FRACTAL ANALYTICS P.LTD, MUMBAI V. DCIT 9(3)(2), MUMBAI

CO 82/MUM/2017

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 3157 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 21-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2006-2007
• Appeal Filed On: 29-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI
• Keywords: Opportunity of being heard; Reasonable cause; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 234B; 147

Judgement Text

, J , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI RAVISH SOOD, JM ITA NO.4037/MUM/2015 : ASST.YEAR 2006-2007 DY .COMMISSIONER OF INCOME - TAX CIRCLE 9(3)(2) MUMBAI. / VS. M/S.FRACTAL ANALYTICS LIMITED UNIT NO.701/702, 7 TH FLOOR SILVER METROPOLIS, WESTERN EXPRESS HIGHWAY, GOREGAON (EAST) MUMBAI 400 063. PAN : AAACF4502D ( / APPELLANT) ( / RESPONDENT) CO NO.82/MUM/2017 : ASST.YEAR 2006-2007 M/S.FRACTAL ANALYTICS LIMITED UNIT NO.701/702, 7 TH FLOOR SILVER METROPOLIS, WESTERN EXPRESS HIGHWAY, GOREGAON (EAST) MUMBAI 400 063. / VS. DY.COMMISSIONER OF INCOME - TAX CIRCLE 9(3)(2) MUMBAI. ( CROSS OBJECTOR ) (RESPONDENT) REVENUE BY : SHRI ALOK JOHRI ASSESSEE BY : SHRI NIRAJ SHETH / DATE OF HEARING : 21.06.2017 / DATE OF PRONOUNCEMENT : 21.08.2017 / O R D E R PER SHAMIM YAHYA, AM THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE EMANATE OUT OF ORDER OF THE LEARNED CIT(A) DATED 18.03.2015 AND PERTAIN TO ASSESSMENT YEAR 2006-2007. 2. THE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER:- (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF LD.CIT(A) IS PERVERSE IN HOLDING THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE AND THE ASSESSEE HAD ITA NO.4037/MUM/2015 CO NO.82/MUM/2017 M/S.FRACTAL ANALYTICS LIMITED. 2 DISCLOSED TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT THEREBY IGNORING THE FACT AS EVIDENT FROM RECORDS THAT THE FIRST SUBMISSION WAS FILED BY THE ASSESSEE ON DECEMBER 8, 2008 AND THAT TOO AFTER REPEATED SHOW-CAUSE NOTICES AND REMINDERS WHICH FINALLY LED TO THE CULMINATION OF NOTICE DATED 25TH NOVEMBER 2008 OF AN EX-PARTE ORDER WHICH FIXED THAT DETAILS SHOULD BE FILED ON OR BY 2ND DECEMBER 2008 BUT THE ASSESSEE AGAIN AVOIDED RESPONDING TO THE NOTICE AND FILED ITS FIRST AND ONLY SUBMISSION ON 8TH DECEMBER 2008 ON THE BASIS OF WHICH ASSESSMENT ORDER WAS PASSED'. H) 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. C1T-(A) ERRED TO APPRECIATE THAT THESE DELAYING TACTICS / NON-COMPLIANCE ATTITUDE ADOPTED BY THE ASSESSEE WOULD AMOUNT TO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT'. (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT-(A) ERRED IN HOLDING THAT THE SAID REOPENING FOR A.Y. 2006-07 AMOUNTS TO 'CHANGE OF OPINION' WITHOUT APPRECIATING THE FACT THAT THERE WAS THERE WAS A CONSIDERABLE DELAY / NON-COMPLIANCE ON THE PART OF THE ASSESSEE TO FILE DETAILS AND HENCE IT CANNOT BE SAID THAT THE AO HAS APPLIED HIS MIND TO THE DETAILS FURNISHED. (III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT-(A) ERRED IN HOLDING THAT THE ASSESSEE HAD DISCLOSED TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT WHEREAS THE FACT AS EVIDENT FROM THE RECORD IS THAT THE DISALLOWANCE HAS BEEN MADE ON A PAYMENT MADE TO ITS WHOLLY OWN SUBSIDIARY WHICH WAS NOT DISCLOSED IN CLAUSE 18 OF FORM 3CD ANNEXED TO THE AUDIT REPORT WHICH PERTAINS TO RELATED PARTY PAYMENTS AND THUS THE SAME RUNS CONTRARY TO THE AVERMENT OF CIT-(A)'. (IV) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT-(A) ERRED IN HOLDING THAT THE ASSESSEE HAD FURNISHED THE REQUISITE DETAILS DURING ASSESSMENT WHEREAS THE FACT IS THAT THE ASSESSEE HAD ONLY FURNISHED VARIOUS SCHEDULES ATTACHED TO ITS FINANCIAL STATEMENTS AND NO DETAILS PERTAINING TO ITA NO.4037/MUM/2015 CO NO.82/MUM/2017 M/S.FRACTAL ANALYTICS LIMITED. 3 THE SAID EXPENSE WAS FURNISHED AND THEREFORE IT CAN BE INFERRED THAT NO ENQUIRY/OR OPINION COULD HAVE BEEN FORMED BY THE AO'. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE DCIT 9(3X2) BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. (V) THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE DCIT 9(3X2) BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3. THE GROUNDS RAISED IN THE CROSS OBJECTION BY THE ASSESSEE READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED ASSESSING OFFICER ('AO') HAS ERRED IN ALLEGING THE RESPONDENT FOR NON-COMPLIANCE AND FOR NOT FULLY DISCLOSING ALL THE MATERIAL FACTS. HOWEVER, AO HAS IGNORED THE FACT STATED IN PARA 2 OF THE ASSESSMENT ORDER ISSUED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ('THE ACT') 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED AO HAS ERRED IN DISALLOWING EXPENSES AMOUNTING TO INR 2,61,15,274 UNDER SECTION 40(A)(I) R.W.S 195 OF THE ACT WITHOUT APPRECIATING SECTION 9(L)(VII) OF THE ACT AND PROVISIONS OF THE INDIA-SINGAPORE TAX TREATY. 3. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE AO HAS ERRED IN DISALLOWING THE EXPENSES OF INR 2,61,15,274 BY PLACING RELIANCE ON PROVISIONS UNDER SECTION 9(L)(I) OF THE ACT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE AO HAS ERRED IN DISALLOWING BUSINESS DEVELOPMENT EXPENSES ITA NO.4037/MUM/2015 CO NO.82/MUM/2017 M/S.FRACTAL ANALYTICS LIMITED. 4 AMOUNTING TO INR 2,61,15,274 WITHOUT APPRECIATING THAT THE BENEFICIAL CIRCULAR 23 OF 1969 DATED JULY 23,1969 WAS IN FORCE DURING THE AY 2007-08 SINCE PAYMENTS MADE TO FRACTAL SINGAPORE WERE CONSIDERED BY THE LEARNED AO IS AKIN TO COMMISSION. 5. FURTHER, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) [CIT(A)] HAS ERRED IN NOT ADJUDICATING THE ABOVE GROUNDS OF APPEAL AND CONSIDERING THE SAID GROUNDS AS INFRUCTUOUS. 6. THE LEARNED AO HAS ERRED IN PRAYING THAT THE ORDER OF CIT(A) BE SET ASIDE AND THAT OF AO BE RESTORED. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN NOT ADJUDICATING THE CONSEQUENTIAL LEVY OF INTEREST UNDER SECTION 234B OF THE ACT AMOUNTING TO INR 5835,154. 8. THE LEARNED AO HAS ERRED IN INITIATING CONSEQUENTIAL PENALTY PROCEEDINGS U/S 271 (L)(C) OF THE ACT. 4. IN THIS CASE ASSESSMENT WAS MADE UNDER REASSESSMENT PROCEEDINGS U/S 143(3) READ WITH SECTION 147 OF THE INCOME-TAX ACT. IN ASSESSMENT ORDER, ASSESSING OFFICER MADE DISALLOWANCE OF COMMISSION AMOUNTING TO RS.2,61,15,274. 5. BEFORE THE LEARNED CIT(A) ASSESSEE OBJECTED TO THE VALIDITY OF REOPENING AS WELL AS MERITS OF THE ADDITION OF RS.2,61,15,274. 6. IN THE APPELLATE ORDER, LEARNED CIT(A) HELD THAT THE REOPENING WAS BAD IN LAW AND HENCE THE RE-ASSESSMENT PROCEEDINGS WERE NOT VALID. LEARNED ITA NO.4037/MUM/2015 CO NO.82/MUM/2017 M/S.FRACTAL ANALYTICS LIMITED. 5 CIT(A) DID NOT ADJUDICATE THE ISSUE UPON MERITS BY TREATING THEM TO BE INFRUCTUOUS. 7. AGAINST THE ABOVE ORDER, REVENUE HAS FILED APPEAL AND THE ASSESSEE HAS FILED CROSS OBJECTION. 8. AT THE OUTSET, WE NOTE THAT THERE IS A DELAY OF 51 DAYS IN FILING THE CROSS OBJECTION BY THE ASSESSEE. FOR THE REASONABLE CAUSE OF DELAY, ASSESSEE HAS FILED AN AFFIDAVIT IN THIS REGARD. UPON HEARING BOTH THE COUNSEL ON THIS ISSUE, WE CONDONE THE DELAY. 9. IN THE CROSS OBJECTION ASSESSEE HAS INTER ALIA OBJECTED THAT CIT(A) HAS ERRED IN NOT ADJUDICATING UPON THE MERITS OF THE CASE. 10. UPON CAREFUL CONSIDERATION, IN OUR CONSIDERED OPINION, WHEN THE REOPENING AS WELL AS MERITS OF THE CASE WERE BEFORE THE LEARNED CIT(A), IT WAS INCUMBENT UPON HIM TO PASS AN ORDER AND ADJUDICATE BY SPEAKING ORDER ON BOTH ASPECTS. IN THE CROSS OBJECTION ASSESSEE IS RIGHTLY AGGRIEVED THAT DESPITE FILING THE APPEAL AND RAISING THE NECESSARY GROUNDS THE LEARNED CIT(A) HAS NOT ADJUDICATED UPON THE MERITS OF THE CASE. THERE ARE CATENA OF DECISIONS OF HIGHER COURTS WHEN IT HAS BEEN HELD THAT IT IS INCUMBENT UPON LOWER AUTHORITIES TO DECIDE UPON THE JURISDICTIONAL AS WELL AS MERITS OF THE CASE RAISED BEFORE THEM SO THAT THERE IS A FINALITY IN PROCEEDING AT LOWER LEVEL AND THE HIGHER FORUM CAN PROPERLY APPRECIATE AND DECIDE UPON THE ISSUE. 11. HENCE IN OUR CONSIDERED OPINION THE INTEREST OF JUSTICE REQUIRES THAT THE ADJUDICATION OF MERITS BE REMITTED TO THE FILE OF THE LEARNED CIT(A). LEARNED ITA NO.4037/MUM/2015 CO NO.82/MUM/2017 M/S.FRACTAL ANALYTICS LIMITED. 6 CIT(A) IS DIRECTED TO COMPLETE THE APPEAL ORDER BY CONSIDERING THE MERITS OF THE CASE AND PASSING AN ORDER ON THE MERITS OF THE CASE. NEEDLESS TO ADD, ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. WE MAKE IT CLEAR THAT WE HAVE NOT CONSIDERED THE ISSUE OF REOPENING IN ANY MANNER WHATSOEVER. REVENUE IS FREE TO TAKE UP THE ISSUE AS REQUIRED AFTER THE ORDER BY THE LEARNED CIT(A) IS COMPLETED IN TERMS OF OUR REMITTING AS ABOVE. BOTH THE COUNSEL FAIRLY AGREED TO THE ABOVE PROPOSITION. 12. IN THE RESULT, APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE STAND ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 21 ST DAY OF AUGUST, 2017. SD/ - (RAVISH SOOD) SD/ - (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 21 ST AUGUST, 2017. DEVDAS* / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT, MUMBAI. 4. / CIT(A), MUMBAI 5. , , / DR, ITAT, MUMBAI 6. [ / GUARD FILE.