ACIT 8(1), MUMBAI V. FIONA INFOSYSTEMS LTD, MUMBAI

ITA 4417/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8333 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 16-10-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 31-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH MEENA
• Assessee Lawyers: B V JHAVERI
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO. 4417/MUM/2010 (ASSESSMENT YEAR: 2004-05) A C I T - 8(1) M/S. FIONA INFOSYSTEMS LTD. ROOM NO. 260A, 2ND FLOOR 903-A, MALKANI TOWER AAYAKAR BHAVAN, M.K. ROAD VS. BANDEVALI HILL ROAD MUMBAI 400020 JOGESHWARI (W), MUMBAI 400012 PAN - AAACF 4645 B APPELLANT RESPONDENT APPELLANT BY: SHRI OMPRAKASH MEENA RESPONDENT BY: SHRI B.V. JHAVERI DATE OF HEARING: 23.10.2012 DATE OF PRONOUNCEMENT: 31.10.2012 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-16, MUMBAI AND IT PERTAINS TO A.Y. 2004-05. 2. ADDITION OF ` 35,94,126/- MADE BY THE AO, HAVING BEEN CANCELLED B Y THE LEARNED CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 3. THE FACTS NECESSARY FOR DISPOSAL OF THIS APPEAL ARE THAT THE ASSESSEE COMPANY IS A TRADER IN COMPUTER SOFTWARE AND HARDWA RE. IN RESPECT OF THE PREVIOUS YEAR RELEVANT TO A.Y. 2004-05 ASSESSEE DEC LARED TOTAL INCOME OF ` 29,95,040/-. AS CAN BE NOTICED FROM THE P & L ACCOU NT THE ASSESSEES TURNOVER FOR THE YEAR UNDER CONSIDERATION IS ` 32.60 CRORES ON WHICH IT DECLARED THE NET PROFIT AT ` 31,33,171/- AND AFTER CLAIMING DEDUCTION TOWARDS DEPRECIATION, ETC. THE TAXABLE INCOME WORKED OUT AT ` 29,95,040/-. THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS THE AO CALLED UPON THE ASSESSEE TO PRODUCE PURCHASE AND SALES REGISTERS, WHERE FROM IT WAS NOTICED THAT THE TOTAL SALES DURI NG THE FINANCIAL YEAR 2003-04 WERE TO THE TUNE OF ` 35,66,08,957/- AND THE TOTAL PURCHASES, AS PER THE REGISTER, IS ` 33,92,04,195/-. THE ASSESSEE WAS ASKED TO RECONCILE THE ITA NO. 4417/MUM/2010 M/S. FIONA INFOSYSTEMS LTD. 2 SALES AND PURCHASES WITH DOCUMENTARY EVIDENCE. THE ASSESSEE FILED COMPUTERISED STATEMENTS IN THAT REGARD. THE AO OBSE RVED THAT THE ASSESSEE DID NOT FURNISH ANY EVIDENCE ABOUT THE INTER-UNIT T RANSFER. FURTHER, AS PER THE RECONCILIATION STATEMENT ASSESSEE RECEIVED SERV ICE CHARGES OF ` 50,26,000/- WHEREAS IN THE P & L ACCOUNT AN AMOUNT OF ` 42,66,294/- WAS CREDITED. KEEPING IN MIND THE AFOREMENTIONED DIFFER ENCES AND IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE THE AO TREATED THE DIFF ERENCE OF ` 1.74 CRORES AS GROSS PROFIT AGAINST WHICH A SUM OF ` 1.38 CRORES DEBITED TO THE P & L ACCOUNT AS EXPENDITURE WAS ALLOWED AS DEDUCTION AND THE DIFFERENCE OF ` 35,94,126/- WAS ADDED TO THE P & L ACCOUNT. THIS WA S IN ADDITION TO THE INCOME DECLARED BY THE ASSESSEE ORIGINALLY. 4. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE CIT(A) THA T ALL THE DETAILS WERE FURNISHED BEFORE THE AO AND AS PER THE RECONCI LIATION OF SALES, APART FROM INTER-UNIT TRANSFER, ASSESSEE HAS ALLOWED DISC OUNT ON SALES, ETC. AND THERE WERE ALSO SALES RETURNS AND AMOUNT SHOWN AS E XPORT AND UPON RECONCILIATION THE SALES TALLY WITH THE FIGURES SHO WN IN THE P & L ACCOUNT. IT WAS THUS CONTENDED THAT THE AO WAS NOT JUSTIFIED IN MAKING ADDITION OF ` 35,94,126/-. DETAILED SUBMISSIONS MADE BEFORE THE C IT(A) WERE EXTRACTED IN PARA 3.3 OF HIS ORDER. THE LEARNED CIT(A) CALLED FOR REMAND REPORT WHEREIN THE AO MERELY STATED THAT THE RECONCILIATION STATEM ENT SUBMITTED BY THE ASSESSEE WAS DULY CONSIDERED BY THE PREVIOUS AO. AS AGAINST THIS, THE LEARNED CIT(A) NOTICED THAT NUMBER OF ADJUSTMENTS W ERE MADE REGARDING SALES AND PURCHASES ON ACCOUNT OF GOODS RETURNED, R ATE DIFFERENCE, DISCOUNTS, INCENTIVES, ETC. AND THESE ADJUSTMENTS W ERE MADE BY WAY OF JOURNAL ENTRIES IN THE LEDGER ACCOUNT OF SALES AND PURCHASES AND SUCH BOOKS WERE DULY AUDITED. UNDER THESE CIRCUMSTANCES THE AO WAS NOT JUSTIFIED IN MAKING ANY ADDITION WITHOUT POINTING OUT ANY DISCRE PANCY IN THE BOOKS OF ACCOUNT. HE THEREFORE SET ASIDE THE ADDITION MADE B Y THE AO BY OBSERVING THAT THE DISALLOWANCE WAS MADE ONLY ON THE BASIS OF SALES AND PURCHASE REGISTERS WITHOUT CONSIDERING THE TOTALITY OF THE B OOKS OF ACCOUNT. 5. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. THE LEAR NED D.R. RELIED UPON THE ORDER PASSED BY THE AO WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO PROCEED TO MAKE THE DISALLOWANCE WITHOUT ITA NO. 4417/MUM/2010 M/S. FIONA INFOSYSTEMS LTD. 3 CONSIDERING THE TOTALITY OF THE ADJUSTMENTS MADE IN THE BOOKS OF ACCOUNT, WHICH ARE DULY AUDITED. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. WE HAVE ALSO CAREFULLY PERUSED THE PAPER BO OK FILED BEFORE US. IT IS NOT IN DISPUTE THAT THE ASSESSEE FURNISHED RECONCIL IATION STATEMENT BEFORE THE AO AND ALL THESE ADJUSTMENTS WERE DULY SUPPORTE D BY JOURNAL ENTRIES AND THE SAID BOOKS WERE DULY AUDITED. NO SPECIFIC D EFECT WAS POINTED OUT WITH REGARD TO NON-VERIFIABILITY OF THE EXPENDITURE SUCH AS DISCOUNT, ETC. EVEN IN THE REMAND PROCEEDINGS THE AO DID NOT PINPO INT AS TO WHAT WAS THE DEFECT IN THE RECONCILIATION STATEMENT SUBMITTED BY THE ASSESSEE. HAVING REGARD TO THE OVERALL CIRCUMSTANCES OF THE CASE WE ARE OF THE VIEW THAT THE LEARNED CIT(A) WAS JUSTIFIED IN SETTING ASIDE THE D ISALLOWANCE MADE BY THE AO. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2012. SD/- SD/- (D. KARUNAKARA RAO) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 31 ST OCTOBER, 2012 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 16, MUMBAI 4. THE CIT VIII, MUMBAI CITY 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.