Rajka Estate Developers Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-5(3), Ahmedabad

ITA 2906/AHD/2011

• Counselvise Citation: 290620514 RSA 2011
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 20-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 24-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: H K LAL SRDR
• Assessee Lawyers: S N DIVATIA
• Keywords: Business income; Depreciation; Principle of natural justice

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO.2906/AHD/2011 ASSESSMENT YEAR:2007-08 RAJKA ESTATE DEVELOPERS PVT. LTD., ASHRAY, NANDANVAN SOCIETY, B/H MONEREPOSE, NR. KARNAVATI CLUB, S.G. HIGHWAY, AHMEDABAD 380058 PAN NO.AABCB4023A / V/S . INCOME TAX OFFICER, WARD-5(3), AHMEDABAD / APPELLANTT .. / RESPONDENT /BY APPELLANT SHRI S.N.DIVATIA, AR /BY RESPONDENT SHRI H.K. LAL, SR-DR /DATE OF HEARING 20-03-2011 / DATE OF PRONOUNCEMENT 23-03-2012 !' !' !' !' / // / O R D E R PER T.R.MEENA, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE O RDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XI, AHMEDABAD IN APPEAL NO. CI T(A)-XI/962/10-11 DATED 30- 09-2011. THE ASSESSEE WAS FRAMED BY THE ITO, WARD-5 (3), AHMEDABAD VIDE HIS ORDER DATED 04-11-2009 FOR THE ASSESSMENT YEAR 2007 -08. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS AS UND ER:- 1.1 THE ORDER PASSED U/S 250 ON 30.9.2011 FOR A.Y. 2007-2008 BY CIT(A)-XI, ABAD PARTLY CONFIRMING THE ADDITION S/DI SALLOWANCES MADE BY ITO, WARD-5(3), ABAD IS WHOLLY ILLEGAL, UNLAWFUL AN D AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 1.2 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN NOT CONSIDERING FULLY AND PROPERLY THE EXPLANATIONS FUR NISHED AND THE ITA NO.2906/AHD/2011 A.Y. 2007-08 RAJKA ESTATE DEVELOPERS P. LTD. V. ITO WD-5(3) ABD PAGE 2 EVIDENCE PRODUCED BY THE APPELLANT WITH REGARD TO T HE IMPUGNED ADDITIONS/DISALLOWANCES. 2.1 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN CONFIRMING THE FOLLOWING ADDITIONS/DISALLOWANCES: (A) SALE PROCEEDS OF SOFTWARE AS OTHER INCOME :RS. 3,90,000 (B) DISALLOWANCE OUT OF ADM. & OTHER EXPS. :RS.3, 88,763 DISALLOWANCE OF DEPN. :RS.3,03,401 (D) DISALLOWANCE OF FINANCIAL EXPS. :RS. 73,98 7 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT NOT TO HAVE UPHELD THE ABOVE SAID ADDITIONS/D ISALLOWANCES. 3. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSESSEE HAS NOT PRESSED GROUND NO.1.1 &1.2, HENCE, DISMISSED THE SAME AS NOT PRESS ED. 4. THE NEXT GROUND NO. 2.1(A) IS AGAINST THE SALE P ROCEED OF SOFTWARE AS OTHER INCOME OF RS.3.90 LAKH, 2.1.(B) DISALLOWANCE OUT OF ADMINISTRATIVE AND OTHER EXPENSES OF RS.3.88,763/- AND 2.1(C) DISALLOWANCE O F DEPRECIATION OF RS.3,03,401/- AND 2.1(D) & DISALLOWANCE OF FINANCIAL EXPENSES OF RS.73,987/-. AS THE ISSUES INVOLVED ARE INTER-CONNECTED WE PASS A CONSOLIDATED ORDER IN THIS REGARD. 5. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PR IVATE LIMITED COMPANY AND IT WAS ORIGINALLY ENGAGED IN THE BUSINESS OF ESTATE DE VELOPERS AND THEREAFTER IT WAS CHANGED FROM TIME TO TIME ALONG WITH THE NAME. PRES ENTLY THE ASSESSEE-COMPANY IS KNOWN AS RAJKA CONSULTANCY PVT. LTD. AND ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT AND OTHER CONSULTANCY ACTIVITIES. DURIN G THE YEAR UNDER CONSIDERATION ASSESSEE FILED RETURN OF INCOME ON 23-10-2007 DECLA RING TOTAL INCOME AT NIL TOGETHER WITH TAX AUDIT REPORT. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT DURING THE YEAR ASSESSEE-COMP ANY HAS SHOWN TOTAL RECEIPT OF RS.2.50 LAKH FROM SISTER CONCERN CONTECH BPO SERVIC ES AND RS. 1.40 LAKH FROM CHANDRA PAL SUKRAMANI AT RS.2.50 LAKH. THE AO MADE DETAILED INVESTIGATION AND FOUND THAT THERE WAS OPENING DEBIT BALANCE IN THE A CCOUNT OF CONTECH BPO SERVICES LTD. OF RS.2.50 LAKH AND ON 30-03-2007 ENTRY FOR AL LEGED SOFTWARE SALES OF RS.2.50 LAKH WAS PASSED WITHOUT ANY BASIS FOR SALE. AS PER INVOICE COPY OF THE ASSESSEE HAD SOLD ONE TRANSCRIPTION MANAGER SOFTWARE BUT THEE IS NO CORRESPONDING PURCHASE SHOWN BY THE ASSESSEE AND THE BILL DATED 31-03-2007 BEARING NO.1 ONLY SPEAK ALLOWED THAT NO BUSINESS HAS BEEN DONE AND ENTRY IN THE ACCOUNT OF ASSOCIATE CONCERN HAS BEEN MADE CONVENIENTLY TO SHOW BUSINESS RECEIPT FOR CLAIMING ITA NO.2906/AHD/2011 A.Y. 2007-08 RAJKA ESTATE DEVELOPERS P. LTD. V. ITO WD-5(3) ABD PAGE 3 EXPENSES. SIMILARLY, BILL NO.2 DATED 31-03-2007 HAS BEEN MADE IN THE NAME OF MR. CHANDRA PAL SUKHRAMANI AS MANAGEMENT CONSULTANCY CH ARGES WHICH IS ALSO NOT INSPIRING BECAUSE THERE IS NO EXPENDITURE ON ITS ST AFF FOR PROPOSED CONSULTANCY RENDERED. THE ASSESSING OFFICER HELD THAT THE ASSES SEE HAD NOT DONE ANY BUSINESS. THEREFORE, HE TREATED TOTAL INCOME OF RS.3.90 LAKH AS INCOME FROM OTHER SOURCES. IN FIRST APPELLATE PROCEEDINGS, LD. CIT(A) HAS CONFIRM ED THE VIEW OF THE AO AND DISMISSED THE APPEAL OF ASSESSEE. 6. THE LD. AR OF THE ASSESSEE REITERATED AR GUED BEFORE US ON THE BASIS OF SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND SUBMITTE D THAT THE INCOME DISCLOSED IN PROFIT AND LOSS ACCOUNT OF RS.3,90 LAKH WAS SALE PR OCEED OF THE SOFTWARE. THE ASSESSEE HAS SUBMITTED COPY OF THE PURCHASE BILL ON 10-09-2009 TO THE AO. SHRI RAJAN VASA, DIRECTOR OF THE ASSESSEE-COMPANY IS TEC HNICALLY QUALIFIED AND EXPERIENCE IN SOFTWARE INDUSTRIES THE INITIAL SOFTW ARE BUSINESS. HE FURTHER CLAIMED THAT THERE IS NO RELEVANCE OF NAME OF THE ASSESSEE- COMPANY TO THE NATURE OF BUSINESS CARRIED ON BY IT. THE BILLS WERE RAISED FO R SALE OF TRANSCRIPTION-MANAGER SOFTWARE AND MANAGEMENT CONSULTANCY CHARGES. HE HAD FILED THE CONFORMATION BEFORE THE ASSESSING OFFICER. THE AO HAD REJECTED T HE SUBMISSION OF THE ASSESSEE WITHOUT PUTTING ANY EVIDENCE AGAINST THE ASSESSEE. THE AO HAD ALSO FAILED TO APPRECIATE THAT THERE WAS ALREADY A OPENING DEBIT B ALANCE IN THE ACCOUNT OF CONTECH BPO SERVICES P. LTD.. THERE WAS A SOFTWARE BUSINESS IN PRECEDING YEAR ALSO. 7. FURTHER HE CONTENDED FOR DISALLOWANCE OF AD MINISTRATIVE EXPENSE. THE ASSESSING OFFICER CALLED FOR DETAILS OF ADMINISTRAT IVE EXPENSES WHICH WAS SUBMITTED TO HIM. THE AO DISALLOWED ON THE BASIS THAT THERE W AS NO BUSINESS. THE ASSESSEE- COMPANY WAS ENGAGED IN THE PURCHASE AND SALE OF HUG E QUANTITY OF SHARES WHICH WERE REFLECTED IN THE BALANCE-SHEET AS ON 31 ST MARCH, 2007. THE JUSTIFICATION OF EXPENSES HAD BEEN SUBMITTED BEFORE THE ASSESSING OF FICER. THE LD CIT(A) ALSO HAD CONFIRMED THE ADDITION MADE BY AO AND FINDINGS WERE GIVEN AT PAGE-5 OF HIS ORDER. 8. THE REMAINING TWO GROUNDS OF DISALLOWANCE OF DEP RECIATION AND DISALLOWANCE OF FINANCIAL EXPENSES ARE RELATED TO BUSINESS AS CL AIMED BY THE ASSESSEE. THE AR OF THE ASSESSEE, HE HOWEVER, AGREED TO MAKE DISALLOWAN CE FROM THE DEPRECIATION AND OUT OF OTHER EXPENSES ON PERSONAL PURPOSES. HOWEVER , THESE ADDITIONS WERE ITA NO.2906/AHD/2011 A.Y. 2007-08 RAJKA ESTATE DEVELOPERS P. LTD. V. ITO WD-5(3) ABD PAGE 4 CONFIRMED BY THE LD. CIT(A) AT PAGE-9 TO 12 OF HIS APPELLATE ORDER. ON THE GROUND THAT THE ASSESSEE-COMPANY LOAN FOR PURCHASE OF CAR HAS B EEN TAKEN IN THE NAME OF ITS DIRECTOR AND NOT IN THE NAME OF ASSESSEE-COMPANY. T HE LOAN WAS TRANSFERRED IN THE BOOKS OF ACCOUNT BY ASSESSEE-COMPANY BY A GENERAL E NTRY AND THERE WAS NO EVIDENCE THAT CAR WAS USED FOR BUSINESS PURPOSE. 9. WE HAVE PERUSED THE ASSESSMENT ORDER, ORD ER OF LD. CIT(A) AND SUBMISSIONS OF BOTH SIDES. THE ASSESSEE FURNISHED COPY OF SALE BILLS AT SERIAL NO.9 AND 10 OF ASSESSEES PAPER BOOK DATED 31-03-2007, WHERE TRANS CRIPTION-MANAGER SOFTWARE AND MANAGEMENT CONSULTANCY CHARGES WAS SHOWN AS SAL E. HE AGAIN HAD SHOWN THE PAYMENT OF RS.1.51 LAKH PAID FOR PURCHASE SOFTWARE PACKAGE AND INCURRED THE VARIOUS EXPENSES DEBITED IN THE PROFIT AND LOSS ACC OUNT BUT THE PURCHASE SHOWN FROM OTHER ADVAITYA PRODUCT PVT. LTD. AT RS.1.50 LAKH HA S NOT BEEN DEBITED IN PROFIT AND LOSS ACCOUNT. THE ASSESSEE HAS ADMITTED VIDE ITS LE TTER DATED 18-06-2009 BEFORE THE AO THAT THERE IS NO PURCHASE EXCEEDING RS.50,000/- AND M/S. CONTECH BPO SERVICES P. LTD. IS A SISTER CONCERN AND THE ASSESS EE IS HOLDING 99.98% SHARES OF THE ASSESSEE-COMPANY FOR WHICH SALE OF RS.2.50 LAKH HAD BEEN SHOWN. THE CONFIRMATIONS SHOWS THAT THERE IS AN ENTRY FOR SOFT WARE SALE ON 31-03-2007 I.E LAST DAY OF FINANCIAL YEAR. THERE IS NO EXPENDITURE FOR DEVELOPMENT OF SOFTWARE. THERE IS NO EXPENDITURE INCURRED FOR RECEIPT OF RS.1.40 LAKH IN PROFIT AND LOSS ACCOUNT AND HAS NOT DEMONSTRATED ANY ACTIVITY TO CONVERT KNOWLEDGE INTO SALEABLE MODELS. THEREFORE WE FIND NO REASON TO INTERFERE INTO THE ORDER OF LD . CIT(A) ON THIS ISSUE AND APPEAL OF ASSESSEE IS DISMISSED. 10. IT IS ALREADY BEEN HELD THAT THERE WAS NO BUSINESS OF THE ASSESSEE AND NO CORROBORATIVE EVIDENCE HAS BEEN FILED BEFORE THE AS SESSING OFFICER AS WELL AS LD. CIT(A) TO CONTROVERT THE FINDINGS OF THE AUTHORITIE S BELOW. THE CASE LAW CITED BY THE LD. AR WAS WITH REFERENCE CAR OWNED BY THE DIRECTOR OF THE ASSESSEE-COMPANY BUT HIRE INCOME HAS BEEN SHOWN IN THE HANDS OF ASSESSEE -COMPANY. AS SUCH, THERE IS NO BUSINESS USE IN THIS CASE OF CAR IT WAS IN THE N AME OF THE DIRECTOR AND LOAN HAS BEEN TAKEN IN THE NAME OF THE DIRECTOR. THEREFORE D EPRECIATION AND DISALLOWANCE OF FINANCE EXPENSES CLAIMED ON CAR WERE NOT INCURRED W HOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. ON THIS POINT ALSO, LD. CIT(A)S ORDER IS HEREBY UPHELD. ITA NO.2906/AHD/2011 A.Y. 2007-08 RAJKA ESTATE DEVELOPERS P. LTD. V. ITO WD-5(3) ABD PAGE 5 11. THE DISALLOWANCE OF ADMINISTRATIVE AND OTHE R EXPENSES OF RS.3,88,763/- WHICH INCLUDED ELECTRICITY EXPENSES OF RS.1,47,521/- WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES AS ASSESSEE HAS N OT CARRIED OUT ANY ACTIVITY DURING THE YEAR UNDER CONSIDERATION. THERE IS NO SALARY TO THE STAFF, THE ELECTRICITY EXPENSES OF RS.1,47,521/- PERTAINS TO THE RESIDENCE OF DIREC TOR AND NOT BUSINESS PREMISES OF THE ASSESSEE. THE SAME HAS NOT BEEN INCURRED FOR BU SINESS PURPOSES. THERE IS NO EVIDENCE WITH THE ASSESSEE TO PROVE THAT TRAVELING EXPENSES WAS INCURRED FOR BUSINESS PURPOSES. THE OTHER MISCELLANEOUS EXPENSES ON MOTOR CAR EXPENSES ARE NOT INCURRED FOR THE BUSINESS PURPOSE. THUS, ON THI S GROUND ALSO THE APPEAL IS DISMISSED. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/03/201 2 SD/- SD/- (MUKUL KUMAR SHAWART) (T.R.MEENA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) #!$%- 23 /03/2012 )!! * DKP* !' !' !' !' ++, ++, ++, ++, -, -, -, -, / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. $$+0 1 / CONCERNED CIT 4. 1- / CIT (A) 5. ,45 +++0, +0, )!! / DR, ITAT, AHMEDABAD 6. 589 :; / GUARD FILE. BY ORDER/ !' , /TRUE COPY/