Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCHES “A” MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year 2008-09. The appeal is directed against the order of the Commissioner (Appeals) – 3, Mumbai and arises out of the order under section 143(3) of the Income Tax Act, 1961 (the “Act’’).
Ground No. 1, 2, 3 &4 in this appeal are taken together for adjudication as they address a common issue. The 1st ground raised by the assessee in this appeal is that the learned CIT(A) erred in upholding the addition to the extent of Rs. 2,63,782/- as concealed professional fees of the appellant on the ground that the appellant was not able to obtain confirmations in respect of 15 entries in the AIR information and was not able to fully reconcile the AIR information received by the Income Tax Department from external sources with the professional fees as per the books of accounts. The 2nd ground raised by the assessee in this appeal is that the Ld. CIT(A) erred in upholding the addition to the extent of Rs. 1,32,000/- in respect of Rishabhdev Technocable Ltd. as concealed professional fees of the assessee on the ground that the assessee was not able to obtain confirmation of the party. The 3rd ground raised
by the assessee in this appeal is that the learned CIT(A) erred in upholding the addition without there being any provision in the Act for making such an addition on the basis of external information and no corroborative evidence. The 4th ground raised by the assessee in this appeal is that the learned CIT(A) erred in not considering the fact that mere TDS made by the client does not automatically mean payment of professional fees to the assessee, more so when the assessee is following cash basis of accounting. 2.1 We find that during the course of appellate proceedings before the Ld. CIT(A), the assessee had filed additional evidence in respect of ground no. 3 to 7 for unreconciled entries. The learned CIT(A) sent to the AO vide his office letter dated 03.06.2011, the additional evidence for examination and comments. The AO vide his remand report dated 17.10.2011 has submitted that the assessee failed to produce any supporting evidence in respect of 25 parties pertaining to aggregate receipts of Rs. 4,27,487/-. The AR of the assessee submitted before the learned CIT(A) that only few details aggregating to Rs. 4,28,427/- remained to be reconciled. The AR further submitted before the learned CIT(A) that with regard to 18 number of parties in respect of aggregate receipt of Rs. 2,63,782/- , the assessee had sent letters to these parties enquiring about the details of payments made to the assessee if any against the TDS as shown in the AIR. However, the assessee has not received any reply from these parties. The learned CIT(A) therefore, sustained the addition of Rs. 2,63,782/-. 2.2 The AR of the assessee also submitted before the learned CIT(A) that as recorded the party listed at serial no 5 & 6 of the remand report and aggregating to Rs. 1,32,000/- [(Rishabdev Technocable Ltd. (Rs. 66,000 + 66,000)] these entries have been matched with Form 26AS wherein these are reflected vide Sr. No. 1162 & 1164. The learned CIT(A) thus sustained the addition of Rs. 1,32,000/-.
3. The learned counsel of the assessee has filed a paper book before the Tribunal certifying that “Page Nos. 1 to 30 and 34 to 39 of the compilation were before the lower authorities. Page Nos. 31, 32, 33 of the compilation are the Ledger Account of Rishabdev Technocable Ltd. letter from Rishabdev Technocable Ltd. and the certificate issued by M/s. Dayal & Lohia, Chartered Accountants which were not before the lower authorities.’’ 4. The learned DR supported the order passed by the learned CIT(A).
We have heard the rival submissions and perused the relevant material on record. We find that the learned counsel of the assessee has filed a paper book before the Tribunal stating that in respect of addition of Rs. 2,63,782/- confirmed the learned CIT(A), out of the 15 parties, letters have been sent to the first 12 parties, however, no reply has been received by the assessee. Also it is mentioned at para 3 here-in-above that page no 31, 32 & 33 of the P/B which represents transactions with Rishabdev Technocable Ltd. were not filed before the learned CIT(A) and the AO. 5.1 We may mention here the Instruction No. 5/2013 dated 08.07.2013 issued by CBDT. Reference was made therein to the judgement of the Hon'ble Delhi High Court in the case of Court On its Own Motion vs. UOI and Ors. (W.P. (C) 2659/2012 & W.P. (C) 5443/2012 dated 14.03.2013). The relevant paragraph of the above Instruction reads as under: ‘’In view of the order of the Hon'ble Delhi High Court (reference: para 50 of the order); it has been decided by the Board that when an assessee approaches the Assessing Officer with requisite details and particulars in the form of TDS certificate as an evidence against any mismatched amount, the said Assessing Officer will verify whether or not the deductor has made payment of the TDS in the Government Account and if the payment has been made, credit of the same should be given to the assessee. However, the Assessing Officer is at liberty to ascertain and verify the true and correct position about the TDS with the relevant AO (TDS). The AO may also, if deemed necessary, issue a notice to the deductor to compel him to file correction statement as per the procedure laid down.’’ 5.2 In view of the factual matrix mentioned at para 5 and the Instruction of the CBDT extracted at para 5.1 here-in-above, the order of the learned CIT(A) upholding the addition of Rs. 2,63,782/- and Rs. 1,32,000/- is set aside and the same is sent back to the file of the AO for verification. The AO would follow the Instruction of CBDT mentioned at para 5.1 and pass an order afresh as per the provisions of the Act after giving reasonable opportunity of being heard to the assessee. Thus ground no 1, 2, 3 & 4 are allowed for statistical purposes.
The 5th ground raised by the assessee in this appeal is that the 6. learned CIT(A) erred in allowing the depreciation on software @25% instead of 60% on the ground that the assessee only had a licence to use and therefore software should be considered as an intangible assets eligible for 25% depreciation. It is further stated that without prejudice to the above, the entire expense should be allowed as an expenditure u/s 37 of the Act.
6.1 We find that the Hon'ble Bombay High Court in the case of CIT vs. Raychem RPG Ltd. (2012) 21 taxmann. Com 507 (Bom) has held that ‘’Where enterprise resource planning (ERP) package software facilitated assessee’s trading operations or enabling management to conduct assessee’s business more efficiently or more profitably but it was not in nature of profit-making apparatus, software expenditure was allowable as revenue expenditure’’. In the instant case, the assessee has claimed only depreciation on software @60%. We, therefore, direct the AO to allow depreciation on software to the assessee @60%. Thus ground no 5 of the appeal is allowed.
In the result, the appeal is partly allowed.
Order pronounced in the open court on 03/01/2017