CIGNA HEALTH SOLUTION INDIA PVT. LTD., Mumbai V. ITO 12(1)(4), Mumbai

ITA 1117/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2860 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 27-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Opportunity of being heard; Principle of natural justice; Revised return; TDS; Set aside
• Section: 271(1)(c); 143(3); 14A; 251; 44AB; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1117/MUM/2019 ASSESSMENT YEAR: 2013-14 CIGNA HEALTH SOLUTIONS INDIA PVT. LTD., CABIN NO. 7.2, 7 TH FLOOR, BOSTON HOUSE, SUREN ROAD, CHAKALA, ANDHERI EAST, MUMBAI-400093. VS. INCOME TAX OFFICER-12(1)(4), ROOM NO. 145A, AAYAKAR BHAVAN, M.K. ROAD, CHURCHGATE MUMBAI-400020. PAN NO. AAECC3118J APPELLANT RESPONDENT ITA NO. 1650/MUM/2019 ASSESSMENT YEAR: 2013-14 INCOME TAX OFFICER-12(1)(4), ROOM NO. 145A, 1 ST FLOOR AAYAKAR BHAVAN, M.K. ROAD, CHURCHGATE MUMBAI-400020. VS. M/S CIGNA HEALTH SOLUTIONS PVT. LTD., FLAT NO. 1201, 12 TH FLOOR, NAIR HOUSE, 14A & 14B ROAD, AHINSA MARG, KHAR (W), MUMBAI-400052. PAN NO. AAECC3118J APPELLANT RESPONDENT ASSESSEE BY : MR. MADHUR AGARWAL, AR REVENUE BY : MS. SHREEKALA PARDESHI, DR DATE OF HEARING : 19 /11/2020 DATE OF PRONOUNCEMENT : 25/11/2020 ORDER PER N.K. PRADHAN, A.M. THE CAPTIONED CROSS APPEALS - ONE BY THE ASSESSEE A ND OTHER BY THE REVENUE- ARE DIRECTED AGAINST THE ORDER OF THE COMM ISSIONER OF INCOME TAX (APPEALS)-20, MUMBAI [IN SHORT CIT(A)] AND ARISE OU T OF THE ASSESSMENT ITA NOS. 1117 & 1650/MUM/2019 CIGNA HEALTH SOLUTIONS 2 COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961 (TH E ACT). AS COMMON ISSUES ARE INVOLVED, WE ARE PROCEEDING TO DISPOSE T HEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 1117/MUM/2019 ASSESSMENT YEAR: 2013-14 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER : ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) HAS: 1. ERRED IN MAKING AN ENHANCEMENT OF INCOME OF RS.2,53 ,95,925/- BY DISALLOWING AN EXPENDITURE OF RS.54,65,476/- AND AD DING AN AMOUNT OF RS.1,99,30,449/- BEING MISMATCH IN DETAILS. 2. VIOLATED THE PRINCIPLES OF NATURAL JUSTICE BY NOT G IVING AN OPPORTUNITY OF BEING HEARD BEFORE MAKING AN ENHANCEMENT UNDER SECT ION 251 OF THE ACT. 3. DISALLOWANCE OF EXPENDITURE OF RS.54,65,476/- I. ERRED IN RESTRICTING THE ALLOWABLE EXPENDITURE TO T HE EXTENT OF REVENUE FROM OPERATIONS OF RS.22,08,686/-, THEREBY DISALLOWING THE EXCESS EXPENDITURE OF RS.54,65,476/- WITHOUT ANY CO GENT REASONS; II. THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE FAC T THAT THE DETAILS OF EXPENDITURE DEBITED TO THE PROFIT AND LOSS ACCOU NT OF RS.76,74,162/- WERE PROVIDED DURING THE COURSE OF A SSESSMENT PROCEEDINGS TO THE ASSESSING OFFICER; AND III. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) HAS ERRONEOUSLY STATED THE AMOUNT OF REVENUE FROM OPERATIONS AS RS. 22,08,686/- INSTEAD OF RS.24,08,686/-. 4. IN MAKING AN ADDITION OF RS.1,99,30,449/- BEING MIS MATCH IN EMPLOYEE BENEFIT EXPENSES IN THE FINANCIAL STATEMENTS OF 2 Y EARS I. ERRED IN MAKING AN ADDITION OF RS.1,99,30,449/- ON THE BASIS THAT THE AMOUNTS UNDER THE HEAD 'EMPLOYEE BENEFIT EXPENSE' A S APPEARING IN THE PREVIOUS YEAR COLUMN [I.E. PERTAINING TO FINANC IAL YEAR (FY) 2012- 13] IN THE FINANCIAL STATEMENT OF FY 2013-14 DIFFERS VASTLY FROM THE AMOUNTS APPEARING IN FINANCIAL STATEMENT OF FY 2012- 13, WITHOUT APPRECIATING THAT THE SAID INCONSISTENCY IN THE FIN ANCIAL STATEMENT IS ITA NOS. 1117 & 1650/MUM/2019 CIGNA HEALTH SOLUTIONS 3 MERELY ON ACCOUNT OF RESTATEMENT/RECLASSIFICATION W ITH NO IMPACT ON PROFIT AND LOSS ACCOUNT. 5. ERRED IN OBSERVING THAT THE ABOVE EXPENSES WERE NOT SUBJECT TO STATUTORY AUDIT, WHICH IS FACTUALLY INCORRECT. 6. ERRED IN MAKING AN ADDITION OF RS.18,545/- ON THE B ASIS OF THE TAX AUDIT REPORT SUBMITTED DURING THE COURSE OF APPELLATE PRO CEEDINGS, WHICH HAS BEEN REJECTED BY THE LEARNED CIT(A) AS NOT ADMISSIB LE UNDER RULE 46A OF THE INCOME-TAX RULES, 1962. 7. THE LEARNED CIT(A) HAS ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT IN RESPECT OF THE ABOV E ADDITIONS. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2013- 14 ON 29.11.2013 DECLARING TOTAL LOSS OF RS.21,24,640/-. THE ASSESSE E IS ENGAGED IN PROVIDING MARKET RESEARCH IN HEALTH INSURANCE AND HEALTHCARE SERVICE SYSTEMS. IT FILED REVISED RETURN TO INCLUDE NET INCOME OF RS.18,27,68 4/-, THEREBY DECLARING TOTAL LOSS OF RS.2,96,956/-. THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT U/S 143(3) ON 28.03.2016 BY MAKING AN AD DITION OF RS.3,68,97,011/- ON ACCOUNT OF SERVICE CHARGES. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FIL ED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT VIDE ORDER DATED 31.12.2018, THE LD. CIT(A) DIRECTED THE AO TO DELETE THE SUM OF RS.3,66,00,060 /- WHICH WAS ADDED AS NOTIONAL INCOME. HOWEVER, BY HIS OFFICE LETTER DATE D 17.12.2018, THE LD. CIT(A) REQUESTED THE ASSESSEE TO EXPLAIN THE BASIS FOR DEBITING RS.74,16,058/- OUT OF THE OTHER EXPENSES OF RS.9, 95,10,344/- AND RS.2,58,104/- OUT OF THE EMPLOYEE BENEFIT EXPENSES DEBITED TO ITS PROFIT AND LOSS ACCOUNT. ALSO HE ASKED THE ASSESSEE TO EXP LAIN WHY THE EXPENDITURE DEBITED TO THE PROFIT AND LOSS ACCOUNT SHOULD NOT BE RESTRICTED TO RS.22,08,686/- BEING ITS REVENUE FROM OPERATION S. ON FURTHER ITA NOS. 1117 & 1650/MUM/2019 CIGNA HEALTH SOLUTIONS 4 COMPARING THE NOTES TO THE FINANCIAL STATEMENTS F OR THE YEAR ENDING 31.03.2013 AND 31.03.2014, HE LOCATED THE FOLLOWING DIFFERENCE : AMOUNT AS PER FINANCIAL STATEMENT FOR THE Y.E. 31.0 3.2013 RS.8,87,40,774/- AMOUNT AS PER FINANCIAL STATEMENT FOR THE Y.E. 31.0 3.2014 RS.6,88,10,325/- DIFFERENCE RS.1,99,30,449/- ON THE BASIS OF THE ABOVE FIGURES, THE LD. CIT(A) ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE EXCESS EXPENDITURE UNDER T HE HEAD OTHER EXPENSES SHOWN FOR THE FINANCIAL YEAR 2012-13 IN T HE NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31.03.2014 SHOULD NOT BE TREATED AS ITS UNEXPLAINED EXPENDITURE FOR THE AY 2013-14. ALSO TH E LD. CIT(A) NOTED THAT THE ASSESSEE WAS NOT ABLE TO EXPLAIN THE BASIS FOR APPORTIONING RS.74,16,058/- OUT OF THE OTHER EXPENSES OF RS.9, 95,10,344/- TO ITS OWN BUSINESS ; SIMILARLY, THE ASSESSEE WAS NOT ABLE TO EXPLAIN THE BASIS FOR APPORTION RS.2,58,104/- OUT OF THE EMPLOYEES BENEFI T EXPENSES. FURTHER, IT IS NOTED BY HIM THAT THE ASSESSEE FAILED TO GET ITS ACCOUNTS AUDITED U/S 44AB OF THE ACT, EVEN THOUGH ITS TOTAL RECEIPTS INCLUDIN G THE RECEIPT FROM CIGNA TTK WAS RS.20,63,59,512/-. THEREBY RESTRICTING THE EXPENDITURE RELATABLE TO T HE SERVICE INCOME, THE LD. CIT(A) DIRECTED THE AO TO RESTRICT THE ALLO WABLE EXPENDITURE TO RS.22,08,686/- ; TO DISALLOW EXPENDITURE OF RS.54,6 5,476/- (RS.76,74,162/- MINUS RS.22,08,686/-) OUT OF THE EXPENDITURE OF RS.76,74, 162/- DEBITED TO THE P&L ACCOUNT AND TO DISALLOW RS.18,545/- OUT OF THE EXPENSES APPORTIONED TO THE INITIAL INFRASTRUCTURE DEVELOPME NT. OBSERVING THAT THE ASSESSEE FAILED TO FILE ANY EXPLANATION REGARDING T HE ABOVE DISCREPANCY, THE LD. CIT(A) CAME TO A FINDING THAT THE ACTUAL EXPEND ITURE UNDER THE HEAD EMPLOYEE BENEFIT EXPENSE WAS RS.6,88,10,325/- AND NOT RS.8,87,40,774/- AS CLAIMED IN NOTE 14 TO THE PROFIT AND LOSS ACCOUN T. THEREBY, HE DISALLOWED ITA NOS. 1117 & 1650/MUM/2019 CIGNA HEALTH SOLUTIONS 5 A SUM OF RS.1,99,30,449/- OUT OF EXPENSES MENTIONED IN NOTE 14 (EMPLOYEE BENEFIT EXPENSE). THUS THE LD. CIT(A) MADE AN ENHAN CEMENT OF THE FOLLOWING AMOUNT : 1. (RS.54,65,476/- PLUS RS.18,545/-) RS.54,84,021/- 2. RS.1,99,30,449/- TOTAL RS.2,54,14,470/- 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITS THAT THE NOTICE DATED 17.12.2018 ISSUED BY THE LD. CIT(A) TO THE AS SESSEE MENTIONS THE FOLLOWING : SUB : APPEAL NO. - CIT (A), MUMBAI- 20/10143/2016- 17 FOR THE ASSESSMENT YEAR 2013-14 REGARDING. THE ABOVE NOTED APPEAL AGAINST THE ORDER U/S 143(3) OF INCOME TAX ACT PREFERRED BY YOU HAS BEEN FIXED FOR HEARING ON 27/1 2/2018 AT 11:00 AM IN MY OFFICE. YOU ARE REQUESTED TO ATTEND IN PERSON OR THROUGH A R EPRESENTATIVE. YOUR COUNSEL SHOULD BRING THE POWER OF ATTORNEY WHILE ATTENDING THE APPELLATE PROCEEDINGS, IF NOT FILED SO FAR. ATTENDANCE IS NOT NECESSARY IF YO U WISH THAT THE APPEAL MAY BE DECIDED ON THE BASIS OF YOUR WRITTEN SUBMISSIONS WH ICH MAY BE FURNISHED ON OR BEFORE THE SAID DATE. PLEASE ALSO SEND YOUR WRITTEN MUMBAI.CIT.APL20@INCO METAX.GOV.IN DRAWING OUR ATTENTION TO THE ABOVE SHOW CAUSE NOTIC E IT IS STATED BY THE LD. COUNSEL THAT THE LD. CIT(A) SHOULD HAVE MEN TIONED SPECIFICALLY THE PROPOSAL FOR ENHANCEMENT OF RS.2,54,14,470/-, WHICH HE HAS NOT DONE. IN THIS CONTEXT, REFERENCE IS MADE BY HIM TO PROVISION S OF SUB-SECTION 2 TO SECTION 251 OF THE ACT. ITA NOS. 1117 & 1650/MUM/2019 CIGNA HEALTH SOLUTIONS 6 4.1 FURTHER, IT IS EXPLAINED BY HIM THAT THE SAID N OTICE DATED 17.12.2018 WAS ISSUED TO AN OLD ADDRESS OF THE ASSESSEE AND BE CAUSE OF THAT THE ASSESSES WAS NOT ABLE TO COMPLY TO THE SAID NOTICE. 4.2 THE LD. COUNSEL FURTHER SUBMITS IN RESPECT OF E NHANCEMENT OF INCOME BY RS.54,65,476/- THAT THE BREAK-UP OF THE EXPENDIT URE WAS PROVIDED TO THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE SUBMISSION DATED 18.12.2015 ; THE AMOUNT OF REVENUE FROM OPERATIONS HAS BEEN ERRONEOUSLY STATED IN THE ORDER AS RS.22,08,686/- INSTEAD OF RS .24,08,686/-. ALSO IT IS EXPLAINED IN RESPECT OF ENHANCEMENT OF INCOME BY RS.1,99,30,449/- RELATING TO EMPLOYEE BENEFIT EXPEN SES THAT THE SO-CALLED INCONSISTENCY IN THE FINANCIAL STATEMENT IS MERELY ON ACCOUNT OF RESTATEMENT/RECLASSIFICATION OF EXPENSES IN THE SCH EDULES TO THE PROFIT AND LOSS ACCOUNTS WITH NO IMPACT ON THE PROFIT AND LOSS ACCOUNT ; THE FACT THAT THE AMOUNTS IN THE FINANCIAL STATEMENT ARE REGROUPE D/RECLASSIFIED HAS BEEN MENTIONED IN THE NOTE 27 OF THE FINANCIAL STATEMENT OF FY 2013-14; FURTHER FOR THE YEAR ENDED 31.03.2013 CIGNA TTK HAD INCURRE D TOTAL EXPENDITURE OF RS.76,74,162/- AND NET LOSS OF RS.33,70,356/- ; THE AFORESAID AMOUNTS AS APPEARING IN THE PREVIOUS YEAR COLUMN (I.E. PERTAIN ING TO FY 2012-13) OF THE AUDITED FINANCIAL STATEMENTS OF 31.03.2014 IS T HE SAME AS AMOUNTS APPEARING IN THE AUDITED FINANCIAL STATEMENTS OF 31 .03.2013 AND ACCORDINGLY THE DIFFERENCE IN THE AMOUNT OF EMPLOYE E BENEFIT EXPENSES BETWEEN THE TWO FINANCIAL STATEMENT IS MERELY ON AC COUNT OF RESTATEMENT. REGARDING INTEREST ON LATE PAYMENT OF TDS, IT IS S TATED BY THE LD. COUNSEL THAT ENHANCEMENT OF INCOME BY RS.18,545/- H AS BEEN DONE ON THE BASIS OF TAX AUDIT REPORT SUBMITTED DURING THE COUR SE OF APPELLATE ITA NOS. 1117 & 1650/MUM/2019 CIGNA HEALTH SOLUTIONS 7 PROCEEDINGS, WHEREAS THE SAID REPORT HAS BEEN REJEC TED BY THE LD. CIT(A) AS NOT ADMISSIBLE UNDER RULE 46A OF THE INCOME TAX RUL ES, 1962. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE (DR) EXPLAINS THAT THE LD. CIT(A) HAS RIGHTLY DIRECTED T HE AO TO ENHANCE THE INCOME OF THE ASSESSEE BY RS.2,54,14,470/-. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. IN THE RECTIFICATION APPLICATION FILED BEFORE THE LD. CIT(A) ON 23.05.2019, THE ASSESSEE HAS STATED THE FOLLOWING : A) NON-RECEIPT OF NOTICE ISSUED UNDER SECTION 251 OF THE ACT ON PERUSAL OF THE ORDER, IT IS OBSERVED THAT YOUR G OODSELF HAS ENHANCED THE INCOME FOR NON-FURNISHING OF RESPONSE AS REQUES TED VIDE NOTICE DATED 17 DECEMBER 2018 ISSUED UNDER SECTION 251(2) OF THE ACT REQUESTING TO EXPLAIN WHY THE ENHANCEMENT SHOULD NOT BE MADE. IN THIS REGARD, WE NOTE THAT THE SAID NOTICE DATED 17 DECEMBER 2018 WAS ISSUED TO AN OLD ADDRESS OF CHSI (I.E. FLAT NO. 120 1, 12 TH FLOOR, NAIR HOUSE, 14A ROAD, AHINSA MARG, 14B ROAD, KHAR WEST, MUMBAI - 400052). IT WOULD BE PERTINENT TO NOTE THAT, CHSI HAD CHANGE D ITS REGISTERED OFFICE ADDRESS AND UPDATED THE SAME IN THE INCOME-TAX DATA BASE VIDE PAN RECTIFICATION APPLICATION DATED 4 FEBRUARY 2016 (CO PY OF THE APPLICATION FILED REFLECTING THE UPDATED ADDRESS IS ENCLOSED AS ANNEXURE 4). THE UPDATED ADDRESS OF CHSI AS PER THE APPLICATION IS A S UNDER: 401/402, RAHEJA TITANIUM, WESTERN EXPRESS HIGHWAY, GOREGAON EAST, MUMBAI - 400063 THE SAME WAS ALSO INTIMATED TO THE AO VIDE LETTER D ATED 3 DECEMBER 2015. COPY OF THE SAID LETTER IS ENCLOSED AS ANNEXU RE 5. THE AFORESAID ITA NOS. 1117 & 1650/MUM/2019 CIGNA HEALTH SOLUTIONS 8 ADDRESS WAS ALSO MENTIONED IN FORM 35 IN WHICH THE APPEAL WAS PREFERRED BEFORE YOUR GOODSELF. FURTHER, THE E-MAIL ID MENTIONED IN THE FORM 35 WAS [e-mail] BUT THE NOTICE W AS SENT TO THE EMAIL ID [e-mail]. COPY OF THE FORM 35 I S ENCLOSED AS ANNEXURE 6. AS THE NOTICE DATED 17 DECEMBER 2018 WAS NOT RECEIV ED BY CHSI ON THE AFORESAID ADDRESS, CHSI WAS NOT ABLE TO COMPLY WITH THE SAID NOTICE: FURTHER, THE ORDER AS WELL AS THE NOTICE DATED 17 D ECEMBER 2018 WERE DOWNLOADED BY CHSI LATER WHEN IT HAD LOGGED ON TO T HE WEB PORTAL OF INDIAN REVENUE AUTHORITIES (IRA) FOR TAX RELATED WO RK. WITHOUT PREJUDICE TO THE ABOVE, WE WISH TO STATE TH AT THE NOTICE DATED 17 DECEMBER 2018 AS DOWNLOADED FROM THE WEB PORTAL OF THE IRA ONLY STATED THAT THE NEXT HEARING WAS SCHEDULED ON 27 DECEMBER 2018. THE NOTICE NEITHER STATES THE DETAILS REQUIRED BY YOUR GOODSEL F NOR THE FACT THAT AN ENHANCEMENT WAS PROPOSED IN THE CASE OF CHSI. COPY OF THE SAID NOTICE DOWNLOADED FROM THE WEB PORTAL OF IRA IS ENCLOSED A S ANNEXURE 7). 6.1 THUS IT IS CLEAR THAT THE NOTICE DATED 17.12.20 18 WAS ISSUED BY THE LD. CIT(A) TO AN OLD ADDRESS OF THE ASSESSEE THEREBY TH E ASSESSEE COULD NOT COMPLY WITH THE SAID NOTICE. CONSIDERING THE ABOVE FACTS, WE SET ASIDE THE ORDE R OF THE LD. CIT(A) ON ENHANCEMENT AND RESTORE THE MATTER TO HIM TO MAK E AN ORDER AFRESH AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE DIRECT THE ASSESSEE TO FILE THE RELEVANT ACCOUNTS/D OCUMENTS/EVIDENCE BEFORE THE LD. CIT(A). 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE I S ALLOWED FOR STATISTICAL PURPOSES. ITA NOS. 1117 & 1650/MUM/2019 CIGNA HEALTH SOLUTIONS 9 ITA NO. 1650/MUM/2019 ASSESSMENT YEAR: 2013-14 8. THE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER : 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.3,68,97,01 1/- AT THE RATE 20% OF EXPENSES INCURRED BY THE ASSESSEE FOR SERVICES REND ERED TO M/S CIGNA TTK DURING THE YEAR. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) WAS JUSTIFIED IN ACCEPTING THE CLAIM OF THE ASSESSEE TH AT THERE WAS NO PROFIT ELEMENT INVOLVED IN A TRANSACTION WHEREIN THE ASSES SEE HAD PROVIDED A HIGHLY TECHNICAL AND PROFESSIONAL SERVICES TO THE O THER PARTY, THAT TOO BY UTILIZING ITS OWN FUNDS. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) WAS JUSTIFIED IN NOT APPRECIATING THE FACT THAT THE FUN CTIONS SO PERFORMED BY THE ASSESSEE COMPANY INVOLVED NOT ONLY HIGHLY TECHNICAL AND PROFESSIONAL SKILL BUT ALSO THE EXPERTISE OF ITS DIRECTORS ETC, WHICH CANNOT BE BELIEVED TO HAVE BEEN CARRIED OUT WITHOUT CHARGING ANY PROFESSIONAL FEES OR SERVICE CHARGES. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) WAS JUSTIFIED IN NOT DISCUSSING AND DELIBERATING UPON T HE VARIOUS ISSUES INVOLVED IN THE ASSESSMENT AS EVIDENT FROM PARA NO. 4.4.1 OF THE APPELLATE ORDER. 5. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A ) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 9. IN THE ASSESSMENT ORDER DATED 28.03.2016, THE AO CONSIDERED THE PROFIT EMBEDDED IN THE DEVELOPMENT INFRASTRUCTURE F OR M/S CIGNA TTK AS INCOME OF THE ASSESSEE. OBSERVING THAT THE ASSESSEE HAS INCURRED EXPENDITURE OF RS.18,44,85,058/- FOR SERVICES RENDE RED TO M/S CIGNA TTK DURING THE YEAR, THE AO ESTIMATED THE SERVICES CHAR GES @ 20% OF ITA NOS. 1117 & 1650/MUM/2019 CIGNA HEALTH SOLUTIONS 10 RS.18,44,85,058/- WHICH COMES TO RS.3,68,97,011/- A ND MADE AN ADDITION OF IT TO THE TOTAL INCOME OF THE ASSESSEE. IN APPEAL, THE LD. CIT(A) DELETED THE ABOVE ADDITI ON ON THE GROUND THAT THERE IS NO PROVISION FOR INCLUDING NOTIONAL I NCOME IN THE TOTAL INCOME OF THE ASSESSEE. 10. BEFORE US, THE LD. DR SUBMITS THAT IT IS NOT NO TIONAL INCOME AND THE AO HAS RIGHTLY ESTIMATED THE SERVICE CHARGES @ 20% OF RS.18,44,85,058/- WHICH COMES TO RS.3,68,97,011/-. FURTHER ELABORATIN G THAT THE CASE OF THE ASSESSEE IS NOT AUDITED U/S 44AB OF THE ACT IN THE STATUTORY TIME LIMIT, THE LD. DR EXPLAINS THAT THE ADDITION OF RS.3,68,97,011 /- MADE BY THE AO BE RESTORED. 11. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE SUBMITS THAT THE PRINCIPLE OF INCOME DOES NOT INCLUDE NOTIONAL INCOM E IS WELL SETTLED BY THE DECISION IN CIT V. CALCUTTA DISCOUNT CO. LTD . (1973) 91 ITR 8 (SC) AND CIT V. A. RAMAN & CO. (1968) 67 ITR 11 (SC). REFERRING TO THE FACTS IN THE IN THE INSTANT CASE THAT THE ASSESSEE AND CIGNA TTK DID NOT QUALIFY AS PERSONS COVERED U/S 40 A(2)(B) OF THE ACT DURING FY 2012-13, IT IS STATED THAT THE TRANSFER P RICING PROVISIONS ARE NOT APPLICABLE. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. GIVING THAT THE ASSESSEE RECEI VED DEVELOPMENT COST FOR DEVELOPING AND TRANSFERRING THE INITIAL INFRASTRUCT URE TO CIGNA TTK, THE TRANSACTION IS NOT EXPENDITURE IN THE HANDS OF THE ASSESSEE. FOR THE ASSESSEE (THE RECIPIENT OF THE AMOUNT) THE PROVISIO NS OF SPECIFIED DOMESTIC TRANSACTION WOULD NOT BE APPLICABLE. ITA NOS. 1117 & 1650/MUM/2019 CIGNA HEALTH SOLUTIONS 11 FURTHER WE FIND THAT (I) THE VENDOR AGREEMENT BETW EEN THE ASSESSEE AND CIGNA TTK HAS BEEN ENTERED AT COST AND NO INCOM E HAS BEEN EARNED BY THE ASSESSEE, (II) THERE IS NEITHER ANY EVIDENCE NO R ALLEGATION THAT ASSESSEE HAS RECEIVED ANY CONSIDERATION OVER AND ABOVE TO WH AT IS MENTIONED IN THE AFORESAID AGREEMENT. IN CALCUTTA DISCOUNT CO. LTD. (SUPRA), THE ASSESSEE COMPANY TRANSFERRED CERTAIN SHARES HELD BY IT TO ITS SUBSID IARY COMPANY AT LOSS THAN THEIR BOOK VALUE. THOUGH THE ITO HAD NOT FOUND THAT THE ASSESSEE HAS MADE SECRET PROFITS, HE HELD THAT THE ASSESSEE MUST BE D EEMED TO HAVE MADE A PROFIT AMOUNTING TO THE DIFFERENCE BETWEEN THE MARK ET PRICE OF THE SHARES AND THEIR BOOK VALUE. THE HON'BLE SUPREME COURT HEL D THAT WHEN ONE TRADER TRANSFERS HIS GOODS TO ANOTHER TRADER AT A P RICE LESS THAN THE MARKET PRICE, THE TAXING AUTHORITY CANNOT TAKE INTO CONSID ERATION, THE MARKET PRICE OF THOSE GOODS, IGNORING THE REAL PRICE FETCHED. UN LESS THE OFFICER WAS ABLE TO COME TO THE CONCLUSION, ON THE MATERIAL BEFORE H IM, THAT THE ASSESSEE HAD REALLY MADE PROFITS IN THE TRANSACTION, IT WAS NOT PERMISSIBLE FOR HIM TO ADD ANY FICTIONAL INCOME TO THE ASSESSEE'S RETURN. IN T HE ABSENCE OF ANY EVIDENCE TO SHOW EITHER THAT THE SALES WERE SHAM TR ANSACTIONS OR THAT THE MARKET PRICES WERE IN FACT PAID BY THE PURCHASERS, THE MERE FACT THAT THE GOODS WERE SOLD AT A CONCESSIONAL RATE TO BENEFIT T HE PURCHASERS AT THE EXPENSE OF THE COMPANY WOULD NOT ENTITLE THE INCOME -TAX DEPARTMENT TO ASSESS THE DIFFERENCE BETWEEN THE MARKET PRICE AND THE PRICE PAID BY THE PURCHASERS, AS PROFIT OF THE COMPANY. 12.1 IN VIEW OF THE ABOVE FACTUAL SCENARIO AND POSI TION OF LAW WE AFFIRM THE ORDER OF THE LD. CIT(A) DELETING THE ADDITION O F RS. 3,68,97,011/-MADE BY THE AO. ITA NOS. 1117 & 1650/MUM/2019 CIGNA HEALTH SOLUTIONS 12 12.2 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 13. TO SUM UP, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR THE STATISTICAL PURPOSES, WHEREAS THE APPEAL FILED BY T HE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25/11/2020. SD/- SD/- (SAKTIJIT DEY) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED: 25/11/2020. RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY.//ASST. REGISTRAR) ITAT, MUMBAI