Religare Finvest Ltd., New Delhi V. CIT, New Delhi

ITA 1312/DEL/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1286 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 06-11-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 25-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 37(1); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.1312/DEL/2010 ASSESSMENT YEAR : 2006-07 RELIGARE FINVEST LIMITED, CIT, 55-HANUMAN ROAD, DELHI-V, CONNAUGHT PLACE, N. DELHI. V. NEW DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAFCS AAFCS AAFCS AAFCS- -- -6301 6301 6301 6301- -- -H HH H APPELLANT BY : SHRI AJAY VOHRA, ADVOCATE. RESPONDENT BY : SHRI SUDESH GARG, CIT-DR. ORDER PER TS KAPOOR, AM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER U/S 263 OF THE ACT PASSED BY CIT, DELHI-V, NEW DELHI DATED 21 .1.2010. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER:- 1. THAT ON THE FACTS AND IN LAW THE COMMISSIONER OF IN COME TAX (HEREINAFTER REFERRED TO AS CIT) ERRED IN ASSUMING JU RISDICTION U/S 263 OF THE INCOME TAX ACT, 1961 . 1(A) THAT ON FACTS AND IN LAW THE NOTICE OF CIT IS B AD IN LAW AND VOID AS IT ORDERS ON SURMISES AND CONJECTURES. THE MATER IAL FOR ALLEGED CONSIDERATION THAT ORDER WAS ERRONEOUS OR PREJ UDICIAL WAS NOT ON RECORD. ITA NO1312/DEL/2010 2 2. THAT THE ORDER PASSED BY THE CIT U/S 263 OF THE ACT IS BAD IN LAW AND VOID AB INITIO. THE APPELLANT CRAVES LEAVE TO ALTER, AMEND, AND OR W ITHDRAW ALL OR ANY OF THE GROUNDS OF APPEAL AT OR BEFORE THE TIM E OF HEARING OF THE APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSMENT IN TH IS CASE WAS FINALIZED U/S 143(3) VIDE ORDER DATED 10.11.2008. TH E PROCEEDINGS U/S 263 WAS INITIATED BY CIT VIDE ISSUE OF SHOW CAUSE NOTIC E U/S 263 DATED 4 TH SEPTEMBER, 2009. THE CIT IN HIS SHOW CAUSE NOTICE HA S ALLEGED THAT FOLLOWING THREE PAYMENTS MADE BY THE ASSESSEE HAS BEEN AL LOWED BY THE ASSESSING OFFICER WITHOUT CHECKING THE REASONABLENESS OF EXPENDITURE AND WITHOUT INVESTIGATION/VERIFYING ANY EVIDENCE FOR ACTUAL RENDERING OF SERVICES. HE FURTHER OBSERVED THAT THE P AYMENTS WERE MADE TO RELATED PARTIES WITHIN THE MEANING OF SECTION 40A(2)(B) AS DETAILED BELOW:- 1. M/S RANBAXY HOLDING CO. ` .54,41,096/- 2. M/S RANBAXY HOLDING CO. ` .33,06,000/- 3. M/S OSKAR INVESTMENT LTD. ` .77,14,000/- IN RESPONSE TO SHOW CAUSE, THE ASSESSEE SUBMITTED ITS REPLY VIDE LETTER DATED 11.1.2010 WHICH IS PLACED AT PAGE 3-12 OF PAPE R BOOK. THE CIT IN HIS ORDER RECORDED THAT AR OF THE ASSESSEE HAD NOT REFER RED TO PAYMENT OF ` .54,41,096/- AND IN RESPECT OF OTHER PAYMENTS OF ` .33,06,000/- AND ` .77,14,000/- HAD FILED SUBMISSIONS RUNNING INTO 10 PAGES IN SUPPORT OF ALLOWABILITY OF CLAIM OF DEDUCTIO N. THE CIT FURTHER NOTED THAT NOWHERE IN THE SUBMISSIONS, A CASE WAS MADE OU T THAT ASSESSING OFFICER HAD EXAMINED THE ALLOWABILITY OF THE EXPENSES WITH REGARD TO ACTUAL RENDERING OF SERVICES IN RESPECT OF P AYMENTS MADE TO ITA NO1312/DEL/2010 3 M/S RANBAXY HOLDING CO. AND M/S OSKAR INVESTMENT LTD. I N VIEW OF THE ABOVE, THE LD CIT HELD THE ASSESSMENT ORDER TO BE ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND ISSUED DIRE CTIONS TO THE ASSESSING OFFICER TO RE-DECIDE THE ISSUE OF ALLOWABILITY OF ABOVE EXPENSES AFTER MAKING NECESSARY ENQUIRIES/INVESTIGATIONS. 3. DISSATISFIED WITH THE ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THIS TRIBUNAL. 4. AT THE OUTSET, THE LD AR TOOK US TO PAGE 1 OF THE PAPER BOOK WHEREIN COPY OF SHOW CAUSE NOTICE WAS PLACED AND INVI TED OUR ATTENTION TO PAGES 41-42 OF PAPER BOOK WHEREIN DETA IL OF EXPENSES CLAIMED WERE PLACED IN THE FORM OF PART OF TAX AUDI T REPORT AND AS A PART OF COMPUTATION OF INCOME. THE LD AR ALSO TOOK US TO PAGES 3-12 OF PAPER BOOK WHEREIN REPLY TO SHOW CAUSE NOTICE WAS PLA CED. IN VIEW OF THE ABOVE, THE LD AR ARGUED THAT DETAIL OF ALL THESE EXPENSES WERE THERE BEFORE ASSESSING OFFICER AND ASSESSING OFFICER HAD E XAMINED THAT DURING ASSESSMENT PROCEEDINGS. CONTINUING HIS ARGUM ENTS HE FURTHER STATED THAT A TOTAL SUM OF ` .95 LAKHS WAS PAID AS SYNDICATION FEES IN ASSESSMENT YEAR 2005-06 AGAINST WHICH ONLY ` .37,63,014/- WAS CLAIMED AS PROPORTIONATE SHARE OF EXPENSES AND REST OF ` .57,36,986/- WAS CLAIMED IN THE CURRENT YEAR. HE FURTHER TOOK US T O PAGE 37 OF THE PAPER BOOK AND INVITED OUR ATTENTION TO PARA 2 OF T HE LETTER DATED 20.12.2007 ADDRESSED TO DY. CIT DURING ASSESSMENT PROCEED INGS. HE INVITED OUR ATTENTION TO THE FACT THAT THE PAYMENT OF ` .95 LAKHS TO M/S RELIGARE HOLDING CO. FOR ARRANGING LOAN/CREDIT FACI LITY WAS BROUGHT TO THE NOTICE OF ASSESSING OFFICER AND IT WAS FULLY EXPLAI NED. SIMILARLY, HE TOOK US TO PAGE 14 OF PAPER BOOK WHEREIN COPY OF LET TER DATED 29 TH AUGUST, 2008 WAS PLACED AND WHEREIN CLAIM OF PROPORTI ONATE DEDUCTION OF ` .57,36,986/- WAS PLACED. WITH REGARD TO OTHER EXPENSE S OF ITA NO1312/DEL/2010 4 GUARANTEE COMMISSION HE TOOK US TO PAGES 71 TO 86 AND EXPLAINED TO US THAT ASSESSEE HAD GONE FOR PLACEMENT OF NON CONVERTIB LE DEBENTURES AND HAD OBTAINED CREDIT RATING FROM ICRA. HE EXPLAINED FURTHER THAT INITIALLY ICRA HAD ASSIGNED A1 RATING TO THEIR NCD WHICH WAS INCREASED TO A1+ ON THE BASIS OF CORPORATE GUARANT EE GIVEN BY M/S RELIAGRE HOLDING LTD & M/S OSCAR INVESTMENT LTD. THE LD AR ARGUED THAT CORPORATE GUARANTEE WAS REQUIRED TO ENHANCE THE CREDIT RATING OF NCD AND THEREFORE GUARANTEE COMMISSION WAS PAID WHICH WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE . HE ALSO TOOK US TO PAGES 87-123 OF PAPER BOOK WHEREIN COPY O F DEED OF GUARANTEE WAS PLACED. IN VIEW OF THE ABOVE HE ARGUE D THAT EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OF THE COMPANY AND FULL DETAILS WERE FURNISHED BEFORE TH E ASSESSING OFFICER AND THEREFORE THE ORDER U/S 263 WAS NOT JUSTIF IED. HE FURTHER ARGUED THAT LD CIT HAS GIVEN HIS ORDER WITHOUT GOING INTO THE REPLY FILED BY THE ASSESSEE AND INVITED OUR ATTENTION TO PAGES 61 TO 70 OF PAPER BOOK WHEREIN THE ASSESSEE HAD FILED DETAILED SUBMISSIONS A GAINST THE SHOW CAUSE NOTICE. HE FURTHER ARGUED THAT M/S OSCAR IN VESTMENT LTD. WAS NOT A RELATED PARTY AS IT HAD ALREADY SOLD ITS SHAR ES IN THE ASSESSEE COMPANY. RELIANCE WAS PLACED ON THE JUDGMENT IN THE CASE OF EICHER LTD. 294 ITR 310 (DEL.). THE LD AR FURTHER STATED T HAT THE ABOVE JUDGMENT OF HON'BLE DELHI HIGH COURT HAS BEEN UPHELD BY HON'BLE SUPREME COURT VIDE JUDGMENT IN 320 ITR 561. RELIANC E WAS ALSO PLACED IN THE CASE LAW OF JP SRIVASTAVA & SONS, KANPUR V. CIT 111 ITR 326 HOLDING THAT WHERE ENTIRE MATERIAL WAS PLACED BEFORE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMENT AND ASSESSING OFFICER AP PLIED HIS MIND AND ACCEPTED THE VIEW OF ASSESSEE BUT DID NOT MEN TION IT IN ASSESSMENT ORDER THE ASSESSEE WAS NOT AT FAULT. THE LD AR FU RTHER ARGUED THAT LD CIT SHOULD NOT HAVE REMITTED THE MATT ER BACK TO ASSESSING OFFICER FOR RE-ADJUDICATION ON EXPENSES RATHER AS PER SETTLED ITA NO1312/DEL/2010 5 LAW HE SHOULD HAVE ARRIVED AT THE CONCLUSION OF ERRON EOUS ASSESSMENT ORDER ONLY AFTER CONDUCTING ENQUIRIES AND RECORDING HIS FINDINGS. RELIANCE WAS PLACED ON A JUDGMENT OF HON'BLE DELHI H IGH COURT IN THE CASE OF ITO V. D.G. HOUSING PROJECT LTD. IN I.T.A. 17 9. 5. THE LD AR CONTINUED HIS ARGUMENTS AND ARGUED THAT ASSESSING OFFICER HAD TAKE A POSSIBLE VIEW UNDER SECTION 37(1) R EAD WITH SECTION 40A(2)(B) OF THE ACT. THE ASSESSING OFFICER HAD CONSIDER ED GUARANTEE FEES AS ALLOWABLE DEDUCTION IN VIEW OF THE FACT THAT WITHOUT CORPORATE GUARANTEE THE ASSESSEE WOULD HAVE OBTAINED NCD AT A HIG HER RATE OF INTEREST. RELIANCE WAS ALSO PLACED IN THE FOLLOWING CA SE LAW OF CIT V. DLF IN I.T.A. NO.236. 6. THE LD DR, ON THE OTHER HAND, ARGUED THAT ASSESSING OFFICER WAS UNDER TOTAL CONFUSION. HE REFERRED TO PAGES 32-33 OF PAPER BOOK WHEREIN DETAIL OF FINANCE CHARGES AND COMMISSION AND SY NDICATION FEES WAS PLACED AND WERE PART OF P&L ACCOUNT PLACED AT PA GE 45 OF PAPER BOOK AND ARGUED THAT THE EXPLANATION GIVEN BY THE A SSESSEE DURING ASSESSMENT PROCEEDINGS WERE RELATING TO PART OF PRECEDIN G YEAR EXPENSES AND NO CURRENT YEAR EXPENDITURE OF GUARANTE E FEE WERE EXPLAINED. THE LD DR FURTHER ARGUED THAT DURING ASSESSM ENT PROCEEDINGS, THE ASSESSEE HAD EXPLAINED ONLY FIRST AMOUN T OF ` .54,41,096/- AND HAD NOT FULLY EXPLAINED THE FURTHE R PAYMENT OF ` .33,06,000/- AND ` .77,14,000/-. HE FURTHER ARGUED THAT ASSESSING OFFICER NEITHER RAISED ANY QUESTION ON REST OF ITEMS AN D NOR THE ASSESSEE SUBMITTED ANYTHING AND HENCE THERE WAS NO ENQUIR Y BY THE ASSESSING OFFICER AND THE ASSESSEE HAD EXPLAINED ONLY PART OF SYNDICATION FEES AND GUARANTEE COMMISSION WAS NOT EXPLAI NED AT ALL. CONTINUING HIS ARGUMENTS, THE LD DR ARGUED THAT NO PA PER HAS BEEN BROUGHT ON RECORD WHICH COULD PROVE THAT ANY SYNDICA TION WAS MADE ITA NO1312/DEL/2010 6 AND MORE OVER THE COMPANIES TO WHOM PAYMENTS WERE MA DE WERE UNDER THE SAME MANAGEMENT AND FURTHER ARGUED THAT DE TAIL OF INTEREST INDICATES THAT ASSESSEE HAD NOT COMPLETELY AVAILED NCDS. HE FURTHER ARGUED THAT M/S RELIGARE HOLDING LTD. WAS NOT LIABLE TO PAY TAX AND THEREFORE THERE WAS TAX ARBITRAGE IN PASSING OVER THE INCOME OF ASSESSEE TO PAYEE. HE FURTHER ARGUED WHILE INVITING OU R ATTENTION TO PAGE 5 TO 56 OF PAPER BOOK THAT THERE IS A DIFFERENC E OF ` .50 CRORES BETWEEN PARTICULARS OF SECURED DEBENTURES IN THE NOTE S TO ACCOUNT AND ON PAGE 5 OF PAPER BOOK. IN VIEW OF THE ABOVE, THE LD DR EXPLAINED THAT ASSESSING OFFICER HAD NOT EXAMINED THE PART OF EX PENSES INCURRED IN PREVIOUS YEARS AND CLAIMED IN THE CURRENT YEAR A ND SIMILARLY HE ARGUED THAT ASSESSING OFFICER HAD NOT APPLIED HIS MIND F OR EXPENSES OF CURRENT YEAR INCURRED AS GUARANTEE FEE AND THEREFORE THE CIT HAD RIGHTLY INITIATED ACTION U/S 263 OF THE ACT. IN HIS R EJOINDER, THE LD AR SUBMITTED THAT WITHOUT CONSIDERING THE MERITS OF THE C ASE, THE ONLY QUESTION IS AS TO WHETHER THE CIT HAS RIGHTLY REMITTE D THE MATTER TO ASSESSING OFFICER OR NOT. HE FURTHER ARGUED THAT CIT CA NNOT TRAVEL BEYOND THE SHOW CAUSE NOTICE. HE FURTHER ARGUED THAT BOTH SHOW CAUSE NOTICE AND ORDER OF CIT WAS SILENT AS TO WHAT NEEDED T O BE DONE ALSO. IN THIS RESPECT OUR ATTENTION WAS INVITED TO THE CASE L AW OF JP SRIVASTAVA & SONS, KANPUR 111 ITR 326 DECIDED BY HON'BLE ALLAHAB AD HIGH COURT WHEREIN IT WAS HELD THAT COMMISSIONER ON THE BASIS OF RE PLY TO SHOW CAUSE NOTICE HAS TO CONSIDER MERITS OF THE OBJECTIONS AN D HE CANNOT JUST DELEGATE THE POWER TO ITO AND DIRECT HIM TO MAK E A FRESH ASSESSMENT. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT ASSESSING OFFICER HAD COMPLETED ASSESSMENT U/S 143(3) AND V IDE QUESTIONNAIRE DATED 29 TH AUGUST 2007, COPY PLACED AT PAGE 40 OF PAPER BOOK HAD ASKED VIDE QUESTION NO.9 REGARDING DETAIL OF COMMISSION AND ITA NO1312/DEL/2010 7 SYNDICATION FEE WITH NATURE OF SERVICES RENDERED AND A SSESSEE VIDE REPLY DATED 20 TH DECEMBER, 2007 VIDE PARA 2 ON PAGE 37 OF PAPER BOO K HAD REPLIED TO THAT QUERY. THE ASSESSING OFFICER ASKED FOR COMMISSION AND SYNDICATION FEES AND THE ASSESSEE HAD REPLIED ONLY T OWARDS EXPLAINING ` .57,36,986/- WHICH WAS PART OF EARLIER YEAR EXPENDIT URE OF ` .95 LAKHS. IT IS FURTHER OBSERVED FROM THE READING OF QUESTIONNAIRE THAT ASSESSING OFFICER WANTED TO KNOW ABOUT COMMISSION AND SYND ICATION FEES ONLY WHICH HE MIGHT HAVE NOTED FROM COMPUTATION OF INCOME PLACED AT PAGE 42 OF PAPER BOOK WHEREIN THE ASSESSEE HA D CLAIMED DEDUCTION A SUM OF ` .57,36,986/- BEING OUT OF EARLIER YEAR EXPENSES. THE ASSESSING OFFICER DID NOT ENQUIRE ABOUT THE GUARAN TEE FEES PAID TO M/S RELIGARE HOLDING LTD. AND M/S OSCAR INVESTMENT LTD. AMOUNTING TO ` .33,06,000/- AND ` .77,14,000/- RESPECTIVELY AND NEITHER THE ASSESSEE EXPLAINED IT. THE CONTENTION OF LD AR THAT ADEQUATE ENQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER DURING COURSE OF ORIG INAL ASSESSMENT PROCEEDINGS IS NOT CORRECT. THOUGH BREAK UP OF EXPENSES OF FINANCE CHARGES AND SYNDICATION FEES WAS AVAILABLE W ITH THE ASSESSING OFFICER YET THE ASSESSING OFFICER DID NOT RAISE AN Y QUESTION REGARDING THE REASONABILITY AND GENUINENESS OF EXPENSES. MOREOVER THOUGH THE ASSESSEE HAD EXPLAINED THE CLAIM OUT OF PREC EDING YEARS EXPENSES, THE ASSESSING OFFICER HAD NOT GONE INTO THE F INDING OF GENUINENESS AND REASONABILITY OF EXPENSES INCURRED IN PR EVIOUS YEAR. THE WRITTEN SUBMISSIONS FILED BEFORE ASSESSING OFFICER ON D ATED 20.12.2007 & 21.6.2008 & 29.8.2008 PLACED AT PAGES 3 7-39, 23-33 & 13-22 OF PAPER BOOK DOES NOT ANYWHERE DEAL WITH THE PAYMENTS OF GUARANTEE FEE AMOUNTING TO ` .33,06,000/- & ` .77,14,000/- THEREFORE THE OBSERVATIONS OF LD CIT THAT ASSESSMENT ORDER WAS ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF REVENUE IS CORRECT. IN VIEW OF THE ABOVE FACTS, WE ARE OF THE VIEW THAT LD CIT HAD RIGHTLY IN ITIATED PROCEEDINGS U/S 263 OF THE ACT AS THE ASSESSMENT ORDER WAS BOTH ERRONE OUS AND ITA NO1312/DEL/2010 8 PREJUDICIAL TO THE INTEREST OF REVENUE. BUT THE ACTI ON OF THE LD CIT IN NOT CONSIDERING THE MERITS OF OBJECTIONS RAISED BY ASSESSEE VI DE REPLY DATED 11.1.2010 PLACED AT PAGES 3 TO 12 OF PAPER BOO K AND JUST REMITTING BACK TO ASSESSING OFFICER FOR RE-ADJUDICATION WAS NOT APPROPRIATE. 8. IN VIEW OF THE ABOVE, WE FEEL IT APPROPRIATE TO REMIT THE FILE BACK TO THE OFFICE OF LD CIT FOR ADJUDICATION AND RECORD ING HIS FINDINGS ON THE OBJECTIONS TO SHOW CAUSE NOTICE WHICH WERE FILED BY AS SESSEE VIDE LETTER DATED 11.1.2010. 9. IN VIEW OF THE ABOVE, THE APPEAL FILED BY THE ASSE SSEE IS ALLOWED FOR STATISTICAL PURPOSES. 10. ORDER PRONOUNCED IN THE OPEN COURT ON 4TH DAY O F JANUARY, 2013. SD/- SD/- (U.B.S. BEDI) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 4.1.2013. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 6.11.2012 ITA NO1312/DEL/2010 9 DATE OF DICTATION 1.1.2013 DATE OF TYPING 2.1.2013 DATE OF ORDER SIGNED BY 4.1.2013 BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET 4.1.2013 & SENT TO THE BENCH CONCERNED.