Income Tax Appellate Tribunal - Hyderabad
Nitt-Data India Enterprise ... vs Assessee on 23 September, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "A" : HYDERABAD
BEFORE SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER
AND
SHRI SAKTIJIT DEY, JUDICIAL MEMBER
ITA.No.587/Hyd/2012
Assessment Year 2001-2002
NTT DATA India Enterprise
Application Services Pvt. Ltd. vs. ACIT, Circle 2 (1)
(formerly known as Intelligroup Hyderabad
Asia Private Limited),
Hyderabad. PAN AAACI7064D
(Appellant) (Respondent)
For appellant : Shri H. Srinivasulu
For respondent : Shri R. Laxman
Date of Hearing : 23.09.2013
Date of pronouncement : 31.10.2013
ORDER
PER SAKTIJIT DEY, J.M.
This appeal filed by the assessee is against the order of the CIT(A)-III, Hyderabad dated 23.02.2012 for the assessment year 2001-2002.
2. The only issue in this appeal is in respect of the addition of Rs.11,97,270/- made by the A.O. and confirmed by the CIT(A).
3. Briefly the facts are, the assessee formerly known as M/s. Intelligroup Asia Private Limited is engaged in the business of Software Development Services. For the impugned assessment year the assessee filed its return of income declaring total income of Rs.1,20,63,190/-. An assessment order was passed under section 143(3) on 31.12.2003 by making certain additions, one of them being addition of an amount of Rs.11,97,270/- being interest from M/s. Seranova India Pvt. Ltd. Additions made by 2 the Assessing Officer were also confirmed by the CIT(A). Against the order passed by the CIT(A) the assessee carried an appeal to the ITAT. In the meanwhile, the assessment completed earlier was reopened under section 147 and ultimately an assessment order was passed on 5.12.2008 by determining the income at Rs.2,03,72,623/-. The appeal preferred by the assessee against the re-assessment order was also dismissed by the CIT(A). The assessee challenged the order of the CIT(A) in an appeal filed before the ITAT. The ITAT took up both the appeals together for hearing and in a combined order dt. 3.7.2009 remitted the issue of addition of interest income of Rs.11,97,270/- to the file of the A.O.
4. It may be stated here that during the original assessment proceedings, the A.O. noticing that the assessee had disclosed interest income of Rs.99,72,180/- as against Rs.1,56,99,877/- received from M/s. Seranova India Pvt. Ltd. and Andhra Bank as mentioned in the TDS certificates, added the differential amount to the income of the assessee. The CIT(A), however, restricted the addition to Rs.11,97,270/-.
5. In the course of the re-assessment proceedings pursuant to the direction of the ITAT, the A.O. vide notice dated 10.8.2010 asked the assessee to furnish information as under :
"1) You are required to furnish the actual interest accrued during the financial year 1999-2000.
2) Please furnish total amount of interest received and TDS thereon.
3) Please furnish break up of the interest income received year-wise on accrual basis and effect on tax thereon."
6. The A.O. again vide order sheet entry dated 12.10.2010 asked the assessee to produce the books of accounts of M/s. Seranova India Pvt. Ltd. In compliance to the query made 3 by the A.O. the assessee submitted that as M/s. Seranova India Pvt. Ltd. has closed its operations long back, procuring information from them would be difficult. The assessee, however, submitted that whatever additional interest was received have been offered for taxation in subsequent assessment years. In this context, the assessee submitted a chart reconciling the difference between the interest as per its books of accounts and as per TDS certificates and the interest income offered to tax spread over assessment years 2000-2001 to 2004-2005. The said chart is reproduced below for convenience.
A.Y. As per the As per the Amount
books of TDS offered to tax
account certificates
2000-01 5,90,731 5,90,731 5,90,731
2001-02 99,72,180 1,11,69,450 99,72,180
2002-03 9,25,695 - -
2003-04 - - -
2004-05 10,34,336 - 10,34,336
Total 1,25,22,942 1,17,60,181 1,25,22,942
7. The A.O. however, did not accept the contentions of the assessee for the reason that as the assessee was following mercantile system of accounting hence, it should have shown interest income on accrual basis. He further opined that the assessee except providing some figures neither produced the books of accounts or any confirmation from M/s. Seranova India Pvt. Ltd. The A.O. observed that the assessee also failed to produce the basis for the total receipt and working of interest thereon. He also observed that the assessee also did not produce any evidence with regard to the principal amount recovered from the said company. On the aforesaid basis the A.O. finally came to a conclusion that the amount of Rs.11,97,270/- is the income of the assessee for the assessment year under dispute.
48. Being aggrieved of the assessment order so passed, the assessee preferred an appeal before the CIT(A). In course of hearing of appeal before the CIT(A), the assessee challenged the addition by contending that since the addition has been made by A.O. without verifying the books of accounts of the borrower, as directed by the ITAT, the addition is bad in law. The learned CIT(A), however, upheld the addition made by the A.O. by rejecting the contentions of the assessee, holding as under :
"5 I have carefully gone through the assessment order, written submissions filed by the appellant and order of the Hon'ble ITAT. As per the Assessing Officer, assessee was given several opportunities to the appellant to decide the issue with regard to the interest amount of Rs.11,97,270/- and asked to furnish books of accounts of M/s. Seranova India Pvt. Ltd, to substantiate to quantify the actual receipts from their books of accounts and also "any other supporting documents". In addition, the AO also given opportunity to produce and to clarify whatever additional interest received was offered for taxation for A.Y. 2002-03 amounting to Rs.9,25,695/- and Rs.l0,34,336/- for A.Y. 2004-05 to clarify whether principle amount and interest amount received. The appellant itself submitted during the course of assessment proceedings the AR further stated that "the company M/s. Seranova India Pvt. Ltd, has closed Its operations very long back and procuring information from them is difficult and requested to accept interest income as offered by the assessee company". Under these circumstances, after examining the evidence and material available on record the AO completed the assessment by adding back interest amount of Rs.l1,97,270/-. As per the direction of the Hon'ble ITAT "Assessing Officer to verify the books of accounts of the borrower". In this case, the appellant itself submitted that the company has closed its operation. Then, it is 5 not possible for the Assessing Officer to obtain books of accounts at his own as submitted by the appellant before him. The Assessing Officer has given several opportunities and also requested to produce evidence to prove that the subsequent years amount received from the same company was of the principle amount or interest amount. The appellant failed to prove before the Assessing Officer and also before me. No further evidence or proof filed before me regarding subsequent years amount received amounts were of interest nature only".
9. The learned A.R. at the very outset submitted that the addition made by the A.O. is not sustainable primarily on the ground that the directions given by the Tribunal were not carried out. The learned A.R. submitted that the ITAT had specifically directed the A.O. to verify the books of accounts of the borrower and thereafter, decide the assessability of differential amount of interest income. In this context, the learned A.R. placed before us the order dated 3.7.2009 in ITA.No.95/Hyd/2006 and others passed by the ITAT, Hyderabad 'B' Bench in assessee's own case and specifically referred to paragraph 10 of the order passed by the Tribunal which reads as under :
"10. We have considered the rival submissions and perused the material available on record. It is the difference between the interest as per the TDS certificate and the interest accounted for by the assessee which has led to the impugned addition. It is the contention of the assessee that interest has been received only to the extent accounted for in its books. Merely basing on the TDS certificates, the lower authorities are not justified in making the impugned addition on account of interest income of the assessee. On considering totality of facts and circumstances of the case, we are inclined to accept the alternative contention of the assessee fore 6 remitting this issue to the file of the assessing officer. We accordingly set aside the impugned orders of the CIT(A) and restore the matter to the file of the Assessing Officer with a direction to examine the books of the borrower company to ascertain the actual amount of interest paid by it to the assessee during the year under appeal".
10. The learned A.R. submitted that the direction of the Tribunal being specific and not being an open remand, the A.O. cannot enlarge the scope of the direction given by the Tribunal and travel beyond it. In support of such contention the learned A.R. relied upon the following decisions :
(i) DCM Estates & Infrastructure Ltd. vs. DCIT (2007) 110 TTJ 604 (Del.)
(ii) Commissioner of Income Tax vs. Raza Textiles Ltd., (2007) 293 ITR 92 (All.)
(iii) Basudeo Prasad Agarwalla vs. ITO and others (1989)180 ITR 388 (Cal.)
11. The learned A.R. submitted that assessee has been following mercantile system of accounting and interest income is recognised as per Accounting Standard AS-9 issued by the ICAI. The learned A.R. submitted that since there was uncertainty with regard to receiving interest from the borrower, the actual interest received was shown in the books of account. He submitted that since in the relevant year the assessee actually received an amount of Rs.99,72,180 from the borrower, the said amount was not only reflected in the books of accounts but also offered as income. He further submitted that the fact of uncertainty in receiving interest can also be evident from the petition filed by the assessee before the Hon'ble High Court praying for winding- up of the borrower company under the Companies Act. The learned A.R. submitted that when the assessee filed its return of income for the impugned assessment year on 31.10.2001, the 7 very same day the borrower issued the TDS certificate showing the interest credited to the assessee at Rs.1,11,69,450/-, hence the assessee never had an occasion to know what amount was shown in the TDS certificate. Since as per the books of the assessee had actually received the amount of Rs.99,72,180/-, the same was offered as income by the assessee in the impugned assessment year. The learned A.R. submitted that for this reason only the assessee had requested for verifying the books of accounts of the borrower to ascertain what amount they have shown as interest payment to the assessee. The learned A.R. submitted that the assessee in fact had offered more interest from borrower as income spread over four assessment years than what is mentioned in the TDS certificate. It was submitted that since rest of the interest actually received from the borrower has been offered as income in the subsequent assessment years, the same income cannot be taxed twice.
12. The learned D.R. on the other hand, strongly supporting the orders of the revenue authorities submitted that since both the assessee as well as the borrower are companies and are following mercantile system of accounting, the interest shown to have been credited in the TDS certificate issued by the borrower should have been offered as income by the assessee. He further submitted that since the assessee did not produce the books of accounts of the borrower, the addition made is justified.
13. We have heard the submissions of the parties and perused the orders of the revenue authorities as well as other materials on record. The only dispute in the present appeal is with regard to addition of an amount of Rs.11,97,270/- which according to the A.O. is the shortfall in interest shown in the TDS certificate issued by the borrower and amount offered by the assessee as income. Whereas, it is the claim of the assessee that 8 whatever amount was actually received from the borrower was offered as income. In the earlier round of litigation when this issue came up for consideration before this Tribunal, the Tribunal, as can be seen from the extracted portion of the order hereinabove, considering the contention of the assessee that, merely basing on the TDS certificates the addition is not justified, had remitted the matter back to the A.O. specifically directing him to verify the books of accounts of the borrower to ascertain the actual amount of interest paid by it to the assessee. It is quite obvious that the direction of the Tribunal has not been complied with. The A.O. has again made the addition without verifying the books of accounts of the borrower to ascertain the exact amount of interest paid to the assessee. This, in our view, is not the correct approach on the part of the A.O. The A.O. without himself exercising the authority conferred by the statute in calling upon the borrower to produce the books of accounts, shifted the burden to the assessee. When the assessee expressed its inability to produce the books of accounts of the borrower on account of closure of its operations, the A.O. simply made the addition without making any effort to ensure verification of the books of accounts. In that view of the matter, the addition made is not justified. That besides as can be seen from the assessment order the assessee complied to all the queries made by the A.O. in notice dated 10.8.2010 by furnishing the details of interest received and offered as income in different assessment years. As can be seen from the chart furnished by the assessee which is reproduced in para 3.2 of the assessment order the assessee has shown total interest received from M/s. Seranova India Pvt. Ltd. at Rs.1,25,22,942/- in five different assessment years viz., A.Y. 2000-2001 to 2004-2005 as against the total interest of Rs.1,17,60,181/- shown in the TDS certificates. Therefore, the contention of the assessee that it has actually shown more 9 interest income than what is mentioned in the TDS certificate, prima facie, appears to be correct. Without verifying and ascertaining this fact the A.O. has made the addition, which in our view is not correct. The CIT(A) has also sustained the addition without appreciating the facts in proper perspective. Therefore, considering the totality of facts and circumstances, we are of the view that, the A.O. was not correct in treating the amount of Rs.11,97,270/- as unexplained income of the assessee merely on the basis of amount shown in TDS certificates without verifying whether the said amount has actually been shown as credited/paid in the books of the borrower. In this view of the matter, we do not find any justifiable reason to uphold the addition of Rs.11,97,270/-. Accordingly, we direct the A.O. to delete the same. Grounds raised by the assessee are allowed.
14. In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on 31.10.2013.
Sd/- Sd/- (B.RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Date 31 s t October, 2013. VBP/- Copy to
1. NTT DATA India Enterprise Application Services Pvt. Ltd.
(formerly known as Intelligroup Asia Private Limited), 5-9-22, Manasa Sarovar Complex, Secretariat, Road, Hyderabad. PAN AAACI7064D
2. ACIT, Circle 2 (1), I.T. Towers, A.C. Guards, Hyderabad
3. CIT(A)-III, Hyderabad.
4. CIT-II, Hyderabad
5. DR "A" Bench, ITAT, Hyderabad