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2020 (11) TMI 938
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....07-08, 2008-09 and 2009-10 which reads as under : A.Y. 2007-08 1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case. 2. The learned Commissioner of Income Tax (Appeals) ought to have held that the addition of Rs. 27,82,846 towards disallowance of exemption is outside the scope of assessment u/s 143(3) r.w.s.153A. Without prejudice to the above, the In the learned Commissioner of Income Tax (Appeals) is not justified in sustaining the addition of Rs. 27,82,846 made by the assessing officer towards disallowance of Exemption u/s 10A of the Act. A.Y.2008-09 1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case. 2. The learned Commissioner of Income Tax(Appeals) ought to have held that the addition of Rs. 76,48,516 towards disallowance of exemption is outside the scope of assessment u/s 143(3) r.w.s.153A 3. without prejudice to the above, the learned Commissioner of Income Tax (Appeals) is not justified in sustaining the addition of Rs. 76,....
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....r the A.Ys 2006-07 to 2010-11 are as under : S.No. Assessment Year Total Software Exports (Rs.) Deduction u/s 10A Profit margin 1. 2006-07 88,08,620 - - 2. 2007-08 2,15,50,525 27,82,846 12.9% 3. 2008-09 2,11,43,740 76,48,516 36.2% 4. 2009-10 91,27,720 11,71,115 12.8% 5. 2010-11 96,92,350 48,60,862 50.2% 4.1. Search u/s 132 was carried out in the assessee's case on 21.01.2011 and during the course of search, certain documents were found and seized as annexure A/FTPL/PO/15 dt.15.02.2011. The Assessing Officer (AO) in para No.6.3 of the order stated that the seized documents are related to the application made by the assessee for registration with STPI. Vide letter dated 11.10.2015 the assessee submitted the Vendors Services Agreement of First Tek Pvt.Ltd. to STPI and the Vendor Services Agreement refers to Temporary Staff Augmentation services but not Development of software products. The DDIT (Inv.), Guntur has also called for information from STPI and the STPI furnished the copy of agreement entered by the First Tek Pvt. Ltd. with other companies. One of such agreements was the Vendor Servi....
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....ee. The AO further observed during the search proceedings that there was no evidence with regard to software development and the assessee was asked to furnish the documentation for software developed, source code, work orders received from the clients and the time sheets etc, for which the assessee could not furnish any of the said details before the AO. The AO also found certain discrepancies in respect of advances received by the assessee from it's client i.e. Sri Satya Kumar made remittances to the assessee's account instead of First Tek Technologies Inc. USA. The above mentioned defects and the discrepancies found during the course of search and subsequent to search made the AO to believe that there was no export of software and the software export claim of the assessee was only with an intention to claim the deduction u/s 10A. Hence, disallowed the deduction claimed by the assessee u/s 10A amounting to Rs. 27,82,846/- and added back to the income. 5. Against the order of the AO the assessee went on appeal before the CIT(A) and furnished the additional evidence which was forwarded by the Ld.CIT(A) to the AO and called for the remand report. The AO submitted the remand report....
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....ith STPI, Softex Forms, agreement entered with the clients, receipt of foreign inward remittances, permission given by the STPI for expansion of the unit, central excise bond etc. The invoices were raised for development of software, which was accepted by the STPI and no adverse remark was made by STPI with regard to software export of the assessee company. No information was found during the course of search or collected by the AO subsequent to the search to establish that either there was no export or the claim made by the assessee was bogus. Therefore, argued that the assessee has rightly claimed the deduction u/s 10A, hence requested to allow the deduction claimed u/s 10A of the Act. 7. On the other hand, the Ld.DR submitted that for the A.Y. 2007-08, 2008-09 and 2009-10, the AO rightly disallowed the deduction claimed u/s 10A and there was enough material that was found and seized during the course of search, marked as annexure A/FTPL/PO/15 dated 15.02.2011 and annexure A/FTPL/PO/12 dated 15.02.2011 indicating the bogus nature of software development and export. The AO made the search assessments taking cue from the material found and seized during the course of search, thu....
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....dings, the assessee furnished the evidence with regard to inward remittances, Softex forms, payment of PF, ESI etc. The assessee also submitted the evidence with regard to bonds executed by the assessee in favour of Central Excise Department. Apart from the above, the assessee was also permitted to establish the computer software unit under STPI scheme. Permission for expansion letter was issued by STPI vide letter dated 16,07.2010. The Ministry of Commerce, Certificate of Importer Exporter Code dated 11.07.2005 giving permission to the assessee for imports and exports, copy of agreement between the assessee and foreign company to provide IT enable services, the invoices claiming the wages of number of persons engaged in development of software and copies of invoices, receipt of foreign exchange, payment of PF, ESI etc was placed before the CIT(A). AO in his remand report with regard to additional evidence such as central excise bond, expansion letter, agreement copy for export of software, Ministry of Commerce letter, simply brushed aside stating that the evidence in respect of Central Excise and Ministry of Commerce are only furnishments, but not conclusive proof for export of so....
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....n the explanation that it is entitled for exemption u/s,10A of the L T. Act in view of the fact that the appellant is developing the software and exporting the same; the invoices were raised the against supply of software and the amount received against supply of software. Therefore, the provisions of Sec..10A are applicable to the facts of the case, The Assessing Officer is of the view that EPF and salary payments did "not indicate that they were made for development of software. This is not justified. The appellant submits that there are substantial salary payments made by the appellant. The nature of work referred to by the employee would not be indicated either to PF, EFP or to any other authority. In the circumstances, expecting the appellant to state the nature of the work of the employee in the statement by the Assessing Officer is not justified. The Assessing Officer mentioned that the appellant did not provide any evidence about the development of software. This is not correct. The permission was obtained from STPI for development of software, The invoices were raised for development of software. The payments were received against development of software.....
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....ence was brought on record to support the department's contention. As per the provisions of section 10A of the Act, the assessee engaged in the export of software is entitled for deduction of 100% profits derived from the export of software. In the instant case, by providing various details, information, the assessee has proved that it was in the activity of software export and received foreign exchange on account of software export. No enquiries were made with the importing country, no evidence was brought on record from the STPI to establish that the assessee's claim is bogus. Therefore, we have no reason to disbelieve the export of software made by the assessee. Thus, we hold that the assessee made export of software and entitled for deduction u/s 10A of the Act." 8.2. Since the facts are similar and the department has not brought any evidence to controvert the submission of the assessee, we are of the considered view that there is no reason to deny the deduction u/s 10A, accordingly, we set aside the orders of the lower authorities and direct the AO to allow the deduction u/s 10A of the Act. In the result, appeals of the assessee for the A.Y. 2007-08 to 2011-12 on this g....
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....for those assessment years. The time limit for issue of notice u/s 143(2) of the Act, for the assessment years 2004-05 & 2005-06 has been expired. The A.O. made additions towards deemed dividend u/s 2(22)(e) of the Act without any incriminating materials and also based on the books of accounts and financial statements, which were already part of regular return of income filed by the assessee u/s 139(1) of the Act, for those assessment years. Therefore, considering the facts and circumstances of the case and also respectfully following the decision of coordinate bench of ITAT, Visakhapatnam in the case of Sri Hari Prasad Bhararia Vs. DCIT (supra), we are of the view that the A.O. has no jurisdiction to make additions in respect of concluded assessments in the absence of any incriminating materials found during the course of search. In this case, undoubtedly the A.O. has made additions towards deemed dividend on the basis of financial statements filed by the assessee along with regular return of income without any material found during the course of search. Therefore, we direct the A.O. to delete additions made towards deemed dividend u/s 2(22)(e) of the Act for the assessment years ....
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.... per Rule 8D at 0.5% of average investment. The action of the Assessing Officer is as per the Rule 8D and the same is confirmed. The ground raised is rejected." 11.2. In the instant case, there was no dispute that the assessee has earned dividend income and provisions of Rule 8D attracts. Accordingly, the AO made the disallowance applying Rule 8D, hence, we do not find any infirmity in the order of the Ld.CIT(A) and the same is upheld. The appeals of the assessee on this ground is dismissed. 12. The next issue for the A.Y.2011-12 is the addition of Rs. 8,93,19,016/- representing the opening balance of the advances received by the assessee. For the A.Y.2011-12, opening balance of advances received was stood at Rs. 8,93,19,016/-. During the assessment proceedings, the AO asked the assessee to explain the reasons for outstanding advances. The assessee explained that the said advances were received for shifting of the premises from the existing place to a new bigger place from the assessee's client, First Tek Technologies Inc., USA to create the necessary infrastructure. During the search proceedings or post search proceedings, the assessee did not produce any evidence to s....
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....or the financial years-. 2005-06 to 2010-11 were submitted before the CIT(A). The assessee further stated that the assessee is required to spend the said amount for development of software. In case the assessee is not in a position to develop the software and incur any expenditure on such development,, the amount is repayable to the foreign company. The foreign company due to recession ,was not in a position to carry on the software business. The assessee also is not carrying on any further activity. During the year under consideration i.e. financial year 2010-11, the assessee was not supplying any software to the foreign company as it closed its business activity. 12.2. The Ld.CIT(A) sent the submissions made by the assessee to the AO for remand report. The AO submitted the remand report stating that there was inconsistency in the reply submitted by the assessee with regard to the outstanding liability. The AO observed that at one point the assessee was stating that the liability was not ceased and at another point stated that it was repaid. Therefore due to inconsistency the AO suggested for confirming the addition. The Ld.CIT(A) verified the submissions of the assessee and th....
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....any evidence to show that the said sum was repaid subsequently, therefore, argued that the AO rightly made the addition and the Ld.CIT(A) erred in deleting the addition. Hence, requested to set aside the order of the Ld.CIT(A) and allow the appeal of the revenue. 16. We have heard both the parties and perused the material placed on record. With regard to relief sought by the assessee in assessee's appeal in respect of the sum of Rs. 4,23,00,000/-, the assessee had admitted the income, stating that the advances were no more payable to the customers. The assessee had admitted the income u/s 132(4) and subsequently filed the return of income and paid the taxes. No addition was made by the AO to the returned income. Therefore, there is no grievance to the assessee. Having paid the taxes and filed the return of income, if there is mistake in the return of income , the assessee ought to have filed the revised return of income within the time allowed under the Act. Alternatively, the assessee ought to have taken remedial measures by filing the petition u/s 264 before the Ld.CIT(A). In the instant case, the assessee has neither agitated the addition before the AO nor filed the ....
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....we hold that the Ld.CIT(A) has rightly deleted the addition. Hence, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue on this ground. I.T.A. No.607/Viz/2019, A.Y. 2009-10 18. For the A.Y.2009-10, the first issue is related to the addition of Rs. 85,69,584/- representing the difference of turnover in STPI and the turnover declared in the P&L account. During the assessment proceedings, the AO found that the assessee had declared the turnover of Rs. Rs. 91,77,720/-, in the return of Income, whereas the turnover admitted to the STPI was Rs. 1,77,47,304/- and there was a difference of Rs. 85,69,584/.The assessee explained before the AO that the value of turnover declared to the STPI was provisional and no way connected to the turnover of the assessee company and the said turnover was not the actual sales. Therefore, argued that no addition required to be made on account of difference of turnover. Not being convinced with the explanation of the assessee, the AO made the addition of Rs. 85,69,584/- to the returned income. 19. Against the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) deleted the addition observing that th....
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....pital expenditure. During the course of search, a promissory note dated 06.04.2007 was found and seized which was issued by M.Venkata Narayana in favour of Shri Bhavanasi Kasiviswanadham for a sum of Rs. 40,00,000/- and the amount was paid from the bank account of the assessee company. The rate of interest mentioned in the promissory note was 2%, hence, the AO viewed that all the amounts advanced to the various parties through the family members were, interest bearing advances, hence, calculated the interest @2% per month and brought to tax the sum of Rs. 1,07,08,000/- as under : A.Y. 2009-10 Date Loan Rate of interest No. of months Interest Radha Realty Corp. India P. Ltd., 0 2% 0 Saimagadha Land Developers b/f loan 3000000 2% 12 720000 Veenus Developers b/f loan 6000000 2% 5 600000 bal 2000000 2% 1 40000 Vijetha Constructions 23/07/2008 10000000 2% 10 2000000 Vijetha Foundation & Constn P. Ltd. b/f loan 20000000 2% 12 4800000 M. Durga Reddy b/f loan 10000000 2% 7 1400000 M. Durga Reddy 30/05/2008 4000000 2....
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.... was conducted in this case. During the course of search, promissory note was found in favour of Bhavanasi Kasiviswanatham for the amounts advanced to M.Venkata Narayana for interest of 2% per month for an amount of Rs. 40 lakhs. On the basis of above promissory note, the AO charged the notional interest on the entire outstanding advances and brought to tax the sum of Rs. 1,07,08,000/-. We find from the orders of the lower authorities that there was no evidence found during the course of search, evidencing collecting of interest on the amounts advanced to other parties i.e. Vijetha Constructions, Vijetha Foundation & Construction P.Ltd., M.Durga Reddy, Saimagadha Land Developers etc. All the loans are brought forward loans except Vijetha Constructions. The assessee submitted that the amounts were given as advances for purchase of property and subsequently, the lands were also purchased and registered in respect of some properties. It was also explained that in the case of M.Durga Reddy, due to some problem, the sale deed was cancelled and the amount was received back. In the case of Veenus Developers, due to defective construction, the sale agreement was cancelled. The above explan....
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....d the security deposit collected from unsuccessful candidates was given back. For the F.Y.2010-11, relevant to the A.Y. 2011-12, the outstanding closing balance was of Rs. 58,83,698/-. Since the operations of the company were closed, the AO viewed that there was no liability on account of H1B Visa on unsuccessful candidates, hence, outstanding amount of Rs. 58,83,698/- was treated as undisclosed income of the assessee and brought to tax. 31. Against which the assessee went on appeal before the CIT(A) and stated that there was no seizure of liability and the amounts are payable and argued that the company is not entitled to treat the same as income. The details of candidates are available, hence, argued that there is no justification for making the addition. The Ld.CIT(A) after considering the submissions of the assessee deleted the addition. 32. We have heard both the parties and perused the material placed on record. In this case, the amount outstanding as at the end of the year was Rs. 58,83,698/-. The AO misdirected himself that since the company has ceased its operations and the advances were received on revenue account, the company has no liability and hence the sa....