DATED 17.10.2011 HAS SUBMITTED THAT THE ASSESSEE FAILED T O PRODUCE ANY SUPPORTING EVIDENCE IN RESPECT OF 25 PARTIES PERTAI NING TO AGGREGATE RECEIPTS OF RS. 4,27,487/-. THE AR OF THE ASSESSEE SUBMITTED BEFORE THE LEARNED CIT(A) THAT ONLY FEW DETAILS AGGREGATIN G TO RS. 4,28,427/- REMAINED TO BE RECONCILED. THE AR FURTHER SUBMITTED BEFORE THE LEARNED CIT(A) THAT WITH REGARD TO 18 NUMBER OF PAR TIES IN RESPECT OF AGGREGATE RECEIPT OF RS. 2,63,782/- , THE ASSESSEE HAD SENT LETTERS TO THESE PARTIES ENQUIRING ABOUT THE DETAILS OF PAYMEN TS MADE TO THE ASSESSEE IF ANY AGAINST THE TDS AS SHOWN IN THE AIR . HOWEVER, THE ASSESSEE HAS NOT RECEIVED ANY REPLY FROM THESE PART IES. THE LEARNED CIT(A) THEREFORE, SUSTAINED THE ADDITION OF RS. 2,6 3,782/-. 2.2 THE AR OF THE ASSESSEE ALSO SUBMITTED BEFORE TH E LEARNED CIT(A) THAT AS RECORDED THE PARTY LISTED AT SERIAL NO 5 & 6 OF THE REMAND REPORT AND AGGREGATING TO RS. 1,32,000/- [(R ISHABDEV TECHNOCABLE LTD. (RS. 66,000 + 66,000)] THESE ENTRI ES HAVE BEEN MATCHED WITH FORM 26AS WHEREIN THESE ARE REFLECTED VIDE SR. NO. 1162 & 1164. THE LEARNED CIT(A) THUS SUSTAINED THE ADDITION OF RS. 1,32,000/-. 3. THE LEARNED COUNSEL OF THE ASSESSEE HAS FILED A PAPER BOOK BEFORE THE TRIBUNAL CERTIFYING THAT PAGE NOS. 1 TO 30 AND 34 TO 39 OF THE COMPILATION WERE BEFORE THE LOWER AUTHORITIES. PAGE NOS. 31, 32, ITA NO. 2733/MUM/2012 3 33 OF THE COMPILATION ARE THE LEDGER ACCOUNT OF RIS HABDEV TECHNOCABLE LTD. LETTER FROM RISHABDEV TECHNOCABLE LTD. AND THE CERTIFICATE ISSUED BY M/S. DAYAL & LOHIA, CHARTERED ACCOUNTANTS WHICH WERE NOT BEFORE THE LOWER AUTHORITIES. 4. THE LEARNED DR SUPPORTED THE ORDER PASSED BY THE LEARNED CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE LEARNED COUNSE L OF THE ASSESSEE HAS FILED A PAPER BOOK BEFORE THE TRIBUNAL STATING THAT IN RESPECT OF ADDITION OF RS. 2,63,782/- CONFIRMED THE LEARNED CI T(A), OUT OF THE 15 PARTIES, LETTERS HAVE BEEN SENT TO THE FIRST 12 PAR TIES, HOWEVER, NO REPLY HAS BEEN RECEIVED BY THE ASSESSEE. ALSO IT IS MENTIONED AT PARA 3 HERE-IN-ABOVE THAT PAGE NO 31, 32 & 33 OF THE P/B W HICH REPRESENTS TRANSACTIONS WITH RISHABDEV TECHNOCABLE LTD. WERE N OT FILED BEFORE THE LEARNED CIT(A) AND THE AO. 5.1 WE MAY MENTION HERE THE INSTRUCTION NO. 5/2013 DATED 08.07.2013 ISSUED BY CBDT. REFERENCE WAS MADE THERE IN TO THE JUDGEMENT OF THE HON'BLE DELHI HIGH COURT IN THE CA SE OF COURT ON ITS OWN MOTION VS. UOI AND ORS. (W.P. (C) 2659/2012 & W.P. (C) 5443/2012 DATED 14.03.2013). THE RELEVANT PARAGRAPH OF THE ABOVE INSTRUCTION READS AS UNDER: IN VIEW OF THE ORDER OF THE HON'BLE DELHI HIGH COU RT (REFERENCE: PARA 50 OF THE ORDER); IT HAS BEEN DECIDED BY THE BOARD THAT WHEN AN ASSES SEE APPROACHES THE ASSESSING OFFICER WITH REQUISITE DETAILS AND PARTIC ULARS IN THE FORM OF TDS CERTIFICATE AS AN EVIDENCE AGAINST ANY MISMATCHED A MOUNT, THE SAID ASSESSING OFFICER WILL VERIFY WHETHER OR NOT THE DEDUCTOR HAS MADE PAYMENT OF THE TDS IN THE GOVERNMENT ACCOUNT AND IF THE PAYMENT HAS BEEN MADE, CREDIT OF THE SAME SHOULD BE GIVEN TO THE ASSESSEE. HOWEVER, THE ASSES SING OFFICER IS AT LIBERTY TO ASCERTAIN AND VERIFY THE TRUE AND CORRECT POSITION ABOUT THE TDS WITH THE RELEVANT AO (TDS). THE AO MAY ALSO, IF DEEMED NECESSARY, ISSUE A NOTICE TO THE DEDUCTOR TO COMPEL HIM TO FILE CORRECTION STATEMENT AS PER THE PROCEDURE LAID DOWN. 5.2 IN VIEW OF THE FACTUAL MATRIX MENTIONED AT PARA 5 AND THE INSTRUCTION OF THE CBDT EXTRACTED AT PARA 5.1 HERE- IN-ABOVE, THE ORDER OF THE LEARNED CIT(A) UPHOLDING THE ADDITION OF RS. 2, 63,782/- AND RS. 1,32,000/- IS SET ASIDE AND THE SAME IS SENT BACK T O THE FILE OF THE AO FOR VERIFICATION. THE AO WOULD FOLLOW THE INSTRUCTION O F CBDT MENTIONED AT ITA NO. 2733/MUM/2012 4 PARA 5.1 AND PASS AN ORDER AFRESH AS PER THE PROVIS IONS OF THE ACT AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS GROUND NO 1, 2, 3 & 4 ARE ALLOWED FOR STATISTICAL P URPOSES. 6. THE 5 TH GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS TH AT THE LEARNED CIT(A) ERRED IN ALLOWING THE DEPRECIATION O N SOFTWARE @25% INSTEAD OF 60% ON THE GROUND THAT THE ASSESSEE ONLY HAD A LICENCE TO USE AND THEREFORE SOFTWARE SHOULD BE CONSIDERED AS AN INTANGIBLE ASSETS ELIGIBLE FOR 25% DEPRECIATION. IT IS FURTHER STATED THAT WITHOUT PREJUDICE TO THE ABOVE, THE ENTIRE EXPENSE SHOULD B E ALLOWED AS AN EXPENDITURE U/S 37 OF THE ACT. 6.1 WE FIND THAT THE HON'BLE BOMBAY HIGH COURT IN T HE CASE OF CIT VS. RAYCHEM RPG LTD. (2012) 21 TAXMANN. COM 507 (BOM) HAS HELD THAT WHERE ENTERPRISE RESOURCE PLANNING (ERP) PAC KAGE SOFTWARE FACILITATED ASSESSEES TRADING OPERATIONS OR ENABLI NG MANAGEMENT TO CONDUCT ASSESSEES BUSINESS MORE EFFICIENTLY OR MOR E PROFITABLY BUT IT WAS NOT IN NATURE OF PROFIT-MAKING APPARATUS, SOFTW ARE EXPENDITURE WAS ALLOWABLE AS REVENUE EXPENDITURE. IN THE INST ANT CASE, THE ASSESSEE HAS CLAIMED ONLY DEPRECIATION ON SOFTWARE @60%. WE, THEREFORE, DIRECT THE AO TO ALLOW DEPRECIATION ON S OFTWARE TO THE ASSESSEE @60%. THUS GROUND NO 5 OF THE APPEAL IS AL LOWED. 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/01/2017 SD/- SD/- (MAHAVIR SINGH) (N. K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBE R MUMBAI; DATED: 03/01/2017 BISWAJIT, SR. P.S. ITA NO. 2733/MUM/2012 5 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI