DCIT (Exemptions), Chandigarh V. Apeejay Education Society, Ludhiana

ITA 65/CHANDI/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2946 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 06-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURINDER MEENA
• Assessee Lawyers: SUMIT LALACHDANI
• Keywords: Bogus purchase; Depreciation; Maximum Marginal Rate; Accommodation entries
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 65/CHD/2017 A SSESSMENT YEAR : 2012-13 THE DCIT, VS. APEEJAY EDUCATION SOCIETY, CIRLCE-1 (EXEMPTIONS), JAWAHAR NAGAR, CHANDIGARH JALANDHAR PAN NO. AAATA3534F (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SURINDER MEENA, JCIT RESPONDENT BY : SH. SUMIT LALACHDANI DATE OF HEARING : 24.05.2018 DATE OF PRONOUNCEMENT : 23. 08. 2018 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 7.10.2016 OF THE COMMISSIONER OF I NCOME TAX(A)-2, JALANDHAR [HEREINAFTER REFERRED TO AS CIT(A)]. 2. THE REVENUE IN THIS APPEAL HAS TAKEN THE FOLLOWI NG GROUNDS OF APPEAL:- (I) WHETHER THE ID. CIT(A)-2, JALANDHAR HAS ERRED IN LAW WHILE ALLOWING THE BENEFIT UNDER SECTION 11 OF THE ACT WITHOUT APPRECIATING THAT THERE WAS A CLEAR VIOLATION OF SECTION 13 OF THE INCOME TAX ACT. (II) WHETHER THE CJT(A)-2, JALANDHAR HAS ERRED IN LAW WHILE NOT CONSIDERING SECTION 13(1)(C) OF THE L.T. ACT, 1961, ACCORDING TO WHICH, ANY INCOME OF THE ITA NO. 65/CHD/2017- APEEJAY EDUCATION SOCIETY, JALANDHAR 2 TRUST DIRECTLY OR INDIRECTLY APPLIED FOR THE BENEFI T OF ANY PERSON REFERRED TO IN SECTION 13(3) OF THE ACT SHALL NOT BE EXCLUDED FROM THE TOTAL INCOME AND PROVISIONS OF SECTION 11 SHALL NOT APPLY TO THE SAM E. (III) WHETHER THE CIT(A)-2, JALANDHAR IS RIGHT IN LAW AS THE FINDINGS RECORDED ARE PERVERSE AND CONTRARY TO THE EVIDENCE/MATERIAL/STATEMENTS AVAILABLE ON RECORD AND DULY CONSIDERED BY THE AO. (IV) WHETHER ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-2, JALANDHAR IS RIGHT IN DELETING THE ADDITION WHEN THE STATEMENT OF SH. SANJAY D. SONAWANI WAS NOT RELIABLE WHEREAS HE HAD CLEARLY CONFIRMED THAT HE HAD PROVIDED ACCOMMODATION ENTRIES TO THE ASSESSEE AND HAD DEPOSED THAT NO SOFTWARE WAS SOLD TO THE ASSESSEE AND HIS COMPANY HAD NO INFRASTRUCTURE, MANPOWER AND EXPERTISE TO EVEN DEVELOP THE SOFTWARES. (V) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. C1T(A) -2, JALANDHAR IS RIGHT IN DELETING THE ADDITION EVEN WHEN A.O. HAS CLEARLY BROUGHT OUT THAT THE ASSESSEE COULD NOT PRODUCE THE SOFTWARE DEVELOPED BY M/S WSL LIMITED DURING THE SURVEY OPERATION AND IN FACT DID NOT FOLLOW THE NORMAL PROCEDURE AND PROCUREMENT AS IN THE CASES OF OTHER PURCHASE. 3. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE FACTS AND ISSUE INVOLVED IN THIS APPEAL ARE SQU ARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE AMRIT SAR BENCH OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE IN ITA NOS. 712 TO 714/ASR/2014 VIDE ORDER DATED 12.8.2016. IT HAS BE EN FURTHER PLEADED THAT WHILE ALLOWING THE APPEAL OF THE ASSESSEE, THE LD. CIT(A) HAS FOLLOWED THE DECISION OF THE AMRITSAR BENCH OF THE TRIBUNAL. (SUPRA). THE RELEVANT FINDINGS OF THE CIT(A) ARE AS UNDER:- ITA NO. 65/CHD/2017- APEEJAY EDUCATION SOCIETY, JALANDHAR 3 4.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER PASSED BY THE AO AND SUBMISSIONS MADE IN THIS REGAR D BY THE APPELLANT INCLUDING THE JUDICIAL CITATIONS G IVEN THEREIN, AND FIND THAT INCOME OF THE TRUST HAS BEEN ASSESSED AT RS. 1,08,40,363/- MAINLY ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON PURCHASE OF SOFTWAR E WHICH HAS BEEN CONSIDERED AS NOT GENUINE BY THE AO. IT IS STATED BY THE AO THAT NO SOFTWARE WAS ACTUALLY PURCHASED BY THE TRUST AND AN ACCOMMODATION ENTRY W AS ARRANGED IN THE BOOKS OF ACCOUNTS AND THEREFORE THE CLAIM OF DEPRECIATION WAS DISALLOWED. AO HAS FOLLOW ED THE EARLIER YEAR'S ORDERS ON TILLS ISSUE. AO HAS FU RTHER HELD THAT AS PER THE PROVISIONS OF SECTION 167B OF THE IT ACT, THE INCOME OF THE TRUST HAS TO BE TAXED AT THE MAXIMUM MARGINAL RATE. 4.4 THE APPELLANT HAS SUBMITTED THAT THE ISSUE OF PURCHASE OF SOFTWARE FROM M/S WASHINGTON SOFTWARE L TD HAS ALREADY BEEN CONSIDERED BY THE HONOURABLE ITAT AMRITSAR BENCH IN THE CASE OF THE APPELLANT IN RESP ECT OF ASSESSMENT YEAR 2008-09, 2010-11 & 2011-12 AND IT W AS HELD THAT ALL THE CONDITIONS OF SECTION 11 OF THE I T ACT STAND FULLY SATISFIED BY THE ASSESSEE. THEREFORE, T HE ADDITIONS MADE BY THE AO MAY BE DELETED AS THE PRES ENT CASE OF THE APPELLANT IS SQUARELY COVERED BY THE DE CISION OF THE HONOURABLE IT AT. 4.5 I HAVE GONE THROUGH THE COPY OF ORDER OF HONOURABLE ITAT AMRITSAR BENCH, IN THE CASE OF THE APPELLANT IN ITA NUMBER 712 TO 714/ASR /2014 DATED 12- 08-2016 AND FIND THAT THIS ISSUE OF PURCHASE OF SOF TWARE FROM M/S WASHINGTON SOFTWARE LTD, WHICH IS BASED AT PUNE HAS BEEN EXAMINED IN DETAIL BY THE HONOURABLE TRIBUNAL AND AFTER GOING THROUGH THE SAME IT WAS HE LD THAT EXEMPTION UNDER SECTION 11 OF THE IT ACT WAS WRONGLY DENIED TO THE APPELLANT. THE ORDER PASSED B Y THE AO AND CONFIRMED BY THE CIT-A WAS REVERSED FOR THES E YEARS. 4.6 IN VIEW OF THE ABOVE SLATED FACTS, RESPECTFULL Y FOLLOWING THE ORDER OF THE HONOURABLE ITAT AMRITSAR BENCH, SINCE THERE IS NO CHANGE IN THE FACTS OF THE CASE IN TIN'S YEAR, 1 HOLD THAT AO WAS NOT JUSTIFIED IN MAKING A DISALLOWANCE OF DEPRECIATION OF RS. 1,08,40,363/- ON ITA NO. 65/CHD/2017- APEEJAY EDUCATION SOCIETY, JALANDHAR 4 ACCOUNT OF BOGUS PURCHASE OF SOFTWARE. FURTHER, 1 H OLD THAT APPELLANT TRUST IS ENTITLED TO THE CLAIM OF EX EMPTION U/S 11 OF THE IT ACT. ACCORDINGLY, THE DISALLOWANC E OF DEPRECIATION MADE BY THE AO OF RS. 1,08,40,363/- IS DELETED. 4. THE LD. COUNSEL HAS FURTHER RELIED UPON UP ON TH E DECISION OF THE COORDINATE CHANDIGARH BENCH OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2013-14 IN ITA NO . 1444/CHD/2017, WHEREIN, THE APPEAL OF THE REVENUE ON IDENTICAL MATTER HAS BEEN DISMISSED BY THE TRIBUNAL VIDE ORDE R DATED 27.3.2018. 4. THE LD. DR COULD NOT PRODUCE ANY CASE LAWS CON TRARY TO THE ABOVE DECISION OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSEE WHILE FOLLOWING THE DECISION OF THE AMRITSAR BENCH OF THE TRIBUNAL (SUPRA). THEREFO RE, THERE IS NO MERIT IN THE APPEAL OF THE REVENUE AND THE SAME IS ACCORDINGLY DISMISSED. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.08.2018 SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 23.08.2018 RKK COPY TO: THE APPELLANT THE RESPONDENT THE CIT THE CIT(A) THE DR ITA NO. 65/CHD/2017- APEEJAY EDUCATION SOCIETY, JALANDHAR 5