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2021 (6) TMI 287 - AT - Income Tax


Issues:
Non-compliance with Tribunal directions, disallowance of depreciation, disallowance of business expenses, non-grant of set off of brought forward losses and unabsorbed depreciation, treating business income as unexplained cash credit.

Analysis:
1. The appeal was against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2006-07. The appellant raised various grounds challenging the actions of the assessing officer and the CIT(A). The issues included non-compliance with Tribunal directions, disallowance of depreciation, disallowance of business expenses, and treatment of business income as unexplained cash credit under section 68 of the Act.

2. The Tribunal noted that all issues were inter-connected and proceeded to address them collectively. The appellant, a software development company, had filed its return declaring nil income. The assessing officer treated the business income as unexplained credit under section 68, disallowed various deductions, and challenged the business activity. The Tribunal had previously directed a fresh assessment.

3. The appellant contended that it had conducted software development activities and provided evidence of business operations, including a software development agreement with a US-based client. The appellant argued that all necessary evidence was submitted, and business activities were conducted, contrary to the assessing officer's findings.

4. The departmental representative supported the assessing officer's decision, stating that the appellant failed to prove business activities. The assessing officer's report highlighted no business activity on the premises, raising doubts about the technical capabilities of employees and infrastructure for software development.

5. The Tribunal reviewed the evidence and discrepancies in the appellant's submissions. While some documentary evidence was presented, critical aspects like bank certificates and statements were missing. The Tribunal emphasized the need for thorough examination of evidence, especially transactions with foreign entities, and continuity of business activities in subsequent years.

6. Consequently, the Tribunal decided to remand the case back to the CIT(A) for fresh adjudication. The appellant was given the opportunity to present additional evidence to support its claim of conducting software development activities. The decision on deductions and set-offs depended on establishing the existence of business activities. The impugned order was set aside for reevaluation, and the appeal was allowed for statistical purposes.

In conclusion, the Tribunal's judgment addressed the interconnected issues raised by the appellant regarding business activities, deductions, and treatment of income. The decision emphasized the importance of thorough examination of evidence and proper enquiry to determine the validity of the appellant's claims.

 

 

 

 

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