2011 (10) TMI 28 - HC - Income Tax

Whether the Income Tax Appellate 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 providend fund of Rs. 7, 53, 103/made during the year? - 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and the assessee itself filed revised return wherein the claim towards depreciation amounting to Rs.3, 18, 24, 076/was withdrawn and the said amount was offered to tax.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. - Decided in favor of assessee.

Summary

Issues:
1. Disallowance of depreciation and late payment of provident fund.
2. Validity of revised return and retracted statement during survey.
3. Justification of Income Tax Appellate Tribunal's decision.

Analysis:
1. The case involved the disallowance of depreciation and late payment of provident fund by the Income Tax Appellate Tribunal. The primary issue was whether the Tribunal was correct in confirming the addition of Rs.3,18,24,076 on account of depreciation and Rs.7,53,103 on account of late payment of provident fund made during the year.

2. The assessee, engaged in computer education and software development, initially claimed depreciation on computer software and hardware. However, during a survey, it was revealed that the assets were not purchased, leading to a revised return where depreciation amounting to Rs.3,18,24,076 was withdrawn and offered for taxation. Despite filing a retracted statement and seeking to file a rerevised return, the authorities disallowed the depreciation and added the amount in the assessment order under Section 143(3) of the Income Tax Act, 1961.

3. The amicus curiae argued that the retracted statement should have been considered, citing a Supreme Court judgment. However, the Revenue's advocate agreed that the disallowance of late payment of provident fund dues should be decided in favor of the assessee based on the same judgment. The Court held that the addition of Rs.3,18,24,076 was justified as there was no evidence of actual purchase of computer software and hardware, supported by findings that assets were not found during the survey and payments were made by bearer cheques. The decision on the late payment of provident fund was in favor of the assessee.

4. Ultimately, the Court upheld the Tribunal's decision to tax the amount offered in the revised return while setting aside the disallowance of provident fund dues. The appeal was disposed of with no costs, appreciating the assistance of the amicus curiae in the case.