Bombay H.C : Whether the Tribunal was right in law of depreciation disallowed and on account of late payment of provident fund

High Court Of Bombay

B.D.P.S. Software Ltd. vs. DCIT

Assessment Year : 2001-02

Section : 32

J.P. Devadhar And K.K. Tated, JJ.

IT Appeal No. 2639 Of 2009

October 13, 2011

JUDGMENT

J.P. Devadhar, J. Since the advocate for the appellant has consistently remained absent on several occasions, we had asked the representative of the appellant, Mr. Thadani who has been regularly taking adjournment to make alternate arrangements. On the last occasion, the said representative expressed the inability of the appellant to engage any other advocate to argue the case on behalf of the appellant. In these circumstances, we requested Mr. Subhash Shetty to assist the Court as amicus curiae, which he readily agreed. Accordingly, the matter was adjourned so as to enable Mr. Shetty to go through the file and take necessary instructions from the representative of the assessee.

2. Today, we have heard Mr. Shetty for the appellant and Mr. Suresh Kumar for the Revenue. The appeal is admitted on the following substantial question of law :

“Whether the Tribunal was right in law in confirming the addition of Rs. 3,18,24,076 on account of depreciation disallowed and on account of late payment of provident fund of Rs. 7,53,103 made during the year ?”

3. By consent, the matter is taken up for final hearing. The assessment year involved herein is asst. yr. 2001-02.

4. The assessee is engaged in the business of computer education and software development. In the assessment year in question, the assessee filed return of income on 30th Oct., 2001 claiming depreciation on computer software and computer hardware at Rs. 4,32,96,085. There was a survey action at the premises of the assessee on 23rd Dec., 2002, wherein statements of the managing director and the chief accountant of the assessee were recorded. In their statements, the managing director and the chief accountant admitted that they have not purchased the computer software and computer hardware and out of the depreciation amounting to Rs. 4,32,96,085 agreed to offer the amount of Rs. 3,18,24,076 for taxation.

5. Accordingly, on 26th Dec., 2002, revised return was filed by the assessee withdrawing the depreciation amounting to Rs. 3,18,24,076. The revised return was accepted on 13th Jan., 2003 under s. 143(1) of the IT Act, 1961. Thereafter, the assessee sought to file re-revised return on 15th Jan., 2003 along with an affidavit, wherein it was stated that in the revised return filed on 26th Dec., 2002 the depreciation amount was erroneously withdrawn and wrongly offered to tax. In the affidavit filed along with the re-revised return the assessee sought to retract the statements recorded during the course of survey action. The re-revised return filed on 15th Jan., 2003 could not be obviously entertained once the revised return filed on 26th Dec., 2002 was processed on 13th Jan., 2003.

6. Thereafter, a notice was issued under s. 143(2) and assessment order under s. 143(3) was passed on 30th May, 2003, wherein the retracted statement of the assessee was disbelieved and the amount of Rs. 3,18,24,076 offered in the revised return was accepted. The AO further disallowed Rs. 7,53,103 being the provident fund dues paid by the assessee belatedly. Challenging the aforesaid order, the assessee filed an appeal before the CIT(A). By an order dt. 27th Aug., 2003, the CIT(A) dismissed the appeal filed by the assessee. Further appeal filed by the assessee was also dismissed on 24th Feb., 2009 [reported as BDPS Software Ltd. v. Dy. CIT [2011] 128 ITD 32 (Mum.)]. Challenging the aforesaid order, present appeal is filed by the assessee under s. 260A of the IT Act, 1961.

7. Mr. Shetty, amicus curiae submitted that once the statement made during the course of survey has been retracted by filing an affidavit and re-revised return has been filed on 15th Jan., 2003 withdrawing the amount of Rs. 3,18,24,076, the authorities below were not justified in denying the depreciation and making addition of the aforesaid amount. He also submitted that in the light of the judgment of the apex Court in the case of CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306/185 Taxman 416 (SC), disallowance of Rs. 7,53,103 on account of late payment of provident fund cannot be sustained.

8. Mr. Suresh Kumar, learned advocate appearing on behalf of the Revenue fairly stated that the issue relating to disallowance on account of late payment of provident fund dues would have to be decided in favour of the assessee in view of the decision of the apex Court in the case of Alom Extrusions Ltd. (supra). As regards the additions of Rs. 3,18,24,076 is concerned, he submitted that in view of the revised return filed by the assessee, the authorities below were justified in sustaining the addition of Rs. 3,18,24,076.

9. On careful consideration of the rival submissions, in our opinion, the challenge to the addition of Rs. 3,18,24,076 cannot be sustained. In the present case, though the assessee initially claimed depreciation of Rs. 4,31,96,085, the assessee admitted during the course of survey that the computer software and hardware has not been purchased by the assessee and the assessee itself filed revised return wherein the claim towards depreciation amounting to Rs. 3,18,24,076 was withdrawn and the said amount was offered to tax. Although the assessee has filed an affidavit retracting the statement recorded during the course of survey, there is no material on record to show that the computer software and computer hardware to the extent of Rs. 3.18 crores were actually purchased by the assessee.

10. The Tribunal has recorded a finding of fact that during the course of survey neither the assets were found nor the assessee could establish names of the parties from whom these computer software and computer hardware were purchased. Moreover, the Tribunal has recorded a finding of fact that even the payments were made by bearer cheques and not by account payee cheques. In these circumstances, the decision of the Tribunal in rejecting the claim of the assessee cannot be faulted.

11. As regards the disallowance of Rs. 7,53,103 on account of late payment of provident fund amount is concerned, counsel on both sides agree that in view of the decision of the apex Court in the case of Alom Extusions Ltd. (supra), the issue has to be answered in favour of the assessee.

12. Accordingly, the appeal is disposed by upholding the order of the Tribunal insofar as it relates to bringing to tax the amount of Rs. 3,18,24,076 offered to tax by the assessee in its revised return and by setting aside the order of the Tribunal insofar as it relates to disallowing the provident fund dues paid belatedly.

13. The appeal is disposed of accordingly with no order as to costs.

14. Before concluding, we place on record our appreciation of the assistance rendered to the Court by Shri Subhash Shetty as amicus curiae.

[Citation : 340 ITR 375]

Leave a Reply

Your email address will not be published. Required fields are marked *