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Income Tax Appellate Tribunal, KOLKATA BENCH “C” KOLKATA
Before: Shri P.M.Jagtap & Shri N.V.Vasudevan
आदेश /O R D E R
PER P.M.Jagtap, Accountant Member:-
This appeal is preferred by the Revenue against the order of CIT(A)-VI, Kolkata dated 17.03.2010 and the same is being disposed of along with the Cross Objection filed by the assessee being C.O No. 82/Kol/2010.
ITA No.1241/Kol/2010 & CO 82/Kol/10 A.Y. 2005-06 ACIT Cir-5, Kol. V. Vishnu Webtech (P) Ltd. Page 2 2. The assessee in the present is a company which is engaged in the business of software development. The return of income for the year under consideration was filed by it on 26.10.2005 declaring total income of Rs.13,75,020/-. In the assessment original completed u/s. 143(3) of the Act vide order dated 27.12.2007, total income of assessee was determined by Assessing Officer at Rs.39,24,108/- after making additions of Rs.25,49,088/- to the income returned by the assessee. The said assessment was subsequently set aside by CIT vide his order passed u/s 263 of the Act with a direction to the AO to reconcile the expenditure incurred by the assessee on construction with respective source of funds claimed to be available with the assessee date-wise and to pass a speaking order. As per the direction of CIT, the expenditure incurred by assessee on construction was verified by the AO with reference to the corresponding sources of funds claimed to be available with the assessee. In this regard, assessee furnished the relevant details of payments as well as sources of funds for AYs 2002-03, 2003-04 & 2004-05. In the details so furnished, the source of funds was explained by the assessee as share capital of Rs.150 lakh, share premium of Rs.150 lakhs, internal accrual of Rs.41 lakh, advance of Rs.34 lakh and current liability of Rs.16 lakh. It was claimed that said sources of funds was sufficient to fully cover the expenditure of Rs.3.48 crores incurred by the assessee on construction during the year under consideration. This claim of the assessee was not found acceptable by the AO. According to him, the main source of funds claimed to be share capital was received by the assessee in the month of March while the expenditure on construction was incurred before 30th September 2004. He held that there was thus no link between the share capital received by the assessee and the investment made in the construction. Consequently, the said investment made by the assessee in construction was treated by AO as unexplained and addition of Rs.3.48 crores was made by him to the total income of the assessee in the assessment completed u/s. 143(3) r.w.s. 263 of the Act vide order dated 27.11.2009.
Against the order passed by AO u/s. 143(3) r.ws. 263 of the Act, an appeal was preferred by assessee before CIT(A) disputing the addition of Rs.3.48 crores made by AO on account of alleged unexplained investment in construction. After considering
ITA No.1241/Kol/2010 & CO 82/Kol/10 A.Y. 2005-06 ACIT Cir-5, Kol. V. Vishnu Webtech (P) Ltd. Page 3 the submissions made by the assessee as well as the materials available on record, Ld. CIT(A) deleted the addition made by the AO on account of alleged unexplained investment in construction for the following reasons given in his impugned order:- “I have gone through the submissions and documents filed by the appellant and also the order of the A.O As seen from the record, the CIT- II, Kolkata in his order u/s. 263 has issued a direction to reconcile the issue of expenditure incurred by the assessee together with date wise sources incoming funds available to them and to pass a speaking order. As seen from the details of fun flow statement and bank accounts filed before me, the appellant filed the same details before the Assessing Officer. Assessee also submitted that cash flow statement along with cash book, bank books were produced before the A.O during the course of assessment proceedings. The AO in his order has not pointed out any un- explained credit or negative cash balance of the appellant in cash book. The appellant submitted the dates of share application money received by account payee cheques form promoters and share applicants which were deposited in the bank account of the assessee. The details filed before me show that the cost of construction was net from time to time with the Promoters’ contribution for share capital. As seen from the books of accounts produced before me the allotment of shares was made on 07.03.2005 against share capital received in earlier years and also Financial year 2004-05. The appellant also filed the details of building construction during the Fyr-2003-04 and 2004-05. The appellant submitted the ledger extract record of share application money received from all the Promoters.
The assessing officer referring to the letter field by the appellant dated 22.10.2009 has concluded that the assessee himself accepted that expenditure was incurred by the assessee after 30.09.2004. However, as seen from the letter dated 22.10.2009 the assessee filed details and evidences to show that all assets were put to use before 30.09.2004. The appellant also filed the summary of expenses accounted for after 30.09.2004. As seen from these details the major part of expenses were incurred or actually paid before 30.09.2004. Only journal entries were made after 30.09.2004 on receipt of final bills or settlement of bills. On verification of the contents of the letter dated 22.10.2009, the conclusion drawn by the AO is without any evidences on basis. The A.O has not brought on record any inconsistencies/cash deficit/introduction of unaccounted monies in the books of accounts. The observation of the AO that the assessee has received funds only on 07.03.2005 is without any basis or fact brought on record. As seen from the balance-sheet there was capital work in progress of Rs.2,47,72,922/- and pre-operative expenses
ITA No.1241/Kol/2010 & CO 82/Kol/10 A.Y. 2005-06 ACIT Cir-5, Kol. V. Vishnu Webtech (P) Ltd. Page 4 of Rs.6,49,469/- incurred in earlier years and brought forward as capital work in progress. The expenditure incurred in earlier years cannot be added as income from the assessment year 2005-06 u/s. 69 of the I.T. Act. The appellant filed the complete details of payments made during the construction period and also the relevant sources of funds. As seen from the details furnished by the appellant, after 30.09.2004 an amount of Rs.5,50,000/- was incurred and there were credits, discount, rebate of Rs.8,62,951/-. Thus, no net expenditure was incurred by the assessee. The AO has not brought out any material on record to show that the construction of the building has not been completed before 30.09.2004. The AO has also allowed the depreciation as claimed by the appellant. The share capital was received by the appellant during the financial year 2002-03, 2003-04 & 2004-05. This is evident from the fund flow statement and the balance sheet submitted by the appellant for the relevant assessment year during the course of appellate proceedings. The observation of the A.O that the assessee received funds only on 07.03.2005 is factually incurred and the AO is not justified in making an addition u/s. 69 without bringing any facts on record. The AO is directed to delete the addition made u/s. 69 of the IT Act. These rounds of appeal are allowed.”
Aggrieved by the order of CIT(A), the Revenue has preferred this appeal before the Tribunal while the assessee has filed its CO.
We have heard arguments of both the sides and also perused the materials on record. The only grievance of the Revenue as projected in the solitary ground raised in its appeal is that the addition made by AO on account of unexplained investment made by the assessee in the construction has been deleted by CIT(A) by relying on the new evidence filed by the assessee without giving any opportunity to the AO to verify the same which is contrary to the provision of Rule 46A of the IT Rules, 1962. In its CO, the assessee-company has supported the impugned order of CIT(A) stating that there was no additional evidence filed by the assessee before CIT(A) and CIT(A) having given relief to the assessee relying on the same evidence which was available before AO, there is no violation of Rule 46A of the IT Rules. Keeping in view this assertion made
ITA No.1241/Kol/2010 & CO 82/Kol/10 A.Y. 2005-06 ACIT Cir-5, Kol. V. Vishnu Webtech (P) Ltd. Page 5 by the assessee-company in its CO which was reiterated by Ld. Counsel of assessee, opportunity was given to Ld. DR to point out specifically the additional evidence, if any, filed by assessee before CIT(A) for the first time which has been relied by the CIT(A) to give relief to the assessee. After having gone through the relevant assessment record, Ld. DR has not been able to point out any such additional evidence filed by the assessee and relied upon by the CIT(A) to give relief to the assessee. Ld. Counsel for assessee on the other hand, has taken us through the impugned order of CIT(A) to show that there was no new evidence filed by the assessee for the first time before CIT(A) and this position clearly evident from the order of the CIT(A) has not been rebutted or controverted out by the Ld. DR. We therefore find no merit in this appeal filed by Revenue and upholding the impugned order of CIT(A), we dismiss the said appeal.
As a result of our decision render above, upholding the impugned order of CIT(A) giving relief to the assessee on the issue involved in this case, the CO filed by the assessee has become infructous, the same is accordingly dismissed.
In the result, appeal of Revenue and CO of the assessee both are dismissed. Order pronounced in open court on 20/10/2015
Sd/- Sd/- (N.V.Vasudevan) (P.M.Jagtap) Judicial Member Accountant Member *Dkp �दनांकः- 20/10/2015 कोलकाता
ITA No.1241/Kol/2010 & CO 82/Kol/10 A.Y. 2005-06 ACIT Cir-5, Kol. V. Vishnu Webtech (P) Ltd. Page 6
आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. आवेदक/Assessee –Vishnu Webtech P.Ltd., C-3/3, Gillander House, 8, N.S. Road, Kolkata-01 2. राज�व/Revenue-ACIT, Cir-5, P-7, Chowringhee Sq. Aayakar Bhavan, 8th Fl, Kol-01 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण कोलकाता / DR, ITAT, Kolkata 6. गाड� फाइल / Guard file. By order/आदेश से, /True Copy/ उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, कोलकाता