Stefanini India Pvt. Ltd., Delhi V. ITO, New Delhi

ITA 229/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0262 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 20-04-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 13-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M BARNWAL
• Assessee Lawyers: HARPREET AJMANI
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 153; 92CA

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH : I2 NEW DELHI ] BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER, A N D SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 229/DEL/2017 ASSESSMENT YEAR : 2010-11 STEFANINI INDIA PVT. LTD. (FORMERLY KNOWN AS CODEX SOFTWARE PVT. LTD., FLAT NO. 302, BLDG. NO. A-10/11, COMMERCIAL COMPLEX, DR. MUKHERJEE NAGAR CITY, DELHI-9. PIN : AABCC9332M (APPELLANT) VS. INCOME TAX OFFICER, WARD : 3 (4) NEW DELHI. (RESPONDENT) APPELLANT BY SH. HARPREET AJMANI, ADV.; RESPONDENT BY SH. M. BARNWAL, SR. D.R.; O R D E R PER PRASHANT MAHARISHI, AM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-38, NEW DELHI, DATED 28.10.2016 WHEREIN THE ASSESSEE CHALLENGED THE ORDER OF THE INCOME TAX OFFICER, WARD 3(4), NEW DELHI, PASSED ON 30.03.2014 UNDER SECTION 143(3) OF DATE OF HEARING 26.02.2020 DATE OF PRONOUNCEMENT 18.03.2020 2 THE INCOME TAX ACT DETERMINING THE TOTAL INCOME OF THE ASSESSEE ON RS.20,05,010/- AGAINST THE RETURNED INCOME OF ASSESSEE OF RS.4,72,201/- WAS CHALLENGED. THE LEARNED CIT (APPEALS) VIDE ABOVE ORDER DISMISSED THE APPEAL OF THE ASSESSEE AND, THEREFORE, ASSESSEE IS IN APPEAL BEFORE US. 2. THE ASSESSEE HAS RAISED EFFECTIVELY TWO GROUNDS OF APPEAL STATING THAT CIT (APPEALS) HAS ERRED IN LAW IN NOT GIVING RELIEF DESPITE SPECIFIC PROVISIONS AVAILABLE UNDER THE INCOME TAX ACT, 1961 OF SAFE HARBOUR RULE AND ALSO NOT PASSING A SPEAKING ORDER THEREON. 3. BRIEF FACTS OF THE CASE SHOWS THAT ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF EXPORT OF IT ENABLED SERVICES. IT FILED ITS RETURN OF INCOME ON 24.10.2011 DECLARING INCOME OF RS.4,72,201/- AFTER CLAIMING EXEMPTION UNDER SECTION 10A TO RS.25,46,061/-. 4. ASSESSING OFFICER NOTICED THAT ASSESSEE HAS ENTERED INTO AN INTERNATIONAL TRANSACTION OF RS.4,35,17,101/-. AS THE TRANSACTION WAS LESS THAN RS. 5 CRORES, THE LEARNED ASSESSING OFFICER ASKED THE ASSESSEE AS TO WHY PROFIT ON SUCH TRANSACTION SHOULD NOT BE WORKED OUT AT 29.13% AS DETERMINED IN THE CASE OF THE ASSESSEE IN THE PRECEDING YEAR. THE ASSESSEE FURNISHED TRANSFER PRICING STUDY REPORT WHERE THE PROFIT WAS 16.11%. IN THE END REPLYING TO THE SHOW CAUSE NOTICES OF THE ASSESSING OFFICER IT WAS SUBMITTED THAT THE PROFIT MARGIN OF 20% MAY BE ADOPTED AS PROVIDED IN THE SAFE HARBOUR RULES. THE ASSESSING OFFICER REJECTED THE SAME BECAUSE SAFE HARBOUR RULES ARE APPLICABLE WITH EFFECT FROM 01.04.2013. THE LEARNED ASSESSING OFFICER THEN TOOK 7 COMPARABLES WHOSE AVERAGE PROFIT MARGIN WAS 20.20%, APPLIED THE SAME TO THE 3 OPERATING COST OF RS.3,74,79,126/- AND FOUND THAT THERE IS A SHORT-FALL WITH RESPECT TO THE ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTION OF PRICE RECEIVED OF RS.4,35,17,101/- BY RS.15,32,808/-. THUS HE PASSED AN ASSESSMENT ORDER ON 30.03.2014 DETERMINING TOTAL INCOME OF THE ASSESSEE AT RS.20,05,010/-. 5. THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT (APPEALS) WHEREIN HE ADJUDICATED GROUND NO. 3 OF THE APPEAL WHEREIN THE ASSESSING OFFICER WAS REQUESTED TO ACCEPT THE SAFE HARBOUR RULE MARGINS OF 20%. THE LEARNED CIT (APPEALS) ACCEPTED THE CONTENTION OF THE ASSESSEE DIRECTING THE ASSESSING OFFICER TO ACCEPT THE MARGIN OF 20%. THUS THE APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED WITHOUT ADJUDICATING OTHER GROUNDS OF APPEAL. THE ASSESSEE IS STILL AGGRIEVED AND HAS PREFERRED THIS APPEAL. 6. THE ASSESSEE HAS CHALLENGED VIDE ADDITIONAL GROUND NOS. 1.1 AND 1.2 OF THE ORDER THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS BARRED BY LIMITATION OF TIME. HE SUBMITTED THAT AS THE GROUND IS PURELY LEGAL IN NATURE SAME SHOULD BE ADMITTED AND ADJUDICATED. 7. THE LEARNED AUTHORIZED REPRESENTATIVE ALSO STATED THAT LEGAL GROUND CAN BE RAISED AT ANY POINT OF TIME. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE OBJECTED TO THE ADDITIONAL GROUND RAISED BY THE ASSESSEE OF THE LIMITATION IN PASSING OF THE ASSESSMENT ORDER. 4 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FOUND THAT ADDITIONAL GROUND RAISED BY THE ASSESSEE IS PURELY LEGAL IN NATURE WHICH GOES TO THE ROOT OF THE MATTER AND AS ASSESSEE IS CHALLENGING THAT THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER IS BEYOND THE LIMITATION PROVIDED UNDER SECTION 153 OF THE INCOME TAX ACT. AS THE GROUND RAISED BY THE ASSESSEE IS PURELY LEGAL, GOES TO THE ROOT OF THE MATTER, CAN BE RAISED AT ANY TIME, THEREFORE, WE ADMIT THE SAME. 10. LOOKING AT THE CHRONOLOGY OF EVENTS SUBMITTED BY THE LEARNED AUTHORIZED REPRESENTATIVE STATING THAT ASSESSEE HAS FILED ITS RETURN OF INCOME ON 24.10.2011 FOR ASSESSMENT YEAR 2011-12. AS THE INTERNATIONAL TRANSACTION ENTERED INTO BY THE ASSESSEE WAS LESS THAN RS.5 CRORES THE ASSESSING OFFICER PROCEEDED TO DETERMINE THE ARMS LENGTH PRICE OF SUCH INTERNATIONAL TRANSACTION ON HIS OWN WITHOUT MAKING A REFERENCE TO THE TRANSFER PRICING OFFICER. THE ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT. ACCORDING TO THE PROVISIONS OF SECTION 153 OF THE ACT FOR THAT ASSESSMENT YEAR NO ORDER OF ASSESSMENT UNDER SECTION 143 SHOULD BE MADE AT ANY TIME AFTER THE EXPIRY OF TWO YEARS FROM THE END OF THE MONTH IN WHICH THE INCOME WAS FIRST ASSESSABLE. BY VIRTUE OF THE AMENDMENT BY FIRST PROVISO THE PERIOD OF TWO YEARS IS CURTAILED TO 21 MONTHS. THERE IS NO REFERENCE MADE TO THE TRANSFER PRICING OFFICER AND, THEREFORE, THE SECOND PROVISO TO SECTION 153(1) DOES NOT APPLY. IF THE REFERENCE IS MADE TO THE TRANSFER PRICING OFFICER THEN IN SUCH A CASE THE TIME LIMIT OF 21 MONTHS GETS EXTENDED TO 36 MONTHS. HOWEVER, THERE IS NO REFERENCE MADE UNDER SECTION 92CA OF THE ACT. THEREFORE, IN THE PRESENT MATTER ON THE IMPUGNED FACTS THE LIMITATION OF 21 MONTHS SHALL APPLY. THE PRESENT ASSESSMENT YEAR ENDS 5 ON 31.03.2011 AND THE PERIOD OF 21 MONTHS THERE-FROM ENDS ON 31 ST DECEMBER, 2013. IN THE PRESENT CASE THE ASSESSMENT ORDER IS PASSED ON 30.03.2014. THEREFORE, APPARENTLY SAME IS BEYOND THE TIME-LIMIT PRESCRIBED UNDER SECTION 153(1) OF THE ACT. IN VIEW OF THE ABOVE FACTS AND AFTER HEARING THE PARTIES, WE HOLD THAT ASSESSMENT ORDER PASSED BY THE LEARNED ASSESSING OFFICER IS BEYOND THE TIME-LIMIT PROVIDED UNDER SECTION 153 OF THE INCOME TAX ACT AND, THEREFORE, LIABLE TO BE QUASHED. 11. IN THE RESULT, ASSESSMENT ORDER PASSED BY THE LEARNED ASSESSING OFFICER AND CONSEQUENT ORDER OF THE LEARNED CIT (APPEALS) ARE QUASHED. THE ADDITIONAL GROUND FILED BY THE ASSESSEE IS ALLOWED. 12. IN VIEW OF OUR ORDER IN THE ADDITIONAL GROUND, ALL OTHER GROUNDS RAISED BY THE ASSESSEE BECOMES INFRUCTUOUS / REDUNDANT, THEREFORE, ARE NOT REQUIRED TO BE ADJUDICATED. 13. IN VIEW OF THIS, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON: 18/03/2020 . SD/- SD/- (SUCHITRA KAMBLE) ( PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18/03/2020 . *MEHTA* 6 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 18/03/2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER. 18/03/2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER. 18/03/2020 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS. 18/03/2020 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT. 18/03/2020 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS. 18/03/2020 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT. 18/03/2020 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK. 18/03/2020 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER. DATE OF DISPATCH OF THE ORDER.