WABAN SOFTWARE P. LTD,MUMBAI vs. DCIT RG 8(3), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order dated 13.12.2013 of CIT(A)-18, Mumbai the assessee had filed the present appeal.Assessee-company, engaged in the business of handling software development activities,filed its original return of income on 14.10.2010 declaring total income of Rs.48.42 lakhs.The AO completed the assessment on 16.01.2013 determining income of the assessee at Rs.79.02 lakhs.

2.Vide its application dated 18.4.2016 the assessee has requested to admit additional evidences as per Rule 29, ITAT Rules, 1963.In its application the assessee has stated that a copy of invoices of fixed assets purchased during the year aggregating to Rs.88.15 lakhs could not be produced before the First Appellate Authority (FAA), that the FAA had rejected the additional invoices of Rs.49.60 lakhs submitted before him as additionall evidence, that the evidence would go to the root of the issue.Assessee has referred to the cases of Suhasini Goenka (216ITR518) and Satya Sethia(143ITR486) alongwith the application, the assessee has furnished a chart showing details of depreciation allowed/disallowed. It contains details like depreciation rate,value of fixed assets,depreciation on assets put to use and total depreciation. 2.1.During the course of hearing before us, the Authorised Representative (AR) stated that there was change in management, that all the evidences could not be produced during the assessment/appellate proceedings, that assessee was able to trace out some details from bank,

2011/M/14 (10-11) Waban Software Pvt.Ltd. that the First Appellate Authority (FAA) had enhanced the disallowance. The Departmental Representative(DR) stated that the issue of additional evidence could be decided on merits by the Bench. 2.2.After hearing the rival submissions,we are of the opinion that the additional evidences produced by the assessee(Pg.91-176)should be admitted as per Rule 29 of the ITAT Rules,as the documents are crucial to decide the issue before us.The assessee has shown a reasonable cause for not producing the same before the AO/FAA.Therefore,same are taken on record.

3.First Effective Ground of appeal is about disallowance of claim of depreciation to the extent of Rs.29.65 lakhs in respect of certain additions made to fixed assets. During the assessment proceedings,the AO found that the assessee had shown addition to the block of plant and machinery of Rs.1.16 crores,that it had shown addition of Rs.1.82 crores to the block of furniture and fixture,that it had claimed depreciation as per the Rules for the additions made to both the blocks.He directed the assessee to submit complete evidence in the shape of bills and vouchers to prove the genuineness of the additions made to the block of assets.In response to the show cause notice,the assessee expressed its difficulty to produce the details called for.It was contended that subsequent to the filing of return there was change in the management of the company, followed by change in employees handling the work. The AO further directed the assessee to submit the relevant evidence.The assessee produced ledger account of the parties from whom the assets were purchased and bank statements evidencing the payment made to them. As the assessee had not produced the evidences to prove the genuineness of purchase of assets the AO allowed depreciation of Rs.29.65 lakhs as against the claim made by the assessee of Rs.56.47 lakhs. Thus, an amount of Rs.26.81 was disallowed. 3.1.Aggrieved by the order of the AO, assessee preferred an appeal before the FAA and made elaborate submissions. It submitted additional evidence before the FAA which included bank statement.The FAA sent the bank statement to the AO for examination and submitted a remand report. Vide his letter dated 17.9.2013, the AO submitted the report in that regard. He forwarded a copy of remand the report to the assessee and issued a show cause notice to it to explain as to why depreciation, amounting to Rs.23.71 lakhs allowed by the AO, without verifying the bills and vouchers should not be disallowed and enhancement to that extent should not be made. The assessee filed its submissions before the FAA. After considering the available material the FAA held that the assessee had claimed depreciation of Rs.56.47 lakhs on the additional assets of Rs.1,16,97,716/- (plant & machinery) and Rs.1,82,76,432/- 2

2011/M/14 (10-11) Waban Software Pvt.Ltd.

(furniture and fixture), that the AO had given reasonable opportunity to the assessee to file complete details and documentary evidence to prove the genuineness of the purchases of the assets in question, that the documentary evidences and details were not filed citing the reason of change of management, that the AO had wrongly allowed depreciation of Rs.29,65,986/-, without verifying the bills/vouchers, that a notice of enhancement was issued to the assessee, that in response to the enhancement notice the assessee had argued that the AO had allowed depreciation of Rs.15.45 lakhs in respect of fixed assets/additions of Rs.80.56 lakhs based on the vendors name appearing in the bank statement, the AO had verified the bank account and had allowed the depreciation.He further observed that before claiming any deduction the onus was on the assessee to produce complete evidences before the AO, that the assessee had failed to submit documentary evidences regarding the purchase of plant and machinery as well as furniture and fixtures, that the AO had inadvertently allowed the depreciation without verifying the facts. The assessee had stated that AO had made disallowance of Rs.15.45 lakhs in place of Rs.23.71 lakhs as mentioned in the enhancement notice. He directed the AO to verify the figures and adopt the correct figures. 3.1.Before us,the AR stated that the additional evidences produced before the Tribunal were not considered by the revenue authorities,that the assessee had purchased the plant, machinery,furniture,that evidences could not be produced due to change in management. The DR supported the order of the FAA. 3.2.We have already admitted the additional evidences produced before us.The FAA had no occasion to verify the correctness of the claim made by the assessee in absence of the said documents.Therefore,we are of the opinion that,in the interest of justice,matter should be restored back to the file of the FAA for fresh adjudication.He would decide the issue after affording a reasonable opportunity of hearing to the assessee and after considering the additional evidences produced before us.Ground no. is decided in favour of the assessee,in part.

4.Next ground of appeal is about further disallowance of Rs. 15.45 lakhs made by the FAA. In the earlier paragraph we have narrated the facts of disallowance made by him on account of depreciation. Following our order for the First ground of appeal, we restore the matter of claim about the depreciation to the file of FAA for fresh adjudication. Second ground is also decided in favour of the assessee, in part. 5.Last ground of appeal is about upholding the disallowance of business expenses of Rs.93, 945/-,incurred by the assessee through credit card based on information of the AIR statement. 3

2011/M/14 (10-11) Waban Software Pvt.Ltd. During the assessment proceedings the AO found that as per the AIR information, the assessee had made credit card payments of Rs. 3.17 lakhs to American Express Banking Corporation. He directed the assessee to explain the source of the payments. In response to the show cause notice, the assessee submitted the details of Rs. 2.23 lakhs out of the total expenditure incurred by it. The AO disallowed the remaining amount i.e. Rs. 93, 945/- and added that the same to the taxable income of the assessee. 5.1.During the appellate proceedings, before the FAA, the assessee argued that credit card expenses mentioned in the statement were towards reimbursements made to one of its employees for the purpose of carrying on its business, that it had requested the AO to provide the breakup of Rs. 93, 945/-and additional time to enable it to provide the details, that the AO did not give any details in that regard, that the above payments were accounted for in the books of accounts and were duly audited, that the business of the company was acquired and none of the employees,who were handling the tax/accounts,had continued. After considering the submission of the assessee, the FAA held that the AO had given reasonable opportunity of hearing to the assessee to submit the details of payments, that no documentary evidences submitted to verify the payment of Rs. 93, 945/-, that the onus was on the assessee submitted the complete documentary evidences before the AO, that the assessee had failed to discharge its onus. Finally, he upheld the order of the AO. 5.2.Before us, the AR stated that card was given to the employee, that the expenditure was incurred for business of the assessee.The DR supported the order of the FAA. We find that the assessee had not produced documentary evidences about the expenditure to prove that same was incurred wholly and exclusive for the business purposes. The bank statement, produced by it before the AO indicates the expenditure incurred but it does not prove the fact of incurring of expenditure for the business. Therefore, in our opinion the order of the FAA does not suffer from any legal infirmity. Upholding the same, we decide third ground of appeal against the assessee. As a result, appeal filed by the assessee stands partly allowed. फलतः िनधा�रती �ारा दािखल क� गई अपील अंशतःमंजूर क� जाती है. Order pronounced in the open court on 12th April, 2017. आदेश क� घोषणा खुले �यायालय म� दनांक 12 अ!ैल, 2017 को क� गई । Sd/- Sd/- (राम लाल नेगी राम लाल नेगी राम लाल नेगी / Ram Lal Negi) (राजे�� / Rajendra) राम लाल नेगी �याियक सद�य / JUDICIAL MEMBER लेखा लेखा लेखा सद�य लेखा सद�य सद�य / ACCOUNTANT MEMBER सद�य मुंबई Mumbai; दनांक/Dated : 12.04.2017. Jv.Sr.PS. आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : आदेश आदेश आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत 1.Appellant /अपीलाथ#

2. Respondent /!$यथ# 4

2011/M/14 (10-11) Waban Software Pvt.Ltd.