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2021 (6) TMI 287 - AT - Income TaxDisallowance of depreciation, business expenses, non grant of set off of brought forward business loss and unabsorbed depreciation and treating the income shown from business as unexplained cash credit under section 68 - HELD THAT:- Various doubts raised by the assessing officer with regard to the technical capability of the concerned employees for developing software, lack of infrastructure, etc. have not been properly addressed by the assessee. It is a fact on record that in course of assessment proceedings, the assessee has furnished a software development agreement with a US based company, who allegedly entrusted the assessee with developing software. Assessee has furnished certain documentary evidence including copies of export invoices raised to the foreign buyer, proof of payment received through bank, banker’s certificate, bank statement showing payment received towards export of software, etc. However, neither the bank certificate nor the bank statement have been filed in the paper book or separately furnished before us for enabling us to record a conclusive finding on these evidences. The aforesaid documentary evidences stated to have been filed before the departmental authorities needs to be thoroughly examined in the context of assessee’s submission regarding development of software for a foreign buyer. As it appears, the departmental authorities have not properly enquired into these aspects by conducting necessary enquiries with the concerned bank or other regulatory authorities, including RBI, since it involves transactions with a foreign party involving repatriation of money from foreign country. One more aspect which has not been examined is, whether the assessee has carried on such software development activity, either with the same client or any other client, in the subsequent assessment years or it is a standalone transaction. If the assessee has continued with such business activity in subsequent years, then assessee’s claim can be accepted. However, all these aspects need to be properly enquired into by the departmental authorities, which appear to have not been done. We are inclined to restore the issue to the learned Commissioner of Income Tax (Appeals) for fresh adjudication after due opportunity of being heard to the assessee. The assessee is also permitted to bring fresh evidence on record to establish its claim of carrying on the business activity of software development. Learned Commissioner of Income Tax (Appeals) would be free to conduct proper enquiry either by himself or get it done through the assessing officer in terms of our observations hereinabove. Assessee’s claim of deduction towards expenses, depreciation as well as set off of brought forward loss and unabsorbed depreciation would ultimately depend upon the outcome of the issue as to whether the assessee has carried out any business activity or not. In view of the aforesaid, we set aside the impugned order of learned Commissioner of Income Tax (Appeals) and restore the issues back to his file for fresh adjudication in terms of our discussion above and only after providing due opportunity of being heard to the assessee. Grounds are allowed for statistical purposes.
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