Kedia Infotech Ltd., New Delhi V. ITO, New Delhi

ITA 426/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58629 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 30-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 01-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: RAVI GUPTA
• Keywords: Depreciation; Principle of natural justice; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D : NEW DELHI) BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.426/DEL./2010 (ASSESSMENT YEAR : 2004-05) M/S. KEDIA INFOTECH LIMITED, VS. ITO, WARD 5 (4), C/O M/S. SUBODH GUPTA & ASSOCIATES, NEW DELHI. CHARTERED ACCOUNTANTS, 301 302, G.K. HOUSE, 187-A SANT NAGAR, EAST OF KAILASH, NEW DELHI-110 065. (PAN : AABCG2072L) ITA NO.554/DEL./2010 (ASSESSMENT YEAR : 2004-05) ITO, WARD 5 (4), VS. M/S. KEDIA INFOTECH LIMITED, NEW DELHI. 112, G.K. HOUSE, 1872, SANT NAGAR, EAST OF KAILASH, NEW DELHI-110 065. (PAN : AABCG2072L) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAVI GUPTA, ADVOCATE REVENUE BY : MS. Y. KAKKAR, DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : BOTH THESE CROSS APPEALS EMANATE FROM THE ORDER OF THE CIT (APPEALS)- VIII, NEW DELHI DATED 30.11.2009 FOR THE ASSESSMENT YEAR 2004-05. THE ASSESSEE COMPANY ENGAGED IN BUYING AND SELLING FABR ICS, TRADING IN SHARES AND ITA NO.426/DEL./2010 ITA NO.554/DEL./2010 2 SOFTWARE ITEMS, VIZ., E-COMMERCE. THE RETURN OF IN COME FILED ON 01.11.2004 DECLARING INCOME OF RS.35,54,610/-. THE GROUNDS I N ASSESSEES APPEAL READ AS UNDER :- (I) THAT THE ORDER PASSED BY LEARNED CIT(A) IS BAD IN LAW AND FACT AND IS ARBITRARY. (II) THAT THE ADDITION OF RS.1597178J/- IS NOT JUST IFIED IN FACT OF LAW AS WELL AS ON THE BASIS OF EVIDENCES SUBMITTED BY THE ASSESSEE. (III) THAT THE LEARNED CIT(A) ERRED IN CONFIRMING D ISALLOWANCE OF 20% OF A) BUSINESS PROMOTION EXPENSES, B) ADVERTISE MENT EXPENSES AND C) LEASE LINE EXPENSES ON AN ADHOC BASIS WITHOU T GIVING ANY JUSTIFICATION FOR SUCH ADDITION. SUCH AN APPROACH W AS ENTIRELY UNSUSTAINABLE IN LAW AND DISALLOWANCE WAS NOT JUSTI FIED. VERY CONCEPT OF TOKEN DISALLOWANCE IS BAD IN LAW BECAUSE SUCH A DISALLOWANCE IS INHERENTLY BASED ON 'SURMISES AND CONJECTURES' AND DEVOID OF A LEGALLY SUSTAINABLE FOUNDATION. THEREFORE, FOLLOWING DISALL OWANCE OUT OF EXPENSES ARE TO BE DELETED - A) BUSINESS PROMOTION EXPENSES RS.121663/- B) ADVERTISEMENT EXPENSES RS.522455/- C) LEASE LINE EXPENSES RS. 98590/- (IV) THAT THE LEARNED CIT(A) ERRED IN CONFIRMING TH E DISALLOWANCE OF DEPRECIATION OF RS.854470/- ON VALUE OF FIXED AS SETS BEING THE DIFFERENCE BETWEEN THE TOTAL ADDITION TO FIXED ASS ETS AS CLAIMED' AND THE VALUE OF BILLS/VOUCHERS PRODUCED BY THE APPELL ANT IN THE COURSE OF ASSESSMENT PROCEEDINGS'. WHEREAS THE BILLS EXCE EDING RS.5 LACS WERE ONLY REQUIRED BY THE ASSESSING OFFICER TO BE P RODUCED DURING ASSESSMENT PROCEEDINGS AND THE SAME WERE PRODUCED A CCORDINGLY. THEREFORE, THE DISALLOWANCE OF DEPRECIATION ON ACCO UNT OF NON-PRODUCTION OF BILLS OF NEW ADDITIONS IN FIXED A SSETS OF LESS THAN RS.5 LAC EACH IS DENIAL OF NATURAL JUSTICE TO THE A SSESSEE. AND, HENCE, THE ADDITION ON ACCOUNT OF DISALLOWANCE OF DEPRECIA TION SHOULD BE DELETED. (V) THAT THE LEARNED CIT(A) HAS ERRED IN NOT ADMITT ING THE ADDITIONAL EVIDENCE AS PER THE PROVISIONS OF RULE 4 6A OF THE INCOME TAX RULE, 1962. (VI) THAT THE EVIDENCES OF VARIOUS EXPENSES AND ADD ITIONS IN FIXED ASSETS WERE FILED ON SELECTIVE BASIS DURING THE COU RSE OF ASSESSMENT ITA NO.426/DEL./2010 ITA NO.554/DEL./2010 3 PROCEEDINGS BEFORE ASSESSING OFFICER. THE ASSESSEE COMPANY HAS PRODUCED COPIES OF ALL SUCH BILLS AND VOUCHERS DURI NG HEARING BEFORE CIT(A) AND FILED NECESSARY EVIDENCE IN SUPPORT OF I TS CLAIM WHICH ARE NOT ACCEPTED BY THE CIT(A). AND, HENCE THE NATURAL JUSTICE IS DENIED TO THE ASSESSEE. (VII) THE IMPUGNED ASSESSMENT ORDER MADE BY THE LEA RNED CIT(A) DESERVES TO BE MODIFIED ACCORDINGLY. (VIII) THE PENAL ACTION INITIATED U/S 271(L)(C) OF THE INCOME TAX ACT 1961 IS LIABLE TO BE QUASHED ACCORDINGLY. THE APPELLANT COMPANY CRAVES LEAVE TO AMEND OR ADD FURTHER GROUNDS OF APPEAL FOR THE CAUSE OF JUSTICE AS MAY BE CONSID ERED NECESSARY BEFORE OR DURING THE COURSE OF HEARING OF THE APPEA L. THE GROUNDS IN REVENUES APPEAL READ AS UNDER :- 1. THE ORDER OF THE LD. CIT (APPEAL) IS ERRONEOUS AND CONTRARY TO FACTS AND LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.28, 96,800/- MADE BY THE AO DISALLOWING THE BUSINESS PROMOTION EXPENSES. 2.1 THE LD. CIT (A) IGNORED THE FACTS THAT THE ASSE SSEE DID NOT FILE ANY EXPLANATION/EVIDENCE TO PROVE THAT THESE EXPENS ES WERE EXCLUSIVELY FOR BUSINESS PURPOSE. 2.2 THE LD. CIT (A) IGNORED THE FACT THAT THE ASSES SEE DID NOT FILE ANY EXPLANATION/EVIDENCE TO PROVE THAT THESE EXPENS ES WERE EXCLUSIVELY FOR BUSINESS PURPOSE. 3. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, OR AMEND ANY GROUND OF THE APPEAL RAISED ABOUT AT THE TIME OF TH E HEARING. 2. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE LE ARNED AR SUBMITTED THAT THE CIT (A) HAS NOT ADMITTED THE ADDITIONAL EVIDENC ES FILED AS PER THE PROVISIONS OF RULE 46A OF THE INCOME TAX RULE, 1962 . ASSESSING OFFICER ASKED TO PRODUCE ALL SUPPORTING DOCUMENTS/INFORMATI ON/VOUCHERS AT FAG END OF ITA NO.426/DEL./2010 ITA NO.554/DEL./2010 4 ASSESSMENT PROCEEDINGS. ASSESSING OFFICER HAD NOT PUT ANY CAP TO FILE THE VOUCHERS OF EXPENDITURE WHICH WERE IN THOUSANDS. S UCH VERIFICATION WAS NOT POSSIBLE IN SHORT TIME. HE FURTHER SUBMITTED THAT THE CIT (A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF 20% OUT OF BUSINE SS PROMOTION EXPENSES, ADVERTISEMENT EXPENSES AND LEASE LINE EXPENSES ON A N ADHOC BASIS. HE SUBMITTED THAT THE CIT (A) CONFIRMED THE ADDITION W ITHOUT GIVING ANY JUSTIFICATION. SUCH AN APPROACH OF THE CIT (A) WAS UNSUSTAINABLE IN LAW. SUSTAINING SUCH DISALLOWANCE WAS NOT JUSTIFIED. TH E CONCEPT OF TOKEN DISALLOWANCE, BASED ON SURMISES AND CONJECTURES, IS DEVOID OF ANY LEGAL FOUNDATION. HE FURTHER PLEADED THAT IN THE CASE OF THE DISALLOWANCE OF DEPRECIATION, THE ASSESSING OFFICER ASKED THE DETAI LS OF BILLS ONLY EXCEEDING RS.5 LACS ONLY. LEARNED AR DREW OUR ATTENTION TO P AGE 371 OF PAPER BOOK WHICH IS QUESTIONNAIRE ISSUED TO ASSESSEE ON 06.10. 2005. THE ASSESSEE SUBMITTED THE DETAILS OF MORE THAN RS.5 LACS. THER EAFTER, THE ASSESSING OFFICER HAS NEVER ASKED THE DETAILS OF BILLS BELOW RS.5 LACS. ASSESSING OFFICER ACCEPTED AND ALLOWED DEPRECIATION ON BILLS MORE THA N RS.5 LACS. THEREFORE, DISALLOWANCE OF DEPRECIATION SUSTAINED OF RS.854470 /- ON THE BASIS THAT BILLS WERE NOT PRODUCED ARE UNJUSTIFIED. SUSTAINING SUCH DISALLOWANCE BASED ON ACCOUNT OF NON-PRODUCTION OF BILLS OF NEW ADDITIONS TO THE FIXED ASSETS OF LESS THAN RS.5 LAC EACH IS COMPLETE DENIAL OF NATURAL JU STICE. HE ALSO PLEADED THAT THE CIT (A) HAS NOT APPRECIATED THE CORRECT FACTS O F THE CASE. FINALLY, HE ITA NO.426/DEL./2010 ITA NO.554/DEL./2010 5 SUBMITTED THAT ALL ISSUES MAY BE RESTORED TO THE FI LE OF ASSESSING OFFICER. HE ALSO PLEADED THAT THE ISSUES INVOLVED IN BOTH THE A PPEALS, I.E., ASSESSEES APPEAL AS WELL AS REVENUES APPEAL SHALL DECIDE DE NOVO BY THE ASSESSING OFFICER. 3. WE HAVE HEARD BOTH THE SIDES. LEARNED DR ALSO N OT HAVING ANY SERIOUS OBJECTION TO THE PROPOSITION MADE BY THE LEARNED AR OF THE ASSESSEE FOR RESTORING ALL THE ISSUES TO THE FILE OF THE ASSESSI NG OFFICER. IN VIEW OF THESE FACTS AND IN THE INTEREST OF JUSTICE AND EQUITY, WE HOLD TO RESTORE ALL THE ISSUES INVOLVED IN BOTH THE APPEALS TO THE ASSESSING OFFIC ER TO BE DECIDED DE NOVO. IN VIEW OF THESE FACTS, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THE ISSUES IN BOTH THE APPEALS TO THE FILE OF THE ASSESSING OFFICER TO BE DECIDED AFRESH. 4. IN THE RESULT, BOTH THE CROSS APPEALS, I.E., ASS ESSEE AS WELL AS REVENUE, ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 31 ST DAY OF JANUARY, 2012. SD/- SD/- (U.B.S. BEDI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 31 ST DAY OF JANUARY, 2012/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-VIII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.