Appeal details
Counselvise Citation
[2015] 140 COUNSELVISE.COM (IT) 97842 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 10 month(s) 19 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
05-11-2015
Appeal Filed By
Department
Order Result
Partly Allowed
Bench Allotted
D
Next Hearing Date
08-09-2015
Assessment Year
2009-2010
Appeal Filed On
17-12-2013
Judgement Text
1 ITA NO. 6649/DEL/2013 PRASHA TECHNOLOGIES LTD. IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE: JUDICIAL MEMBER ITA NO. 6649/DEL/2013 ASSTT. YRS: 2009-10 DCIT, CIRCLE-14(1), VS. PRASHA TECHNOLOGIES LTD., NEW DELHI. J-1813 (ANNEXE), CHITTRANJAN PARK, NEW DELHI. PAN: AAACP 3591 N ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI T. VAISANTHAN SR. DR RESPONDENT BY : SHRI P.N. MEHTA CA ADV. DATE OF HEARING : 08/09/2015. DATE OF ORDER : 05/11/2015. O R D E R PER S.V. MEHROTRA, A.M.. : THIS APPEAL, PREFERRED BY THE REVENUE, IS DIRECTE D AGAINST THE ORDER DATED 30-09-2013, PASSED BY THE LD. CIT(A)-XVII, N EW DELHI IN APPEAL NO. 441/11-12, RELATING TO A.Y. 2009-10. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A CLOSELY HELD LIMITED COMPANY, IN THE RELEVANT ASSESSMENT YEAR WAS ENGAGE D IN THE BUSINESS OF MANUFACTURE OF TELECOMMUNICATION EQUIPMENT AND DIES EL GENERATING SETS AT 2 ITA NO. 6649/DEL/2013 PRASHA TECHNOLOGIES LTD. ITS FACTORY LOCATED AT MANESAR AND FARIDABAD, HARYA NA. THE ASSESSEE FILED RETURN OF INCOME DECLARING INCOME AT RS. 6,61,79,55 9/-. THE ASSESSMENT WAS COMPLETED AT A TOTAL INCOME OF RS. 7,12,13,320/-, A S UNDER: NET PROFIT AS PER COMPUTATION OF INCOME SUBMITTED BY THE ASSESSEE RS. 68179558/- ADD: I) DEPRECIATION RS. 1127512/- II) PROVISIONS RS. 1500000/- III) CAPITAL EXPENDITURE RS. 406250/- ASSESSED INCOME RS. 71213320/- 3. LD. CIT(A) ALLOWED THE ASSESSEES CLAIM. BEING A GGRIEVED, THE REVENUE IS IN APPEAL BEFORE US AND HAS TAKEN FOLLOW ING GROUNDS OF APPEAL: 1. 'ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 11 ,27,512/- AND RS 4,06,250/ - BY ADMITTING THE ADDITIONAL EVIDENCE S WITHOUT GIVING OPPORTUNITY TO THE ASSESSING OFFICER FOR NEC ESSARY COMMENTS WHICH IS IN CONTRAVENTION OF RULE 46A (3) OF THE INCOME TAX RULES. 2. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.15, 00,000/- BY TREATING IT AS ASCERTAINED LIABILITY AND AS SUCH AL LOWANCE AS AN EXPENSES WHEREAS THE DECISION OF MINISTRY OF CORPOR ATE AFFAIRS TO REVISE PAY CAME INTO EXISTENCE AFTER 31.03.2009. 3. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FR ESH GROUNDS OF APPEAL AND/ OR DELETE OR AMEND ANY OF TH E GROUND OF APPEAL. 3 ITA NO. 6649/DEL/2013 PRASHA TECHNOLOGIES LTD. 4. BRIEF FACTS OF THE CASE, APROPOS GROUND NO. 1, A RE THAT DURING THE YEAR THE ASSESSEE HAD CLAIMED DEPRECIATION OF RS. 1,60,2 9,748/-, WHICH, INTER ALIA, INCLUDED CLAIM OF DEPRECIATION OF RS. 11,27,512/- ON THE ADDITION TO FIXED ASSETS AGGREGATING TO RS. 2,25,50,237/-, BEING 5% O F THE ACQUIRED VALUE. THE AO HAS OBSERVED THAT ASSESSEE DID NOT FILE ANY DETA ILS IN RESPECT OF THESE ADDITIONS TO THE BUILDING. HE FURTHER NOTED THAT TH E ADDITION HAD BEEN MADE TO THE BUILDING ON 31-3-2009 I.E. THE LAST DAY OF T HE FINANCIAL YEAR. THE AO DISPUTED THE USER OF THE BUILDING BECAUSE ASSESSEE HAD NOT SUBMITTED THE DETAILS AND COPIES OF THE BILLS TO THE ADDITION TO THE BUILDING. HE, ACCORDINGLY, DISALLOWED THE CLAIM OF DEPRECIATION O F RS. 11,27,512/-. 5. AS REGARDS THE ADDITION OF RS. 4,06,250/-, THE A O HAS OBSERVED THAT THE ASSESSEE HAD CLAIMED LEGAL AND PROFESSIONAL EXP ENSES AMOUNTING TO RS. 33,92,741/-. ON VERIFICATION OF THE DETAILS SUBMITT ED BY THE ASSESSEE, HE CONCLUDED THAT ASSESSEE HAD DEBITED CERTAIN EXPENSE S, WHICH WERE CAPITAL IN NATURE, HAVING LONG TERM RAMIFICATIONS FOR THE BUS INESS OF THE ASSESSEE. HE HAS GIVEN DETAILS OF SUCH EXPENSES AS UNDER: DATE AMOUNT DESCRIPTION 2.5.2008 40000 ISO CERTIFICATE B 22.11.2008 70000 CERTIFICATION AUDIT ISO 24.11.2008 10000 ISO CERTIFICATE 31.3.2009 68000 CONSULTANCY FOR FIRE FIGHTING SYSTE M INSTALLATION 19.1.2009 212000 ASSISTANCE RENDERED IN SEARCH AND SELECTION 29.1.2009 6000 FOR PROPERTY VALUATION IN GR. NOIDA 5.3.2009 64000 INSTALLING EMS ISO14001 & QMS, ISO9001: 2008 6. HE, THEREFORE, TREATED THESE EXPENSES AS CAPITAL IN NATURE AND ALLOWED DEPRECATION @ 25% AND THUS MADE ADDITION OF RS. 4,0 6,250/-. 4 ITA NO. 6649/DEL/2013 PRASHA TECHNOLOGIES LTD. 7. AS REGARDS DISALLOWANCE OF DEPRECIATION, BEFORE LD. CIT(A), THE ASSESSEE, INTER ALIA, SUBMITTED AS UNDER: IT IS SUBMITTED THAT DURING THE COURSE OF PROCEEDI NGS THE A.O. ASKED THE ASSESSEE TO PROVIDE COPIES OF THE ADDITIO NS TO THE FIXED ASSETS. THE ASSESSEE FILED COPIES OF ALL THE FIXED ASSETS EXCEPT BUILDING. IN THE COURSE OF THE PROCEEDINGS THE ASSE SSEE COMPANY FILED A COPY OF THE APPLICATION MADE TO HSIIDC, MAN ESAR, DIST. GURGAON FOR PERMISSION TO OCCUPY THE BUILDING DULY SUPPORTED BY THE ARCHITECT'S CERTIFICATE STATING THAT THE BUI LDING WAS COMPLETED ON 21.03.2009. COPY OF THE SAME IS ENCLOS ED. THE ASSESSEE ALSO APPLIED TO THE CENTRAL EXCISE AUT HORITY III, RANGE XIII, GURGAON ON 24.03.2009 WHICH WAS ACKNOWL EDGED BY THE EXCISE AUTHORITIES ON 25.03.2009. A COPY OF THE ACKNOWLEDGMENT OF THE LETTER IS ENCLOSED. THE ASSESSEE HAD STARTED USE OF THE BUILDING AND WO RK WAS CARRIED OUT IN THE BUILDING. THE POWER CONNECTION, IT WAS SANCTIONED FOR HE EARLIER BUILDING WAS MORE THAN EN OUGH FOR BOTH THE BUILDINGS AND EVEN NOW NO FURTHER POWER LO AD HAS BEEN ASKED FOR BY THE COMPANY. 8. LD. CIT(A), AFTER CONSIDERING THESE DETAILS AND THE ARCHITECTS CERTIFICATE, WHICH STATED THAT THE BUILDING WAS COM PLETED ON 21-3-2009, DELETED THE DISALLOWANCE. 9. AS REGARDS RS. 4,70,000/-, OUT OF LEGAL AND PROF ESSIONAL EXPENSES, TREATED AS CAPITAL IN NATURE, THE ASSESSEE SUBMITTE D BEFORE LD. CIT(A) AS UNDER: A) THE FACTORIES OF THE COMPANY ARE ISO COMPLIANCE UNITS. THE ASSESSEE COMPANY HAS TO PAY TO THE AUTHORITY AN NUAL FEE FOR THE RENEWAL OF THESE CERTIFICATES. AN AUDIT IS CARR IED OUT BEFORE THE CERTIFICATE IS RENEWED. THIS TYPE OF EXPENDITUR E IS A REVENUE EXPENDITURE AND IS NOT OF ANY ENDURING BENEFIT. THE SE CERTIFICATES ARE FOR A PERIOD OF ONE YEAR ONLY AND THEY ARE RENEWED EVERY YEAR. 5 ITA NO. 6649/DEL/2013 PRASHA TECHNOLOGIES LTD. IN THIS RESPECT WE RELY ON THE FOLLOWING CASE LAWS CIT VS. INFOYS TECHNOLOGIES LTD. 349ITR 582 & CIT VS. PEROT SYSTEM S TSI (INDIA) LTD. 349ITR 563 DELHI. IN THE ABOVE CASES IT HAS BEEN CLEARLY HELD THAT TH IS TYPE OF EXPENDITURE IS ALLOWABLE EXPENDITURE. THE AMOUNTS S PENT ON ISO CERTIFICATE IS RS.50,000/- AND FOR THE AUDIT RS .70,000/-. B) A SUM OF RS. 68,000/- WAS SPENT FOR CARRYING OUT A DRILL ON ACCOUNT OF FIRE FIGHTING TRAINING TO THE STAFF. THE AMOUNT WAS PAID TO FIRE SAFETY SERVICES. THIS PAYMENT IS ACTUA LLY ON AN ACCOUNT OF TRAINING GIVEN TO THE STAFF FOR USE OF F IRE FIGHTING. THIS AMOUNT HAS NOT BEEN PAID FOR CONSULTANCY FOR F IREFIGHTING SYSTEM INSTALLATION BUT FOR TRAINING THE STAFF FROM TIME TO TIME FOR THE USE OF FIREFIGHTING EQUIPMENT. C) THE ASSESSEE ENGAGED THE SERVICES OF OMAM CONSUL TANTS PVT. LTD. FOR THE SEARCH AND SELECTION OF THE STAFF PAYMENT IS NOT ON ACCOUNT OF ANY CAPITAL EXPENDITURE BUT THE ASSIS TANCE RENDERED FOR THE SELECTION OF THE STAFF FOR THE OR GANIZATION. D) A SUM OF RS.6000/- WAS PAID TO S.I. DHEER FOR PR EPARING VALUATION REPORT FOR THE PROPERTY SITUATED AT G-1, INDUSTRIAL AREA, SONIPAT, HARYANA. THE COMPANY HAD PLANNED TO ESTABLISH A FACTORY AT THE SAID PLACE BUT THE PLAN DID NOT MA TERIALIZE AND THE CO. DID NOT PURCHASE THE LAND. E) A SUM OF RS 64,000/- WAS PAID TO AASTHA BUSINESS CATALYSTS FOR 1SO-14001 & QMS-1SO-9001. THIS IS YEA RLY FEE PAID TO THE SAID ORGANIZATION. THE ABOVE PAYMENTS ARE DULY SUPPORTED BY THE VOUCHE RS WHICH ARE ENCLOSED AND ON WHICH TAX HAS, BEEN DEDUCTED BE FORE PAYMENT OF THE AMOUNT. 10. LD. CIT(A), AFTER CONSIDERING THESE DETAILS, DE LETED THE DISALLOWANCE. 6 ITA NO. 6649/DEL/2013 PRASHA TECHNOLOGIES LTD. 11. THE MAIN GRIEVANCE OF THE DEPARTMENT IS THAT LD . CIT(A) ADMITTED THE ADDITIONAL EVIDENCE IN RESPECT OF BOTH THE DISALLOW ANCES DISCUSSED ABOVE, WITHOUT GIVING OPPORTUNITY TO THE AO FOR NECESSARY COMMENTS, WHICH IS IN CONTRAVENTION OF RULE 46A(3). LD. DR HAS RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MANISH BUIL D WELL PVT. LTD. RENDERED IN ITA NO. 928/2011 DATED 15-11-2011, WHE REIN IT HAS BEEN, INTER ALIA, HELD AS UNDER: 22. AS WE HAVE WITH THE CONSENT OF THE LEARNED COU NSEL, HEARD THEM ON MERITS, WE PROCEED TO DECIDE THE AFORESAID SUBSTANTIAL QUESTIONS OF LAW. SINCE THE CIT (A) HIMSELF REFERS TO RULE 46A AND HAS ALSO ADMITTED THAT THE CONFIRMATION LETTERS ADDUCED BY THE ASSESSEE BEFORE HIM WERE TECHNICALLY FRESH EVID ENCE, IT IS NOT POSSIBLE TO ACCEPT THE PLEA OF THE LEARNED COUN SEL FOR THE ASSESSEE THAT THE CIT (A), IN EXAMINING THE CONFIRM ATION LETTERS, WAS EXERCISING HIS INDEPENDENT POWERS OF ENQUIRY UN DER SUB- SECTION (4) OF SECTION 250 OF THE INCOME TAX ACT. I T IS TRUE THAT THE CIT (A) AS FIRST APPELLATE AUTHORITY HAS CONTER MINOUS POWERS OVER THE SOURCES OF INCOME CONSTITUTING THE SUBJECT MATTER OF THE ASSESSMENT, EXCEPT THE POWER TO TACKL E NEW SOURCES OF INCOME NOT CONSIDERED BY THE ASSESSING O FFICER, AND CAN DO WHAT THE ASSESSING OFFICER CAN DO AND CAN DI RECT THE ASSESSING OFFICER TO DO WHAT HE HAS FAILED TO DO, A S HELD BY THE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME -TAX, U.P. V. KANPUR COAL SYNDICATE, (1964) 53 ITR 225, B UT IN THIS CASE, THE CIT (A) DID NOT EXERCISE THIS RIGHT. THIS POWER, WHICH IS RECOGNIZED IN SUB-SECTION (4) OF SECTION 250, HA S TO BE EXERCISED BY THE CIT (A) AND THERE SHOULD BE MATERI AL ON RECORD TO SHOW THAT HE, WHILE DISPOSING OF THE APPEAL, HAD DIRECTED FURTHER ENQUIRY AND CALLED FOR THE CONFIRMATION LET TERS FROM THE ASSESSEE EVEN IN RESPECT OF RECEIPT OF MONIES FROM CUSTOMERS BY WAY OF CHEQUES. RULE 46A IS A PROVISION IN THE INCO ME TAX RULES, 1962 WHICH IS INVOKED, ON THE OTHER HAND, BY THE 7 ITA NO. 6649/DEL/2013 PRASHA TECHNOLOGIES LTD. ASSESSEE WHO IS IN AN APPEAL BEFORE THE CIT (A). ON CE THE ASSESSEE INVOKES RULE 46A AND PRAYS FOR ADMISSION O F ADDITIONAL EVIDENCE BEFORE THE CIT (A), THEN THE PR OCEDURE PRESCRIBED IN THE SAID RULE HAS TO BE SCRUPULOUSLY FOLLOWED. THE FACT THAT SUB-SECTION (4) OF SECTION 250CONFERS POW ERS ON THE CIT (A) TO CONDUCT AN ENQUIRY AS HE THINKS FIT, WHI LE DISPOSING OF THE APPEAL, CANNOT BE RELIED UPON TO CONTEND THA T THE PROCEDURAL REQUIREMENTS OF RULE 46A NEED NOT BE COM PLIED WITH. IF SUCH A PLEA OF THE ASSESSEE IS ACCEPTED, I T WOULD REDUCE RULE 46A TO A DEAD LETTER BECAUSE IT WOULD THEN BE OPEN TO EVERY ASSESSEE TO FURNISH ADDITIONAL EVIDENCE BEFOR E THE CIT (A) AND THEREAFTER CONTEND THAT THE EVIDENCE SHOULD BE ACCEPTED AND TAKEN ON RECORD BY THE CIT (A) BY VIRTUE OF HIS POWERS OF ENQUIRY UNDER SUB-SECTION (4) OF SECTION 250. THIS WOULD MEAN IN TURN THAT THE REQUIREMENT OF RECORDING REASONS F OR ADMITTING THE ADDITIONAL EVIDENCE, THE REQUIREMENT OF EXAMINI NG WHETHER THE CONDITIONS FOR ADMITTING THE ADDITIONAL EVIDENC E ARE SATISFIED, THE REQUIREMENT THAT THE ASSESSING OFFIC ER SHOULD- BE ALLOWED A REASONABLE OPPORTUNITY OF EXAMINING THE E VIDENCE ETC. CAN BE THROWN TO THE WINDS, A POSITION WHICH I S WHOLLY UNACCEPTABLE AND MAY RESULT IN UNACCEPTABLE AND UNJ UST CONSEQUENCES. THE FUNDAMENTAL RULE WHICH IS VALID I N ALL BRANCHES OF LAW, INCLUDING INCOME TAX LAW, IS THAT THE ASSESSEE SHOULD ADDUCE THE ENTIRE EVIDENCE IN HIS POSSESSION AT THE EARLIEST POINT OF TIME. THIS ENSURES FULL, FAIR AND DETAILED ENQUIRY AND VERIFICATION. A 7-JUDGE BENCH OF THE SU PREME COURT IN KESHAV MILLS CO. LTD. V. COMMISSIONER OF I NCOME- TAX, BOMBAY NORTH, AHMEDABAD (1965) 56 ITR SC 365 H AD OBSERVED AS UNDER:- 'PROCEEDINGS TAKEN FOR THE RECOVERY OF TAX UNDER TH E PROVISIONS OF THE ACT ARE NATURALLY INTENDED TO BE OVER WITHOU T UNNECESSARY DELAY, AND SO, IT IS THE DUTY OF THE PARTIES, BOTH THE DEPARTMENT 8 ITA NO. 6649/DEL/2013 PRASHA TECHNOLOGIES LTD. AND THE ASSESSEE, TO LEAD ALL THEIR EVIDENCE AT THE STAGE WHEN THE MATTER IS IN CHARGE OF THE INCOME-TAX OFFICER.' 23. IT IS FOR THE AFORESAID REASON THAT RULE 46A ST ARTS IN A NEGATIVE MANNER BY SAYING THAT AN APPELLANT BEFORE THE CIT (A) SHALL NOT BE ENTITLED TO PRODUCE BEFORE HIM ANY EVI DENCE, WHETHER ORAL OR DOCUMENTARY, OTHER THAN THE EVIDENC E ADDUCED BY HIM BEFORE THE ASSESSING OFFICER. AFTER MAKING S UCH A GENERAL STATEMENT, WHICH IS IN CONSONANCE WITH THE PRINCIPLE STATED IN THE ABOVE JUDGMENT, EXCEPTIONS HAVE BEEN CARVED OUT THAT IN CERTAIN CIRCUMSTANCES IT WOULD BE OPEN TO T HE CIT (A) TO ADMIT ADDITIONAL EVIDENCE. THEREFORE, ADDITIONAL EV IDENCE CAN BE PRODUCED AT THE FIRST APPELLATE STAGE WHEN CONDI TIONS STIPULATE IN THE RULE 46A ARE SATISFIED AND A FINDI NG IS RECORDED. RULE 46 A READS:- 'PRODUCTION OF ADDITIONAL EVIDENCE BEFORE THE [DEPU TY COMMISSIONER (APPEALS)] [AND COMMISSIONER (APPEALS) ]. 46A. (1) THE APPELLANT SHALL NOT BE ENTITLED TO PRO DUCE BEFORE THE [DEPUTY COMMISSIONER (APPEALS)] [OR, AS THE CAS E MAY BE, THE COMMISSIONER (APPEALS)], ANY EVIDENCE, WHETHER ORAL OR DOCUMENTARY, OTHER THAN THE EVIDENCE PRODUCED BY HI M DURING THE COURSE OF PROCEEDINGS BEFORE THE [ASSESSING OFF ICER], EXCEPT IN THE FOLLOWING CIRCUMSTANCES, NAMELY: (A) WHERE THE [ASSESSING OFFICER] HAS REFUSED TO A DMIT EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED; OR (B) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE [ASSESSING OFFICER] ; OR (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE [ASSESSING OFFICER] ANY EVIDEN CE WHICH IS RELEVANT TO ANY GROUND OF APPEAL; OR 9 ITA NO. 6649/DEL/2013 PRASHA TECHNOLOGIES LTD. (D) WHERE THE [ASSESSING OFFICER] HAS MADE THE ORDE R APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO TH E APPELLANT TO ADDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. (2) NO EVIDENCE SHALL BE ADMITTED UNDER SUB-RULE (1 ) UNLESS THE [DEPUTY COMMISSIONER (APPEALS)] [OR, AS THE CASE MA Y BE, THE COMMISSIONER (APPEALS)] RECORDS IN WRITING THE REAS ONS FOR ITS ADMISSION. (3) THE [DEPUTY COMMISSIONER (APPEALS)] [OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS)] SHALL 'NOT TAKE INT O ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-RULE (1) UNLESS THE [ASSESSING OFFICER] HAS BEEN ALLOWED A REASONABLE OPPORTUNITY (A) TO EXAMINE THE EVIDENCE OR DOCUMENT OR TO CROSS -EXAMINE THE WITNESS PRODUCED BY THE APPELLANT, OR (B) TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITN ESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT. (4) NOTHING CONTAINED IN THIS RULE SHALL AFFECT THE POWER OF THE [DEPUTY COMMISSIONER (APPEALS)] [OR, AS THE CASE MA Y BE, THE COMMISSIONER (APPEALS)] TO DIRECT THE PRODUCTION OF ANY DOCUMENT, OR THE EXAMINATION OF ANY WITNESS, TO ENA BLE HIM TO DISPOSE OF THE APPEAL, OR FOR ANY OTHER SUBSTANTIAL CAUSE INCLUDING THE ENHANCEMENT OF THE ASSESSMENT OR PENA LTY (WHETHER ON HIS OWN MOTION OR ON THE REQUEST OF THE [ASSESSING OFFICER]) UNDER CLAUSE (A) OF SUB-SECTION (1) OF SE CTION 251 OR THE IMPOSITION OF PENALTY UNDER SECTION 271.] WE AR E HIGHLIGHTING THESE ASPECTS ONLY TO PRESS HOME THE P OINT THAT THE CONDITIONS PRESCRIBED IN RULE 46A MUST BE SHOWN TO EXIST BEFORE ADDITIONAL EVIDENCE IS ADMITTED AND EVERY PR OCEDURAL REQUIREMENT MENTIONED IN THE RULE HAS TO BE STRICTL Y COMPLIED WITH SO THAT THE RULE IS MEANINGFULLY EXERCISED AND NOT EXERCISED IN A ROUTINE OR CURSORY MANNER. A DISTINC TION SHOULD BE RECOGNIZED AND MAINTAINED BETWEEN A CASE WHERE T HE 10 ITA NO. 6649/DEL/2013 PRASHA TECHNOLOGIES LTD. ASSESSEE INVOKES RULE 46A TO ADDUCE ADDITIONAL EVID ENCE BEFORE THE CIT (A) AND A CASE WHERE THE CIT (A), WI THOUT BEING PROMPTED BY THE ASSESSEE, WHILE DEALING WITH THE AP PEAL, CONSIDERS IT FIT TO CAUSE OR MAKE A FURTHER ENQUIRY BY VIRTUE OF THE POWERS VESTED IN HIM UNDER SUB-SECTION (4) OF S ECTION 250. IT IS ONLY WHEN HE EXERCISES HIS STATUTORY SUO MOTO POWER UNDER THE ABOVE SUB-SECTION THAT THE REQUIREMENTS OF RULE 46A NEED NOT BE FOLLOWED. ON THE OTHER HAND, WHENEVER THE AS SESSEE WHO IS IN APPEAL BEFORE HIM INVOKES RULE 46A, IT IS INC UMBENT UPON THE CIT (A) TO COMPLY WITH THE REQUIREMENTS OF THE RULE STRICTLY. 24. IN THE PRESENT CASE, THE CIT (A) HAS OBSERVED T HAT THE ADDITIONAL EVIDENCE SHOULD BE ADMITTED BECAUSE THE ASSESSEE WAS PREVENTED BY ADDUCING THEM BEFORE THE ASSESSING OFFICER. THIS OBSERVATION TAKES CARE OF CLAUSE (C) OF SUB-RU LE (RJ-OF RULE 46A. THE OBSERVATION OF THE CIT (A) ALSO TAKES CARE OF SUB-RULE (2) UNDER WHICH HE IS REQUIRED TO RECORD HIS REASON S FOR ADMITTING THE ADDITIONAL EVIDENCE. THUS, THE REQUIR EMENT OF SUB-RULES (1) AND (2) OF RULE 46A HAVE BEEN COMPLIE D WITH. HOWEVER, SUB-RULE (3) WHICH INTERDICTS THE CIT (A) FROM TAKING INTO ACCOUNT ANY EVIDENCE PRODUCED FOR THE FIRST TI ME BEFORE HIM UNLESS THE ASSESSING OFFICER HAS HAD A REASONAB LE OPPORTUNITY OF EXAMINING THE EVIDENCE AND REBUT THE SAME, HAS NOT BEEN COMPLIED WITH. THERE IS NOTHING IN THE ORD ER OF THE CIT (A) TO SHOW THAT THE ASSESSING OFFICER WAS CONF RONTED WITH THE CONFIRMATION LETTERS RECEIVED BY THE ASSESSEE F ROM THE CUSTOMERS WHO PAID THE AMOUNTS BY CHEQUES AND ASKED FOR COMMENTS. THUS, THE END RESULT HAS BEEN THAT ADDITI ONAL EVIDENCE WAS ADMITTED AND ACCEPTED AS GENUINE WITHO UT THE ASSESSING OFFICER FURNISHING HIS COMMENTS AND WITHO UT VERIFICATION. SINCE THIS IS AN INDISPENSABLE REQUIR EMENT, WE ARE OF THE VIEW THAT THE TRIBUNAL OUGHT TO HAVE RESTORE D THE MATTER TO THE CIT (A) WITH THE DIRECTION TO HIM TO COMPLY WITH SUB- 11 ITA NO. 6649/DEL/2013 PRASHA TECHNOLOGIES LTD. RULE (3) OF RULE 46A. IN OUR OPINION AND WITH RESPE CT, THE ERROR COMMITTED BY THE TRIBUNAL IS THAT IT PROCEEDED TO M IX UP THE POWERS OF THE CIT (A) UNDER SUB- SECTION (4) OF SEC TION 250 WITH THE POWERS VESTED IN HIM UNDER RULE 46A. THE T RIBUNAL SEEMS TO HAVE OVERLOOKED SUB-RULEFA) OF RULE 46A WH ICH ITSELF TAKES NOTE OF THE DISTINCTION BETWEEN THE POWERS CO NFERRED BY THE CIT (A) UNDER THE STATUTE WHILE DISPOSING OF TH E ASSESSEE'S APPEAL AND THE POWERS CONFERRED UPON HIM UNDER RULE 46A. THE TRIBUNAL ERRED IN ITS INTERPRETATION OF THE PRO VISIONS OF RULE 46A VIS-A-VIS SECTION 250(4). ITS VIEW THAT SINCE I N ANY CASE THE CIT (A), BY VIRTUE OF HIS CONTERMINOUS POWERS OVER THE ASSESSMENT ORDER, WAS EMPOWERED TO CALL FOR ANY DOC UMENT OR MAKE ANY FURTHER ENQUIRY AS HE THINKS FIT, THERE WA S NO VIOLATION OF RULE 46A IS ERRONEOUS. THE TRIBUNAL APPEARS TO H AVE NOT APPRECIATED THE DISTINCTION BETWEEN THE TWO PROVISI ONS. IF THE VIEW OF THE TRIBUNAL IS ACCEPTED, IT WOULD MAKE RUL E 46A OTIOSE AND IT WOULD OPEN UP THE POSSIBILITY OF THE ASSESSEES' CONTENDING THAT ANY ADDITIONAL EVIDENCE SOUGHT TO B E INTRODUCED BY THEM BEFORE THE CIT (A) CANNOT BE SUBJECTED TO T HE CONDITIONS PRESCRIBED IN RULE 46A BECAUSE IN ANY CA SE THE CIT (A) IS VESTED WITH CONTERMINOUS POWERS OVER THE ASS ESSMENT ORDERS OR POWERS OF INDEPENDENT ENQUIRY UNDER SUB-S ECTION (4) OF SECTION 250. THAT IS A CONSEQUENCE WHICH CANNOT AT ALL BE COUNTENANCED. 12. LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT A S FAR AS DISALLOWANCE OF RS. 4,70,000/-, TREATING THE SAME AS CAPITAL EXPEND ITURE BY THE AO IS CONCERNED, THE AO DOES NOT DISPUTE SUBMISSION OF D ETAILS AND, THEREFORE, NO FRESH EVIDENCE WAS ADMITTED BY THE LD. CIT(A). 13 HAVING HEARD BOTH THE PARTIES, WE FIND THAT AS F AR AS DELETION OF DISALLOWANCE OF DEPRECIATION BY LD. CIT(A) IS CONCE RNED, IT IS EVIDENT FROM 12 ITA NO. 6649/DEL/2013 PRASHA TECHNOLOGIES LTD. THE SUBMISSIONS MADE BEFORE LD. CIT(A), REPRODUCED EARLIER, THAT LD. CIT(A) DID TAKE INTO CONSIDERATION THE ADDITIONAL EVIDENCE S AND, THEREFORE, IN VIEW OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MANISH BUILD WELL PVT. LTD. (SUPRA), THE MATTER NEEDS TO B E RESTORED TO THE FILE OF AO TO EXAMINE THE DETAILS AFRESH. 14. HOWEVER, AS FAR AS DELETION OF DISALLOWANCE OF RS. 4,70,000/- BY LD. CIT(A) IS CONCERNED, WE FIND CONSIDERABLE FORCE IN THE SUBMISSION OF LD. COUNSEL FOR THE ASSESSEE THAT THE DETAILS WERE FURN ISHED BEFORE AO ALSO, WHICH HAVE BEEN NOTED BY HIM IN THE ASSESSMENT ORDE R, REPRODUCED EARLIER, AND, THEREFORE, LD. CIT(A) DID NOT ADMIT ANY ADDITI ONAL EVIDENCE ON THIS COUNT. ACCORDINGLY, GRIEVANCE OF DEPARTMENT ON THIS ISSUE IS NOT JUSTIFIED. ACCORDINGLY, GROUND NO. 1 IS PARTLY ALLOWED FOR ST ATISTICAL PURPOSES. 15. BRIEF FACTS APROPOS GROUND NO. 2 ARE THAT FROM THE DETAILS SUBMITTED BY THE ASSESSEE IN RESPECT OF PAYMENT OF DIRECTORS, IT WAS OBSERVED THAT THE ASSESSEE HAD MADE PAYMENT OF RS. 39,30,000/- ON AC COUNT OF DIRECTORS REMUNERATION AND ALSO MADE A PROVISION OF RS. 15 LA CS ON 31-3-2009 AS PROVISION FOR DIRECTORS REMUNERATION. THE AO DISAL LOWED THE PROVISION MADE BY ASSESSEE, INTER ALIA, OBSERVING THAT ASSESS EE HAD DEBITED SUCH EXPENSES, WHICH WAS NOT CRYSTALLIZED DURING THE YEA R UNDER CONSIDERATION. BEFORE LD. CIT(A) THE ASSESSEE HAD, INTER ALIA, SUB MITTED AS UNDER: THE ASSESSEE COMPANY HAD APPLIED TO THE CENTRAL GO VERNMENT FOR THE INCREASE IN Y REMUNERATION OF THE MANAGING DIRECTOR IN OCTOBER 2008. THE INCREASE IN REMUNERATION WAS APPL IED FOR THE PERIOD 01.04.2008 TO 31.03.2010. A COPY OF THE RESOLUTION 13 ITA NO. 6649/DEL/2013 PRASHA TECHNOLOGIES LTD. PASSED BY THE EXTRA ORDINARY GENERAL MEETING HELD O N 16.10.2008 IS ENCLOSED. THE CENTRAL GOVERNMENT ON 3 1.07.2009 APPROVED THE REMUNERATION OF THE MANAGING DIRECTOR. THEREFORE, AS ON 31.03.2009 THE COMPANY HAD PROVIDE D FOR RS.15,00,000/- I.E. INCREASED REMUNERATION FROM RS. 37,72,977/-. AFTER TAKING INTO ACCOUNT A SUM OF RS.15,00,000/- T HE TOTAL REMUNERATION AMOUNTED TO RS.52, 72, 977/-. THE CENT RAL GOVERNMENT SANCTIONED THE INCREASE IN THE REMUNERAT ION TO RS. 59, 15,604/-. A COPY OF THE SANCTION OF GOVERNMENT OF INDIA IS ENCLOSED. IN THE SUBSEQUENT YEAR THE PROVISION OF S ALARY WHICH WAS MADE ON 31.03.2009 WAS PAID AND TAX WAS DEDUCTE D AT SOURCE. THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND, THEREFORE, THE PROVISION HAD TO MAK E FOR THE INCREASE IN REMUNERATION PASSED BY THE SHAREHOLDERS BUT THE AMOUNT WAS PAID TILL THE SANCTION OF THE CENTRAL GO VERNMENT WAS RECEIVED. ATTENTION IS INVITED TO THE DEBATE ON THE FINANCE B ILL, 1968 WHEREIN IT WAS SPECIFICALLY LAID DOWN THAT WHERE TH E SCALE OF REMUNERATION OF DIRECTORS IS APPROVED BY COMPANY LA W ADMINISTRATION, THERE WILL BE NO QUESTION OF DISALL OWANCE OF ANY PART THEREOF IN THE INCOME TAX ASSESSMENTS OF THE C OMPANY ON THE GROUND THAT REMUNERATION PAID ARE UNREASONABLE OR EXCESSIVE. IN THIS CONNECTION ATTENTION WAS INVITED TO CIRCULAR NO. 6P DATED 06-07-1968, WHERE THE COMPANY LAW ADMINISTRATION HAS STATED' THAT THE DEPUTY PRIME M INISTER AND THE MINISTER OF FINANCE OBSERVED IN THE LOK SAB HA (DURING THE DEBATE ON THE FINANCE BILL, 1968) THAT, WHERE T HE SCALE OF REMUNERATION OF A DIRECTOR OF A COMPANY HAD BEEN APPROVED BY THE COMPANY LAW ADMINISTRATION, THERE W AS NO QUESTION OF THE DISALLOWANCE OF ANY PART THEREOF I N THE INCOME TAX ASSESSMENT OF THE COMPANY ON THE GROUND THAT TH E REMUNERATION WAS UNREASONABLE OR EXCESSIVE'. 14 ITA NO. 6649/DEL/2013 PRASHA TECHNOLOGIES LTD. FOR THE GUIDELINES ISSUED UNDER THE COMPANIES ACT, 1956 IN REGARD TO MANAGERIAL REMUNERATION THE FOLLOWING MAY BE REFERRED TO 'NOTIFICATION NO. GSR 36(E) DATED 16.01 .2002 AMENDING CERTAIN PROVISIONS OF SCHEDULE XIII OF THE COMPANIES ACT, 1956'. 16. THE ASSESSEE ALSO RELIED ON THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SHRIRAM PISTON RINGS LTD., W HEREIN IT WAS, INTER ALIA, HELD THAT THE COMPANY LAW BOARD HAD JURISDICTION AN D AUTHORITY TO FIX THE REMUNERATION, WHOSE APPROVAL WAS SOUGHT UNDER THE P ROVISIONS OF SECTION 637 AA OF THE COMPANIES ACT, 1956 AND ONE OF THE FA CTORS WHICH THE BOARD HAD TO CONSIDER, WHILE GRANTING APPROVAL, WAS THE P ROFESSIONAL QUALIFICATION AND EXPERIENCE OF THE INDIVIDUAL IN RESPECT OF WHOM THE REMUNERATION WAS TO BE FIXED. 17. LD. CIT(A), ACCORDINGLY, HELD THAT THE SALARY O F RS. 15 LACS WAS AN ASCERTAINED LIABILITY AND, THEREFORE, ALLOWABLE EX PENDITURE BECAUSE THE ASSESSEE HAD PRODUCED DOCUMENTS TO SHOW THAT APPROV AL OF THE CENTRAL GOVERNMENT WAS OBTAINED FOR GIVING SALARY OF RS. 4, 92,967/- PER MONTH. THE ASSESSEE HAS ATTACHED COPY OF APPROVAL DATED 31-7-2 009. 18. HAVING HEARD BOTH THE PARTIES, WE DO NOT FIND A NY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A), BECAUSE ASSESSEE HAD AP PLIED FOR INCREASE IN REMUNERATION OF THE MANAGING DIRECTOR IN OCTOBER 20 08 FOR THE PERIOD 1-4- 2008 TO 31-3-2010. THE FORMAL APPROVAL THOUGH WAS GRANTED ON 31-7-2009, BUT THE SAME RELATED BACK TO FY 2008-09 ALSO. THERE FORE, THE ASSESSEE WAS FULLY JUSTIFIED IN MAKING PROVISION OF RS. 15 LACS, BEING THE INCREASED 15 ITA NO. 6649/DEL/2013 PRASHA TECHNOLOGIES LTD. REMUNERATION OVER AND ABOVE THE REMUNERATION DRAWN BY THE MANAGING DIRECTOR. ACCORDINGLY, THIS GROUND IS REJECTED. 19. IN THE RESULT, DEPARTMENTS APPEAL IS PARTLY AL LOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN OPEN COURT ON 05/11/2015. SD/- SD/- ( SUCHITRA KAMBLE ) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 05/11/2015. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. 16 ITA NO. 6649/DEL/2013 PRASHA TECHNOLOGIES LTD. -+ DATE INITIAL 1. DRAFT DICTATED ON 4 -11.2015 PS 2. DRAFT PLACED BEFORE AUTHOR 5.11.2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.
