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TMI Blog2016 (4) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... prove the strength of the supplier to provide the software mentioned in the bills, assessee could not produce the details whether it has hardware strength of installing such software . it could not also established giving the softwares to sobha developers, It could not establish how the seven other persons have got right to waive the compensations, It is also not established that what are the compelling reasons for the assessee to waive the compensation of the software destroyed which are not of small value. Therefore we are of the view that statement of Shri Tarun Goyal is not at all relevant for claim of depreciation of the assessee which assessee is required to establish independently. In view of above facts we confirm the finding of CIT (A) in confirming the disallowance of depreciation on software purchased by assessee - Decided against assessee. - ITA No.4808/Del/2012, ITA No.4809/Del/2012, ITA No.4810/Del/2012 - - - Dated:- 10-3-2016 - SHRI A.T.VARKEY, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Sh.S.M. Mathur, CA For The Revenue : Sh. Sunil Chander Sharma, CIT DR ORDER PER PRASHANT MAHARISHI, A. M. 1. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... records to establish who has enjoyed the financial benefits out of the alleged bogus deal or transaction. Neither the learned Assessing Officer nor the Hon'ble Commissioner of Income Tax (Appeals) has also brought any material on record that the appellant company is connected in bogus transaction of creation of false documents. In the absence of such material disallowance of depreciation is totally unwarranted and unsustainable in law. 6. That on the facts and circumstances of the case the Hon'blc Commissioner of Income Tax (Appeals) had erred in law is not appreciating that the appellant already proved the ownership of the said Softwares purchased by it and also proved its user in the business carried by the appellant. 3. The grounds of appeal raised by the assessee for the Assessment Year 2009-10 are as under:- 1. That the Hon'ble Commissioner of Income Tax (Appeals) has erred in law as much as facts of the case by upholding the disallowance of depreciation of ₹ 1,35,75,856/- on Softwares by following the findings of the immediate proceeding year relevant to Assessment Year 2008-09. 4. The grounds of appeal raised by the assessee for the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant already proved the ownership of the said Softwares purchased by it and also proved its user in the business carried by the appellant. 6. The ld DR did not object to the additional grounds of appeal for all the three years and therefore the same are admitted as these grounds are legal in nature and parties can raise them at any point of the proceedings by following the procedures laid down. Hence we admit these grounds in the interest of the justice. 7. Firstly we advert to the appeal of the assessee for Assessment Year 2008-09. Brief facts of the case are that the assessee is a company engaged in business of horticulture, agriculture and real estate carried out from A-11, Kailash Colony, New Delhi. 8. On 26.03.2010 search u/s 132 of the Act was carried out at the business and residential premises of the assessee who belongs to Ashok Solomen and Chintels Group of cases. Notice u/s 153A of the Act was issued on 10.03.2011 and in response to that return of income was filed on 28.04.2011 u/s 153A of the Act declared income of ₹ 2,31,47,987/- . On post search enquiry it was found that one Shri Tarun Goyal was subjected to search u/s 132 of the Act on 1st Septemb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ousing project. Later on this project was cancelled vide agreement dated 08.10.2011 and assessee was informed by Sobha that the software has been damaged and destroyed and therefore it cannot be returned. It was submitted that the bills have been debited in the books of account and depreciation has been claimed. As the AO was not satisfied with this explanation of the assessee the depreciation on the software amounting to ₹ 8484910/- being 20% depreciation on the cost of software of ₹ 42424550/- was disallowed. The assessee preferred an appeal before the learned Commissioner of Income-tax (Appeals), who confirmed the disallowance as the assessee has failed to establish the ownership and r use of the alleged software. Therefore the assessee is in appeal before us. 9. The additional grounds raised by the assessee was against the fact that for Assessment Year 2008-09 provision of section 153A cannot be applied as there is no incriminating material found during the search. For this it was submitted that the date of search is 26.03.2010 to 27.03.2010. Return of income of Assessment Year 2008-09 was filed on 21st October 2008 and return of income was processed u/s 143(1) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. 12. According to provisions of section 153A of the Act AO is required to assess or reassess the total income of six assessment years separately. According to the provision of section 153A only the assessment or reassessment pending‟ on the date of initiation of the search shall abate. Therefore the assessment can be made with respect to assessment years which are pending on the date of initiation of the search. Then the total income of the assessee for such assessment years will have to be computed by the AO as a fresh exercises. 13. In this case the assessee has submitted a copy of Panchnama dated 27.03.2010 which shows that the search commenced on 26.03.2010 based on the authorization dated 25.03.2010. Therefore the date of initiation of the search is 25.03.2010 and the date of intimation u/s 143(1) of the Act was 27.03.2010. Hence, we are of the view th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween the assessee and seven parties which shows that joint development agreement entered into between them have been cancelled. According to Clause No.6 of that agreement it was mentioned that the second party i.e. Sobha Developers Ltd has agreed to hand over the first party i.e. seven different parties , including the sophisticated software presentation and other material. It was mentioned that the software which has been given by first party to the second party have been damaged and destroyed and therefore could not return that to the first party and first party has waived all claims and damages arising out of that loss. Therefore it was stated that now the software is not available. It was further stated that additions have been made on the basis of Statement of Mr. Tarun Goyal who has not been confronted to the assessee, copy of the statement is not given and therefore it cannot be used against the assessee. It was further submitted that the bills of the software purchased are available and submitted before the lower authorities, which shows PAN No, Central Sales Tax No etc of the suppliers of the software. It was further stated that the assessee has discharged its onus that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... un Goyal has more than 120 bank accounts and in these bank accounts he had deposited more than 250 crores cash. On the enquiry it was found that all the directors of the companies controlled by the Shri Tarun Goyal were bogus, moreover the addresses of the companies and directors were bogus. The statement of Shri Tarun Goyal was recorded u/s 132(4) of the Income Tax Act 1961. In his statement he had accepted that he has provided accommodation entries and bogus bills to number of persons. Company named M/s. Macro Infotech Ltd. was formed by Shri Tarun Goyal. The main task of the company is to issue bogus bills. On the verification it comes to the notice that M/s. Macro Infotech Ltd. has no expertise in software business. The addresses of the company were also verified during the post search enquiry and it was found that air the addresses were bogus. The information about the beneficiaries had been sent to the office of concerned CITs. When the .search and seizure action conducted against M/s. Chintels India Ltd. the information in respect to this has been sent to the Intelligence unit, New Delhi. 6.1 During the post search enquiries after the search and seizure operation again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company during the financial year 2007-08 had purchased software in aggregate ₹ 4,24,25,050/- from them. Payment of all the bills for the supply of software were made by the assessee company through payees cheque drawn on Bank of Rajasthan as per confirmation, of account sent by M/s Macro Infotech. These softwares were installed in the company and all the purchases were duly incorporated in the books of account of the company. This sophisticated software was most effectively used as a marketing /sales tool in order to convince Sobha to participate in the development of the Group Housing Projects. It was later handed over to Sobha for joint use of development and marketing upon entering in the Joint Development Agreement dated 25/09/2008 for the 32 acres i.e. (12.306 acres and 19.768 acres) Group Housing Projects. Later, upon cancellation of the 19.768 acres Project vide agreement dated 8/10/2011, we were informed that it has been damaged/destroyed by Sobha and hence cannot be returned. The aforementioned agreements along with details of supply of software and copy of purchase bills issued by M/s Macro Infotech are enclosed herewith for your ready reference. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this disallowance in Para 2.3.2 at pg 10 to 14 of the order which is as under:- 2.3 I have carefully considered the facts of the case, the arguments of the appellant and the position of law. The AO had made the disallowance of the claim of depreciation on software alleged to have been purchased from M/s Macro Infotech Ltd., in the background of the information received from the Investigation Directorate regarding the accommodation entry network being operated by Shri Tarun Goyal through the 90-odd companies and over 200 bank accounts that he formed and controlled for this purpose as admitted by him before the Department at the time of search conducted in his case. The appellant had claimed that it had purchased software worth ₹ 4,24,25,050/- from M/s. Macro Infotech Ltd. on the basis of copies of invoice purported to have been issued by that company, which on enquiry was found non-existent at its Head Office and Site Office address as given on the Invoice itself and its Branch Office address as given in the Invoice turned out to be the address of Shri Tarun Goyal, who was the mastermind of the accommodation entry network run from that address. Obviously, the AO gave a sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Investigation but had further made enquiries and had given an opportunity to the appellant to justify its claim by producing evidence of ownership and user of the software claimed to have been purchased from the said M/s Macro Infotech Ltd. Since the appellant failed to produce any evidence to establish either the existence of the software or its user by the appellant, the AO was well within his rights to disallow depreciation in the appellant's case. The case laws relied upon by the appellant are, therefore, clearly distinguishable on facts from the instant case. 2.3.4 Even during the appellate proceedings, the appellant has only reiterated what it said before the AO. No evidence other than the Invoice which already lost its evidentiary value due to non- existence of its issuer at the given address has been furnished to support either the ownership or user of the software by the appellant. The appellant has claimed that the software claimed to have been purchased from the said M/s Macro Infotech Ltd. was a specialised, sophisticated software which was to be used as a marketing/sales tool in the development of the Group Housing Projects undertaken in joint venture with one M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Thus the assessee was cheated by Seers as she never became owner of the Gas cylinders supposed to have been purchased by her from Modern. The AO disallowed depreciation on the gas cylinders and also made addition of ₹ 13,70,000/- as income from undisclosed sources in the hands of the assessee. The disallowance of depreciation was upheld ip further appeal. However, when the AO imposed penalty for concealment on the same issue, his order was assailed in appeal. The CIT(A) decided the penalty appeal in favour of the assessee on the ground that she! was genuinely cheated by Seers and was not in connivance with Seers and therefore no penalty was exigible. This order was upheld by the Hon. High Court in the cited case. It is clear from the above that the facts of the cited case are very much different from the instant case. In the cited case, the issue to be decided was whether the assessee should be penalised for making a wrong claim of depreciation in the given facts and circumstances of that case. In fact, as far as the assessment stage is concerned, the depreciation claimed on non-existent gas cylinders was disallowed which was also upheld in appeal. Therefore, to that exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1229/-. Suddenly in this year from 24th of August 2007 to 29/08/2007 assessee purchased software of ₹ 425 lakhs approximately. After that there is no purchase of any hardware or software items. 21. Macro Infotech has raised invoice number CIL/01/2007-08 dated 02/07/2007 for ₹ 95,00,000/- . The amount is paid for cost of software being for main ADC server. The narration also sold that it is client workstation software, media client software including database, single sport disc/tape, multi segment tapes timing/transfer management software, video fileserver, VTR , Sony protocol, venous router, switches etc. This software was purchased for 19 users. Undoubtedly it shows spend number, CST number, UATT number of the supplier. 22. The 2nd software was purchased by assessee by invoice No. 2 dated 16/07/2007 ₹ 75 lakhs/-, the narration of the software purchases web-based managed to monitoring computer software for assignment in his display of analog and digital video embedded audio and computer images. The quantity was fixed. 23. The 3rd software was purchased by assessee by invoice No. 3 dated 30/07/2007 for ₹ 42 lakhs. This software was for graphics shi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments have been made in the month of August 2007 where as the three software were purchased in the month of August itself and three in the month of July 2007. 30. On the specific querry raised by the assessing officer that what is the business of the supplier of this kind of software, assessee supplied the detail of address of the assessee. On verification of the said address it had come to know that no such companies was running from that address Therefore AO was of the view that this supplier is non-existent and also the software purchased by the asssessee is fictitious. Before CIT (A) assessee was asked to prove the existence of software which was denied by the assessee. 31. For the purposes of the claim of the depreciation u/s 32 of the act the assessee is required to establish following with reference to evidences a. There is a specified assets b. Such assets is partly or fully owned by the assessee c. Such assets are also used by the assessee for the purposes of the business of profession of the assessee. 32. Therefore in the present case it is established that there is no such asset in existence. The reasons for the same areas under :- a) For the existen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty . Therefore it is apparent that the assessee is just a confirming party in this cancellation agreement where in it is stated that software is destroyed and no compensation is payable which is waived by party of the first part which is not the assessee but the 7 other persons who are different companies and individuals. It is mentioned in that agreement that right for compensation is waived by those seven persons and not the assessee company. It is also not demonstrated by the company that how the seven persons have got any right to waive the compensation which is the property of the appellant company and not of those seven persons. h) Further according to the cancellation agreement Sobha Developers has refused to provide the Sophisticated softwares Presentation as it is damaged. Therefore there is no reference of any software as are purchased by the assessee but it talks about the software presentations. Hence assessee has failed to provide any evidence that it has such software were given to Sobha Developers. i) These facts are also coupled with the unusual facts of the case that all these software were purchased by the assessee in a single month and for which payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that statement of Shri Tarun Goyal is not at all relevant for claim of depreciation of the assessee which assessee is required to establish independently. 35. In view of above facts we confirm the finding of CIT (A) in confirming the disallowance of depreciation of ₹ 84,84,910/- for AY 2008-09 on software purchased by assessee of ₹ 4,24,25,050/-. In the result ground no 1 to 6 of the appeal of the assessee are dismissed. 36. In the result appeal of the assessee for AY 2008-09 is dismissed. 37. For AY 2009-10 and 2010-11 assessee has raised single ground against the confirmation of disallowance of depreciation on these softwares which have been dealt with by us in assessee s appeal for AY 2008-09. Similarly we also confirm the disallowance of depreciation of ₹ 1.35.75.856/- for AY 2009-10 on the same softwares in appeal of assessee for Ay 2009-10 and ₹ 81,14,514/- on the same softwares in appeal of the assessee for AY 2010-11. In the result both the appeals of the assessee for AY 2009-10 and 2010-11 are also dismissed. 38. In the result all the three appeals of the assessee is dismissed. 39. Order pronounced in the open court on 10/03/2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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