M/s Conexant Systems Private Limited, Hyderabad V. ITO, Ward 1(2), Hyderabad

ITA 1430/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59352 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 18-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Keywords: Depreciation; Transfer pricing; Principle of natural justice; International transaction; Retrospective amendment; Validity of assessment
• Section: 143(3); 142(1); 234B; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE CHANDRA POOJARI, ACCOUNTANT MEMBER & SMT. AS HA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.1430/HYD/2010 ASSESSMENT YEAR 2006-07 M/S CONEXANT SYSTEMS PVT. LTD. (FORMERLY KNOWN AS CONEXANT SYSTEMS NOIDA P LTD.), HYDERABAD (PAN AAACF 2723N) VS THE ITO, WARD 1(2), HYDERABAD APPELLANT RESPONDENT SA.5/H/2012 IN ITA 1430/H/2010 ASSESSMENT YEAR 2006-07 M/S CONEXANT SYSTEMS PVT. LTD. HYDERABAD (PAN AAACF 2723N) VS THE ITO, WARD 1(2), HYDERABAD APPELLANT RESPONDENT APPELLANT BY : SMT. KANCHUN KAUSHAL RESPONDENT BY : SHRI V. SRINIVAS DATE OF HEARING : 30.1.2012 DATE OF PRONOUNCEMENT : 22.3.2012 ORDER PER ASHA VIJAYARAGHAVAN, JM . THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE ITO, WARD 1(2)-HYDERABAD DATED 14.10.2010 AND THE SA FILED BY THE ASSESSEE PERTAINS TO THE ASSESS MENT YEAR 2006-07. THE ASSESSEE FILED THE STAY PETITION IN SA.5/H/2012 ON 12.1.2012 FOR THE 3 RD TIME, EARLIER SA NO.3/2011 & SA.79/2011 WERE FILED AND HEARD BY THE TRIBUNAL. THE ASSESSEES AP PEAL IN ITA NO.1430/H/2011 WAS POSTED FOR HEARING ON 16.1.2012 AND ADJOURNED TO 30.1.2012. IT WAS POINTED OUT BY THE LEARNED CO UNSEL THAT THE STAY WILL EXPIRE ON 20.1.2012. THE TRIBUNAL HAS DIRECTED THE STAY MATTER TO BE PUT UP FOR HEARING WITH THE APPEAL POSTED ON 30. 1.2012. SINCE WE ARE PASSING THE ORDER AND DISPOSING OFF THE APPEAL, IN ITA ITA NO.1430/HYD/2010 CONEXANT SYSTEMS P LTD. , HYDERABAD 2 NO.1430/H/2010 THE STAY PETITION FILED BY THE ASSES SEE IN SA.5/H/2012 WILL BECOME INFRUCTUOUS. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS IN IT S APPEAL: AS UNDER: 1. THAT THE ASSESSMENT ORDER PASSED IN PURSUANCE T O THE DIRECTIONS ISSUED BY THE LEARNED DRP IS A VITIATED ORDER AS TH E LEARNED DRP ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ADDITION MADE BY THE LEARNED AO TO THE ASSESSEES INCOME BY ISSUING A NON SPEAKI NG ORDER WITHOUT APPROPRIATE APPLICATION OF MIND. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LEARNED AO TPO AND THE LD. DRP ERRED IN MAKING ADJUSTMENT I N ARMS LENGTH PRICE OF THE ASSESSEES INTERNATIONAL TRANSACTIONS WITH RELATED PARTIES BY RS.42,747,499 AND IN MAKING ADDITION ON ACCOUNT OF DEPRECIATION OF RS.937,224/-. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE AO AND LD. DRP ERRED IN UPHOLDING THE REJECTION OF TRANSFER PRICIN G TP DOCUMENTATION BY THE LD. TPO. 4. THAT THE LD. AO/LD. TPO AND THE LD. DRP ERRED IN IGNORING THE LIMITED RISK NATURE OF THE SERVICES PROVIDED BY THE ASSESSEE AND UPHOLDING THE CONCLUSION OF THE LD. TPO THAT NO ADJ USTMENT ON ACCOUNT OF RISK DIFFERENTIAL IS REQUIRED WHILE DETERMINING THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE. 5.1 THAT THE LD. TPO ERRED IN NOT APPLYING MULTIPLE YEAR/PRIOR YEAR DATA FOR COMPARABLE COMPANIES WHILE DETERMINING ARMS LE NGTH PRICE. 5.2. THAT THE LD. TPO ERRED IN USING DATA AS AT THE TIME OF ASSESSMENT PROCEEDINGS, INSTEAD OF THAT AVAILABLE AS ON THE DA TE OF PREPARING THE TP DOCUMENTATION FOR COMPARABLE COMPANIES WHILE DETERM INING ARMS LENGTH PRICE. 5.3. THAT LD. TPO ERRED IN REJECTING COMPANIES SIM ILAR TO THE ASSESSEE IN FUNCTIONS, ASSET BASE AND RISK PROFILE WHILE PERFOR MING COMPARABILITY ANALYSIS. ITA NO.1430/HYD/2010 CONEXANT SYSTEMS P LTD. , HYDERABAD 3 5.4. THAT THE LD. TPO ERRED IN CHERRY PICKING AND SELECTING COMPANIES WITH HIGH PROFIT MARGIN DURING THE FINANCIAL YEAR 2 005-06 IN ORDER TO DETERMINE THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE. 5.5. THAT THE TPO ERRED IN NOT CONSIDERING THE CONS OLIDATED FINANCIALS FOR COMPUTING THE OPERATING PROFIT MARGI NS OF HELIOS AND MATHESON INFORMATION TECH LTD. 5.6. THAT THE TPO ERRED IN DISREGARDING THE FRESH S EARCH CONDUCTED BY THE ASSESSEE AND ADDITIONAL COMPANIES IDENTIFIED THEREIN, DEFYING THE PRINCIPLES OF NATURAL JUSTICE. 5.7. THAT TPO ERRED IN DENYING APPROPRIATE ADJUSTM ENT TOWARDS THE WORKING CAPITAL DIFFERENCE BETWEEN THE ASSESSEE AND THE ENTREPRENEURIAL COMPANIES SELECTED AS COMPARABLE IN DETERMINATION OF ARMS LENGTH PRICE. 5.8. THAT THE TPO ERRED IN DENYING APPROPRIATE ADJ USTMENT TOWARDS THE WORKING CAPITAL DIFFERENCE BETWEEN THE ASSESSEE AND THE ENTREPRENEURIAL COMPANIES SELECTED AS COMPARABL E IN DETERMINATION OF ARMS LENGTH PRICE. 6. THAT LD. PANEL ERRED IN UPHOLDING THE ERRONEOUS ACTIONS OF THE TPO AS STATED IN GROUNDS 5.1 TO 5.8. 7. THAT THE AO HAS GROSSLY ERRED IN ALLOWING THE D EPRECIATION ON COMPUTER PERIPHERALS AT THE RATE OF 15% WHICH IS TH E RATE ALLOWABLE FOR GENERAL PLANT AND MACHINERY. INSTEAD OF AT THE RATE OF 60% APPLICABLE TO COMPUTERS AS PER RULE 5 OF THE IT RULES, 1962 (THE RULES) R.W.S. 32(1) OF THE ACT. 7.1. THE AO FURTHER ERRED ON FACTS IN EQUATING COMP UTER ACCESSORIES AND PERIPHERALS WHICH ARE INTEGRAL PART S OF COMPUTER WITH MACHINES LIKE MRI SCANNING MACHINE, MEASURING MACHINES USED IN THE WIELDING INDUSTRY. ITA NO.1430/HYD/2010 CONEXANT SYSTEMS P LTD. , HYDERABAD 4 7.2. THE AO HAS ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE AND IN LAW, ERRED IN HOLDING THAT THE COMP UTER PERIPHERALS/ACCESSORIES ARE NOT PART OF THE COMPUTE RS. 7.3. THE LD. AO HAS ERRED IN NOT SERVING A VALID NOTICE U/S 143(2) OF THE ACT WITHIN THE TIME PRESCR IBED UNDER THE ACT AND HENCE THE ASSESSMENT PROCEEDINGS ARE BAD IN LAW AND VOID AB INITIO. 8. THAT THE AO HAS ERRED BOTH ON FACTS AND IN LAW IN LEVYING INTEREST U/S 234B OF THE ACT AMOUNTING TO RS.13,868 ,575/- 9. THAT THE CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE INTEREST LEVIED BY THE AO UNDER SECT ION 234C OF THE ACT AMOUNTING TO RS.530.82/- 3. THE FACTS ARE THAT THE ASSESSEE FILED THE RETU RN OF INCOME ON 27.11.2006 DECLARING AN INCOME OF RS. 3,1 2,27,910/-. ACCORDING TO THE DEPARTMENT NOTICE U/S 143(2) WAS I SSUED ON 22.11.2007. A DIRECTOR OF THE ASSESSEE HAS FILED AN AFFIDAVIT THAT THEY NEVER RECEIVED IT. SUBSEQUENTLY ASSESSMENT WAS TAKEN UP FOR SCRUTINY AND WAS REFERRED TO THE TRANSFER PRICI NG OFFICER. ON THE BASIS OF THE ORDER OF THE TRANSFER PRICING OFFI CER DATED 24.9.2009, THE AO ISSUED A DRAFT ASSESSMENT ORDER U /S 144C(3) DATED 14.10.2010. THE ASSESSEE APPROACHED THE DISPU TE RESOLUTION PANEL, WHO ISSUED THEIR DIRECTIONS U/S 1 44C OF THE ACT BY THEIR ORDER DATED 0.9.2010. PURSUANT TO THE SAME THE ORDER OF ASSESSMENT 143(3) WAS PASSED ON 14.10.2010 DETERMIN ING THE TOTAL INCOME AT RS. 7,49,12,730/-. 4. AGGRIEVED THE ASSESSEE IS IN APPEAL. THE LEAR NED DR SHRI V. SRINIVAS FILED WRITTEN SUBMISSIONS OF THE R EVENUES ARGUMENTS IN THE MATTER OF GROUND NO.7.3. OF THE CA PTIONED ITA NO.1430/HYD/2010 CONEXANT SYSTEMS P LTD. , HYDERABAD 5 APPEAL SUMMARISING THAT THE GROUND RELATING TO ALLE GED NON- SERVICE OF NOTICE UNDER SECTION 143(2) OF THE INCOM E-TAX ACT, 1961 (THE ACT) IS TO BE DISMISSED FOR THE FOLLOWI NG REASONS: I. FIRSTLY, THERE IS A VALID PRESUMPTION OF SERVICE OF NOTICE; II. SECONDLY, MISTAKES, IF ANY, ARE CURABLE IN TERMS OF SECTION 292BB OF THE ACT; AND III) THIRDLY, THE ACTIONS OF THE ASSESSING OFFI CER AND THE ASSESSEE SHOW THAT THE REQUIREMENTS OF SECTION 143( 2) OF THE ACT ARE COMPLIED WITH TO ALL INTENTS AND PURPOSES. 5. THE ASSESSEES COUNSEL IN HIS WRITTEN SUBMISSION S FILED IN REPLY TO THE WRITTEN SUBMISSION FILED BY THE DEPAR TMENT SUBMITTED ITS OBJECTION TO THE PRESUMPTION OF WITH RESPECT TO SERVICE OF NOTICE S FOLLOWS: . OBJECTIONS WERE RAISED REGARDING THE VALIDITY OF THE ASSESSMENT PROCEEDINGS BEFORE THE LEARNED ASSESSING OFFICE (LD AO) VIDE LETTER DATED 05-11-2008 AND 2 7-10- 2009 AS THE NOTICE WAS NOT RECEIVED BY THE ASSESSEE . THE VALIDITY OF THE PROCEEDINGS WAS CONTESTED BY THE AP PELLANT AT EVERY STAGE OF THE ASSESSMENT AND THE LD AO DID NOT TAKE ANY ACTION IN THIS REGARD TO SHOW THE APPELLANT THA T THE ALLEGED NOTICE WAS INDEED SERVED. IN THE ALLEGED NO TICE (A CERTIFIED TRUE COPY OF WHICH WAS PROVIDED TO US DUR ING THE APPEAL BEFORE THE HONBLE BENCH), THE DATE OF HEARI NG WAS FIXED ON 29-11-2007. NO FRESH DATE OF HEARING WAS P OSTED UNTIL ALMOST A YEAR PASSED, WHICH CLEARLY DEMONSTRA TES THAT THE NOTICE DATED 22-11-2007 WAS NEVER SERVED, AS TH E NEXT NOTICE UNDER SECTION 142(1) DATED 10-10-2008 HAS BE EN RECEIVED ONLY ON 21-10-2008 AS IS EVIDENT FROM THE ASSESSMENT FILE PERUSED BY THE HONBLE BENCH. ONUS OF THE APPELLANT WAS PROVED WHEN THE APPELLANT RAISED OBJE CTION VIDE LETTER DATED 05-11-2008 THAT THE NOTICE WAS NO T ITA NO.1430/HYD/2010 CONEXANT SYSTEMS P LTD. , HYDERABAD 6 SERVED ON THE APPELLANT. HOWEVER, NO ACTION WAS TAK EN BY THE LD AO TO PROVE OTHERWISE, NOR HAS ANY EVIDENCE BEEN SUBMITTED UNTIL THE LAST HEARING BEFORE THE HONBLE BENCH ON 30-01-2012. 6. THE LEARNED COUNSEL KANCHUN KAUSHAL ALSO SUBMITTED THAT THE ORDER UNDER SECTION 115WE(3) OF THE ACT DATED 22.12.2008 ACCEPTED THE VALUE OF FRINGE BENEF ITS AS RETURNED BY THE APPELLANT FOR THE SAID ASSESSMENT Y EAR IN RESPONSE TO THE NOTICE UNDER SECTION 115WE(3) DATED 01-12- 2008 (NOT THE NOTICE DATED 22.11.2007), AND HENCE, IT WOULD NOT HAVE ANY BEARING ON THIS PROCEEDINGS, WHERE THE VAL IDITY OF NOTICE HAS BEEN CHALLENGED IN THE VERY INITIAL STAG E ITSELF. 7. THE DEPARTMENT HAD SUBMITTED AT PARA 2.2 OF ITS SUBMISSION AS FOLLOWS: CERTIFIED COPY OF THE SAID NOTICE WAS PLACED BEFO RE THE HONBLE BENCH FOR REFERENCE AND RECORD. AT THIS PO INT, THE HONBLE BENCH DIRECTED PRODUCTION OF THE CASE RECOR DS FOR THEIR PERUSAL, AND ADJOURNED THE CASE TO 26.9.2011. THE CASE WAS ADJOURNED FOR THEIR PERUSAL AND ADJOURNED THE CASE TO 26.9.2011. THE CASE WAS ADJOURNED TO 21.11 .2011 AT THE LD. COUNSELS REQUEST AND THEREAFTER ON 29.1 1.2011 BY THE HONBLE BENCH. THE MATTER WAS TAKEN UP THE NEXT DAY I.E. 30.11.2011. THE CASE WAS PERUSED BY THE B ENCH, WHICH WAS PLEASED TO ADJOURN THE CASE TO 27.12.2011 WITH A DIRECTION TO THE DEPARTMENT TO PRODUCE SOME EVID ENCE OF SERVICE OF THE SAID NOTICE DATED 22.11.2007. THE MATTER WAS PERUSED WITH THE PREDECESSOR AO IN NEW DELHI FR OM WHERE THE RECORDS WERE RECEIVED ON TRANSFER, CONSEQ UENT ON AN AMALGAMATION IN THE GROUP. ITA NO.1430/HYD/2010 CONEXANT SYSTEMS P LTD. , HYDERABAD 7 8. IN RESPONSE TO THE SUBMISSION OF THE DEPARTMEN T, THE ASSESSEE SUBMITTED THAT THE CASE RECORD WAS PER USED BY THE HONBLE BENCH ON 30-11-2011. AS CAN BE PERUSED BY T HE HONBLE BENCH, NO FRESH DATE OF HEARING WAS POSTED UNTIL AL MOST ONE YEAR PASSED, WHICH CLEARLY DEMONSTRATES THAT THE NOTICE DATED 22-11- 2007 WAS NEVER SERVED WHICH LED THE HONBLE BENCH T O ISSUE A DIRECTION TO THE DEPARTMENT TO PRODUCE SOME EVIDEN CE OF SERVICE OF THE SAID NOTICE DATED 22-11-2007. 9. FURTHER, IT WAS SUBMITTED THAT THE ONUS WAS PL ACED ON THE DEPARTMENT TO PROVE THAT THE NOTICE WAS SERV ED ON TIME. THE DEPARTMENT PLACED ON RECORD A COPY OF THE SPEED POST BOOKING LIST FOR 22-11-2007, AND SUBMITTED THAT THI S EVIDENCE ESTABLISHED THE FACT THAT THE NOTICE WAS IRRETRIEVA BLY PUT BEYOND THE LD AO AS ON 23-11-2007. HOWEVER, THIS DOCUMENT DOES NOT PROVE BEYOND DOUBT THAT NOTICE WAS SERVED BY THE LD AO WITHIN THE DUE DATE. HENCE, THE HONBLE BENCH AGAIN DIRECT ED THE DEPARTMENT TO PRODUCE A CERTIFICATE FROM THE POSTAL AUTHORITIES THAT THE NOTICE HAS BEEN DESPATCHED/ SERVED ON THE ADDRESSEE. 10. IN THIS REGARD, A LETTER FROM THE POSTAL AUTH ORITIES IN NEW DELHI WAS FILED, WHEREIN IT WAS INTIMATED THAT THE RELEVANT RECORDS ARE UNAVAILABLE AND HAVE BEEN WEEDED OUT VI DE THE POSTAL DEPARTMENT RULES. THIS RESPONSE RECEIVED FRO M THE POSTAL AUTHORITIES IS NOT IN ANY WAY A CONCLUSIVE PROOF TH AT THE NOTICE WAS DESPATCHED/ SERVED ON THE APPELLANT. 11. THE DEPARTMENT SUBMITTED THAT INSOFAR AS THE NOTICE IS NOT SEEN TO BE RETURNED UNSERVED, AND TIME TO LI MITATION FROM THE SAID DATE WAS REASONABLE AND ADEQUATE, THERE WA S A NECESSARY PRESUMPTION OF SERVICE. AS IS EVIDENT FRO M THE SPEED POST BOOKING LIST FOR 22-11-2007 PRODUCED BY THE DE PARTMENT, ITA NO.1430/HYD/2010 CONEXANT SYSTEMS P LTD. , HYDERABAD 8 THE DOCUMENT WAS PICKED UP FROM THE DEPARTMENT ON 2 2-11- 2007. WHAT IS THE PRESUMPTION OF THE EVIDENCE/ MATE RIAL TO SHOW THAT A NOTICE HANDED OVER TO THE POSTAL AUTHOR ITIES ON 22- 11-2007, AS IS BEING ALLEGED BY THE DEPARTMENT, WAS DESPATCHED BETWEEN 23-11-2007 AND 30-11-2007. IT IS THIS MATER IAL/ EVIDENCE OF DESPATCH BETWEEN 23-11-2007 AND 30-11-2 007 THAT THE HONBLE BENCH HAD DIRECTED THE DEPARTMENT TO FI LE. NO SUCH EVIDENCE WAS FILED BY THE DEPARTMENT IN THE LAST DA TE OF HEARING, I.E. 30.01.2012. COUPLED WITH THE FACT THAT NO FRES H NOTICE OF HEARING WAS ISSUED BY THE LD AO AFTER NON-APPEARANC E ON THE ALLEGED DATE OF HEARING, I.E. 29.11.2007, PROVES BE YOND DOUBT THAT THE NOTICE WAS NEVER SERVED. 12 THE DEPARTMENT AT PARA 2.4 RELIED ON THE FO LLOWING TWO CASE LAWS: 1. CIT VS. MADHSY FILMS (P) LTD. (301 ITR 69) 2. SECTION 27 OF THE GENERAL CLAUSES ACT, 1897 3. CHIEF CIT VS. VK GURURAJ AND OTHERS (SC) 4. CAPITAL GEM OVERSEAS (P) LTD. VS. ITO (2006) 101 IT D117 13 THE ASSESSEE IN HIS WRITTEN SUBMISSION SUMMAR ISED THAT IN THE PRESENT CASE THE ONUS WAS ON THE DEPA RTMENT TO PROVE THAT THE NOTICE WAS SERVED, HOWEVER, THERE WA S NO PROOF OF DESPATCH FILED BY THE DEPARTMENT. FURTHER, THE ONU S OF THE ASSESSEE IS PROVED BY THE FACT THAT THE OBJECTIONS WERE FILED DURING THE ASSESSMENT PROCEEDINGS VIDE LETTER DATED NOV. 5, 2008, AND THE RELEVANT GROUNDS WERE ALSO TAKEN UP B EFORE THE DRP AND THE TRIBUNAL, WHO DID NOT DECIDE ON THE MAT TER. FURTHER, THE LEARNED AO HAS NOT REFIXED THE HEARING OF NON APPEARANCE ON 2911.2007 WHICH WAS THE HEARING DATE AS PER THE ALLEGED NOTICE. THE LEARNED AO ALSO DID NOT TAKE A NY ACTION ON ITA NO.1430/HYD/2010 CONEXANT SYSTEMS P LTD. , HYDERABAD 9 THE OBJECTIONS FILED BY THE ASSESSEE REGARDING NON RECEIPT OF THE NOTICE WITHIN THE STATUTORY TIME PERIOD. 14 WITH RESPECT TO THE CASE RELIED ON BY THE DEPA RTMENT VIZ. RAMESH KHOSLA VS. ITO (154 ITR 556). THE ASSE SSEE COUNTERED THAT THE DEPARTMENT HAD IN RAMESH KHOSLA S CASE FILED ACKNOWLEDGEMENT COPIES AS PROOF OF SERVICE OF DEMAND NOTICES FOR MOST OF THE ASSESSMENT YEARS. WHEREAS THE PRESENT CASE THE DEPARTMENT HAS NOT BEEN ABLE TO ESTABLISH THE FACT THAT THE NOTICE HAS IN FACT BEEN SERVED ON THE ASSESSEE. 15 WITH RESPECT TO THE CASE OF CIT VS. SHANKER LA L VED PRAKASH (300 ITR 243), THE ASSESSEE IN ITS WRITTEN SUBMISSION POINTED OUT THAT THE FACTS ARE DIFFERENT AS THE ASS ESSEE HAD NOT RECEIVED THE NOTICE 22.11.2007. THE COMPANY HAD F ILED ITS OBJECTION BEFORE THE AO AT THE TIME OF THE ASSESSME NT PROCEEDINGS ITSELF THAT THE NOTICE WAS NOT SERVED O N THE ASSESSEE. 16. THE LEARNED COUNSEL ARGUED THAT NOTICE U/S 143 (2) IS MANDATORY REQUIREMENT FOR COMPLETING AN ASSESSMENT U/S 143(3) SINCE THE ASSESSMENT WAS COMPLETED WITHOUT SERVICE OF NOTICE U/S 143(2) THE ASSESSMENT IS INVALID. 17. THE FOLLOWING CASE LAW WAS RELIED UPON IN THIS CONTEXT: 1. CIT VS. CEBON INDIA LTD. 229 CTR 188(P&H) 2. CIT VS. EQBAL SINGH SINDHANA, 304 ITR 177 (DEL.) 3. BHPE KINHILL JOINT VENTURE VS. ADIT 116 ITD 123 4. SHUBHAM ENTERPRISES VS. ITO (3 SOT 250) (ALL) 5. NULON INDIA LTD. VS ITO (323 ITR 681) (DEL.) 18. IN PARA 6 OF THE SUBMISSIONS FILED BY THE DEPARTMENT, WITHOUT PREJUDICE TO THE ABOVE ARGUMENT S OF THE DEPARTMENT RELIANCE WAS PLACED ON THE AMENDED PROV ISIONS OF SECTION 292BB OF THE ACT, WHICH PROVIDES THAT IT SH ALL BE DEEMED ITA NO.1430/HYD/2010 CONEXANT SYSTEMS P LTD. , HYDERABAD 10 THAT THE NOTICE HAS BEEN SERVED IN TIME AND IN ACCO RDANCE WITH THE PROVISIONS OF THE ACT IF THE ASSESSEE HAS APPEA RED IN ANY PROCEEDING AND COOPERATED IN ANY ENQUIRY RELATING T O AN ASSESSMENT. 19. FURTHER, THE DEPARTMENT RELIED ON THE DECISIO N OF P&H HC IN THE CASE OF OM SONS INTERNATIONAL VS. CIT 60 DTR (P&H) 393. RELIANCE WAS ALSO PLACED ON THE DECISIO N OF THE JURISDICTIONAL BENCH OF THE TRIBUNAL IN THE CASE OF NAVAYUGA SPATIAL TECHNOLOGIES P LTD. VS. DCIT (IN ITA NO.155 7/H/2010). 20. FURTHER THE DEPARTMENT RELIED ON THE CBDT CIR CULAR 1 OF 2009 DATED 27.3.2009 TO THE EFFECT THAT SECTI ON 292BB OF THE ACT APPLIES TO ALL PROCEEDINGS PENDING AS ON 1. 4.2008 WITHOUT PREJUDICE TO BOTH THE ARGUMENTS OF THE DEPA RTMENT VIZ., RELIANCE WAS PLACED : 1. ON OM SONS INTERNATIONAL VS. CIT 2. THE CIRCULAR 1 OF 2009 DATED 27.3.2009, THE DEPARTM ENT REFERRED TO THE DECISION OF THE KERALA HC IN THE CA SE OF KG THOMAS CIT 301 ITR 301 IN ITS SUBMISSIONS. IT HAD BEEN HELD IN THE DECISION OF KG THOMAS (SUPRA) THAT THE PROCEDURE U/S 143(2) OF THE ACT IS TO ENSURE THAT AN ADVERSE ORDER IS ISSUED ONLY AFTER PROPER OPPORTUNI TY IS GIVEN TO THE ASSESSEE. IN THIS CASE, IT IS CONCEDE D WAS IN FACT FILED AND REASSESSMENT NOTICE AND FINAL ORDER WERE ALSO ISSUED WITHIN THE TIME LIMIT PRESCRIBED UNDER THE ACT. 21. IN THE COUNTER SUBMISSION MADE BY THE ASSESSE E IT WAS CONTENDED AS FOLLOWS: 1. ASSUMING BUT ADMITTING THAT THE PROVISIONS OF SECTI ON 292BB ARE APPLICABLE FOR ASSESSMENT YEAR 2006-07 OU R CASE GETS COVERED BY THE PROVISO TO SECTION 292BB O F THE ACT ITA NO.1430/HYD/2010 CONEXANT SYSTEMS P LTD. , HYDERABAD 11 WHEREIN IT IS PROVIDED THAT NOTHING CONTAINED IN TH IS SECTION SHALL APPLY WHERE THE ASSESSEE HAS RAISED SUCH OBJE CTION BEFORE THE COMPLETION OF SUCH ASSESSMENT OR REASSES SMENT. 22. HENCE, AS PER THE PROVISO TO SECTION 292BB OF THE ACT, THE DEEMING PROVISIONS RELATING TO SERVICE OF NOTICE SHALL NOT BE APPLICABLE IN A SITUATION WHERE THE ASSESSEE HAS RAISED OBJECTION BEFORE THE COMPLETION OF THE ASSESSMENT. IN OUR CASE, THE ASSESSEE HAD RAISED OBJECTIONS AT THE ASSESSMEN T STAGE ITSELF BY FILING ITS OBJECTIONS VIDE LETTER DATED 5.11.200 8 THAT THE NOTICE U/S 143(2) OF THE ACT HAS NOT BEEN SERVED ON THE AS SESSEE. HENCE, THE DELAY IN THE SERVICE OF NOTICE IS NOT CU RABLE U/S 292BB OF THE ACT AS THE CASE IS COVERED BUY THE PR OVISO TO THE SECTION. 23. FURTHER THE ASSESSEES COUNSEL ALSO RELIED ON THE JUDGEMENT OF THE SPECIAL BENCH OF ITAT DELHI IN THE CASE OF KUBER TABOCCO PRODUCTS P LTD. VS DCIT (2009) 310 IT R 300 (T.DEL.) WHEREIN IT WAS HELD THAT SECTION 292 BB IS APPLICABLE TO ASSESSMENT YEAR 2008-09 AND SUBSEQUENT YEARS. 24. IN THE CASE OF KUBER TOBACCO PRODUCTS P LTD. IT WAS HELD THAT SECTION 292BB HAS NO RETROSPECTIVE EFFECT AND IS TO BE CONSTRUED PROSPECTIVELY. PRIOR TO 1.4.2008 I.E. UP TO 31.3.2008, AS PER SECTION 292BB THE ASSESSEE IS NOT PRECLUDED FROM TAKING ANY OBJECTION REGARDING INVALIDITY OF ASSESSMENT / REASSESSMENT ON THE GROUND OF IMPROPER/INVALID ISSUANCE/SERVICE OF NOTICE. HENCE, IT WAS CONCLUDED THAT SECTION 292BB IS APPL ICABLE TO ASSESSMENT YEAR 2008-09 AND SUBSEQUENT ASSESSMENT Y EARS. 25. IT WAS SUBMITTED THAT AMPLE TIME WAS PROVIDE D TO THE DEPARTMENT FOR SUBMISSION OF PROOF THAT THE IMP UGNED NOTICE ITA NO.1430/HYD/2010 CONEXANT SYSTEMS P LTD. , HYDERABAD 12 DATED 22.11.2007 WAS DESPATCHED IN THE PERIOD BETW EEN 23.11.2007 AND 30.11.2007. NO SUCH PROOF WAS SUBMI TTED BY THE DEPARTMENT TO PROVE THAT THE IMPUGNED NOTICE WA S INDEED SERVED ON THE ASSESSEE. THE FACT THAT NO NEW HEARI NG WAS FIXED AFTER THE DATE OF HEARING FIXED BY THE ALLEGED NOTI CE FURTHER ESTABLISHED THAT THE NOTICE WAS NOT SERVED. 26. WE HEARD BOTH THE PARTIES. IT IS THE ASSES SEES CASE THAT THE ONUS WAS ON THE DEPARTMENT TO PROVE T HAT THE NOTICE WAS SERVED, HOWEVER, THERE WAS NO PROOF OF D ESPATCH FILED BY THE DEPARTMENT. FURTHER, THE ONUS OF THE APPELLA NT IS PROVED BY THE FACT THAT THE OBJECTIONS WERE FILED DURING T HE ASSESSMENT PROCEEDINGS VIDE LETTER DATED NOVEMBER 05, 2008, AN D THE RELEVANT GROUNDS WERE ALSO TAKEN UP BEFORE THE DRP AND THE HONBLE TRIBUNAL, WHO DID NOT DECIDE ON THE MATTER. FURTHER, THE LD AO HAS NOT REFIXED THE HEARING ON NON-APPEARANCE ON 29-11- 2007 WHICH WAS THE HEARING DATE AS PER THE ALLEGED NOTICE. THE LD AO ALSO DID NOT TAKE ANY ACTION ON THE OBJECTION S FILED BY THE ASSESSEE REGARDING NON-RECEIPT OF THE NOTICE WITHIN THE STATUTORY TIME PERIOD. 27. IT IS THE CONTENTION OF THE DEPARTMENT THAT T HE NOTICE U/S 143(2) WAS ISSUED ON 22.11.2007 FIXING THE HEAR ING ON 29.11.2007. THEY HAVE ALSO PRODUCED CERTIFICATE OF THE POSTAL AUTHORITIES OF HAVING RECEIVED A LETTER ADDRESSED T O THE ASSESSEE 0N 23.11.2007. WHILE THE ASSESSEE HAS STATED THAT T HEY HAVE CONTESTED THE VALIDITY OF THE ASSESSMENT, THE AO IN HIS DRAFT/ FINAL ASSESSMENT ORDER OR THE DRP HAVE NOT DEALT WI TH IT. WE DO NOT SEE ANY SPECIFIC GROUND ON THIS ISSUE RAISED BY THE ASSESSEE BEFORE THE DRP. 28. WE SEE FORCE IN THE ISSUE RAISED BY THE ASSES SEE. IT GOES TO THE ROOT OF THE MATTER AND IT IS A LEGAL IS SUE. HOWEVER, THE LOWER AUTHORITIES HAVE NOT DEALT WITH THE SAME. APP LYING THE ITA NO.1430/HYD/2010 CONEXANT SYSTEMS P LTD. , HYDERABAD 13 RATIO OF THE APEX COURT IN THE CASE OF GKN DRIVE SH AFTS (INDIA ) LTD V CIT (259 ITR 19), WHEN AS ASSESSEE OBJECTS TO THE VALIDITY OF AN ASSESSMENT, IT IS THE AO IS BOUND TO DISPOSE OFF THE SAME BY A SPEAKING ORDER. IN THIS CASE WE FIND THAT THE AO HAS NOT AT ALL DEALT WITH THIS IMPORTANT ISSUE REGARDING JURIS DICTION. HENCE APPLYING THE DECISION FO THE APEX COURT IN THE CASE OF GKN DRIVE SHAFTS (INDIA ) LTD V CIT (259 ITR 19), IN THE IN TEREST OF JUSTICE WE SET ASIDE THIS ISSUE TO THE FILES OF THE AO FOR REDOING THE SAME IN ACCORDANCE WITH THE PROVISIONS OF THE LAW, AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE TO RAISE THE IR OBJECTIONS ON THIS ISSUE AND GIVING A REASONED ORDER. 30. IN THIS VIEW OF THE MATTER, WE ARE NOT DECIDI NG THE OTHER ISSUES RAISED IN THE APPEAL BY THE ASSESSEE A T THIS STAGE AS THE LEGAL ISSUE HAS TO BE DECIDED FIRST. 31. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON: 22.3.2012 SD/- SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER DATED THE 22 ND MARCH, 2012 COPY FORWARDED TO: 1. M/S CONEXANT SYSTEMS PVT. LTD., (FORMERLY KNOWN AS CONEXANT SYSTEMS NOIDA P LTD.), 5 TH FLOOR, PIONEER TOWERS, PLOT NO.16, SURVEY NO.64/2, SOFTWARE UNITS, LAYOUT, MADHAPUR, HYDERABAD-81. 2. THE ITO, WARD 1(2), HYDERABAD 3. THE DRP, -I, HYDERABAD-4 HYDERABAD 4. THE DR, ITAT, HYDERABAD NP/