M/s Cadtrium Engineering Solutioins (P) Ltd., New Delhi V. ITO, New Delhi

ITA 3372/DEL/2012

• Counselvise Citation: 337220114 RSA 2012
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 29-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V K AGGARWAL
• Keywords: Depreciation; Principle of natural justice
• Section: 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI S.V.MEHROTRA, ACCOUNTANT MEMBER AND SHRI KULBHARAT, JUDICIAL MEMBER I.T.A .NO.- 3372/DEL/2012 (ASSESSMENT YEAR- 2007-08) CADTRIUM ENGINEERING SOLUTIONS (P) LTD. VS ITO, 146, SECTOR-I, POCKET-2, WARD-3(2), DWARKA, NEW DELHI NEW DELHI PAN:-AACCC1750E (A PPELLANT) (RESPONDENT) APPELLANT BY: SH. V.K.AGGARWAL, AR RESPONDENT BY: SH. SANJAY K. JAIN, SR. DR APPEAL HEARD ON-11.09.2012 ORDER PRONOUNCED ON-14.09.2012 ORDER PER KULBHARAT, JM THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-VIII, NEW DELHI DATED 20.04.2012. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- 1). UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLATE ORDER PASSED BY THE LD. CIT(A) IS ILLEGAL BEING AGINST THE PRINCIPLES OF NATURAL JUSTICE AND AGAINST THE P ROVISIONS OF IT ACT, 1961. 2). THE LD. CIT(A) HAS GROSSLY ERRED ON FACTS AS W ELL AS IN LAW IN NOT ALLOWING RELIEF U/S 10A OF THE INCOME TA X ACT, 1961. 3). THE LD. CIT(A) HAS GROSSLY ERRED ON FACTS AS W ELL AS IN LAW IN CONFIRMING THAT PURCHASE OF COMPUTER (RS. 1, 78,940/-) IS I.T.A .NO.- 3372/DEL/2012 2 NOT GENUINE AND CONSEQUENTLY CONFIRMING THE DISALLO WANCE OF DEPRECIATION (RS. 1,07,364/-) ON THE SAME. 4). THE LD. CIT(A) HAS GROSSLY ERRED ON FACTS AS W ELL AS IN LAW IN CONFIRMING DISALLOWANCE OF RS. 1,65,000/- FO R PURCHASE/HIRING OF SOFTWARE U/S 40(A)(IA). 5). THE APPELLANT CRAVES LEAVE TO ADD, ALTER, MODI FY AND WITHDRAW ANY GROUND OF APPEAL BEFORE OR DURING THE APPELLATE PROCEEDINGS. 3. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS SELECTED FOR SCRUTINY AND ASSESSMENT U/S 143(3) OF THE INCOME TA X ACT, 1961 (HEREIN AFTER REFER TO AS THE ACT) WAS FRAMED VIDE ORDER DA TED 11.12.2009. THE ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT DISA LLOWED THE CLAIM OF EXEMPTION U/S 10A, DEPRECIATION AND MADE DISALLOWAN CE U/S 40(A)(IA). 4. AT THE REQUEST OF LD. COUNSEL FOR THE ASSESSEE, GROUND NO.-1 & 2 ARE TAKEN TOGETHER. THE FIRST EFFECTIVE GROUND IS REGA RDING DISALLOWANCE OF RELIEF U/S 10A OF THE ACT. LD. COUNSEL FOR THE ASSESSEE, S H. V.K.AGGARWAL, SUBMITTED THAT THE ASSESSEE COMPANY IS ENGAGED IN T HE EXPORT OF ENGINEERING BASED SOFTWARE SERIES SINCE MAY 2003 AND THE APPELL ANT VIDE ITS APPLICATION DATED 10.04.2006 APPLIED FOR REGISTRATION WITH SOFT WARE TECHNOLOGY PARKS OF INDIA (STPI) FOR CONVERSION FROM DTA TO STP UNIT. THE STPI, NOIDA VIDE ITS LETTER DATED 03.05.2006 GRANTED THE REQUISITE P ERMISSION. (I) LD. COUNSEL SUBMITTED THAT THE AUTHORITIES BELO W FAILED TO APPRECIATE THE FACTS IN RIGHT PERSPECTIVE AND MIS-CONSTRUED TH E LETTER ISSUED BY STPI. I.T.A .NO.- 3372/DEL/2012 3 HE SUBMITTED THAT THE ASSESSING OFFICER ON THE BASI S OF MIS-CONCEPTION OF LAW DECLINED RELIEF ON THE BASIS THAT IT WAS A CASE OF BUSINESS ALREADY IN EXISTENCE WHICH HAS BEEN RECONSTRUCTED FOR CLAIMING EXEMPTION U/S 10A, THE ASSESSEE UTILIZED COMPUTERS, WHICH HAD BEEN USED EA RLIER IN THE OTHER PURPOSES, FOR ACCOMPLISHING THE JOBS ON THE PROFITS OF WHICH IT IS CLAIMING EXEMPTION U/S 10A, FROM THE FATE OF PURCHASE OF PLA NT AND MACHINERY (COMPUTERS), IT IS FOUND THAT FIRST PURCHASE WAS MA DE FROM 01.07.2006 ONWARDS FROM THE ENTITIES WHOSE EXISTENCE IS UNDER DOUBT. THE INVOICES OF M/S GAURAV COMPUTERS WAS FOUND TO BE BOGUS. THE AS SESSEE WRONGLY CLAIMED EXEMPTION U/S 10A AND ALSO DEPRECIATION ON PURCHASE OF COMPUTERS FROM M/S GAURAV COMPUTER AND RECEIVED REMITTANCE IN RESPECT OF FIVE ORDERS WHICH WERE EXECUTED PRIOR TO NEW PLANT AND MACHINER Y (COMPUTERS) WAS PUT TO ME. THE ASSESSEE DID NOT FULFILL THE CONDITION AS MENTIONED AT S.NO. 4 IN THE LETTER BEARING NO. STPIN/APP/532006/200777/3740 6 AND THE ASSESSEE DID NOT FULFILL THE REQUIREMENT ENVISAGED U/S 10A O F THE ACT. (II) LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT TH E LD. CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER ON THE BASIS TH AT THE BASIC CONDITION U/S 10A OF THE ACT IS CONCERNED UNIT, BEGAN MANUFACTURE OF COMPUTER SOFTWARES IN THE SOFTWARE TECHNOLOGICAL PARK. IT IS OBSERVED BY THE LD. CIT(A) THAT THE ASSESSEE DID NOT FULFILL THE BASIC REQUIREMENTS OF INTIMATING THE DATE OF I.T.A .NO.- 3372/DEL/2012 4 COMMERCIAL PRODUCTION TO THE STPI WHICH WAS A BASIC CONDITION FOR GRANTING OF REGISTRATION. MOREOVER, THE ASSESSING OFFICER HAS ALSO PROVED ON THE BASIS OF EVIDENCE ON RECORD THAT PURCHASE OF COMPUT ER WAS BOGUS WHICH ALSO LEADS TO THE INFERENCE THAT COMMERCIAL PRODUCTION H AD NOT STARTED IN STPI AND ALSO THAT THE EXPORT SALES SHOWN WERE PRIOR TO THE PERIOD OF COMMERCIAL PRODUCTION. (III) LD. COUNSEL SUBMITTED THAT THE FINDING OF THE AUTHORITIES BELOW IS MIS- CONCEIVED. HE SUBMITTED THAT FROM THE BARE READING OF LETTER GRANTING PERMISSION, IT IS EVIDENT THAT THE CONDITION FOR GR ANTING PERMISSION ARE EMBODIED IN PARA 2 OF THE SAID LETTER. LD. COUNSEL SUBMITTED THAT THE ANOTHER OBJECTION OF THE AUTHORITIES BELOW WAS THAT AS PER PARA 4, THE ASSESSEE FAILED TO INTIMATE THE COMMERCIAL PRODUCTION TO STPI. HE SUBMITTED THAT THIS CANNOT BE TERMED AS MANDATORY CONDITION, AS HAS BEE N ADMITTED BY THE STPI IN THE LATER YEARS THAT THE INTIMATION REGARDING CO MMERCIAL PRODUCTION TO STPI WAS IMMATERIAL. THEREFORE, HE SUBMITTED THAT THE AUTHORITIES BELOW GROSSLY ERRED IN REJECTING THE CLAIM ON THE BASIS T HAT NO INTIMATION WAS GIVEN TO STPI. FURTHER, HE SUBMITTED THAT AN INTIMATION DATED 26.03.2007 WAS DULY GIVEN ACKNOWLEDGEMENT, THEREOF, IS ENCLOSED AT PAGE 3 OF THE PAPER BOOK. THEREFORE, THE CONDITION REGARDING INTIMATION DOES NOT SURVIVE. HE SUBMITTED THAT ANOTHER BASIS WHICH THE LD. CIT(A) H AS TAKEN FOR DECLINING I.T.A .NO.- 3372/DEL/2012 5 THE RELIEF U/S 10A IS THAT THE PURCHASE OF COMPUTER S AMOUNTING TO RS. 1,78,940/- ON 19.08.2006 FROM M/S GAURAV COMPUTERS SERVICE HAS BEEN TREATED AS A BOGUS AND, THEREFORE, THE COMMERCIAL PRODUCTION HAS NOT BEEN STARTED IN STPI. HE SUBMITTED THAT A PERUSAL OF TH E SCHEDULE 2 TO THE BALANCE SHEET PERTAINING TO FIXED ASSETS CLEARLY INDICATES THAT COST OF THE COMPUTERS IN THE OPENING BALANCE IS RS. 6,74,310/- AND AN ADDITI ON OF RS. 3,70,340/- WAS DURING THE YEAR. SIMILARLY, THE VALUE OF OPENING B ALANCE OF SOFTWARE IS RS. 10,43,861/- AND THERE IS AN ADDITION OF RS. 3,32,00 0/- DURING THE YEAR. HE SUBMITTED THAT FROM THE RECORDS, IT IS CRYSTAL CLEA R THAT THE PRODUCTION HAS ALREADY BEEN STARTED BECAUSE THE ASSESSEE WAS IN PO SSESSION OF MANY COMPUTERS AND INTIMATION TO THIS EFFECT WAS GIVEN T O STPI AND IT WAS INFORMED THAT AFTER REGISTRATION WITH STPI, FIRST A PPROVAL OF THE WORK DONE BY THE COMPANY HAS BEEN MADE ON 06.05.2006 BE ONE OF I TS CUSTOMERS. HE SUBMITTED THAT IT WAS ALSO INTIMATED THAT THE COMPA NY IS PROVIDING SOFTWARE BASED ENGINEERING SERVICE TO ITS FOREIGN CUSTOMERS SINCE MAY 2003. HE SUBMITTED THAT THE ASSESSING OFFICER UNDER THE MIS- CONCEPTION OF LAW CAME TO CONCLUSION THAT THE CONDITIONS MENTIONED U/S 10A (2)(II)&(III) ARE VIOLATED. HE SUBMITTED THAT CONVERSION FROM DOMEST IC TARIFF AREA TO STP UNIT CANNOT BE TERMED AS SPLITTING UP OR RECONSTRUC TION OF BUSINESS ALREADY IN EXISTENCE AND ALSO IT CANNOT BE TERMED AS TRANSFER OF MACHINERY OR PLANT, I.T.A .NO.- 3372/DEL/2012 6 PREVIOUSLY USED FOR ANY PURPOSE. HE SUBMITTED THAT EVEN THE CBDT HAS CLARIFIED IN CIRCULAR NO.- 1/2005 DATED 06.01.2005 THAT AN UNDERTAKING SET UP IN DOMESTIC TARIFF AREA WHICH IS SUBSEQUENTLY APPRO VED AS 100% EOU IS ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT. HE SUBM ITTED THAT SINCE 10B AND 10A ARE IDENTICAL ON ALL MATERIAL ASPECTS, THE CIRC ULAR WILL EQUALLY APPLY TO THE FACTS OF THE PRESENT CASE ALSO. IN SUPPORT OF THIS CONTENTION, HE RELIED ON THE DECISION OF HONBLE CO-ORDINATE BENCH, BANGLORE IN THE CASE OF DCIT VS M/S MPHASIS LTD, 2011-TIOL-743-ITAT-BANG. HE SU BMITTED THAT THE CONVERSION OF DTA UNIT INTO STPI UNIT DOES NOT VIOL ATE THE CONDITIONS OF SECTION 10A(2)(II)&(III). 5. IN SUPPORT OF THIS CONTENTION, HE RELIED UPON VA RIOUS DECISIONS OF THE HONBLE CO-ORDINATE BENCH RENDERED IN THE CASE OF I TO VS M/S FORSEE INFORMATION SYSTEM (P) LTD.; 2008-TIOL-456-ITAT-BAN G. AND ITO VS M/S EXPERT OUTSOURCE (P) LTD; 2010-TIOL-537-ITAT-BANG. AND ALSO THE DECISIONS OF THE HONBLE HIGH COURT OF KARNATAKA RE NDERED IN THE CASE OF CIT VS. MAXIM INDIA INTEGRATED CIRCUIT DESIGN (P) L TD; (2011) 202 TAXMAN 365 (KAR.). HE ALSO RELIED ON THE DECISION OF THE HON'BLE HIGH COURT OF PUNJAB & HARYANA RENDERED IN THE CASE OF CIT VS EX CEL SOFTECH LTD. (2008) 219 CTR (P & H) 405. HE SUBMITTED THAT THE ASSESS ING OFFICER HAS ALSO OBSERVED THAT THE WORK EXECUTE BETWEEN 01.04.2006 TO 30.05.2006 FOR M/S I.T.A .NO.- 3372/DEL/2012 7 EURO PARTNERS APS, DENMARK AGAINST WHICH THE ASSESS EE RECEIVED ADVANCE OF RS. 2,13,600/- ON 12.04.2006, DOES NOT QUALIFY FOR EXEMPTION U/S 10A. HE FURTHER OBSERVED THAT THE FIRST PURCHASE OF COMPUTE R WAS MADE ON 01.07.2006, THEREFORE, THE 5 EXPORT ORDERS EXECUTED BEFORE 01.07.2006 ARE NOT ENTITLED TO RELIEF U/S 10A. HE SUBMITTED THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THE ADVANCE TAKEN ON 12.04.2006 BUT THE SALE WAS AFFECTED ON 06.05.2006, AS PER THE INVOICES RAISED. HE SUBM ITTED THAT THE WORK WAS EXECUTED AFTER 03.05.2006 AND 4 INVOICES OUT OF 5 I NVOICES WERE BETWEEN 03.05.2006 AND 01.07.2006. THEREFORE, DURING THE P REVIOUS YEAR 2006-07, ALL THE SALES WERE AFFECTED AFTER THE DATE OF PERMI SSION FROM STPI. HE SUBMITTED THAT THE DATE OF BOOKING THE ORDER IS IMM ATERIAL BECAUSE THE PROFIT ACCRUES ONLY WHEN SALE IS AFFECTED BY STP UNIT, IT WILL BE ENTITLED TO RELIEF U/S 10A. HE RELIED ON THE DECISION OF HONBLE ITAT, BA NGLORE RENDERED IN THE CASE OF INFOSYS TECHNOLOGIES LTD. VS JCIT;(2007) 10 8 TTJ (BANG) 282, THEREFORE THE APPELLANT HAVE EFFECTED ALL THE SALES AFTER 03.05.2006 AFTER BECOMING STPI HAS ENTITLED TO RELIEF U/S 10A. HE S UBMITTED THAT WITHOUT PREJUDICE TO THE SUBMISSIONS MADE HERE IN BEFORE TH E STPI HAS CLEARLY MENTIONED THAT THE INTIMATION FOR COMMERCIAL PRODU CTION WAS NOT A MATERIAL CONDITION, THEREFORE, THE ASSESSEE CANNOT BE DENIED RELIEF U/S 10A MERELY ON THE BASIS OF MIS-CONCEPTION OF LAW AND MIS-CONSTRUC TION OF THE PERMISSION I.T.A .NO.- 3372/DEL/2012 8 LETTER DATED 03.05.2006. HE SUBMITTED THAT THERE I S NOTHING ON RECORD SUGGESTING THAT THE PERMISSION GRANTED BY THE STPI WAS WITHDRAWN ON ACCOUNT OF NON-INTIMATION OF DATE OF COMMERCIAL PRO DUCTION. LD. AR SUBMITTED THAT BEFORE ASSESSING OFFICER AS WELL AS LD. CIT(A), A COPY OF ACKNOWLEDGEMENT OF INTIMATION WAS DULY SUBMITTED AN D EVEN OTHERWISE ALSO NON-INTIMATION IS NOT FATAL. ON THE CONTRARY, LD. DR SUBMITTED THAT THERE IS A FINDING OF FACT BY THE AUTHORITIES BELOW THAT THE A SSESSEE FAILED TO FULFILL THE CONDITIONS AS MENTIONED U/S 10A OF THE ACT. HE SUB MITTED THAT THERE IS A CATEGORICALLY FINDING THAT THE INTIMATION FOR COMME RCIAL PRODUCTION WAS NOT GIVEN TO STPI. MOREOVER, THE ASSESSING OFFICER HAS ALSO PROVED ON THE BASIS OF EVIDENCE ON RECORD THAT PURCHASE OF COMPUTER WAS BOGUS THAT LEADS TO THE INFERENCE THAT COMMERCIAL PRODUCTION HAD BEEN START ED IN THE STPI UNIT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED MATE RIAL AVAILABLE ON RECORD AND THE JUDGEMENT CITED. WE FIND THAT THE A SSESSING OFFICER AS WELL AS LD. CIT(A) HAS DECLINED THE RELIEF U/S 10A ON TH E BASIS THAT AS PER CLAUSE 4 OF THE PERMISSION LETTER ISSUED BY STPI ENVISAGED THAT THE ASSESSEE WOULD INTIMATE THE STPI IN RESPECT OF THE COMMENCEMENT OF COMMERCIAL PRODUCTION. THE ASSESSING OFFICER HAS ALSO OBSERVE D THAT THE CONDITIONS AS MENTIONED IN CLAUSE (II) & (III) OF SUB-SECTION 2 O F SECTION 10A HAD NOT BEEN COMPILED WITH ON THE BASIS THAT THE BUSINESS WAS AL READY IN EXISTENCE WHICH I.T.A .NO.- 3372/DEL/2012 9 HAD BEEN RECONSTRUCTED FOR CLAIMING EXEMPTION U/S 1 0A. THE INVOICES SUBMITTED BY THE ASSESSEE WERE IN RESPECT OF THE OR DER PLACED PRIOR TO PERMISSION GRANTED BY STPI. THEREFORE, SAME CANNOT BE TAKEN AS THE BEGINNING OF COMMERCIAL PRODUCTION. HE ALSO DECLIN ED THE RELIEF ON THE BASIS THAT THE ASSESSEE HAD NOT COMPLETING WITH THE CONDI TION AS MENTIONED AT S. NO. 4 IN THE LETTER DATED 03.05.2006 OF THE STPI. 7. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO TH E RIVAL SUBMISSIONS. THE UNDISPUTED FACT IS THAT AS PER THE APPLICATION DATED 10.04.2006, FILED BY THE ASSESSEE WITH STPI FOR REGISTRATION AS STP UNIT , IT IS MENTIONED ON PAGE 9 OF THE PAPER BOOK CONVERSION FROM DTA TO STP UNIT. THUS, THE FACT REMAINS, THE ASSESSEE COMPANY WAS CONVERTED TO STP UNIT AND, THEREFORE, THERE WAS NO RESTRUCTURING AND OR TRANSFERRING OF THE BUSINES S AS SUCH. THEREFORE, IN OUR CONSIDERED OPINION, THE CONDITIO NS AS MENTIONED IN SECTION 10A(2)(II) & (III) ARE NOT VIOLATED AS THER E IS NEITHER SPLITTING UP OR THE RE-CONSTRUCTION OF THE BUSINESS ALREADY IN EXIS TENCE BECAUSE CONVERSION AND SPLITTING UP OR THE RE-CONSTRUCTION ARE COMPLET ELY DIFFERENT TERMS. MOREOVER, CONVERSION CANNOT BE TERMED AS TRANSFER. IN OUR VIEW, THE CIRCULAR AS RELIED BY THE LD. COUNSEL FOR THE ASSESSEE WOULD BE APPLICABLE ON THE PRESENT CASE ALSO. WE ARE FORTIFIED BY THE DECISIO N OF THE HONBLE CO- ORDINATE BENCH RENDERED IN THE CASE OF ITO VS FORSE E INFORMATION SYSTEMS I.T.A .NO.- 3372/DEL/2012 10 (P) LTD (SUPRA). FURTHER, THE FINDING OF THE AUTHO RITIES BELOW THAT THE INTIMATION WITH REGARD TO COMMERCIAL PRODUCTION WAS NOT GIVEN, THEREFORE, THE PERMISSION AS GIVEN STPI BECAME NON-EXISTENT AN D CONSEQUENTLY, DIS- ENTITLED THE ASSESSEE COMPANY FROM CLAIMING RELIEF U/S 10A, THIS VIEW OF THE AUTHORITIES BELOW IS NOT ACCEPTABLE AS THERE IS NOT HING ON RECORD SUGGESTING THAT PERMISSION GRANTED WAS SUBSEQUENTLY, CANCELLED OR WITHDRAWN ON THE BASIS THAT THE ASSESSEE COULD NOT GIVE INTIMATION T O STPI IN RESPECT OF THE BEGINNING OF COMMERCIAL PRODUCTION. MOREOVER, IN T HE SUBSEQUENT YEAR, STPI ITSELF HAD INTIMATED TO THE ASSESSING OFFICER THAT CONDITION OF INTIMATION IS IMMATERIAL. FURTHER, FROM A BARE REA DING OF THE LETTER DATED 03.05.2006, IT IS EVIDENT THAT CLAUSE 2 OF THE LETT ER EMBODIED THE CONDITIONS IN ADDITION TO THE CONDITIONS MENTIONED IN ANNEXURE . THIS BEING THE POSITION, THE RELIANCE AS PLACED BY THE AUTHORITIES BELOW ON CLAUSE 4 OF PERMISSION LETTER IS NO CORRECT. THEREFORE, IN VIEW OF ABOVE DISCUSSION AND THE JUDGEMENT RELIED BY THE LD. COUNSEL FOR THE ASSESSE E, WE ARE OF THE OPINION THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION U/S 10A . ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASS ESSEE MADE U/S 10A OF THE ACT, AND DELETE THE ADDITION MADE IN THIS REGARD. THIS GROUND OF THE ASSESSEES APPEAL IS ALLOWED. I.T.A .NO.- 3372/DEL/2012 11 8. NEXT GROUND IS WITH REGARD TO DISALLOWANCE OF TH E DEPRECIATION CLAIMED AT RS. 1,07,364/. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE BA SIS OF MAKING DISALLOWANCE BY THE ASSESSING OFFICER IS THAT THE S UPPLIERS OF COMPUTERS M/S GAURAV COMPUTER WAS NOT AVAILABLE AT THE GIVEN ADDR ESS. HE SUBMITTED THAT THE ASSESSEE COMPANY HAD SUPPLIED ALL NECESSARY DET AILS THAT IS INVOICE NO, BANK STATEMENT, PAN OF THE SUPPLIERS AND HE SUBMITT ED THAT SINCE THE PURCHASES WERE MADE IN THE YEAR 2006 AND THE INQUIR Y WAS CONDUCTED ONLY IN YEAR 2009. HE SUBMITTED THAT DURING THE INTERVENIN G PERIOD SUPPLIER MIGHT HAVE SHIFTED ELSEWHERE OR CLOSED DOWN THE BUSINESS. HE SUBMITTED THAT NON- AVAILABILITY OF THE SUPPLIERS AT THE OLD ADDRESS CA NNOT BE SOLE BASIS FOR DRAWING ADVERSE INFERENCE. WHEN THE ASSESSEE HAS S UBMITTED THE EVIDENCE OF PAYMENT MADE BY CHEQUE DULY DEBITED IN THE BANK ACCOUNTS OF THE ASSESSEE. HE PLACED RELIANCE ON THE DECISION OF TH E HONBLE ITAT, JAIPUR RENDERED IN THE CASE OF SHANKAR EXPORTERS VS. ADDL. CIT (2010) 132 TTJ (JP)107, WHEREIN REJECTING ALL THE BOOKS OF ACCOUNT S, WAS HELD TO BE NOT JUSTIFIED, ON THE BASIS THAT THE SUPPLIERS WERE NOT AVAILABLE ON THE GIVEN ADDRESS. RELIANCE IS ALSO PLACED ON THE DECISION O F THE HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT VS DWARKADHISH IN VESTMENT (P) LTD. (2010) 6 TAXMAN.COM 84 (DELHI). I.T.A .NO.- 3372/DEL/2012 12 9. ON THE CONTRARY, LD. DR SUBMITTED THAT AN INQUIR Y WAS CONDUCTED BY THE ASSESSING OFFICER THROUGH THE INCOME TAX INSPEC TOR WHO REPORTED THAT AT THE GIVEN ADDRESS, THE FIRM WAS NOT EXISTING AND TH E ADDRESS AS MENTIONED IN THE BILL OF M/S GAURAV COMPUTERS, WAS A RESIDENTIAL HOUSE OF ONE SH. YADAV, WHO IS AN EMPLOYEE OF THE TRANSPORT DEPARTME NT OF THE U.P. GOVERNMENT AND INFORMED THAT NO SUCH FIRM IN THE NA ME OF M/S GAURAV COMPUTER EVER EXISTED THERE. HE SUBMITTED THAT THE ASSESSEE FAILED TO SUBMIT ANY CONVINCING EVIDENCES TO CONTROVERT THE FINDINGS OF THE INSPECTOR. IN RE- JOINDER, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE ASSESSEE OUGHT TO HAVE BEEN GIVEN A CHANCE TO REBUT THE FINDINGS O F THE INSPECTOR. MOREOVER, HE SUBMITTED THAT THE ASSESSEE HAS GIVEN ALL REQUISITE DETAILS AND NOT PRUDENT PERSON WHO MAKE PAYMENT TO A NON-EXISTI NG ENTITLE. 10. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED MAT ERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER HAS DISALLOWED THE C LAIM OF DEPRECIATION ON THE BASIS THAT THE FIRM WAS NOT EXISTING AT THE GIV EN ADDRESS. FROM THE RECORDS, IT IS TRANSPIRED THAT THE ASSESSING OFFICE R HAS NOT MADE INQUIRY FROM THE OFFICE OF THE ASSESSEE ABOUT THE INSTALLATION O F COMPUTERS ETC. BUT FACT REMAINS THAT ASSESSEE DID NOT CONTROVERT THE REPORT OF INSPECTOR BY SEEKING CROSS-EXAMINATION AT ANY STAGE. THE ASSESSING OFFI CER HAS ALSO NOT GIVEN ANY FINDING IN RESPECT OF THE EVIDENCE, I.E PAYMENT BY CHEQUE, HOW THEY ARE I.T.A .NO.- 3372/DEL/2012 13 NOT CREDIBLE. SUCH PAYMENTS COULD NOT HAVE BEEN MA DE IN VACCUM, MONEY HAVE TRAVELED TO SOME DESTINATION. THE ASSESSING O FFICER DID NOT FEEL IT PROPER TO FIND OUT THE ULTIMATE DESTINATION OF MONE Y PAID BY THE ASSESSEE COMPANY CLAIMED TO HAVE BEEN PAID AS PRICE OF COMPU TERS. THEREFORE, TO SUBSERVE INTEREST OF JUSTICE, THIS ISSUE IS REMITTE D BACK TO THE FILE OF ASSESSING OFFICER, TO DECIDE AFRESH AFTER GIVING AD EQUATE OPPORTUNITY TO THE ASSESSEE OF HEARING. THIS GROUND OF THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 11. NEXT GROUND IS WITH REGARD TO DISALLOWANCE MADE U/S 40(A)(IA). LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AS SESSING OFFICER HAS MADE ADDITION U/S 40(A)(IA), BY MAKING DISALLOWANCE FOR NOT DEDUCTING TAX AT SOURCE U/S 194J OF THE ACT. LD. COUNSEL SUBMITTED THAT THIS ISSUE IS WELL- SETTLED NOW. NO CHARGES WERE PAYABLE AT THE END OF THE FINANCIAL YEAR. HE SUBMITTED THAT A SUM OF RS. 1,65,000/- WAS ACTUALLY PAID DURING THE YEAR AND PAYMENTS ARE DEBITED IN THE ICICI BANK A/C. THE DE TAILS ARE SUBMITTED AT PAGE 36-39 OF THE PAPER BOOK. HE SUBMITTED THAT SI NCE THE ENTIRE CHARGES HAD ACTUALLY PAID, THEREFORE, SECTION 40A(IA) IS NO T APPLICABLE. LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HONBLE SPECIAL BENCH OF THIS TRIBUNAL RENDERED IN THE CASE OF MERI LYN SHIPPING & TRANSPORTS, VISAKHAPATNAM VS. ACIT; (2012) 70 DTR ( VISAKHA) (SB)(TRIB) I.T.A .NO.- 3372/DEL/2012 14 81 AND ALSO THE DECISION OF THE HONBLE CO-ORDINATE BENCH, HYDERABAD RENDERED IN THE CASE OF TEJA CONSTRUCTION VS. ACIT (2010) 36 DTR (TRIB) 220 (HYD). ON THE CONTRARY, LD. SENIOR DR RELIED O N THE ORDERS OF THE AUTHORITIES BELOW. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED MAT ERIAL AVAILABLE ON RECORD. IT IS NOT DISPUTED THAT THE PAYMENTS WERE MADE DURING THE YEAR AND NO AMOUNT WAS PAYABLE AT THE END OF THE FINANCIAL Y EAR. THIS FACT IS NOT CONTROVERTED BY THE REVENUE. SINCE THE HONBLE SPE CIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORTS, VISAKHAPATNAM VS. ACIT (SUPRA) HAS HELD AS UNDER :- 6..THE PROVISION OF SECTION 40(A)(IA) OF THE ACT WAS INTRODUCED IN ORDER TO ENSURE COMPLIANCE OF TDS BUT ASSIGNED THE TERM PAYABLE IN THE PROVISION OF SECTION 40(A )(IA) OF THE ACT. ON A COMPARISON BETWEEN THE PROPOSED AND ENAC TED PROVISION, THE ONLY CONCLUSION, WHICH CAN BE REACHE D, IS THAT LEGISLATIVE CONSISTENTLY REPLACED THE WORDS AMOUNT CREDITED OR PAID WITH THE WORD PAYABLE IN THE FINAL ENAC TMENT AND SUCH CHANGE WAS NOT DONE WITHOUT ANY PURPOSE. IT I S A BASIC PRESUMPTION THAT AN ENACTMENT WAS BROUGHT IN BY THE LEGISLATURE IS WELL THOUGHT OF AND PROPERLY WORDED IN ORDER TO GIVE MEANING TO ITS INTENT BY CHANGING THE WORDS FR OM CREDITED OR PAID TO PAYABLE. THE LEGISLATIV E INTENT HAS BEEN MADE CLEAR THAT ONLY THE OUTSTANDING AMOUNT OR THE PROVISION FOR EXPENSE LIABLE FOR TDS IS SOUGHT TO B E DISALLOWED IN THE EVENT THERE IS A DEFAULT OF TDS. RESPECTFULLY, FOLLOWING THE RATIO LAID IN MERILYN SHIPPING & TRANSPORTS, VISAKHAPATNAM VS. ACIT (SUPRA), THIS GR OUND OF THE ASSESSEES I.T.A .NO.- 3372/DEL/2012 15 APPEAL IS ALLOWED. THE ASSESSING OFFICER IS DIRECT ED TO DELETE THE ADDITION MADE ON THIS BASIS. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14.09.2012. SD/- SD/- (S.V.MEHROTRA) (KULBHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 14/09/2012 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI