2019 (1) TMI 1390 - AT - Income Tax

Addition on account of excess debit of discount in Profit & Loss A/c - admissibility of additional evidences even after lapse of 6 years time - Held that - The additional evidences were sent to the Assessing Officer for remand report, but he did not send any remand report on the admissibility of additional evidences even after lapse of 6 years time. Therefore, the CIT(A), after giving several reminders, has rightly observed that the AO had nothing to say on the admissibility of additional evidences. CIT(A) has rightly deleted the additions after relying on various judicial precedents. As a result, the appeal of the Revenue deserves to be dismissed.

Summary

Issues Involved:
1. Deletion of addition on account of excess debit of discount in Profit & Loss A/c.
2. Deletion of addition on account of excess claim of depreciation on computer accessories.

Detailed Analysis:

1. Deletion of Addition on Account of Excess Debit of Discount in Profit & Loss A/c:

The appellant filed a return of income, which was revised, and during the assessment proceedings, the Assessing Officer (AO) asked for reconciliation of receipts as per profit and loss account and TDS certificates. The assessee provided a reconciliation chart, showing a significant debit towards discount allowed/handling charges. The AO observed discrepancies between the commission received and the handling charges debited, leading to an addition of ?3,04,80,562/- to the income of the assessee due to unreconciled amounts.

The CIT(A) deleted the addition, noting that the AO had not made any independent enquiry to verify whether the appellant had debited excess commission without passing it on to the customers. The CIT(A) found the appellant's documentation, including BSP Settlement advices, agreements with customers, and invoices, to be credible evidence supporting the appellant's claims. The CIT(A) also referenced the Delhi High Court's decision in CIT vs. Singapore Airlines Ltd., which provided an overview of the procedures and accounting methods in the travel agency business.

The ITAT upheld the CIT(A)'s decision, finding no infirmity in the order. The ITAT noted that the AO had not rejected the books of accounts under section 145(3) nor made a best judgment assessment under section 144. The ITAT concluded that the addition was not supported by facts or law and dismissed the revenue's appeal on this ground.

2. Deletion of Addition on Account of Excess Claim of Depreciation on Computer Accessories:

The AO noticed that the assessee claimed depreciation on computer accessories and peripherals at 60%, whereas the AO allowed only 15%, resulting in an addition of ?2,88,751/-.

The CIT(A) deleted the addition, referencing the decision of the Delhi High Court in CIT vs. BSES Yamuna Power Ltd., which established that UPS and printers are integral parts of the computer system and thus entitled to depreciation at 60%. The CIT(A) observed that the law in this matter is well settled and decided in favor of the appellant.

The ITAT upheld the CIT(A)'s decision, noting that the revenue did not contest the observations made by the CIT(A). The ITAT emphasized that the additional evidences were sent to the AO for a remand report, but none was provided even after six years. Consequently, the ITAT found no reason to interfere with the CIT(A)'s decision and dismissed the revenue's appeal on this ground.

Conclusion:

The ITAT dismissed the revenue's appeal, upholding the CIT(A)'s deletion of additions on both grounds. The CIT(A)'s decisions were based on thorough examination of evidence and relevant judicial precedents, and the AO's failure to provide a remand report further supported the CIT(A)'s conclusions.