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Facts
The assessee, Techno Teaching Infosolution Pvt. Ltd., filed a nil return for AY 2012-13. The AO made additions including a disallowance of Rs. 4,11,99,736/- related to deferred revenue from e-learning software sales with warranty services, and an addition of Rs. 1,04,05,000/- under Section 68 of the Income Tax Act. The CIT(A) upheld these additions, leading the assessee to appeal before the Tribunal.
Held
The Tribunal noted that neither the AO nor the CIT(A) properly examined the assessee's claim regarding deferred revenue recognition as per AS-9 or the substantiation for the Section 68 addition. Therefore, in the interest of justice, the case was restored to the AO for fresh adjudication, giving the assessee an opportunity to present all facts and documents. The orders of the AO and CIT(A) were set aside.
Key Issues
The key legal issues concerned the justification of disallowing deferred revenue recognition for post-sale warranty services and the validity of the Section 68 addition due to alleged failure to prove identity, creditworthiness, and genuineness of share applicants.
Sections Cited
143(2), 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri Rajesh Kumar&Shri Pradip Kumar Choubey]
ORDER / आदेश Per Pradip Kumar Choubey, JM: This is the appeal preferred by the assessee against the order of Commissioner of Income Tax (Appeal)- NFAC, Delhi (hereinafter referred to as the Ld. CIT(A)] dated 20.11.2023 for AY 2012-13.
Brief facts of the case of the assessee are that the return of income for AY 2012-13 was filed by the assessee declaring total income at Nil and also filed revised Assessment Year: 2012-13 Techno Teaching Infosolution Pvt. Ltd. return declaring total income Nil. The case of the assessee was selected for scrutiny, notice u/s 143(2) was issued. The case of the assessee was discussed with the A.R of the assessee and after discussion with the AR, an amount of Rs. 4,11,99,736/- has been disallowed and same was added back into the total income of the assessee. The AO has also added an amount of Rs. 6,654/- on TDS, addition of Rs. 1 lacs fee for increase of authorized share capital and further an amount of Rs. 1,04,05,000/- has been added u/s 68 of the Act.
Aggrieved by the said order the assessee preferred an appeal before the Ld. CIT(A) wherein the appeal of the assessee has been dismissed.
Being aggrieved and dissatisfied the present appeal has been preferred by the assessee before us.
The Ld. Counsel of the assessee challenges the very impugned order thereby submitting that the AO did not appreciate the case of the assessee in proper perspective and misconceived the assessee’s claim with that of warranty in support of claim in case of Laptop, TV set etc. The Ld. Counsel further submits that the AO failed to take note of the peculiarity of software business and arbitrarily added back entire claim of deduction of Rs. 4,11,99,736/-. The Ld. Counsel further submits that the AO as well as Ld. CIT(A) was erred in sustaining the addition as it is on the record that the assessee did not realize the entire amount in the year under assessment, rather the assessee received part amount in the year under assessment. The further submission of the Ld. Counsel of the assessee is that substantial amount is still due from the party, due to the dispute and the assessee duly recognized all the revenue cumulatively in the AY 2013- 14 and 2012-13 and 2014-15 which is on record but the AO as well as Ld. CIT(A) did not consider this fact. The Ld. Counsel submits that proper examination has not been done by the AO nor by the Ld. CIT(A) hence his prayer to back to the appeal of the assessee to the file of AO for fresh assessment after proper examination of the case of the assessee by giving an opportunity to the assessee to place entire true facts. The Ld. Counsel draw our attention regarding his paper such as the tax invoices, profit and loss account, balance sheet and financial statement and submits that the company has sold Assessment Year: 2012-13 Techno Teaching Infosolution Pvt. Ltd. Rs. 7,62,24,404/- e-learning software and the AO has mentioned in the assessment order that the assessee company sold software products of Rs. 6,72,08,645/- i.e factually incorrect.
The Ld. D.R supports the impugned order.
In the light of submission of the assessee, we have perused the case of the assessee and find that the company has sold Rs. 7,62,24,404/- e-learning software with three years product support option and warranty. The Ld. Counsel submits that in the instant case only Rs. 2,60,08,909/- was recognized as revenue as per AS-9 in FY 2011- 12 and the balance amount of Rs. 4,11,99,736/- was recognized in the subsequent year as and when revenue materialized which is duly reflected in the balance sheet of subsequent year. There was no loss of the revenue at all. The ld. Counsel has also submitted a chart with regard to payment receipt which is as follows:
Particulars AY 2012-13 2013-14 2014-15
Payment received 55,00,000/- 1,50,53,070/- 38,00,000/-
The Ld. Counsel has argued before us that on account of post-sale warranty services provided the assessee company had recognized the same on deferred revenue basis following the accounting standard laid down by ICAI and according to him assessing the same by the AO by all the three subsequent assessment year would lead to double taxation. The main contention of the Ld. A.R is that the AO has made error by addition Rs. 4,11,99,736/- by deferring the accounting principle and revenue recognition method followed by the assessee.
Going over the order passed by the Ld. CIT(A) it appears to us that the assessee company was requested to furnish historical data as per the table that was used to create provision to trace the post sale warranty services but the assessee did not provide any information. We further find that on the issue of disallowance of 1,00,000/- is concerned, the Ld. CIT(A) has held that the assessee company did not provide any explanation as Assessment Year: 2012-13 Techno Teaching Infosolution Pvt. Ltd. to why it should be allowed. We further find that the Ld. CIT(A) has upheld the addition u/s 68 of the Act on the ground that the assessee has failed to substantiate the three ingredients i.e. identity, creditworthiness of the share applicant and genuineness of the transaction. Before us the prayer of the Ld. Counsel of the assessee is that the assessee has to be given an opportunity to place his case before the AO. The assessee has sufficient documentary evidence as well as material to satisfy the case regarding his case. Keeping in view the facts of the case as discussed above as well as considering the submission made by the assessee, for the interest of justice, we are inclined to restore the case of the assessee to the file of AO for fresh adjudication after proper verification of the documents and after hearing the assessee. The order passed by the AO confirmed by the CIT(A) is here by set aside, matter is restored to the file of AO for fresh order.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order is pronounced in the open court on 17th March, 2025
Sd/- Sd/- (Rajesh Kumar/राजेश कुमार) (Pradip Kumar Choubey /�द�प कुमार चौबे) Accountant Member/लेखा सद�य Judicial Member/�या�यक सद�य Dated: 17th March, 2025 SM, Sr. PS Copy of the order forwarded to: 1. Appellant- Techno Teaching Infosolution Pvt. Ltd., 1A, Ashutosh Mukherjee Road, Kolkata-700020 2. Respondent – DCIT, Circle-1(2), Kolkata 3. Ld. CIT(A)-NFAC, Delhi 4. Ld. Pr. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail)