M/s Subba Microsystem Ltd., New Delhi v. Addl. CIT, New Delhi

ITA 5/DEL/2011 | 2005-2006
Pronouncement Date: 25-11-2011 | Result: Allowed

Appeal Details

RSA Number 520114 RSA 2011
Assessee PAN AAACM9827G
Bench Delhi
Appeal Number ITA 5/DEL/2011
Duration Of Justice 10 month(s) 21 day(s)
Appellant M/s Subba Microsystem Ltd., New Delhi
Respondent Addl. CIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 25-11-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 25-11-2011
Date Of Final Hearing 05-09-2011
Next Hearing Date 05-09-2011
Assessment Year 2005-2006
Appeal Filed On 03-01-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI K.G. BANSAL ITA NO. 05/DEL/11 ASSTT. YR: 2005-06 M/S SUBBA MICROSYSTEM LTD. VS. ADD. CIT RANGE-9 267 MASJID MOTH NEW DELHI. UDAIPARK NDSE-II NEW DELHI-110049. PAN/GIR NO.AAACM9827G ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI R.S. SINGHVI FCA RESPONDENT BY: SHRI NIRANJAN KAULI CIT DR O R D E R PER R.P. TOLANI J.M : THIS IS ASSESSEES APPEAL AGAINST CIT(A)S ORDER DA TED 28-10-2010 RELATING TO A.Y. 2005-06. 2. FIRST ISSUE RAISED IN GROUNDS OF APPEAL NOS. 1 TO 3 IS AGAINST THE ORDER OF CIT(A) IN SUSTAINING DISALLOWANCE OF RS. 2 16 25 812/- IN RESPECT OF CLAIM OF BUSINESS PROMOTION COMPUTER SOFTWARE EXPENSES A ND DEPRECIATION. 3. BRIEF FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF SMART CARDS USED AS IDENTITY CARDS LICENSES AND FOR ELECTION IDENTITY CARDS SUPPLIED TO ELECTION COMMISSION OF I NDIA. FOR A.Y. 2005-06 THE ASSESSEE FILED RETURN DECLARING TOTAL INCOME OF RS. 1 71 11 890/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO QUESTIO NED ABOUT THE EXPENSES INCURRED IN RELATION TO BUSINESS PROMOTION; COMPUTE R SOFTWARE DEPRECIATION. AO RECEIVED INFORMATION FROM INVESTIGATION WING DE LHI IN THE FORM OF COPY OF A STATEMENT & AFFIDAVIT IN RESPECT OF ONE S HRI S.K. GUPTA CA. HE ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 2 WAS ALLEGED TO BE RUNNING/ CONTROLLING A NUMBER O F COMPANIES ENGAGED IN ISSUING ACCOMMODATION BILLS. IT IS OBSERVED BY AO T HAT DURING THE COURSE OF SEARCH OF PREMISES OF SHRI S.K. GUPTA NUMBER OF B ILLS ISSUED BY SUCH COMPANIES WERE FOUND AND SEIZED. IN STATEMENT RECO RDED ON OATH HE ADMITTED THAT SOME OF HIS COMPANIES WERE ISSUING A CCOMMODATION BILLS TO VARIOUS CUSTOMERS; THEY HAD NO INFRASTRUCTURE TO P ROVIDE THE SERVICES MENTIONED IN THE BILLS. AO HAS ALSO OBSERVED ON PA GE 2 OF HIS ORDER THAT DURING THE COURSE OF SEARCH SOME INCRIMINATING DOCU MENTS WERE FOUND RELATING TO VARIOUS CUSTOMERS INCLUDING THE ASSESS EE. SHRI S.K. GUPTAS AFFIDAVIT DATED 5-2-2007 DEPOSED AS UNDER: I S.K. GUPTA S/0 SHRI G.L. GUPTA ON BEHALF OF MY GROUP OF COMPANIES (ENCLOSED AS PER ANNEXURE A) HAVING REGIS TERED OFFICE AT H-108 IIND FLOOR OPP. HOTEL MARINA CON NAUGHT PLACE NEW DELHI IN INDIA DO HEREBY SOLEMNLY7 AFFI RM AS UNDER: 1. THAT I HAD GIVEN STATEMENTS U/S 131 AND 132(4) O F THE INCOME TAX ACT 1961 ON DECEMBER 27 2006 AND DECEMB ER 13 2006 THAT I HAVE PROVIDED ACCOMMODATION BILLS TO R ELIANCE AND VARIOUS OTHER PARTIES AND I AFFIRM THAT WHATEVER I HAVE SAID IN MY ABOVE STATEMENTS IS CORRECT EXCEPT THAT I HAVE D ONE ACTUAL WORK FOR RELIANCE ALSO. 2. THAT I AM WILLING TO PAY TAX ON WORK DONE FOR RE LIANCE GROUP AMOUNTING TO RS. 848 CRORE (RS. EIGHT FORTY C RORRE) [AS PER ANNEXURE B ATTACHED]. I HAVE BOOKED EXCESSIVE E XPENDITURE TO UNDERSTATE THE PROFITS BUT CERTAIN EXPENSES WER E ACTUALLY INCURRED FOR EARNING THE INCOME AND AS SUCH MY GROU P OF COMPANIES MAY PLEASE BE ALLOWED THE SUITABLE EXPEND ITURE AS GENUINE EXPENDITURE HAS BEEN INCURRED FOR EARNING T HE INCOME. I AM MAKING THIS DISCLOSURE IN ADDITION TO MY EARLIER SURRENDER OF RS. 3 CRORE AND I SHALL NOT CLAIM ANY SET OFF AGAIN ST THIS SURRENDER IN ANY SUBSEQUENT PROCEEDINGS UNDER THE I NCOME TAX ACT 1961. ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 3 3. THAT THIS IS MY FINAL STATEMENT AND IF I EVER S AY THAT I HAVE PROVIDED ACCOMMODATION BILL TO RELIANCE I CAN BE PROSECUTED. 4. THAT I AM READY TO RECONFIRM THE ABOVE FACTS IN MY STATEMENT U/S 132(4) OF THE INCOME TAX ACT 1961 SO THAT I COULD BE SAVED FROM PENALTY PROCEEDINGS. SD/- DEPONENT VERIFIED AND CONFIRMED THAT INFORMATION CONTAINED U NDER PARA 1 TO 4 OF ABOVE IS TRUE & CORRECT TO THE BEST OF MY I NFORMATION AND KNOWLEDGE. SD/- DEPONENT GIVEN ON 5 TH DAY OF FEBRUARY 2007 AT NEW DELHI. ANNEXURE A LIST OF COMPANEIS: 1. B.T. TECHNET LIMITED 2. SWEN TELEVISION LIMITED (FORMERLY GLOBEX TECH INDIA LTD.) 3. DCM VAULTS LIMITED 4. CENTENARY SOFTWARE PRIVATE LIMITED 5. ERA ADVERTISING & MARKETING CO. PTV. LTD. 6. KONICHIVA BUILDERS LIMITED 7. CAMSOFT (INDIA) PVTL. LTD. 8. KRISHNA INFORMEDIA LIMTIED (FORMERLY BOLNI EXIM (INDIA) LTD.) 9. SPG FINVEST PRIVATE LIMITED 10. TRUMP & GATES 11. HIGHTECH COMPUTECH PVT. LTD. 3.1. AO CALLED ON THE ASSESSEE TO EXPLAIN THE ENTRI ES FOUND IN THE SEARCHED DOCUMENTS IN RESPECT OF ESQUIRE PRINTER AND STATION ERY CENTENARY SOFTWARE ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 4 PVT. LTD. HITECH COMPUTECH PVT. LTD. POWER GOLD E LECTRICAL PVT. LTD. AND GLOBEX TECH INDIA LTD. AND PROPOSED TO TREAT THE BI LLS AS BOGUS IN VIEW OF SHRI S.K. GUPTAS STATEMENT AND AFFIDAVIT. 3.2. ASSESSEE FILED REPLIES WHICH IN EFFECT CONTEN D DATED 28-12-2007 EXPLAINING AS UNDER: (I) THAT MR. GUPTAS STATEMENT WAS GENERAL CONTRADICTO RY AND ACCEPTED THAT IN SOME CASES SOFTWARE SUPPLIED. IT W AS NO WHERE STATED THAT THE BILLS RAISED BY HIS COMPANIES ON M/S SUBBA MICROSYSTEM LTD. ARE ACCOMMODATION BILLS. (II) NO SPECIFIC INCRIMINATING MATERIAL IN RESPECT OF AS SESSEE WAS FOUND IN THE SEARCH AT MR. GUPTAS PREMISES. (III) THAT ALL PAYMENTS MADE O TO ABOVE PARTIES HAVE BEEN MADE BY A/C PAYEE CHEQUES AND AFTER DEDUCTING REQUIRED T AX AT SOURCE. (IV) THAT THE ASSESSEE BE PROVIDED AN OPPORTUNITY TO CRO SS EXAMINE MR. S.K. GUPTA. 3.3. AO HOWEVER INFERRED AS UNDER: (I) SHRI S.K. GUPTA HAS CONFIRMED THAT NEITHER SERVICE S NOR SUPPLIES WERE RENDERED. DIRECT MENTION OF THE ASSESSEES NAM E IN STATEMENT WAS NOT MATERIAL. (II) CLAIM OF THE ASSESSEE THAT PAYMENT BY A/C PAYEE CHE QUES AND DEDUCTION OF TPS DO NOT MAKE TRANSACTION SACROSANCT RELIANCE WAS PLACED ON CIT V. PRECISION FINANCE PVT. LTD. 208 IT R 465 (CAL.). (III) THE REQUEST THAT THE ASSESSEE BE PROVIDED AN OPPORT UNITY TO CROSS- EXAMINE MR. S.K. GUPTA IS ALSO NOT ACCEPTABLE. IN VIEW OF THE OVERWHELMING EVIDENCE AGAINST THE ASSESSEE THE ONU S TO PROVE THE ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 5 TRANSACTION AS GENUINE WAS ON THE ASSESSEE. IT WAS THE ASSESSEE WHO WAS REQUIRED TO PRODUCE MR. GUPTA IN SUPPORT OF THE TRANSACTION. FAILURE IN DOING SO RENDERS THE EXPLANATION OF THE ASSESSEE UNACCEPTABLE. 3.4. THE AO THUS SOLELY RELYING ON S.K. GUPTAS STA TEMENT MADE THESE ADDITIONS ON ACCOUNT OF SOFTWARE & VARIOUS OTHER EX PENSES. 3.5. AGGRIEVED ASSESSEE PREFERRED FIRST APPEAL. CI T(A) CONFIRMED THE ADDITIONS BY FOLLOWING OBSERVATIONS: (I) DISALLOWANCE OF RS. 2 106 25 812/-; BUSINESS PROMOT ION; & DEPRECIATION ON SOFTWARE: 6.3. THE SUBMISSION GIVEN BY THE APPELLANT HAS BEE N CONSIDERED AND ITS CONTENTION THAT SH. S.K. GUPTA H AS NOWHERE STATED THAT THE BILLS ISSUED TO M/S SUBBA MICROSYST EM LTD. ARE ACCOMMODATION BILLS IS NOT ACCEPTABLE FOR IN HIS S TATEMENT SH. S.K. GUPTA HAS EXPLICITLY STATED THAT HIS DEALINGS WITH ALL THE CONCERNS EXCEPT RELIANCE INDUSTRIES WERE NOT GENUIN E. THE EXCLUSION OF RELIANCE INDUSTRIES IMPLIES THAT THE T RANSACTIONS WITH ALL THE OTHER CONCERNS WERE SHAM AND BOGUS. TH ERE WAS NO NECESSITY FOR HIM TO NAME ALL THE CONCERNS WITH WHO M HE HAD BOGUS DEALINGS. FOR HE AHS ALREADY STATED THAT WITH THE SOLE EXCEPTION OF RELIANCE INDUSTRIES ALL OTHER TRANSAC TIONS ENTERED WITH THE OTHER COMPANIES WERE NOT GENUINE. THIS WOU LD BY IMPLICATION INCLUDE THE APPELLANT COMPANY. 6.4. REGARDING THE CONTENTION OF THE APPELLANT THAT IT SHOULD HAVE BEEN GIVEN AN OPPORTUNITY TO CROSS EXAMINE SH. S.K. GUPTA IS NOT ACCEPTABLE FOR THE APPELLANT WAS CONF RONTED WITH THE STATEMENT OF SH. S.K. GUPTA AND THE COPY OF AFF IDAVIT WAS GIVEN TO HIM. THE APPELLANT COMPANY HAS NOWHERE REB UTTED THE AFFIDAVIT OF SH. S.K. GUPTA BY FILING A REJOINDER AFFIDAVIT. NOTHING PREVENTED THE APPELLANT COMPANY FROM FILING A REJOINDER AFFIDAVIT. THE ASSESSEE COMPANY HAS NOT T AKEN ANY PAINS TO CONTRADICT THE STATEMENT OF SH. S.K. GUPTA NOR IT COULD FURNISH ANY EVIDENCE TO ESTABLISH THAT THE AFFIDAVI T FILED BY SH. S.K. GUPTA WAS INACCURATE. ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 6 6.5. IN HIS STATEMENT SH. S.K. GUPTA HAS BROUGHT OU T THE MODUS OPERANDI OF HIS OPERATION. SINCE THE APPELLAN T ALLEGES THAT ALL THE TRANSACTIONS WERE GENUINE NOTHING PRE VENTED HIM FROM PRODUCING SH. S.K. GUPTA BEFORE THE ASSESSING OFFICER AND CROSS-EXAMINE SH. S.K. GUPTA. HOWEVER THE APPE LLANT MADE NO SUCH EFFORTS. LOOKING INTO THE ABOVE DISCUS SION SINCE APPELLANT HAS MADE NO EFFORTS TO CONTRADICT THE STA TEMENT OF SH. S.K. GUPTA THE DISALLOWANCE OF RS. 2 16 25 812/- M ADE BY THE ASSESSING OFFICER IS JUSTIFIED AND BOTH THE SECOND & THIRD GROUNDS OF THE APPELLANT ARE HEREBY DISMISSED. (II) DEFERRED REVENUE EXPENDITURE : SINCE THE ADVERTISEMENT EXPENSES HAVE BEEN HELD TO BE REVENUE IN NATURE AND THEY PERTAINED TO THE ASSTT. YR. 2000-01 THEREFORE THE SAME CANNOT BE ALLOWED DURING THIS Y EAR. THUS THIS GROUND OF THE ASSESSEE IS ALSO DISMISSED. AGGRIEVED ASSESSEE IS BEFORE US. 4. LEARNED COUNSEL CONTENDS THAT AO ONLY GAVE A COP Y OF THE STATEMENT AND AFFIDAVIT OF SHRI GUPTA AND INQUIRED IN RESPECT OF ASSESSEES TRANSACTIONS IN RESPECT OF THE FOLLOWING COMPANIES: (1) ESQUIRE PRINTER & STATIONERS (2) CENTENARY SOFTWARE PVT. LTD. (3) HITECH COMPUTECH P. LTD. (4) POWER GOLD ELECTRICIAN PVT. LTD. (5) GLOBEX TECH INDIA LTD. 4.1. THE ASSESSEE EXPLAINED BY VARIOUS LETTERS REPR ESENTING AS UNDER: (1) THE SAID SHRI S.K. GUPTA HAS NO WHERE SPECIFICALLY STATED THAT BILLS RAISED BY HIS COMPANIES ON THE ASSESSEE M/S SUBBA M ICROSYSTEM LTD. WERE ACCOMMODATION BILLS. ONLY BY A GENERAL AND SWE EPING ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 7 STATEMENT HE HAS STATED THAT THESE COMPANIES INDULG E IN ACCOMMODATION ENTRIES. (2) IN SOME CASES HE HAS HIMSELF ACCEPTED THAT SOFTWARE AND SERVICES WERE PROVIDED AND IN SOME CASES SOFTWARE AND SERVIC ES WERE OUTSOURCED. (3) ASSESSEE HAD MADE ALL THE PAYMENTS TO THESE COMPAN IES BY A/C PAYEE CHEQUES AND TDS HAS BEEN DEDUCTED THEREFROM. ASSES SEE HAS DULY DEPOSITED THE TDS AMOUNT IN GOVT. TREASURY. (4) THE ASSESSEE REQUESTED TO BE PROVIDED AN OPPORTUNIT Y TO CROSS- EXAMINE MR. S.K. GUPTA. 4.2. AO HOWEVER MADE THE ADDITIONS BY HOLDING IN PARA 3.9 AS UNDER: I) THE REQUEST OF CROSS-EXAMINATION OF MR. GUPTA WAS N OT ACCEPTABLE. II) IN VIEW OF THE OVERWHELMING EVIDENCE AGAINST THE AS SESSEE THE ONUS TO PROVE THE TRANSACTION AS GENUINE WAS ON THE ASSESSEE. III) THE ASSESSEE WAS REQUIRED TO PRODUCE MR. GUPTA IN R ESPECT OF THESE TRANSACTIONS AND AS ASSESSEE FAILED TO PRO DUCE HIM THEREFORE THE EXPLANATION RENDERED BY THE ASSESSEE WAS UNACCEPTABLE. 4.3. AO INSTEAD OF GIVING OPPORTUNITY OF CROSS-EXAM INATION OF SHRI S.K. GUPTA ARBITRARILY HELD THAT AS ALL THE ABOVE COMP ANIES BELONGED TO SHRI S.K. GUPTA AND THEY WERE PROVIDING ACCOMMODATION ENTRIES TO FACILITATE THE CUSTOMERS IN REDUCING THE TAXABLE INCOME. THE ASSES SEE WAS RESULTANTLY A BENEFICIARY BY WAY OF THE BOGUS BILLS. CONSEQUENTLY FOLLOWING ADDITIONS WERE MADE: ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 8 S.NO. NAME OF THE COMPANY AMOUNT OF BILL TYPE DISALLOWANCE 1. ESQUIRE PRINTERS & STATIONERS (DIWALI GIFT EXP. BUSINESS PROMOTION) 30 64 530 EXP. 100% 30 64 530 2. HITECH COMPUTECH PVT. LTD. [COMPUTER & SOFTWARE] 35 00 000 FIXED ASSET 60% DEP. DISALLOWED 21 00 000 3. POWER GOLD ELECTRONICS SYSTEMS PVT. LTD. (COMPUTER SOFTWARE PURCHASE) 59 35 470 FIXED ASST. DEP. 60% 35 61 282 4. CENTENARY SOFTWARE PVT. LTD. (COMPUTER & SOFTWARE) 30 00 000 FIXED ASSET 60% DEP. 18 00 000 5. B.T. TECHNET LTD. (COMPUTER & SOFTWARE) 1 50 00 000 FIXED ASSET 60% DEP. 90 00 000 6. GLOBEX TECH INDIA LIMITED 35 00 000 21 00 000 TOTAL: 4 16 25 812 4.4. LEARNED COUNSEL VEHEMENTLY CONTENDS THAT THE B ASIS FOR ADDITION IN THE CASE OF ASSESSEE AS ADOPTED BY THE AO AND CONFIRMED BY CIT(A) IS TOTALLY MISCONCEIVED AND AGAINST THE SETTLED PROPOSITION OF LAW. HONBLE SUPREME COURT HAS SQUARELY HELD THAT WHAT IS STATED BY THE ASSESSEE IS PRESUMED TO BE TRUE UNLESS IT IS PROVED OTHERWISE BY THE DEPARTME NT THEREFORE THE BURDEN OF PROOF ULTIMATELY LIES ON AO. THE ASSESSEE MAINTA INS REGULAR BOOKS OF ACCOUNTS WHICH ARE DULY AUDITED; THE TRANSACTIONS I N QUESTION ARE THROUGH BANKING CHANNELS; ALL THE REQUISITE INVOICES WERE P RODUCED BEFORE AO AND DULY INCORPORATED IN THE BOOKS OF ACCOUNTS; THE CHE QUES RECEIVED BY THE ASSESSEE HAVE BEEN CLEARED BY SUPPLIERS WHICH ARE REFLECTED IN THE BANK STATEMENTS AND AFTER CLEARANCE THEY HAVE BEEN CREDI TED TO THE RESPECTIVE ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 9 COMPANIES AS MENTIONED ABOVE. BESIDES THE ASSESSEE HAS DEDUCTED TDS WHERE-EVER APPLICABLE AND DEPOSITED THE SAME IN THE GOVERNMENT TREASURY AND FILED THE REQUISITE STATUTORY FORMS AND ISSUED CERTIFICATES IN FAVOUR OF THE DEDUCTEES. THE PAYMENT OF TDS REQUIRES TIN NOS. AND PAN NOS. ALL THESE RECORDS CLEARLY DEMONSTRATE THE IDENTITY OF THE DED UCTEE AND GENUINENESS OF TRANSACTIONS. ALL THESE EVIDENCES ATTRIBUTE APPARE NT AND CORDIAL STATE OF AFFAIRS AND IF THE DEPARTMENT HAS TO PROVE OTHERWIS E THE BURDEN SQUARELY LIES ON IT AND NOT ASSESSEE. AO AND CIT(A) BOTH IN THEIR ORDER HAVE THIRSTED THE ENTIRE BURDEN ON THE ASSESSEE ON EVERY ASPECT. 4.5. IN RESPECT OF SHRI S.K. GUPTA FOLLOWING IS PL EADED: (1) HE HAS NOT GIVEN THE ALLEGED STATEMENT AND AFFIDAVI T IN PROCEEDINGS INITIATED AGAINST THE ASSESSEE; THEY WERE GIVEN IS SHRI S.K. GUPTAS OWN PROCEEDINGS AND NOT THAT OF ASSESSEE. THEREFORE THEY MAY CREATE A SUSPICION BUT THE COPIES THEREOF WITHOUT CORROBOR ATION CANNOT BEHELD TO BE CONCLUSIVE PROOF AGAINST THE ASSESSEE. TO PROVE THE CONTENTS OF STATEMENT AND AFFIDAVIT IN THE CASE OF A THIRD PARTY THE BURDEN LIES SQUARELY ON THE DEPARTMENT AND NOT ON T HE ASSESSEE. (2) SHRI S.K. GUPTA NO WHERE IN HIS STATEMENT HAS SPECI FICALLY DEPOSED THAT THE TRANSACTIONS WITH THE ASSESSEE ARE BOGUS R ATHER IT STATES THAT IN SOME CASES SUPPLIES OF SERVICES WERE RENDERED BY SUCH COMPANIES. THEREFORE THIS STATEMENT BY ITSELF CANNOT BECOME A BASIS TO MAKE ADDITIONS IN THE HANDS OF THE ASSESSEE WHICH ARE EF FECTED THROUGH BANKING CHANNELS AND AFTER DUE STATUTORY COMPLIANCE IN RESPECT THEREOF. (3) IT IS A SETTLED PRINCIPLE OF LAW THAT NO ADDITION C AN BE MADE IN THE HANDS OF THE ASSESSEE WITHOUT CROSS-EXAMINATION OF THE PERSON WHO ALLEGES AGAINST IT. ASSESSEE BEFORE AO AND CIT(A) R EPEATEDLY ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 10 REQUESTED FOR THE CROSS-EXAMINATION OF SHRI S.K. GU PTA WHICH HAS BEEN SPECIFICALLY DENIED ON THE BASIS THAT THE COPY THEREOF WERE SUPPLIED TO ASSESSEE AND THEY WERE NOT REBUTTED BY REJOINDER AFFIDAVIT. (4) ASSESSEE ON EVERY STAGE VEHEMENTLY OPPOSED THE STAT EMENT AND AFFIDAVIT OF SHRI S.K. GUPTA AND ADDITIONS BASED TH EREON IN WRITING. IT IS NOT FAIR ON THE PART OF THE CIT(A) TO HOLD THAT ASSESSEE HAS NOT COUNTERED THE CONTENTS BY AN AFFIDAVIT. THE ENTIRE STATEMENT AND AFFIDAVIT HAS BEEN OPPOSED BY THE ASSESSEE AT EVER Y LEVEL OF PROCEEDINGS. BOTH THE LD. LOWER AUTHORITIES DID NOT PROVIDE THE OPPORTUNITY BY HOLDING THAT THE ASSESSEE WAS GIVEN SUFFICIENT MATERIAL. REFUSAL OF CROSS-EXAMINATION OF SHRI S.K. GUPTA WHICH NEITHER NAMES THE ASSESSEE NOR GIVEN IN THE PROCEED INGS CONNECTED WITH ASSESSEE IS UNTENABLE AND MAKES THE ADDITIONS ARBITRARY BASED ON SUCH ASSUMPTIONS WHICH CANNOT BE SUSTAINED IN TH E EYES OF LAW. (5) LEARNED COUNSEL FURTHER CONTENDS THAT THE ASSESSEE S MAIN DEALINGS ARE WITH ELECTION COMMISSION OF INDIA FOR SUPPLY VO TER IDENTITY CARDS ETC. AND OTHER CUSTOMERS FOR I.D. CARDS. THE ENTIR E BUSINESS OPERATIONS ARE BASED ON PUBLIC RELATIONS AND SOFTWA RE SERVICES. THE SALES MADE TO ELECTION COMMISSION AND OTHER CUSTOME RS HAVE BEEN ACCEPTED. THE ASSESSEE CANNOT CARRY OUT ITS BUSINES S WITHOUT THE HELP OF SOFTWARE AND SINCE ITS BUSINESS DEPENDS ON PUBLI C RELATIONS FOR SECURING VARIOUS ORDERS IN RESPECT OF IDENTITY CARD S AND VOTER IDENTITY CARDS. THIS REQUIRES INTENSIVE USE OF SOFTWARE AND SUPPLY OF PRESENTATION ITEMS TO VARIOUS CUSTOMERS FOR EFFECT IVE BUSINESS OPERATIONS. (6) IN VIEW OF THE ENTIRETY OF FACTS IT BECOMES CLEAR THAT THE ADDITIONS MADE ARE UNSUBSTANTIATED BASED ON COPIES OF STATEM ENT AND AFFIDAVIT ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 11 OF A THIRD PARTY IN THE PROCEEDINGS CONDUCTED AT TH IRD PARTY. THEREFORE THERE IS NO MATERIAL ON RECORD WHICH IN LEGAL TERMS MAKES ANY BASIS FOR SUCH ADDITIONS IN THE HANDS OF THE AS SESSEE. (7) A PERUSAL OF THE AFFIDAVIT GIVEN BY SHRI S.K. GUPTA FURTHER REVEALS THAT THE SAME IS CONTRADICTORY. IN PARA 1 ITSELF ON ONE HAND HE STATES THAT HE HAS PROVIDED ACCOMMODATION BILLS TO RELIANC E AND VARIOUS PARTIES AND IN ANOTHER SENTENCE HAS STATED THAT HE HAS DONE ACTUAL WORK FOR THE RELIANCE. IT INDICATES SHRI S.K. GUPTA HAD TO DEAL WITH HUGE CORPORATION LIKE RELIANCE AND RENDERED SERVICE S WHICH PRESUPPOSES ACTUAL SERVICES. IF HE RENDER ACTUAL SE RVICE WITH RELIANCE IT COULD HAVE BEEN RENDERED TO OTHER PAR TIES AS WELL INCLUDING ASSESSEE. (8) IN SECOND PARA OF THE AFFIDAVIT IT IS DEPOSED THAT HE HAS DONE WORK OF RS. 848 CRORES WITH RELIANCE WHICH CONSTITUTES ACTU AL WORK. IT IS FURTHER DEPOSED THAT HE HAS BOOKED ACTUAL EXPENSES FOR EARNING THE INCOME THEREFORE HIS GROUP COMPANIES MAY BE ALLOWE D THE SUITABLE EXPENDITURE AS THE SAME IS GENUINE. (9) HE HAS MADE A DISCLOSURE OF RS. 3 CRORES VIDE STATE MENT DATED 27-12- 2006. HE FURTHER STATES THAT HE WILL NOT CLAIM ANY SET OF THIS SURRENDER. THE AFFIDAVIT CLEARLY PROVES THAT SHRI S .K. GUPTA AND HIS COMPANIES WERE ALSO ENGAGED IN ACTUAL RENDERING OF SERVICES AND INCURRING GENUINE EXPENDITURE AND HAD WHEREWITHAL T O TRANSACT AS BIG OF SERVICES AS RS. 848 CRORES TO RELIANCE. AO HAS NOT REFERRED TO ANY SUCH DISALLOWANCE IN THE HANDS OF THE RELIANCE. (10) IN THE STATEMENT DATED 27-12-2006 QUESTION NO. 4 AND REPLY IS REFERRED AS UNDER: ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 12 Q.4. I AM SHOWING YOU THE BILLS (ANNEX. 14) PAGE 68 RAISED BY KRISHNA INFOMEDIA LTD. TO M/S ACCORD INSURANCE SERVICES ON ACCOUNT OF CONSULTANCY CHARGES FOR RENDERING ________ & INSURANCE ADVISORY SERVICES RS. 1 10 200/-. PL. STATE WHETHER THESE SERVICES WERE ACTUALLY PROVIDED & IF SO NAMES AND ADDRESSES OF THE PERSONS WHO PROVIDED THE ABOVE SERVICES MAY BE GIVEN? ANS: SOME OF THE SERVICES WERE PROVIDED BY US BUT I CANT GIVE THE EXACT DETAILS. ALSO I CANNOT GIVE DETAILS OF THE EXACT NATURE OF SERVICES PROVIDED OR WHO THE EMPLOYEES WHO PROVIDED THE ABOVE SERVICES. I DO NOT HAVE ANY EMPLOYEE WHO ARE SPECIALLY DEVOTED A SKILLED FOR PROVIDING INSURANCE SERVICES. THIS QUESTION CLEARLY INDICATES THAT SHRI S.K. GUPT A HAS NO WHERE STATED ALL SERVICES RENDERED BY HIS COMPANIES WERE BOGUS. RATHER IT STATES TO THE CONTRARY THAT SOME OF THE SERVICES WE RE PROVIDED. WITH THIS ADMISSION ON RECORD AND THERE BEING NO SPECIF IC NAME OF THE ASSESSEE IN THE ENTIRE STATEMENT AND AFFIDAVIT IT CANNOT BE HELD ON ASSUMPTIONS THAT THE TRANSACTIONS WITH ASSESSEE WE RE BOGUS. THE DEPARTMENT HAS TO PROVE THE ALLEGATION AGAINST ASSE SSEE. IN THE ABSENCE OF EVEN A PRELIMINARY CROSS-EXAMINATION OF SHRI GUP TA GIVEN BY THE AO OR CIT(A) THE ADDITION IS WHOLLY UNSUSTAINABLE. (11) QUESTION NO. 8 AND ANSWER IS AS UNDER: Q. 8)- NOW I AM SHOWING YOU ANNEX. 18/ PAGE 100 BILL OF BT TECHNET TO MOTHERSON SWAN INFOTECH & DESIGN FOR PRODUCTION MATRIX RS. 51.48 LACS. NEXT BILL RAISED BY BT TECHNET TO PASHUPATI FABRICS FOR SOFTWARE DEVELOPMENT CHARGES (PAGE NO. 111). ANNEX. 05 (PAGE 50) BILL OF SWAN T.V. TO ASL INSURANCE BROKERS ETC. PL. ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 13 STATE WHAT SERVICES WERE PROVIDED TO THESE PARTIES? ANS. IN THE CASE OF MOTHERSON SWAN WE HAVE SUPPLIED SOFTWARE WHICH WAS PURCHASED FROM SWAN SOFTWARE LTD. WITHOUT DOING ANY ADDITION. IN THE CASE OF SWAN T.V. WE HAVE PROVIDED AGENCY SERVICES FOR WHICH WE ARE GETTING 15% AGENCY SERVICE COMMISSION FOR THE ADVERTISEMENT SHOWN ON JHANKAR T.V. IN THE CASE OF PASHUPATI FABRICS I DONT HAVE THE DETAILS. THUS IN THE CASE OF SWAN T.V. GUPTAS COMPANIES H AVE PROVIDED AGENCY COMMISSION FOR THE ADVERTISEMENT AND IN CASE OF PASHUPATI FABRICS IT DID NOT HAVE DETAILS. (12) Q. NO. 11 AND ANS. IS AS UNDER: Q. 11:- NOW I AM SHOWING YOU THE A/C STATEMENT OF NIIT LTD. FROM 07-12-2003 ONWARDS IN THE BOOKS OF BT TECHNET AMOUNTING TO RS. 16 38 000.00 ON A/C OF SOFTWARE DE VELOPMENT SERVICES. PL. SPECIFY WHAT SERVICES WERE PROVIDED B Y WHOM THE LOCATION NAMES OF SOFTWARE ENGINEERS ETC.? ANS: I DO NOT HAVE ANY DETAILS RIGHT NOW BUT I WAN T TO SAY THAT NAMES WERE NOT PROVIDED DIRECTLY BY US BUT TOOK TH E HELP OF OTHER COYS. TO HIM PROVIDED BY OTHER COYS. AND BILL WAS RAISED TO THEM THROUGH US. SOME SERVICES ARE DIRECTLY PROV IDED BY US. THE QUESTION CLEARLY INDICATES IN MANY CASES THE SE RVICES WERE PROVIDED DIRECTLY BUT IT WAS THROUGH OTHER COMPANIE S AND BILLS WERE RAISED THROUGH MR. GUPTAS COMPANY AND IN SOME CASE S SERVICES WERE DIRECTLY PROVIDED BY HIS COMPANIES. (11) IT IS CONTENDED THAT THIS STATEMENT AND AFFIDAVIT PROVE THAT HIS COMPANIES WERE GIVING SERVICES IN SOME CASES AND IN SOME CASES ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 14 SERVICE WAS PROVIDED THROUGH OTHER COMPANIES AND BI LLS WERE RAISED BY HIS COMPANIES. THE SERVICES ARE ACTUALLY PROVIDE D TO THE ASSESSEE INVOICES ARE RAISED; CHEQUES ARE ISSUED AND CLEARED ; RELEVANT APPLICABLE TDS IS DEDUCTED. IN SUCH EVENTUALITY IT DOES NOT BECOME THE CONCERN OF THE ASSESSEE AS TO WHO IN THE BACK IS MAKING SUPPLIES AND RENDERING SERVICES. THE DEPARTMENT IS PUTTING THE STATEMENT OF SHRI S.K. GUPTA AND AFFIDAVIT IN ASSESSEES CASE TO PROJECT A WRONG PICTURE AS IF SHRI S.K. GUPTA HAS ENTIRELY ACCEPTED THAT ALL THE SERVICES AND SUPPLIES ARE BOGUS. (12) QUESTION NOS. 16 17 & 18 AND ANSWERS TO THEM ARE A S UNDER: Q. 16: IN RESPONSE TO Q. 8 YOU HAVE STATED THAT SO FTWARE WAS PURCHASED FROM SWAN SOFTWARE LTD. & THEN SUPPLI ED TO MOTHERSON SWAN. PL. GIVE THE NAME & ADDRESS OF T HE COY. FROM WHERE YOU HAD DEALINGS AS ABOVE? ANS: I AM UNABLE TO RECALL PRESENTLY. Q. 17: PL. SPECIFY THE NAMES OF ALL THE COYS./ ACCOMMODATION BILLS HAVE BEEN PROVIDED BY YOUR GROU P ENTITIES? ANS: I DONT REMEMBER RIGHT NOW AND WILL PROVIDE AL L THE DETAILS AFTER GOING THROUGH ALL THE BILLS. Q. 18: PL. PROVIDE THE ASSTT. DETAILS OF ALL YOUR G ROUP COYS. FOR THE LAST SIX YEARS IN THE CAPACITY OF DIR ECTORS AND OTHERWISE WITH FAMILY MEMBERS. ANS: YES SIR WE WILL PROVIDE THE ASKED DETAILS ON 29-12- 2006. 4.6. THESE QUESTIONS AND ANSWERS CLEARLY STATE THAT SHRI GUPTAS GROUP COMPANIES WERE CARRYING OF VARIOUS ACTIVITIES INCLU DING SUPPLY OF SOFTWARE. ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 15 THOUGH HE HAS NAMED MANY OTHER COMPANIES ASSESSEE DOES NOT APPEAR IN SUCH NAMES. 4.7. QUESTION NO. 18 CLEARLY INDICATES THAT ALL HIS COMPANIES WERE ASSESSED TO TAX WHOSE DETAILS WERE CALLED FOR BY DEPARTMENT . NO SUCH DETAILS HAVE BEEN PROVIDED TO ASSESSEE. THUS THE INFORMATION BE ING RELIED IS PARTIAL. NEITHER THESE COMPLETE DETAILS HAVE BEEN MADE AVAI LABLE TO THE ASSESSEE NOR THE CROSS-EXAMINATION OF SHRI S.K. GUPTA HAS BEEN P ROVIDED. BOTH THE LOWER AUTHORITIES HAVE UNJUSTIFIABLY TURNED DOWN THE REQU EST OF CROSS-EXAMINATION AND WITHOUT BRINGING ANY CORROBORATIVE MATERIAL ON THE BASIS OF PARTIAL INFORMATION I.E. COPY OF STATEMENT AND AFFIDAVIT G IVEN BY SHRI S.K. GUPTA. 4.8. THE STATEMENT RATHER SUPPORTS THE CASE OF THE ASSESSEE; THE CONTENTS OF AFFIDAVIT ARE CONTRADICTORY AND CLEARLY INDICATES THAT SHRI GUPTAS COMPANIES HAD HUGE BUSINESS RELATIONSHIP ON ACTUAL TERMS WITH RELIANCE WITH A TURN OVER OF RS. 840 CRORES. THERE IS NO WHISPER IN THE ASSESSMENT ORDER THAT ANYTHING ADVERSE HAS BEEN INFERRED ON THE RELIANCE BY SUCH STATEMENT. 4.9. LEARNED COUNSEL THUS CONTENDS THAT THE ENTIRE ADDITION HAS BEEN MADE BY DENIAL OF NATURAL JUSTICE; UNNECESSARILY SHIFTIN G THE BURDEN ON THE ASSESSEE TO PRODUCE SHRI S.K. GUPTA WHICH CLEARLY LIES ON TH E DEPARTMENT AND RELYING ON PARTIAL/ HALF BACKED INFORMATION ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 16 4.10. LEARNED COUNSEL CONTENDS THAT SIMILAR ISSUE C AME UP FOR CONSIDERATION IN OTHER CASES OF S.K. GUPTA ASSOCIATED COMPANIES IN RESPECT OF SOFTWARE AND OTHER SUPPLIES. IN THE CASE OF M/S QGS TRAINING INSTITUTE (P) LTD. FOR A.Y. 2004-05 IN ITA NO. 2571/DEL/10 ITAT DELHI BEN CH F VIDE ORDER DATED 28-1-2011 HAS ALLOWED EXPENDITURE OF SOFTWARE DEVELOPMENT CHARGES BY FOLLOWING OBSERVATIONS: 4. IT IS THE AOS CASE THAT A SUM OF RS. 3 25 000/ - SHOWN TO HAVE BEEN INCURRED BY THE ASSESSEE TOWARDS SOFTWARE DEVELOPMENT CHARGES IS BOGUS AND IS MERELY AN ACCOM MODATION ENTRY TAKEN FROM M/S CAM SOFT INDIA (P) LTD. OUT OF THE TOTAL EXPENDITURE CLAIM OF RS. 3 25 000/- A SUM OF RS. 1 62 500/- HAS BEEN CLAIMED BY THE ASSESSEE IN THE CURRENT ASSESSM ENT YEAR AND THE BALANCE 50% CLAIMED IN THE SUBSEQUENT ASSESSMEN T YEAR 2005-06. IN THIS CASE THE ASSESSEE AHS PRODUCED VA RIOUS DOCUMENTS AND PAPERS WHICH ARE PLACED IN THE PAPER BOOK FILED BY THE ASSESSEE. WE HAVE GONE THROUGH THE LEDGER AC COUNT OF M/S CAM SOFT INDIA (P) LTD. WHICH IS PLACED AT PAGE 16 OF THE PAPER BOOK. WE FIND THAT THE ASSESSEE HAS CREDITED THE ACCOUNT OF M/S CAM SOFT INDIA (P) LTD. BY RS. 3 25 000/- ON 20-3-2004 ON ACCOUNT OF SOFTWARE DEVELOPMENT CHARGES AGAINST WHICH THE ASSESSEE MADE A PAYMENT OF RS. 2 LAKHS BY CHEQUE ON 22-3- 2004 AND OUT OF WHICH THE ASSESSEE ALSO DEDUCTED T AX AT SOURCE AMOUNTING TO RS. 4 000/- AND RS. 2 663/- LEAVING A BALANCE OF RS. 1 18 327/- PAYABLE BY THE ASSESSEE. THE ASSESSE E HAS ALSO PRODUCED BEFORE US THE COPY OF VOUCHERS AS WELL AS BILL SUBMITTED BY THE AO HAS MERELY TREATED THE TRANSACT ION M/S CAM SOFT INDIA (P) LTD. THE AO HAS MERELY TREATED T HE TRANSACTION WITH M/S CAM SOFT INDIA (P) LTD. TO BE IN THE NATURE OF ACCOMMODATION ENTRY ON THE BASIS OF REPORT OF IN VESTIGATION OFFICER BUT HAS NOT PROVIDED ANY OPPORTUNITY TO THE ASSESSEE TO CROSS-EXAMINE THE PARTY. FURTHER THE AO HAS TREATE D THE TRANSACTION TO BE IN THE NATURE OF ACCOMMODATION EN TRY ON THE BASIS OF STATEMENT OF ONE SHRI S.K. GUPTA. HOWEVER ON PERUSAL OF THE STATEMENT OF SHRI S.K. GUPTA NO SUCH ALLEGAT ION HAS BEEN ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 17 MADE THAT THE TRANSACTION WITH THE ASSESSEE WAS ACT UALLY NOT UNDERTAKEN BUT WAS MERE A BOOK ENTRY. THE ASSESSEE WAS NOT PROVIDED TO CROSS-EXAMINE SHRI S.K. GUPTA AND THERE FORE THE INFERENCE DRAWN FROM THE STATEMENT CANNOT BE RELIED UPON PARTICULARLY IN VIEW OF THE FACT THAT THE ASSESSEE HAS PRODUCED THE COPY OF VOUCHER AND BILL ISSUED BY M/S CAM SOFT INDIA (P) LTD. AND PAYMENT HAS BEEN MADE BY ACCOUNT PAYEE CHE QUE. WE THEREFORE HOLD THAT THERE IS NO SUFFICIENT MATERIA L ON RECORD TO ESTABLISH THAT ASSESSEE HAS NOT ACTUALLY PURCHASED THE SOFTWARE DEVELOPMENT FROM M/S CAM SOFT INDIA (P) LTD. WE TH EREFORE DELETE THE DISALLOWANCE ON THE FACTS OF THE PRESENT CASE. 5. SINCE IN THE REASSESSMENT THE ONLY ADDITION MADE BY THE AO WAS RS. 1 62 500/- BEING 50% OF THE SOFTWARE DEV ELOPMENT CHARGES AND THAT HAS BEEN DELETED BY US THE QUESTI ON ABOUT THE VALIDITY OF REASSESSMENT PROCEEDINGS INITIATED BY T HE AO U/S 147/148 OF THE ACT HAS BECOME ACADEMIC AND WE THER EFORE DO NOT PROCEED TO DECIDE THE SAME WHICH HAS BECOME RED UNDANT AT THIS STAGE. 4.11. THE FACTS BEING SIMILAR IT CANNOT BE HELD IN THE CASE OF THE ASSESSEE THAT ALL THE SUPPLIES MADE BY S.K. GUPTA COMPANIES WERE ACCOMMODATION ENTRIES; MORE SO WHEN ASSESSEES NAME NO WHERE FING ERS IN STATEMENT OR AFFIDAVIT. 4.12. LEARNED COUNSEL FURTHER CONTENDS THAT IN THIS YEAR ASSESSEE CLAIMED 60% DEPRECIATION ON SOFTWARE AND COMPUTER ACCESSORI ES AND THE REMAINDER WAS CARRIED AS WDV IN THE NEXT YEAR. AO AND CIT(A) DISALLOWED 60% DEPRECATION. HOWEVER IN SUBSEQUENT ASSESSMENT YEAR 2006-07 BY AN ORDER U/S 143(3) AO HAS ALLOWED THE DEPRECIATION ON THE REMAINDER WDV. THE RELEVANT ORDER STATEMENT SCHEDULE OF ASSETS IS ENC LOSED ON THE PAPER BOOK. ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 18 LEARNED COUNSEL CONTENDS THAT THIS ORDER IS NOW FIN AL AND DEPARTMENT CANNOT TAKE PROBATE AND REPROBATE ON SAME SET OF FACTS. 4.13. LEARNED COUNSEL CONTENDS THAT THERE IS NO MA TERIAL ON RECORD TO SUSTAIN SUCH ADDITIONS AS RAISED IN QUESTION NOS. 1 TO 3 WHICH MAY BE DELETED. 4.4. APROPOS GROUND NO. 4 LEARNED COUNSEL CONTENDS THAT THE ISSUE IN QUESTION IS SQUARELY COVERED IN ITS FAVOUR BY ORDER OF ITAT DELHI BENCH G RENDERED IN ITA NO. 4508.DEL/07 FOR A.Y. 2004-05 D ATED 30-1-2009 IN WHICH THE ITAT HAS ALLOWED THE DEFERRED REVENUE EXP ENDITURE ON THE BASIS OF REASONABLE CONSIDERATION BY FOLLOWING OBSERVATIO N: 8. IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2000-01 EXPENDITURE OF RS. 14 25 724/- WAS INCURRED BY THE ASSESSEE COM PANY ON ADVERTISEMENT. AS CLAIMED BY IT THE DEDUCTION ON A CCOUNT OF THE SAID EXPENDITURE WAS NOT CLAIMED IN AY 2000-01 DUE TO INADEQUATE PROFITS AND THE SAME WAS CLAIMED IN THE NEXT FIVE ASSESSMENT YEARS BY AMORTIZING THE SAID EXPENDITURE . IN THE INITIAL THREE YEARS I.E. AY 2001-02 2002-03 & 2003 -04 THE DEDUCTION SO CLAIMED STOOD ALLOWED TO THE ASSESSEE COMPANY IN THE SUMMARY ASSESSMENTS COMPLETED U/S 143(1). IN TH E YEAR UNDER CONSIDERATION THE SAID DEDUCTION HOWEVER W AS DISALLOWED BY THE AO ON THE GROUND THAT THE ADVERTI SEMENT EXPENSES HAVING BEEN INCURRED BY THE ASSESSEE COMPA NY IN THE PREVIOUS YEAR RELEVANT TO AY 2001-02 THE SAME DID NOT PERTAIN TO THE YEAR UNDER CONSIDERATION I.E. AY 2004-05. TH E LEARNED CIT(A) HOWEVER DELETED THE SAID DISALLOWANCE MADE BY THE AO ON THIS ISSUE INTER ALIA ON THE GROUND THAT TH E ASSESSEE COMPANY HAVING SUFFERED HEAVY LOSSES IN THE EARLIER YEARS THE ALLOWING OF DEDUCTION FOR THE ENTIRE AMOUNT OF ADVE RTISEMENT EXPENDITURE IN AY 2001-02 OR ALLOWING OF AMORTIZATI ON OF THE SAID EXPENDITURE OVER A PERIOD OF FIVE YEARS WOULD HAVE SAME ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 19 IMPACT ON REVENUE. AFTER CONSIDERING THE RIVAL SUBM ISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD WE FIND T HIS BASIS ADOPTED BY THE LD. CIT(A) WHILE ALLOWING THE CLAIM OF THE ASSESSEE ON ACCOUNT OF AMORTIZED ADVERTISEMENT EXPE NDITURE TO BE QUITE REASONABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. EVEN THE LEARNED DR HAS NOT BEEN ABLE TO RAISE ANY MATERIAL CONTENTION TO CHALLENGE THIS BASIS ADOPTED BY THE L EARNED CIT(A). WE THEREFORE FIND NO JUSTIFIABLE REASON T O INTERFERE WITH THE IMPUGNED ORDER OF THE LEARNED CIT(A) ON TH IS ISSUE AND UPHOLDING THE SAME WE DISMISS GROUND NO. 2 OF THE REVENUES APPEAL. 5. LEARNED DR ON THE OTHER HAND SUPPORTS THE ORDE RS OF LOWER AUTHORITIES AND CONTENDS THAT IT IS NOT OBLIGATORY ON THE PART OF AO TO PROVIDE CROSS-EXAMINATION OF THE WITNESSES IN EACH AND EVER Y CASE. IN THE ASSESSEES CASE IT HAD DEALINGS WITH SHRI S.K. GUPTA AND THE B URDEN TO PRODUCE HIM WAS ON THE ASSESSEE WHICH HAS NOT BEEN DISCHARGED. CO PY OF SAID STATEMENT AND AFFIDAVIT OF SHRI S.K. GUPTA WAS PROVIDED TO ASSESS EE THEREFORE IT HAD THE KNOWLEDGE ABOUT ALLEGATIONS AGAINST HIM AND BURDEN WAS ON THE ASSESSEE TO EFFECTIVELY DISCHARGE THE SAME. IN THE ABSENCE THER EOF THE ADDITIONS WERE RIGHTLY MADE. 6. LEARNED COUNSEL FOR THE ASSESSEE IN REJOINDER CO NTENDS THAT SHRI S.K. GUPTA WAS DEPARTMENTS WITNESS AS IT WAS RELYING ON HIS STATEMENT AND AFFIDAVIT THEREFORE THE BURDEN TO PROVE DID NOT L IE WITH ASSESSEE. THE ASSESSEE DISCHARGED ITS BURDEN BY PROVING THE IDENT ITY OF THE SUPPLIER GENUINENESS OF THE TRANSACTIONS ONLY A SWEEPING ST ATEMENT HAS BEEN HELD AS ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 20 BASIS FOR ADDITIONS THAT EXPENDITURE HAS BEEN INFL ATED BY SHRI S.K. GUPTA AND IN SOME CASES HE HAS ENTERED INTO ACCOMMODATION TRANSACTIONS. THIS IS A BARE STATEMENT WHICH SPEAKS OF SOME DETAILS TO BE FILED LATER WHICH ARE NOT COMMUNICATED; BEREFT OF ANY COGENT EVIDENCE AND WIT H NUMBER OF SELF CONTRADICTIONS; THIS CANNOT BE MADE A BASIS FOR SU CH ADDITIONS. IF THE CROSS- EXAMINATION IS NOT TO BE PROVIDED AS AN EXCEPTION THEN IT IS FOR THE AO TO MAKE OUT SUCH A CASE; IT CANNOT BE DENIED CASUALLY. SHRI S.K. GUPTA HAILS FROM DELHI ALL HIS CONCERNS ARE INCOME-TAX ASSESSE ES THEREFORE HE COULD HAVE BEEN VERY WELL PRODUCED BY THE LOWER AUTHORITI ES FOR CROSS- EXAMINATION. BY A WRONG PRETEXT THE BURDEN TO PRODU CED SHRI S.K. GUPTA HAS BEEN THRUSTED ON THE ASSESSEE WHICH IS UNTENABLE AN D UNJUSTIFIED. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE SOLE BASIS FOR ADDITIONS I N THE ASSESSEES CASE IS ATTRIBUTED TO THE STATEMENT AND AFFIDAVIT OF SAID S HRI S.K. GUPTA WHICH ARE REFERRED TO ABOVE. FROM THE ABOVE FOLLOWING FACTS CLEARLY EMERGE: (I) IN THE SAID STATEMENT AND AFFIDAVIT THE ASSESSEES NAME DOES NOT FIND ANY SPECIFIC MENTION. (II) DURING THE COURSE OF SEARCH IN THE PREMISES OF SHRI S.K. GUPTA IT IS ALLEGED THAT SOME INCRIMINATING MATERIAL WAS FOUND BUT NOTHING HAS BEEN REFERRED TO IN ASSESSEES CASE AGAINST IT WHICH IMPLIES THAT TH ERE ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 21 WAS NO DIRECT EVIDENCE FOUND DURING THE COURSE OF SEARCH IN RESPECT OF ANY TRANSACTION WITH THE ASSES SEE (III) THE STATEMENT AND AFFIDAVIT REFER TO DETAILS FILED BY SHRI S.K. GUPTA IN RESPECT OF VARIOUS QUESTIONS SPECIFICALLY WHICH HAVE NOT BEEN SUPPLIED TO ASSESSEE. (IV) EXCEPT COPY OF STATEMENT AND AFFIDAVIT NO OTHER INCRIMINATING MATERIAL WAS COMMUNICATED TO ASSESSEE. (V) REFERENCE TO VARIOUS QUESTIONS OF STATEMENT AND AFFIDAVIT OF SHRI S.K. GUPTA ADMITS THAT IN SOME OF THE CASES SUPPLY OF SERVICES OF SOFTWARE WERE EFFECTED. (VI) ASSESSEES INTEREST FOR CROSS-EXAMINATION OF SHRI S.K. GUPTA WHICH AHS BEEN SPECIFICALLY DENIED ON THE REASON THAT SUPPLY OF STATEMENT AND AFFIDAVIT WAS ENOUGH AND THE CROSS-EXAMINATION WILL NOT BE PROVIDED. (VII) THE ASSESSEE HAS BEEN SADDLED WITH THE BURDEN TO PRODUCE SHRI S.K. GUPTA THOUGH HE WAS PROPOSED BY THE DEPARTMENT AS ITS WITNESS SINCE THE RELIANC E WAS PLACED BY IT ON THE STATEMENT AND AFFIDAVIT. (VIII) ITAT IN THE CASE OF M/S QGS TRAINING INSTITUTE (P) LTD. (SUPRA) HAS HELD THAT IN THESE FACTS AND CIRCUMSTANCES THE MATERIAL ON RECORD CANNOT BE SAID SUFFICIENT MATERIAL TO ESTABLISH THAT THERE WERE NO ACTUAL PURCHASE OF SOFTWARE. ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 22 7.1. IN VIEW OF THESE FACTS WE HOLD THAT SHRI S.K. GUPTA WAS A DEPARTMENTAL WITNESS AND THE BURDEN TO PRODUCE HIM FOR CROSS-EXAMINATION WAS ON THE DEPARTMENT WHICH AHS NOT BEEN DISCHARGE D. IN THE ABSENCE OF SUCH CROSS-EXAMINATION AGREEING WITH M/S QGS TRAIN ING INSTITUTE (P) LTD. (SUPRA) IT IS HELD THAT THERE IS NO SUFFICIENT MAT ERIAL ON RECORD TO ESTABLISH THAT ASSESSEES PURCHASES FROM S K GUPTA COMPANIES WERE NOT GENUINE. EVEN IF WE CONSIDER THE MERIT SHRI S.K. GUPTA THRO UGHOUT HIS STATEMENT HAS NOT STATED THAT ALL THE SUPPLIES BY ITS COMPANIES W ERE ACCOMMODATION IN NATURE. IN THE ABSENCE OF ASSESSEES SPECIFIC NAME IN ANY OF THE INCRIMINATING MATERIAL STATEMENT OR AFFIDAVIT IT CANNOT BE HELD THAT ASSESSEES PURCHASES WERE BOGUS ON THE BASIS OF STATEMENT AND AFFIDAVIT. 7.2. IN THE STATEMENT AND AFFIDAVIT GIVEN BY SHRI S .K. GUPTA DURING THE COURSE OF SEARCH THERE IS NEITHER ANY REFERENCE OR RELIANCE TO SUCH MATERIAL. UNDER THESE CIRCUMSTANCES THE INFORMATION BEING R ELIED ON BY THE DEPARTMENT BECOMES INCOMPLETE AND FOR WANT OF CROSS -EXAMINATION AND THE FACT THAT SHRI S.K. GUPTA HAS NO WHERE STATED THAT ALL THE SUPPLIES WERE ACCOMMODATION OR BOGUS IN NATURE. HE AHS ACCEPTED T HAT IN VARIOUS CASES GOODS AND SERVICES WERE TRANSACTED AND WITH RELIANC E IT HAD ACTUAL TRANSACTIONS OF ABOUT RS. 840 CRORES. IN VIEW OF TH E FOREGOING WE SEE NO ITA NO. 5/DEL/11 M/S SUBBA MICROSYSTEM LTD. 23 JUSTIFICATION IN THESE ADDITIONS WHICH ARE DELETED . GROUND NOS. 1 2 & 3 OF ASSESSEE ARE ALLOWED. 7.3. COMING TO GROUND NO. 4 RESPECTFULLY FOLLOWING ITAT JUDGMENT IN ASSESSEES OWN CASE FOR A.Y. 2004-05 (SUPRA) WE AL LOW THE CLAIM OF THE ASSESSEE IN RESPECT OF DEFERRED REVENUE EXPENDITURE . 8. IN THE RESULT ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 25-11-2011. SD/- SD/- ( K.G. BANSAL ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25-11-2011. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR