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Income Tax Appellate Tribunal, “D”, BENCH MUMBAI
Before: SHRI C.N. PRASAD, JM & SHRI M.BALAGANESH, AM
Date of Hearing 11/04/2019 Date of Pronouncement 03/05/2019 आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in A.Y.2011-2012 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-3, Mumbai in Appeal No.CIT(A)-3/DCIT-1(3)/IT-16/2014-15, dated 04.05.2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3)of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 17.02.2014 by the ld. Income Tax Officer – 1(2), Thane (hereinafter referred to as ld. AO).
The first issue to be decided in this appeal is as to whether the ld CITA was justified in confirming the addition made in the sum of Rs.11,90,941/- towards un-reconciled AIR entries in the facts and circumstances of the case.
Roots Corporation Ltd. 2.1. The brief facts of this issue are that during the course of assessment proceedings, the ld AO had observed that AIR information was received from ITD database and the assessee was given the same to reconcile it with its books of accounts. The assessee submitted that total revenue from 141 parties as per AIR report was Rs.8,33,91,572/- whereas the amount which could be reconciled was Rs.8,12,91,668/- only thereby leading to a difference of Rs.20,99,904/-. The assessee also submitted that the data from ITD database may be incorrect or the parties may have erroneously put wrong PAN and accordingly adding the difference in the hands of the assessee would not be justified. The ld AO however held that the assessee failed to offer any explanation for the difference sum of Rs.20,99,904/- with supporting evidence and brought to tax as unexplained credit in the assessment. During the course of appellate proceedings, the assessee submitted additional evidences under Rule 46A of the Income Tax Rules which were forwarded to the ld AO for remand report. The assessee was further able to reconcile the differences to the tune of Rs.9,08,963/-. The ld AO furnished a remand report accepting to the relief of Rs.9,08,963/- and prayed for sustaining the addition of Rs.11,90,941/- before the ld CITA. Aggrieved, the assessee is in appeal before us. 2.2. We have heard the rival submissions. We find that the issue under dispute was the subject matter of adjudication by this tribunal in Asst Year 2010-11 in assessee’s own case in dated 17.4.2018 wherein it was held as under:-
Roots Corporation Ltd.
We have heard the rival submissions, perused the orders of the authorities below. The letter written to the Assessing Officer clearly states that the assessee requested the Assessing Officer to provide necessary information to reconcile the balance entries. However, in spite of request the Assessing Officer could not provide any information and moreover he made addition stating that the assessee agreed for the same. Assessing Officer made addition solely on the basis of AIR information and we see no other information is brought on record by the Assessing Officer to show that the assessee had in fact received this income from the said parties. We also see that the assessee reconciled 95% of the transactions leaving only 4.76% of the transactions unreconciled due to lack of data.
We find that almost an identical situation aroused in the case of M/s. Yahoo India Pvt. Ltd. (supra) and the Coordinate Bench held as under: - "7. We have considered the submissions of the parties and perused the material available on record. Undisputedly, out of 1,479 entries as per AIR data, only 161 entries, according to the allegation of the Assessing Officer, remained un-reconciled by the assessee. It is also not disputed that apart from AIR information, there is no other evidence or material available before the Assessing Officer to indicate that assessee has received income more than what is declared in Profit & Loss account. It is also a fact on record that in course of hearing of appeal, assessee has reconciled 161 un- reconciled entries by furnishing all necessary details. It is not the case of the Department that the information / details submitted by the assessee in respect of unreconciled entries are not genuine or unbelievable. Therefore, when the learned Commissioner (Appeals) has directed the Assessing Officer to verify the reconciliation of entries by examining the details submitted by the assessee, there is no reason why the Department should be aggrieved. Prima-facie, as could be seen, the learned Commissioner (Appeals) has directed the Assessing Officer to give effect only to the entries reconciled by the assessee. Moreover, on a perusal of the relevant case laws cited by the learned counsel, we find that the consistent view of the Tribunal in these decisions are, only on the basis of AIR information no addition can be made when there is no other materials before the Assessing Officer to demonstrate that assessee has received income more than what is declared by him. In the present case also, a perusal of the assessment order reveals that apart from the AIR information, there is no other material / evidence available before the Assessing Officer to establish that assessee has received more income than what is shown in the Profit & Loss account. In the aforesaid view of the matter, we do not find any infirmity in the direction of the learned Commissioner (Appeals) which is upheld. Ground no.1, is dismissed."
Roots Corporation Ltd. 9. In view of what is discussed above, we do not find any valid reason for the Assessing Officer to make addition towards unreconciled income as the addition was solely based on AIR information and without making proper enquiries, without submitting the information as requested by the assessee. In the circumstances, we direct the Assessing Officer to delete the addition. Grounds raised by the assessee are allowed. 2.3. We find that during the year under appeal, the assessee was able to reconcile 97.48% of the total transactions reflected in ITD database and is in a much better footing than it was placed in Asst Year 2010-11 supra. In view of these facts and respectfully following the judicial precedent relied upon hereinabove, we direct the ld AO to delete the addition of Rs 11,90,941/- and grant relief to the assessee. Accordingly, the Ground No. 1 raised by the assessee is allowed.
3. The Ground No. 2 raised by the assessee is with regard to non- grant of depreciation on computer peripherals at the rate of 60% in the facts and circumstances of the case. 3.1. The brief facts of this issue are that the assessee claimed depreciation @ 60% on the following items treating it to be part of computer , which was sought to be treated as plant and machinery by the ld AO eligible for depreciation @ 15% as under:- Sr. Name of Asset Depreciation No. As per assessee As per AO (60%) (15%) 1 CCTV-DVR 16 Channel 40,5000 15,188 2 DPU1001 A-Wifi 2,10,641 19,373 3 Minitower Dell 25,148 9,431 4 Network Switch 1,95,415 39,383 5 Others 25,333 5,460 6 Printers 2,39,693 59,923 7 Racks 30,521 10,607 8 Router 90,170 22,239 Total 8,57,421 1,81,604 Difference 6,75,819 Roots Corporation Ltd. 3.2. The ld AO in the remand report observed that perusal of the above items indicate that CCTV, DPU1001A- Wifi, Minitower Dell, Network Switch, Others, Printers, Racks and Router are in no way related to the computer or its peripherals as they do not in any way enhance the working of the computer or the computer is not dependent for its functioning. These are add-ons and are not integral part of the computer system to qualify it to avail depreciation @ 60%. Accordingly, he prayed for sustaining the disallowance of Rs 6,75,819/- before the ld CITA. The ld CITA accordingly sustained the disallowance of Rs 6,75,819/-. Aggrieved, the assessee is in appeal before us. 3.3. We have heard the rival submissions. From the table above, we find that the items in Serial Numbers 1,2,3,4,6 & 8 are certainly integral part of computer thereby eligible for depreciation at 60%. The other two items in Serial Numbers 5 & 7 would be eligible for depreciation at 15%. Our finding is in consonance with the decision of Special Bench of Mumbai Tribunal in the case of DCIT vs Datacraft India Ltd reported in 40 SOT 295 dated 9.7.2010 and the decision of Hon’ble Delhi High Court in the case of CIT vs BSES Yamuna Powers Ltd reported in 358 ITR 47 (Del). The relevant findings thereon are not reproduced herein for the sake of brevity. Accordingly, we direct the ld AO to recomputed the depreciation as per the aforesaid directions given by us specifically mentioning the serial numbers. Accordingly, the Ground No. 2 raised by the assessee is partly allowed.
Roots Corporation Ltd.
The next issue to be decided in this appeal is as to whether the ld CITA was justified in confirming the disallowance of bad debts of Rs 13,91,338/- in the facts and circumstances of the case. 4.1. The brief facts of this issue are that the ld AO in the remand report dated 27.4.2017 submitted that the parties in respect of which bad debts are claimed are TCS group, Tata Tele Services, Tata Steel, Reliance Communication Ltd, Reliance LIC, ICICI Lombard, Essar Oil, Hero Honda, Asian PPG Industries, Johnson & Johnson , ABB Ltd and Mahindra & Mahindra Ltd. Since the above parties are established listed companies and by no stretch of imagination, the amounts could be termed as irrecoverable and accordingly the claim of bad debts by the assessee is not in order. In other words, the ld AO in the remand report observed that the assessee had not proved that the debts had become irrecoverable to the tune of Rs 13,91,338/- and hence claim of bad debts written off by the assessee is not to be allowed. The ld CITA accordingly upheld the disallowance of claim of bad debts written off in the sum of Rs 13,91,338/- Aggrieved, the assessee is in appeal before us. 4.2. We have heard the rival submissions. We find that the assessee had claimed bad debts in respect of 54 customers to the tune of Rs 13,91,338/- , against which, the income was duly offered by the assessee in earlier years. We find that the ld AO had not disputed even in the remand report that the assessee had not complied with provisions of section 36(2) of the Act by offering the income in earlier years. The only reason for which disallowance was sustained by the ld CITA was with Roots Corporation Ltd. regard to the fact that the assessee had not proved the debt as irrecoverable in respect of these 54 parties. We find that pursuant to amendment made in section 36(1)(vii) of the Act with effect from 1.4.1989, it is enough if the debt had been written off as irrecoverable by the assessee to claim the same as bad debt u/s 36(1)(vii) of the Act. There is no need to prove that the said debt had become irrecoverable after 1.4.1989. Reliance in this regard is placed on the decision of the Hon’ble Supreme Court in the case of TRF Ltd reported in 323 ITR 397 (SC). Accordingly, we direct the ld AO to delete the disallowance of bad debts in the sum of Rs 13,91,338/-. Hence the Ground No. 3 raised by the assessee is allowed.
The last issue to be decided in this appeal is as to whether the ld CITA was justified in not entertaining the assessee’s claim of deduction u/s 35AD of the Act in the facts and circumstances of the case. 5.1. We have heard the rival submissions. We find that the ld AO in the remand report had stated that assessee had not claimed any deduction u/s 35AD of the Act in the return of income and that the assessee had made this claim for the first time only during the course of assessment proceedings and filed revised computation. The ld AO also observed that the assessee in support of this claim had also submitted the Chartered Accountant’s certificate in Form 10CCB during the course of assessment. We find that the ld CITA had placed reliance on the decision of Hon’ble Supreme Court in the case of Goetze (India) Ltd vs CIT reported in 284 ITR 323 (SC) for denying the claim of deduction u/s 35AD of the Act to the Roots Corporation Ltd. assessee. We find that the Hon’ble Supreme Court had made it clear in its order that the claim made by the assessee otherwise than by way of a valid return is not applicable to the appellate authorities. Hence we hold that the ld CITA ought to have considered the claim of deduction u/s 35AD of the Act in the instant case. Reliance in this regard is also placed on the decision of Hon’ble Bombay High Court in the case of CIT vs Pruthvi Brokers & Shareholders reported in 349 ITR 336 (Bom). But we find that the lower authorities had not examined the claim of the assessee on merits. Hence we deem it fit and appropriate to remand this issue to the file of ld AO for adjudication of this issue on merits and if the assessee is found to be eligible, the same should be granted to the assessee, even if the same was not claimed in the return of income in view of aforesaid decision of Hon’ble Jurisdictional High Court. Accordingly, the Ground No. 4 raised by the assessee is allowed for statistical purposes.
In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 03/05/2019