IDBI Capital Markets & Securities Ltd. Vs DCIT (ITAT Mumbai)
Conclusion: Since AO had not considered revised return of income which was filed within prescribed period of limitation for the difference between income disclosed in return and total receipts as per Form 26AS, therefore, the matter was remanded back to AO with direction to verify the fact and grant relief to assessee in accordance with law.
Held: AO took his view that income disclosed by assessee as per return of income was ₹ 38.04 crore; whereas the total receipt as per Form 26AS was ₹ 54.14 crore and the difference of two figure remained unexplained by assessee. Accordingly AO treated the same as income of assessee. Commissioner (Appeals) confirmed the action of AO with similar observations. It was held that the allegation of AO was that TDS disclosed in the return of income was only of ₹ 3.03 crore; whereas as per Form 26 AS was ₹ 5.18 crore. It was noted that in the ordinal return of income assessee claimed TDS of ₹ 3.03 crore however, in the revised return of income filed by assessee, assessee claimed TDS of ₹ 6.53 crores . This fact clearly showed that AO had not considered the revised return of income. The revised return of income was filed within prescribed period of limitation under the Act. Considering the fact that AO had not considered the revised return of income filed by assessee within time, The matter was restored to the file of AO to verify the fact and grant relief to assessee in accordance with law.
FULL TEXT OF THE ITAT JUDGEMENT
1. This appeal by assessee is directed against the order of learned Commissioner (Appeals)-9 (the learned Commissioner (Appeals)), Mumbai dt. 18-10-2016 for assessment year 2012-13. The assessee has raised the following grounds of appeal:
Ground 1- Addition for Suppressed Receipts
1.0. The learned Commissioner of Income Tax grossly erred in confirming the addition of ₹ 16,09,63,742 without properly understanding the facts of the case, the reasons for which the addition was made by the assessing officer and the submissions made by the assessee.
1.1. The learned Commissioner (Appeals) has confirmed the addition for the alleged failure of the assessee to explaining the discrepancy without mentioning the discrepancy which needed explanations.
1.2. In case the difference between the gross receipts as per Form 26AS and the receipts in respect of which TDS credit has been claimed in ITR has been considered a discrepancy, the learned Commissioner (Appeals) has failed to take account of the fact that all the gross receipts reflected in statement 26AS are duly reflected in the accounts on the basis of which the income as per ITR was computed. The amount of TDS credit as per Form 26AS matches with the credit claimed in the revised ITR reference to which the attention of the assessing officer as well as Commissioner (Appeals) was drawn. The assessing officer having been satisfied allowed credit for total amount of TDS claimed by the assessee in the revised ITR. The learned Commissioner of Income Tax failed to take note of the fact that the receipts as per ITR stand at much higher figure than the receipts reflected in the statement 26AS.
1.3. The learned Commissioner of Income Tax failed to appreciate that the difference between the gross receipts and the taxable income does not represent suppressed receipts as total income is computed after deducting from the gross receipts the allowable expenses incidental to business.
1.4. The learned Commissioner of Income Tax has gone wrong in basing his decision on the alleged absence of a formal prayer for admitting additional evidence. The assessee did not seek to rely on any additional evidence. All the facts relied upon in appeal were before the assessing officer to which the attention of the Commissioner of Income Tax was also drawn.
1.5. There is no justification for the addition given by the assessing officer in the remand report called for by the learned Commissioner of Income Tax and submitted by the assessing officer.
Ground No. 2- Disallowance of 25% expenses
2.0 The learned Commissioner of Income Tax in a very cryptic observation, without averting to the assessee’s submissions and commenting on the validity of assessing officer ‘s observations unjustifiably confirmed disallowance of 25% of aggregate expenses under all heads of income.
2.1. The learned Commissioner of Income Tax failed to appreciate that the disallowance has been made without any basis, purely on surmises and conjectures and without giving a single instance of expenditure unreleted to business. The assessee is a public sector undertaking subject to statutory audits as well as audit by Comptroller & Auditor General of India and such disallowances have not been made in the past as well as future assessments.
2.2. The learned Commissioner of Income Tax failed to take into account that the vouchers were duly produced before the assessing officer and no query or objection was ever made by him in respect of any of the item of expenditure.
2.3. The learned Commissioner of Income Tax is not justified in basing his decision on absence of any formal prayer for admission of any additional evidence as the assessee pleaded the case on the basis of evidence already produced before the assessing officer.
2.4. The learned Commissioner of Income Tax failed to appreciate that the reliance of the assessing officer on the decision of the Supreme Court in the case of Ramanand Sagar v. Dy. CIT (2002) 256 ITR 134 (Bom) : 2002 TaxPub(DT) 1187 (Bom-HC) is wholly misplaced as the assessee discharged its onus by producing the vouchers in respect of which no further question was raised by the assessing officer.
2.5. Without prejudice to the relief claimed as per ground 1, the assessee submits that having computed the income equal to the gross receipts as per statement 26AS, the disallowance made in respect of expenses has no leg to stand.
2.6. The assessing officer did not make any submission in respect of such disallowance in the remand report called for and submitted by the assessing officer.
Ground 3- Disallowance of Computer Maintenance Expenses
3.0 The learned Commissioner of Income Tax erred in confirming the disallowance made in respect of maintenance expenses of computer software as expenses of capital nature ignoring the legal position that repair and maintenance expenses of a capital assets are expenses incidental to business allowable under section 37 of the Act.
3.1. The learned Commissioner of Income Tax was totally unjustified in law in taking the view that capital assets are entitled to depreciation only and no other allowance including allowance for expenditure incurred in keeping the asset in working condition.
3.2. The disallowance being totally against law, deserves to be deleted.
Ground 4 – Disallowance of Bad Debts
4.0 The learned Commissioner of Income Tax was not justified in confirming the disallowance of ₹ 32,68,120 without considering the assesses submissions, evidence produced before the assessing officer, the contention made in the remand report and the assesses submissions made in response to the remand report.
4.1. The assessing officer in his remand report mentioned the ingredients of section 36(2) laying down the conditions for allowance of bad debt without mentioning any condition which is not fulfilled. The fact of its having been written off 1 that it was a business debt, that it was taken into account in the computation of business income of the assessment year 2008-09 were substantiated by submitting copies of account from the audited and published accounts of the company after which no further query was raised neither by the assessing officer nor by the Commissioner of Income Tax.
4.2. The learned Commissioner of Income Tax is not correct in observing that the appellant’s contentions are not based upon the submissions made before the assessing officer.
4.3. The learned Commissioner of Income Tax is also not justified in basing his decision on the appellant not making any formal prayer for admission of any additional evidence under Rule 46 of Income Tax Rules, 1962 without going into the evidence submitted before the assessing officer. The appellant did not seek to adduce any additional evidence unless required by him.
Ground No. 5- Disallowance out of Depreciation
5.0 The learned Commissioner of Income Tax was in error in confirming the rate of 10% depreciation in respect of electronic equipments like air conditioners, refrigerators etc. as against the rate of 15% claimed by the assessee which is the rate prescribed for ‘Plant and machinery’ under the schedule.
5.1. The learned Commissioner of Income Tax failed to appreciate that the office equipments like air conditioners etc. fall within the category of ‘Plant and Machinery’ in respect of which the allowable rate of depreciation is 15%.
5.2. That the disallowance is against the rules and deserves to be deleted.
Ground No.6 – Disallowance of loss on error trade ₹ 100000
6.0 The learned Commissioner of Income Tax even after having accepted that the loss on error trade is allowable under the law, was in error in confirming the disallowance for alleged want of evidence when the assessing officer had not raised any issue of evidence. The amount is made up of several errors running into the aggregate of ₹ 100000 and was substantiated by producing the copy of account from books which are duly audited and published.
6.1. That the only ground on which assessing officer made the disallowance is by applying the provision of explanation to section 73 which is not applicable in the case and its non- application has not been disputed by the Commissioner of Income Tax also when he says that the expenditure should have been allowable. Having so held, the disallowance should have been deleted.
6.2. The disallowance on account of error trade has been deleted in appeal in preceding years.
6.3. That the disallowance is not justified and deserves to be deleted.
2. Brief facts of the case are that assessee is a company is wholly owned subsidiary of IDBI Bank Ltd, engaged in integrated financial services provider viz; investment banking, portfolio and file management, corporate advisory, institutional broking and distribution, retail broking and distribution and mutual fund advisory services and distribution. The assessee filed its return of income for assessment year 2012-13 on 21-9-2012 declaring total income of ₹ 38 crore approximately. The assessment was completed under section 143(3) on 22-1-2015 determining total income at ₹ 58.89 crore by making the following additions/disallowances.
