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c). That the CIT(A) erred on facts and in law in confirming disallowance of Rs.3,35,625/- in the absence of confirmation from the party M/s Gigaware Software Solutions. The amount was paid for purchase of certain software. The denial is unjust, illegal and against facts.

3. The assessee company was incorporated on February, 1986. During the year the assessee was engaged in the activity of the trading of generic software and providing computerized software development services for the domestic as well as for foreign market. The Assessing Officer observed that during the year assessee company has claimed to have incurred expenses of Rs.12.26 lacs on power and fuel as per profit and loss a/c. In comparison to the earlier year expense the amount spent on power and fuel in the year under reference is on higher side whereas total turnover has been decreased to 90% from last year. (Last year turnover was Rs.33,69,22,000/- this year turnover was Rs.2,41,60,000/-). The assessee was asked to justify the same. The assessee replied the same vide letter dated 2/12/2005. The Assessing Officer observed that the assessee had debited Rs. 7 lacs as service charges in profit and loss account. Detail furnished in this regard shows that Rs. 7 lacs relates to registration charge for getting registration with software Technology park Noida for availing service of STPI. The assessee was going to start new business activity during the year under consideration and incurred Rs. 7 lacs on the same. These expense are the expenses which falls under the ambit of Section 35D of the Income Tax Act, 1961. The Assessing Officer further observed that the assessee had spent Rs. 7 lacs in connection with availing the services of STPI means the assessee had incurred the expenditure on extension of the existing business. The assessee cannot claim these expenses as whole. These expenses are not routine nature and appearing of enduring benefit nature. Therefore these expenses are amortized being expenses of pre-operative expenses. However, as per Section 35D 1/5 of Rs. 7 lacs is allowable. Thus the Assessing Officer disallowed Rs. 5,60,000/-. As relates to the purchases of software from M/s. Gigaware Software Solutions, the Assessing Officer observed that the Assessee has not furnished any document that exhibits the credit balance. In absence of any detail/confirmation from the said party, the outstanding balance shown to Rs. 3,35,625/- was treated as a deemed income of the assessee under Section 41 (1) of the Income Tax Act, 1961.