The DCIT, Circle-3(1), Visakhapatnam v. M/s MCC Software Devp & Trng Pvt. Ltd., Visakhapatnam

ITA 397/VIZ/2005 | 2001-2002
Pronouncement Date: 13-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 39725314 RSA 2005
Assessee PAN AAHFM1371R
Bench Visakhapatnam
Appeal Number ITA 397/VIZ/2005
Duration Of Justice 4 year(s) 7 month(s) 29 day(s)
Appellant The DCIT, Circle-3(1), Visakhapatnam
Respondent M/s MCC Software Devp & Trng Pvt. Ltd., Visakhapatnam
Appeal Type Income Tax Appeal
Pronouncement Date 13-05-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 13-05-2010
Assessment Year 2001-2002
Appeal Filed On 14-09-2005
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH: VISAKHAPATNAM BEFORE: SRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SRI B.R. BASKARAN ACCOUNTANT MEMBER I.T.A. NO.397&398/VIZAG/2005 ASSESSMENT YEAR : 2001-02 & 2002-03 DCIT CIRCLE-3(1) VISAKHAPATNAM VS. M/S. MCC SOFTWARE DEVELOPMENT & TRAINING PVT. LTD VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AAHFM1371R APPELLANT BY : SHRI SUBRATA SARKAR DR RESPONDENT BY : N O N E O R D E R PER SHRI B.R. BASKARAN ACCOUNTANT MEMBER : THE APPEALS OF THE REVENUE RELATING TO THE ASS ESSMENT YEARS 2001-02 AND 2002-03 ARE DIRECTED AGAINST THE ORDERS PASSED BY L D CIT(A)-I VISAKHAPATNAM. SINCE THE ISSUES AGITATED IN THESE TWO APPEALS ARE IDENTICAL IN NATURE AND BASED UPON SAME SET OF FACTS WE FIND IT CONVENIENT TO DI SPOSE THEM OF BY THIS COMMON ORDER. NONE APPEARED ON BEHALF OF THE ASSESSEE DES PITE THE SERVICE OF NOTICE AND HENCE WE PROCEED TO DISPOSE OF THESE APPEALS EX -PARTE QUA THE ASSESSEE. 2. THE ADDITION MADE BY THE AO HAVING BEEN RED UCED BY THE LD CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 3. THE ASSESSEE IS IN THE BUSINESS OF SOFTWARE TRAINING AND DEVELOPMENT. A SURVEY OPERATION U/S 133A OF THE ACT WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 06.1.2003. DURING THE COURSE OF SU RVEY THE DEPARTMENT FOUND A C.D. WHICH CONTAINED THE FINANCIAL STATEMENTS RELA TING TO THE FINANCIAL YEARS RELEVANT TO THE ASSESSMENT YEARS 2001-02 AND 2002-0 3. THE FINANCIAL RESULTS WERE VERY MUCH IN VARIANCE WITH THE PROFIT SHOWN IN THE RETURN OF INCOME FILED BY 2 THE ASSESSEE. THOUGH THE AO ORDERED FOR AN AUDIT U /S 142(2A) OF THE ACT THE ASSESSEE DID NOT CO-OPERATE WITH THAT AUDITOR AND H ENCE THE AUDITOR EXPRESSED HIS INABILITY TO FURNISH ANY REPORT. THERE AFTER THE AO AFFORDED AN OPPORTUNITY TO THE ASSESSEE BUT WAS NOT SATISFIED WITH THE EXPLAN ATIONS GIVEN BY THE ASSESSEE. HENCE THE AO COMPLETED THE ASSESSMENT BY ADOPTING T HE FINANCIAL RESULTS AS FOUND IN THE C.D. 4. IN THE APPEAL THE LD CIT(A) FOUND THAT THE DEPRECIATION WAS NOT CHARGED IN THE FINANCIAL STATEMENTS FOUND IN THE C.D AND ACCOR DINGLY HELD THAT THE DEPRECIATION IS ALLOWABLE. THE LD CIT(A) ALSO ACCE PTED THE EXPLANATIONS OF THE ASSESSEE THAT THE FINANCIAL STATEMENTS FOUND IN THE C.D. ARE PROVISIONAL STATEMENTS AND THE VARIATION FOUND BETWEEN BOTH THE STATEMENTS RELATING TO THE DIRECT INCOME AND CERTAIN EXPENSES ARE DUE TO THE A CCOUNTING POLICY FOLLOWED BY THE COMPANY. FOR EXAMPLE WITH REGARD TO THE INCOM E BY WAY OF FEE RECEIPTS IT WAS SUBMITTED THAT THE C.D. CONTAINS ACTUAL RECEIPT S WHERE AS FOR PREPARING THE PROFIT AND LOSS ACCOUNT UNDER THE COMPANIES ACT TH E FEES PERTAINING UNFINISHED JOBS ARE DEFERRED. ACCEPTING THE SAID EXPLANATIONS THE LD CIT(A) DIRECTED THE AO TO PROCEED FROM THE PROFIT SHOWN IN THE PROFIT A ND LOSS ACCOUNT AND CONFIRMED DISALLOWANCES WITH REGARD TO CERTAIN ITEM S. THUS IN EFFECT THE LD CIT(A) REJECTED THE VIEW OF THE AO TO ADOPT THE PRO FIT AS SHOWN IN THE FINANCIAL STATEMENTS AVAILABLE IN THE C.D. AGGRIEVED BY THE ORDER OF LD CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE LD DR AND ALSO CAREFULLY PERUSED THE RECORD. WITH REGARD TO THE ALLOWABILITY OF ELIGIBLE DEPRECIATION THERE CANNOT BE ANY DISPUTE THAT THE SAME IS ALLOWABLE AS A DEDUCTION. HENCE W E CONFIRM THE ORDER OF LD CIT(A) ON THIS ISSUE. WITH REGARD TO THE VARIATION DUE TO THE ADOPTION OF A PARTICULAR ACCOUNTING POLICY WE NOTICE THAT THE LD CIT(A) HAS ACCEPTED THE EXPLANATIONS WITH OUT MAKING DUE VERIFICATION. IF THE VARIATION IS ONLY DUE TO THE ACCOUNTING POLICY THEN THERE WILL NOT BE MUCH DIFF ICULTY FOR THE ASSESSEE TO PREPARE A RECONCILIATION STATEMENT AND EXPLAIN THE DIFFERENCE. WITH OUT THE RECONCILIATION STATEMENTS THE EXPLANATIONS OF THE ASSESSEE WOULD AMOUNT TO 3 WEAVING IN THE AIR AND HENCE WE ARE OF THE VIEW THA T THE ASSESSEE HAS TO SUBSTANTIATE ITS EXPLANATIONS IN A PROPER MANNER. HENCE WE ARE OF THE VIEW THAT THE AO IS RIGHT IN PROCEEDING FROM THE PROFIT SHOWN IN THE FINANCIAL STATEMENT FOUND IN THE C.D. HOWEVER IN OUR VIEW THE DIFFER ENCE FOUND BETWEEN THE FINANCIAL STATEMENTS FOUND IN THE C.D AND THE FINAN CIAL STATEMENTS ATTACHED TO THE PROFIT AND LOSS ACCOUNT MAY BE DEDUCTED IF THE ASSESSEE PROPERLY EXPLAINS THE DIFFERENCE. IN VIEW OF THIS MATTER WE SET AS IDE THE ORDER PASSED BY LD CIT(A) AND RESTORE THE MATTER TO THE FILE OF AO WIT H A DIRECTION TO ALLOW NECESSARY DEDUCTIONS ON THE BASIS OF RECONCILIATION STATEMENT IF THE AO IS SATISFIED WITH THE EXPLANATIONS OF THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO EXPLAIN THE DIFFERENCE BY FILING NECESSARY RECONCILIATION STATE MENTS. 6. IN THE RESULT THE APPEALS OF THE REVENUE AR E PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 13.05.2010 SD/- SD/- (SUNIL KUMAR YADAV) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER VG/SPS VISAKHAPATNAM DATE : 13 TH MAY 2010 A COPY OF THIS ORDER IS FORWARDED TO : 01 DCIT CIRCLE-3(1) VISAKHAPATNAM 02 M/S. M.C.C. SOFTWARE DEVELOPMENT & TRAINING PVT. LTD. D.NO.47-14-3 POTLURI CLASSIC DWARAKANAGAR VISAKHAPATNAM 03 THE CIT (A)-I VISAKHAPATNAM 04 THE CIT VISAKHAPATNAM 05 THE DR ITAT VISAKHAPAATNAM 06 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY ITAT VISAKHAPATNAM BENCH